Judge dismisses lawsuit against Restaurant.com and CEO
Loop North News

Legal

• Delaware corporation can’t be sued in Illinois
• Decision does not prevent suit from moving to Delaware

6-Oct-18 – Two shareholders of Restaurant.com picked the wrong state in which to file their lawsuit against the company and its CEO.

A Cook County Circuit Court judge has dismissed their complaint against Dr. Kenneth Chessick, a lawyer and River North resident, saying Restaurant.com, though based in Arlington Heights, was incorporated in Delaware and any lawsuit needs to be filed there.

Restaurant.com sells gift certificates for restaurants nationwide. In their request for an injunction, filed on October 26, 2017, Adnan Adamji, the company’s former Chief Information Officer, and Steven Schnall, a New York-based entrepreneur, accused Chessick of intentionally mismanaging the company in a scheme to drive down its value, push out other shareholders, sell the company, and make millions for himself.

Adnan Adamji Steven Schnall

They say he used company money as a slush fund to pay for first-class travel around the world for himself and his wife, Ellen Chessick.

Adnan Adamji (far left) and Steven Schnall (near left).

When Kenneth Chessick started with Restaurant.com as CEO in 2012, according to Adamji and Schnall, he made a series of bad decisions such as firing the company’s outside sales force and replacing them with telemarketers, cutting back on email marketing, and changing agreements with restaurants that resulted in thousands of them quitting. The company’s fortunes started to reverse, they claimed. Revenue dropped from $63 million to $45 million during Chessick’s first year at the helm and, say the plaintiffs, it has declined every year since, bringing the company to “the brink of bankruptcy.”

From 2012 through 2017, the company allegedly spent more money than it earned. While other employees were fired or had their salaries frozen, Chessick was allegedly paid more than $1 million every year through 2016.

Claiming breach of fiduciary duty to shareholders and unjust enrichment, Adamji and Schnall wanted the judge to fire Chessick and force him to pay back millions of dollars in ill-gotten gains.

Judge Franklin Valderrama, however, pointed out that Restaurant.com was incorporated in Delaware on April 1, 1999, and registered to conduct business in Illinois on September 2, 2004.

On April 24, 2015, Kenneth and Ellen Chessick (right), as members of the company’s board of directors, rewrote Restaurant.com’s bylaws, adding an article that said any legal action against the company, a director, officer, or any other employee had to be filed in Delaware.

Northwestern Illinois University

Through their attorney, Robert Shelist, Adamji and Schnall argued that the forum-selection clause was itself a breach of fiduciary duty by Kenneth Chessick, who they say was acting in his own self-interest. Such a bylaw, they said, could be considered invalid if it was used for purposes “inconsistent with the director’s fiduciary duties.”

They said the bylaw was intended, as noted by Valderrama, “to shield Chessick from potential litigation due to his allegedly repeated, wrongful conduct as CEO.”

The associate judge also noted that Adamji and Schnall have not identified any witnesses that must be deposed in Illinois, nor have they asserted that moving the lawsuit to Delaware would be a financial hardship for them.

“Even if the litigation were to move forward in Delaware,” Valderrama wrote in his September 21 memorandum order and opinion, “the parties may still depose any potential witnesses in Illinois.”

Along with a condominium unit in southwest Florida, the Chessicks own 15 condo units at Marina City.

Photos obtained from Quontic Bank and Northwestern Illinois University.

By Steven Dahlman | Loop North News | sdahlman@loopnorth.com

Published 6-Oct-18 3:58 AM

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