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Spago investors sue to block Puck’s Beverly Hills relocation

Spago investors sue to block Puck’s Beverly Hills relocation – three investors in Spago restaurant in West Hollywood, CA, sue chef Wolfgang Puck

Richard Martin

LOS ANGELES – Claiming breach of contract and breach of fiduciary duty, three limited partners in Spago have rejected a buyout offer and sued chef Wolfgang Puck in an attempt to block his famed West Hollywood restaurant’s closure and relocation next year to Beverly Hills.

Puck, whose wife, Barbara Lazaroff, and three other general partners also are defendants, has said that if contractually prescribed arbitration with the three dissidents fails, the 15-year-old dining landmark above Sunset Strip would remain open, but it would be forced to funnel cash into extensive rehabilitation. Puck intends to terminate the original partnership, and investors in it would not receive stakes in the relocated business.

Spago’s principals, meanwhile, continue efforts to complete financing for the intended March debut of Spago Beverly Hills, at the refurbished Canon Drive site formerly occupied by Bistro Garden. Designer Lazaroff said her plans for remodeling have been approved, and partial demolition has been completed. puck recently hired chef Michael Otsuko away from Patina restaurant here to head Spago’s kitchen, both to prepare for the relocation and to replace chef Francois KwakuDongo, who this week will preside over the opening of Spago Chicago.

But the plaintiffs – Michael Elias, Gaile Wakeman and Jill Myers, who pooled $30,000 in 1981 to buy two of the original Spago’s 34 limited shares – are seeking a court injunction against the Beverly Hills opening, arguing that a competing Spago nearby would devalue their investment.

Peter Appleton, attorney for the trio, said their agreement with Spago binds the partnership until 2015, and his clients have rejected Spago’s $25,000-per-share buyout offer. He said Spago’s own effort to convince them to sell back their stake confirmed the alleged fiduciary breach because the solicitation predicted that the new restaurant would devalue the original one if it stayed open.

“We have decided to open another [Spago] location, just as we have in Las Vegas and Chicago,” Lazaroff said. “We have the right; it’s in black and white. We don’t want to argue about it. We’ll go to arbitration.”

She said it was conceivable “but not really likely” that the new restaurant might open under a name other than Spago if an agreement with the holdout partners is not reached. Spago’s principals used different concept names locally when they launched the individually incorporated Chinois on Main, Granita and Wolfgang Puck Cafe restaurants. The cafe chain’s operating company this month launched the new Puck-Lazaroff prototype concept, ObaChine, in Beverly Hills, and branches of the pan-Asian chain are scheduled to open soon in Seattle and Phoenix.

Although the three dissidents “are not happy,” Lazaroff observed, the plaintiffs were rewarded with unspecified dividends over the years during which Spago has enjoyed almost unparalleled fame. “It was certainly a good investment,” she said. “They got their money back in the first year.”

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