Financing

Boston Market's collapse leaves creditors fighting over assets

One of the chain’s bankers is pushing back against US Foods’ efforts to garnish its accounts after the distributor won a judgment earlier this year. The reasoning? It has too many garnishment requests.
Boston Market
Boston Market's creditors are trying to get whatever assets they can find. | Photo: Shutterstock.

In April, Fifth Third Bank received an order to turn over funds it holds in an account belonging to the struggling fast-casual chain Boston Market, after the distributor US Foods won a $15 million judgment over unpaid bills.

But the bank has yet to comply with the request. The problem? US Foods is one of eight different creditors targeting the account, including landlords, one other distributor and two different states.

“Fifth Third now faces conflicting court orders and obligations,” the bank wrote in a lawsuit against Boston Market, US Foods and several other entities that have won such judgments. “… it simply cannot comply with US Foods’ demands without violating the explicit terms of each order directed at accounts of Boston Market received” before the distributor sent its initial order.

Boston Market has collapsed in a wave of lawsuits and other legal filings over unpaid bills. The fast-casual chain has thus far avoided bankruptcy court, and its structure is a complex tangle of LLCs around the country, many with different listed owners.

That has left creditors effectively fighting over whatever assets they can find.

(Read here about the challenges faced by former Boston Market employees.)

Boston Market has been sued at least 150 times by creditors of various types since 2020, when former Pizza Hut franchisee Jay Pandya bought the company. He later bought Corner Bakery. In both cases, the company refused to pay bills without steep discounts.

That led to closed stores as landlords padlocked the doors over unpaid rent or utilities didn’t get paid.

Corner Bakery was ultimately forced into bankruptcy when investors bought the debt and took over ownership.

But the problems continued at Boston Market, where workers often didn’t get paid and managers had to find workarounds when US Foods stopped delivering the company’s food over unpaid bills last year.

The chain, which began 2023 with 300 restaurants, finished the year with 92. But, according to multiple sources, it is down to about two dozen operating locations, a stunning closure of more than 90% of the chain’s restaurants in just 18 months.

(Check out our coverage on Boston Market’s collapse.)

Pandya himself has tried filing personal bankruptcy multiple times, only to have those filings get canceled.

Companies owed money by Boston Market took the company, and often Pandya, to court. They would frequently win, because the company itself wouldn’t respond to the lawsuit. And after the win, they would collect by targeting whatever Boston Market banks they could find and put liens on whatever assets they could locate.

US Foods won its lawsuit against Boston Market in January after a federal judge cited the company for a “willful disregard” to the litigation. The restaurant chain filed an appeal, but that appeal has been dropped on the company’s behalf after its attorney withdrew. Pandya’s appeal as an individual has continued, according to court documents.

The bank, according to its lawsuit, has received and processed “a number of collection orders—in the form of garnishments, levies and other court orders—directed at and restraining funds held” on behalf of Boston Market, the lawsuit said.

In January of last year, the bank was ordered to withhold twice the $118,183.81 judgment amount for Greenridge Plaza, a Staten Island, New York, property company.

In September, a New York state court ordered the bank to withhold up to $321,099.59 in unpaid bills to Samson MCA LLC, a merchant cash advance company that had sued Boston Market and won.

The next month, Fifth Third received an order to withhold $222,860.29 after a court in Illinois ruled in favor of Metropolitan Investment Group of Wheaton LLC, an investment group that had sued over unpaid leases.

The bank received two more such subpoenas in November, from a court in New York from a landlord over a $50,078.34 judgment and then from a federal court in Texas over $400,000 due to the distributor Ben E. Keith.

The first US Foods order came in February this year, following the $15 million judgment. Less than two weeks later, the Arizona Department of Revenue sent a levy notice to the bank over $600,000 in unpaid taxes plus interest, according to court documents. In March, RFTC 1 Corp., an Illinois landlord, ordered Fifth Third to hold assets.

Last, but not least, the state of New Mexico demanded funds of up to $4,794.56 over unpaid taxes.

US Foods, as a national distributor of food, has special priority to collect what it is owed under a federal law known as PACA, or the Perishable Agricultural Commodities Act. The company has asserted those rights in a counterclaim against Fifth Third.

Regardless, the bank is unable to satisfy all these claims no matter what happens. The judgments total nearly $17 million. Fifth Third holds just $255,000 in its Boston Market account.

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