Oath Pizza, a fast-casual pizza chain out of Massachusetts that featured former Chipotle executives among its management, was struggling last year when the company put its assets up for sale to pay off its creditors.
Instead, the company’s CEO ended the sale process, ignored offers from competitors and acquired the assets for himself, according to a lawsuit filed last week in a Massachusetts court.
James Alpi, who invested $250,000 in the chain in 2021, filed a derivative lawsuit on behalf of the chain’s former parent company, Next Level Pizza, accusing Oath Pizza CEO Andrew Kellogg of self-dealing by effectively selling the company’s assets—and not its liabilities—to a new company in which he was paid the same, $400,000 salary.
Oath was started in 2015 and Kellogg, who spent nearly a decade with Chipotle, joined a few years later. The brand operated eight corporate locations and 22 non-traditional units by 2021, when it started to franchise.
According to his lawsuit, Alpi invested $250,000 into the company in 2021 through a convertible note that apparently was increased to $625,000 at the end of last year.
In the lawsuit, Alpi says Kellogg said the company had investment commitments that would carry Oath through the end of this year. In reality, Alpi argues that Kellogg knew Oath “had less than a year’s working capital.”
By that November, Oath Pizza agreed to dissolve the company, sell its assets and repay its creditors. The company hired a financial consultant and, according to the lawsuit, “received offers for significant sums to purchase its assets,” including at least one offer worth $1 million. Instead, in January, Kellogg “shut down the sale process” and instead sold the assets to a new company under his control called “New Oath.”
The sale price was $10,000, plus an unsecured note payable over 10 years. The sale “left the company with no way to satisfy its debts or pay its creditors,” including Alpi. The lawsuit said Kellogg steered through the sale process over objections from its financial advisor. Kellogg then dismissed the advisor.
Efforts to reach Oath Pizza or Kellogg were unsuccessful as of Tuesday morning.
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