Nashville at law: A Shaub lawsuit and a Park settlement

New developments in two much-watched ongoing legal cases lead the news from Nashville's courts this week.

A former division manager for SouthEast Waffles told Nashville's U.S. Bankruptcy Court last week that he ought to be allowed to pursue a class-action lawsuit against Jim Shaub, former CEO of the troubled restaurant chain.

In October, SouthEast Waffles asked the court to block a wage-and-hour lawsuit filed the previous month in an Alabama federal court. John William Fortner of Birmingham sued Shaub personally after filing an earlier complaint against SouthEast Waffles that he withdrew when the company filed for bankruptcy in late August.

Fortner claims that SouthEast Waffles wrongly classified its managers as exempt from laws requiring time-and-a-half payment for overtime. He also asserts that the company has a routine policy of improperly docking managers' wages for amounts "representing cash losses and/or inventory losses at the restaurants."

SouthEast Waffles argues that the protection of the bankruptcy court ought to extend to Shaub personally, since his contract with the company would require it to defend him and to cover any judgment against him.

In last week's reply, Fortner's attorneys assert that Shaub, as a third party in the bankruptcy proceedings, is not entitled to the same shield from lawsuits that SouthEast Waffles enjoys. They cite case law to argue that only under "unusual circumstances" could Shaub deserve such protection.

"Additionally," Fortner's answer states, "the court should not overlook the fact that if and when Shaub seeks an enforcement of the indemnification agreement" that requires SouthEast Waffles to defend him, the company will, "in all likelihood," seek to be relieved of its obligations to Shaub.

The filing says the company could invoke laws stripping Shaub of his indemnity because of his conduct as CEO, which creditors have criticized intensely.

"Due to the allegations of Shaub’s gross mismanagement of the Debtor, the Debtor will be unable to later state in good conscience that Shaub acted in good faith and in the best interests of the Debtor," Fortner argues.

A hearing on SouthEast Waffles' motion for an injunction to halt Fortner's lawsuit is set for Nov. 18.

Jason A. Stuckey of the Birmingham firm Gulas and Stuckey represents Fortner, with Linda W. Knight of Gullett, Sanford, Robinson & Martin as local counsel. Representing SouthEast Waffles are Barbara D. Holmes and Glenn B. Rose of Harwell Howard Hyne Gabbert & Manner.

Settlement may be near in Park brokerage litigation

In a lawsuit against the Florida investment firm that retained accused fraud artist Michael J. Park as an affiliate broker, attorneys for both sides say they think all parties are ready to sit down and discuss a possible resolution of claims against the brokerage.

"Significant progress has been made toward the conduct of a global mediation of all claims against 1st Discount Brokerage Inc. and related parties regarding the conduct of Michael Park and monies provided to him for investment," the lawyers said in an Oct. 31 court filing in the case of Saravoot Siriyutwatana et al. v. 1st Discount et al.

At least two other lawsuits are also pending against the firm, accusing it of negligently allowing Park to fleece investors out of millions.

The Siriyutwatana filing says most or all parties that may have claims against 1st Discount have been contacted and that a mediation session is tentatively set for Dec. 9 and 10.

Matthew J. Sweeney, Randal S. Mashburn and Michael G. Hoskins Baker, Donelson, Bearman, Caldwell & Berkowitz are the attorneys for 1st Discount. Perry A. Craft and Michael G. Sheppard of the Brentwood firm Craft & Sheppard represent the Siriyutwatana plaintiffs.

United States District Court

The Clever Factory Inc. v. Rite Aid Corp., Kingsbridge International Inc., Jiande Bedding Articles Ltd. et al. Lawsuit filed Oct. 31. Operating from MetroCenter, consumer products company The Clever Factory develops low-price items for sale in mass-merchant chain stores.

It is suing drugstore giant Rite Aid, as well as a competing supplier and a Shanghai factory for copyright infringement, claiming they have produced and sold knockoffs of a series of flash cards with titles like "Bible Trivia" and "Build-a-Word." They ask the court to order a halt to the infringement and award unspecified damages. Plaintiffs' attorneys: Robb S. Harvey and Heather J. Hubbard of Waller Lansden Dortch & Davis.

Davidson County Chancery Court

Special Promotions Inc. and Alan Vermilye v. Practical Christianity Foundation. Filed Nov. 3. The souring of a business relationship centered on Bible-study DVDs led to this case. Special Promotions cut a deal last year for the Florida-based PCF to produce, market and distribute DVDs that Vermilye would create under a five-year contract.

But things did not work out as planned, and the foundation terminated Vermilye in June. The plaintiffs accuse the PCF of "fraud in the inducement" for promising success that it did not deliver. They seek $1.575 million in damages. Plaintiffs' attorney: Angus Gillis III of Schulman, LeRoy & Bennett.