It’s not just film studios leaving law firms holding the bag in California bankruptcy courts.
A day before Open Road Films LLC sought Chapter 11 protection in Los Angeles—disclosing a nearly $500,000 debt to Latham & Watkins—a Golden State icon slipped into insolvency in Santa Ana, California.
Ruby’s Diner Inc., a Newport Beach-based restaurant chain known for its retro decor and frequent appearances in pop culture, filed for bankruptcy on Sept. 5, citing a series of financial setbacks, including a troubled gift card program. The chain, often found at the end of picturesque piers on the Pacific Ocean, intends to continue its operations in bankruptcy court.
According to a list of the Newport Beach-based company’s 20 largest unsecured creditors, Ruby’s owes nearly $500,000 to four law firms: Costa Mesa’s Weiland Golden Goodrich ($177,318.54); Newport Beach’s Croudace & Dietrich ($107,647.57); Snell & Wilmer ($86,613.40); and Irvine’s Kohut & Kohut ($80,719). Ruby’s also owes $266,087.37 to GlassRatner Advisory & Capital Group, a financial restructuring firm acquired in August by Los Angeles-based B. Riley Financial Inc. (GlassRatner is serving as a financial adviser to Ruby’s in bankruptcy court.)
William Lobel, a veteran corporate restructuring partner at Pachulski Stang Ziehl & Jones, is advising Ruby’s in Chapter 11 proceedings. Lobel, a former name partner at Lobel Weiland Golden Friedman (now Weiland Golden Goodrich), joined Pachulski Stang in January and opened the national bankruptcy firm’s office in Costa Mesa. Pachulski Stang has not yet filed billing statements with the bankruptcy court.
Ruby’s, which estimates both assets and liabilities of between $1,000 and $10 million in its bankruptcy filing, was founded in 1982 when CEO Douglas Cavanaugh opened an eatery in what was once a bait shack on Balboa Pier in Southern California. Cavanaugh named the restaurant chain that would become famous for its hamburgers, hot dogs, milkshakes and mid-20th century motif after his mother, Ruby, who died in late 2015 at 93.
While Ruby’s now has more than 30 locations in Arizona, California, Nevada, New Jersey, Pennsylvania and Texas, about two-thirds of them are owned by franchisees. The bankruptcy this week only includes four company-owned stores, according to a statement from Ruby’s and and local news reports.
The privately owned company has secured a $4 million investment from one if its franchisees, mall developer Steven Craig of the Newport Beach-based Craig Realty Group, to help restructure its operations. Craig will become chairman of the company and own 60 percent of a reorganized Ruby’s, which expects to conclude its Chapter 11 proceedings within 120 to 180 days.