Trendy big-city restaurants are often here today, gone tomorrow. Such is the case with Grace, a hot West Loop eatery that earned three Michelin stars, a bevy of industry awards, and was the most coveted reservation in Chicago before its owner abruptly closed the restaurant late in 2017. Now, Grace’s former star chef and manager/sommelier are suing to void their noncompete employment agreements.
Head chef Curtis D. and general manager Michael M. were allegedly working together at Avenues restaurant in Chicago’s chic Peninsula Hotel, when they met Michael O. Curtis and Michael M. had discussed opening their own restaurant which they wanted to name Grace, and found an eager investor in Michael O., who had no experience in the culinary industry. The three went into business together in 2011.
The complaint filed February 20 in Cook County Circuit Court describes the high-priced Grace restaurant as an immediate success upon its opening in 2014 and a “culinary jewel” of the city. It was reportedly profitable within eight months, and Michael O. recouped his entire $3 million investment in the restaurant within several years.
The plaintiffs claim their employment agreements, executed in 2012, were drafted by Michael O.’s attorneys and presented to them without the advice of their own counsel. The agreements contained covenants not to compete for 18 months following termination of employment.
They claim they were led to believe they were receiving ownership rights at the time they signed, when in fact they wouldn’t have the right to share in Grace’s profits for five years. Then the pair would each begin receiving a one-third share of the restaurant’s net revenues.
Curtis and Michael M. accuse Michael O. of holding the two of them out to the public as Grace’s owners in order to capitalize on their reputation and contacts in the industry, while in reality giving them no ownership interest in the enterprise.
“While [Michael O.] repeatedly referred to Curtis and Michael as “partners” and their agreement as a “partnership,” their relationship was nothing more than that of employer and employee,” the complaint states.
According to the complaint, in December 2017, five years to the day after Michael M. signed his agreement, Michael O. fired him. Curtis resigned about three weeks later, then the rest of the staff collectively walked out and Michael O. closed the restaurant the same evening. The plaintiffs claim their disputes with Michael O. had “simmered for several years.”
The plaintiffs accuse Michael O. of not only threatening to enforce the noncompete covenants despite the restaurant’s closure but leaking them to the press in what they charge is an attempt to sabotage their efforts to gain new employment or attract investors to new ventures.
Michael O. has reportedly made statements to the Chicago business press indicating he plans to open a new restaurant in the former Grace location within six to eight months.
Curtis and Michael M. are seeking declaratory relief as to their contracts, specifically the provisions prohibiting their solicitation of former Grace customers and employees, and the non-compete and confidentiality provisions. They contend they have been unable to work since Grace’s closing and cannot continue to support their families, because Michael O.’s threat to enforce the noncompetes prevents them from finding meaningful work or pursuing opportunities either in Chicago or in a seven-county radius surrounding it without risking legal consequences.
They argue the restrictive covenants are unenforceable since Grace is out of business and it is causing plaintiffs undue hardship, and that even if Michael O. opens a new restaurant, he has no legitimate business interest to protect.
The case is Duffy and Muser vs. Grace MMC, LLC.
Our Elgin non-compete agreement attorneys have defended high-level executives in a covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago Business. You can view that article by clicking here.
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