Millionaire Tom Knox sues Table 31 for ending 50 percent discount

Tom Knox has sued Table 31 in the Comcast Center for allegedly ending his 50 percent food and drinks discount. (Credit: Rikard Larma/Metro)

Philadelphia 2015 mayoral hopeful and millionaire Tom Knox has sued Table 31 restaurant in the Comcast Center for allegedly taking an axe to Knox’s 50 percent discount, as first reported by The Philly Post.

A breach of contract suit filedThursday in Philadelphia’s Court of Common Pleas on behalf of Knox and his wife Linda Knox names 1701 JFK Restaurant, LLC, as well as owner Chris Scarduzio.

According to the complaint, Knox in 2008 became a partner in the “redefined steakhouse bistro,” agreeing to invest $250,000 for partnership shares “as well as in exchange for the guaranteed 50 percent discount on all food and beverage purchases.”

Knox claims the discount was “material” to his agreement.

Table 31 allegedly discontinued the half-price investor mealstwo years later “without explanation” and didn’t reinstate it despite Knox’s “repeated requests.”

Due to a lack of working capital, an amendment to the Table 31 partnership was proposed in January 2011 to include more investors and convert some advances into capital contributions, according to the suit.

The complaint states Knox refused to sign the amended partnership agreement without assurances the discount would again be honored

Partnership CFO Edward Lack allegedly wrote to the Knoxes the same month “to assure them that the 50 percent discount would be applied to all ‘food and bev’ charges going forward.”

But the 50 percent discount was allegedly again discontinued in 2012 “without explanation or basis.”

The Knoxes are seeking a court order dissolving their partnership with the restaurant, along with unspecified economic damages.

“The expense of operating the partnership including, inter alia, the cost of the guaranteed payments to Scarduzio and the ongoing rental expenses, are so great that the partnership cannot operate at a net gain in the future,” the complaint concludes.

It further states Table 31 is disqualified under the U.S. Security and Exchange Commission’s rules from making offerings to raise additional capital in the future.

Knox is asking for full access to the partnership’s books and financial records to determine “the extent of the mismanagement” as far as Table 31’s handling of its assets and compliance with SEC regulations.

Additional allegations

The suit also claims:

• Table 31’s prospectus projected a $7.5 million design and construction budget, but Scarduzio made cash contributions totaling only $120, while as much as $4 million was slated to be raised from investors and an additional $3.5 million borrowed from financial institutions.

• Table 31 operated at a net loss each year since it opened in 2008, even after receiving an advance from two investors in 2009 and 2010 totaling more than $1 million.

• The loss came despite “purported efforts to reduce operating expenses and increase revenues,” including eliminating chef positions, reallocating restaurant staff and renegotiating the lease agreement.

• The partnership continued to make annual guaranteed payments of $190,000 to Scarduzio and to provide him other benefits, such as a $600 monthly car allowance and family health insurance, even after investors were asked for more money in July 2010 and January 2011.

• Scarduzio and Lack “fraudulently” assured Knox the partnership had complied with all U.S. Securities and Exchange Commission reporting requirements, but did not file the necessary paperwork.