The Kona Grill polished-casual chain and former CEO James Kuhn have agreed to drop their lawsuits against one other, eliminating a possible complication in the pending sale of the bankrupt restaurant operation.
Kuhn had been fired by the company in November after serving for less than three months as CEO. He filed a lawsuit in February, alleging he was wrongfully terminated and owed $191,000.
Kona immediately counter-sued, alleging Kuhn had worsened the company’s financial plight by starving the chain of essential resources. Among other things, Kuhn was accused of refusing to fill staff vacancies, failing to pay vendors and stopping restaurants from providing wasabi, the fiery Japanese mustard, as a standard complement to its sushi dishes.
“During Mr. Kuhn’s tenure as CEO, Kona Grill had the worst same-store sales of any publicly traded restaurant company in the United States,” read the original complaint. “Indeed, the decline in same-store sales during this time was unprecedented for Kona Grill.”
The complaint also alleged that Kuhn “frequently consumed alcohol on the company’s properties, even going so far as to unilaterally close restaurants early so that he could drink at the restaurant bar (at the expense of additional sales from patrons to the restaurant from the general public).” On one occasion, it continues, Kuhn drove one of Kona’s catering vehicles after drinking.
Kona asked for a payment of at least $75,000 from Kuhn.
As part of the dismissal of its lawsuit, Kona agreed to withdraw all of its allegations against Kuhn and acknowledged in court documents that "there is no basis to support such allegations."
A bankruptcy court judge is scheduled to begin hearings today on whether One Group Hospitality, parent of the STK high-end steakhouse chain, can proceed with its acquisition of 26-restaurant Kona for $25 million and the assumption of $11 million in ongoing operating expenses.
One Group has indicated that it intends to run the Kona branches under their current name and to expand the chain.
Kona filed for Chapter 11 bankruptcy protection at the end of August.
Correction: An earlier version of this story failed to note that Kona withdrew all allegations against Kuhn and acknowledged there was no basis for the assertions.