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The Boston Globe

Business

Judge rejects lawyer’s bid for bankrupt pizzerias

A lawyer representing former Upper Crust workers has lost a last-ditch effort to buy four of the company’s pizzerias and block their sale to a private equity firm with ties to the bankrupt chain’s ousted founder.

On behalf of ex-employees who accuse Upper Crust of seizing their wages, Shannon Liss-Riordan submitted a purchase plan late Wednesday to bankruptcy Judge Henry J. Boroff that included an offer to pay $855,000 for leases at the South End, Watertown, Wellesley, and Lexington locations. That’s $200,000 more than the proposed sale price of the four restaurants to UC Acquisition, an affiliate of investment firm Ditmars Ltd., which plans to work with Upper Crust founder Jordan Tobins.

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But Boroff denied Liss-Riordan’s motion Thursday, saying it was too late for a new bid since the auction of Upper Crust’s assets took place Dec. 19.

“I’m disappointed in the ruling. At the last minute, an investor appeared who was willing to provide additional funding for the bankruptcy estate,” Liss-Riordan said. “I understand the court’s desire to maintain the integrity of the auction process, but I thought that the court and trustee’s primary goal would have been to maximize the proceeds for the creditors.”

Liss-Riordan’s alternate proposal — which called for employees to have an ownership stake in the pizza shops — included a $510,000 loan from Elizabeth Grady chief executive John P. Walsh; $50,000 of Liss-Riordan’s own money; and $295,000 from bidders who were unsuccessful in their attempt to purchase the South End site’s lease at last month’s auction.

Liss-Riordan and another partner who bought the lease for the Harvard Square site plan to give employees ownership shares at that restaurant, which will operate under a different name.

UC Acquisition submitted the highest proposals to buy leases for the South End, Watertown, Wellesley, and Lexington locations.

But Liss-Riordan objected to the sale, arguing it would violate the terms of an injunction pending against Tobins that prohibited him from transferring assets.

A hearing on that injunction is scheduled for Friday before Suffolk Superior Court Judge Bonnie H. MacLeod.

Tobins, who was placed on leave last year after fellow Upper Crust owners accused him of misusing company funds, is not putting any money toward the UC Acquisition deals, an attorney for Tobins previously told the Globe.

A lawyer for UC Acquisition Thursday declined to comment on the court’s denial of the alternate sale proposal.

Mark G. DeGiacomo, the trustee overseeing the bankruptcy case, said auctions are held after giving notice to all parties. “If you want to bid, that’s the time to bid,” he said.

Upper Crust, founded in 2001, filed for bankruptcy protection in October after a lengthy struggle with labor and financial problems. DeGiacomo shuttered 10 of the stores in November.

The business owes at least $3.4 million, and federal labor officials submitted a claim that the chain owed workers about $850,000 in back wages and damages.

Liss-Riordan sued Upper Crust in 2010 on behalf of immigrant workers who said the firm exploited employees.

In the judge’s order rejecting Liss-Riordan’s effort to buy the four Upper Crust stores, Boroff cautioned her to “take great care” to avoid conflicts of interest under the Massachusetts rules of professional conduct for lawyers.

Joe Berman, a partner at Looney & Grossman in Boston, said that kind of statement indicates the judge is concerned about something “that may create an ethical issue.”

Berman, who practices in the area of lawyer professional responsibility, said he does not know all the details of the case, but attorneys have to be careful when they are co-investors with clients in a business venture.

Liss-Riordan, who represents the former employees as creditors in the bankruptcy case and also is an investor in the Harvard store where employees will get ownership stakes, said her actions “have been in the interests of the workers and the creditors.”

Jenn Abelson can be reached at abelson@globe.com. Follow her on Twitter @jennabelson.

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