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Two Guys owner responds to RBC lawsuit, news reports

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THIS INFORMATION FROM A NEWS RELEASE SENT TO THE WWAY NEWSCHANNEL 3 NEWSROOM

Recently, it was reported that various entities and individuals related to the Two Guys Grille chain of restaurants are involved in an ongoing lawsuit with RBC Bank. Omitted from those reports was the recognition that the present lawsuit is the culmination of various legal actions, which have been ongoing for over three (3) years.

The underlying actions had their beginnings in 2007 when the management of Two Guys Grille restaurants attempted to assist the former owners of the two (2) local Bear Rock Café restaurants (Military Cutoff Road and Independence Mall) in trying to save those struggling businesses. The Independence Mall location was converted to a Two Guys Grille, and members of Two Guys Grille management took over operations of the Military Cutoff Road location. With the downturn in the economy, the Bear Rock Café on Military Cutoff Road closed within a short period. The former owners of the Bear Rock Café became shareholders in a newly created entity, Two Guys Grille Independence, Inc. (“TGI”), which was established specifically to operate the converted mall location.

Business enterprises often establish several separate and distinct legal entities. These entities may perform one or more specific operational functions or represent a distinct profit center. In the case of TGI, the entity was established specifically to convert and to operate the former Bear Rock Café mall location. The former owners of Bear Rock Café were shareholders in TGI, but these persons did not participate in the other Two Guys Grille enterprises. Such a separation of functions and activities is not only commonplace, but it is often dictated by prudence and good business judgment. The objective is to assure that a downturn, failure, or unanticipated event in one location or function does not destroy the entire business enterprise.
For business reasons, it was eventually determined that the relationships with the former owners of Bear Rock Café should not continue, and efforts were undertaken to dissolve those business relationships. The parties eventually sought intervention from the courts in order to resolve various conflicting claims among the parties.

In the meantime, the former Bear Rock Café owners and related entities were involved in various lawsuits and legal actions, including one with RBC Bank relating to loans arising from the operation of the Bear Rock Café restaurants. (At inception, no Two Guys Grille entity or related person was a party to the original indebtedness to RBC Bank.) RBC Bank eventually secured a Judgment against one or both of the former owners of the Bear Rock Café restaurants, and in partial satisfaction of that Judgment, assignment was made to RBC Bank of a Promissory Note originally given by TGI in favor of one of the former owners Bear Rock Café with a face amount of Three Hundred Seventy-five Thousand Dollars ($375,000.00). Collection on the Promissory Note was subject to litigation before the assignment to RBC Bank, and TGI eventually allowed Judgment in the amount of Three Hundred Seventy-five Thousand Eight Hundred Sixty-one and 12/100 Dollars ($375,861.12) to be entered on the Promissory Note in favor of RBC Bank.

At the time the Judgment in favor of RBC Bank was entered against TGI, that entity was in the process of discontinuing its business operations in recognition of the fact that the former owners of Bear Rock Café were not capable of actively participating in the business enterprise and given the tremendous debt obligations related to that specific entity. Repeated offers were made to allow RBC Bank to take the assets of TGI or to receive payment for the value of the same. These offers were repeatedly refused by RBC Bank.
Instead, RBC Bank chose to maintain actions against other entities related to the Two Guys Grille restaurants and shareholders. None of these parties ever had any direct obligation or agreement with RBC Bank. RBC Bank with its nearly unlimited resources asserted claims against these parties in the North Carolina Business Court based upon convoluted and complex legal theories. The claims and allegations on their face allege wrongdoing and misdeeds, but are far removed for the realities of the operations of the businesses. This aggressive litigation tactic of searching for multiple pockets from which to satisfy an acknowledged claim against TGI directly threatens the continued operations of the Two Guys Grille restaurants, which employs nearly one hundred (100) persons throughout eastern North Carolina.

I was advised by legal counsel that continued defense of RBC Bank’s claims by various Two Guys entities and shareholders will likely require costs of defense in excess of One Hundred Thousand Dollars ($100,000.00). Additionally, RBC Bank has asserted claims against me personally potentially giving rise to treble damages. Theoretically, these alleged damages could exceed One Million Dollars ($1,000,000.00) despite the fact that the original TGI obligation was $375,000.00. I personally had no liability on the original TGI Promissory Note; nevertheless, I previously contributed tens of thousands of dollars in order to keep afloat that business enterprise for the benefit of all concerned. I now find myself in the cross hairs of RBC Bank primarily because the bank perceives me as having the ability to pay.
Facing such a personal onslaught by RBC Bank, I had no recourse but to seek the protections afforded me by the United States Bankruptcy Court. My objective in filing a bankruptcy petition was to implement a plan of reorganization, which will allow me the opportunity to satisfy legitimate claims of my creditors and to provide, on more equal footing, a forum in which I can defend the incredible claims and charges levied by RBC Bank.

I have at all times endeavored to operate and manage the Two Guys Grille restaurants with integrity and prudence. No effort has been made to deprive the legitimate creditors of Two Guys Grille restaurants of what is due to them. All actions undertaken by me were done in consultation with financial professionals and legal counsel, and I have at all times tried to act for the best interests of Two Guys Grille restaurants and of the many persons who depend on the businesses for their livelihoods. It is my hope that the restaurants will continue to benefit those persons and to serve our loyal customers in the communities in which we operate for many years to come.

Given that these matters are subject to litigation in several forums, no additional statements are anticipated. Inquiries or questions should be directed to my attorney, J. Wesley Casteen, Esq., CPA.
- Jonathan Duea, Shareholder

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