Upper Crust chain divided up at auction
The bankrupt Upper Crust pizza chain was sliced up at auction Wednesday, as a private equity firm with ties to ousted founder Jordan Tobins won leases for four restaurants, while an attorney who filed a class-action lawsuit against Tobins and the company for allegedly exploiting workers purchased the Harvard Square location.
Shannon Liss-Riordan, who sued Upper Crust in 2010 on behalf of immigrant employees who claim the business took advantage of workers and seized back wages from them, said she plans to give employees ownership shares in the restaurant. She partnered with another investor, Haluk Ozek, who owns Monella Boutique in Harvard Square, to buy the Cambridge lease and equipment and they are considering naming the restaurant "The Just Crust."
"We are very excited about buying back the Harvard Square location and making it into a model workplace for the benefit of the workers," Liss-Riordan said. "I hope this effort will provide at least one bright spot in this sad and troubling story."
An affiliate of Ditmars Ltd. — the private equity firm working with Tobins — made the top offers of $290,000 for the South End location on Tremont Street; $180,000 for the Lexington restaurant; $110,000 for the Wellesley shop; and $75,000 for the Watertown site. Christopher Panos, who represents Ditmars, said it is pleased it was the highest bidder and is hopeful it can soon begin hiring workers and making pizza.
This fall, the firm provided $250,000 as part of a settlement that was in the works between Tobins and his Upper Crust partners, according to attorneys and court records.
"Upper Crust is really Jordan's life so he's very excited. He's very happy a number of employees will be back having jobs," said Rick Mikels, an attorney for Tobins, who started the chain in Beacon Hill in 2001.
Boston Restaurant Associates, which runs the Regina Pizzeria chain, acquired the lease for the Upper Crust near Fenway Park for $175,000. Sam Sokol, who works for a real estate and hospitality investment firm, paid $100,000 for the Newbury Street site and said he plans to open a pizza shop at the location, but would not disclose which brand.
Al Carvelli, who runs an Upper Crust franchise in Plymouth, submitted the successful bid of $70,000 for the Hingham location. The landlord at State Street bought back its lease for $170,000 and the landlord for the Washington, D.C., shop also took over its site for $63,000.
The offers are for leases and restaurant equipment, not the rights to use the Upper Crust name. Upper Crust filed for bankruptcy protection in October after years of financial and labor troubles. A bankruptcy trustee closed 10 stores in November because the business had almost no cash and few supplies after executives paid themselves a month's salary in advance. Upper Crust said in court records it owes at least $3.4 million, and the US Department of Labor filed a claim that the company owes workers $850,000 in back wages and damages.
As Upper Crust rapidly expanded, the business depended on immigrant laborers from a village in Brazil. At first, workers embraced the opportunity, but over time, the relationship was strained as employees were underpaid for long workweeks while owners indulged in luxuries such as a yacht, according to a 2010 investigation published in the Globe.
They took their complaints to federal labor officials, who ordered the pizza chain to pay workers about $350,000 in overtime. Company executives then allegedly came up with a scheme to wrest the money back by slashing wages, resulting in a class-action lawsuit and another labor investigation.
Tobins and his partners, Joshua Huggard and Brendan Higgins, have repeatedly denied these allegations. But tensions between the co-owners emerged earlier this year when Tobins was placed on leave, and then sued by Huggard and Higgins for allegedly misusing about $750,000 in company funds for personal expenses.
Liss-Riordan said she believes there are questions about whether Tobins, through a third-party firm, can buy the Upper Crust locations because of an injunction prohibiting him from transferring assets.
"Although he will claim he is doing it through someone else, the point is that assets under his control should be preserved to pay back the employees, as well as creditors of Upper Crust," Liss-Riordan said.
A hearing to approve the sales, which totaled roughly $1.5 million, is set for Dec. 27. Mark G. DeGiacomo, the trustee overseeing the bankruptcy, said he will review all aspects of the bidders, including statements disclosing where the money was coming from and relationships to the debtors.
DeGiacomo is investigating Upper Crust operations for potential lawsuits against individuals who may have received money prior to the bankruptcy outside the course of business. He said he plans to try to recover more funds for creditors.