Did the famous Palm grow into a steakhouse chain at the expense of some of the founders descendan -

Many family arguments occur around the dinner table or, maybe, over text message. But since 2012, the descendants of the founders of the Palm restaurant have been fighting in Manhattan courtrooms over licensing royalties and other complex transactions related to the legendary steakhouse chain. A judge’s decision last fall on the case only seemed to escalate the conflict.

In November, Andrea Masley, a judge in the commercial division of the New York Supreme Court, awarded $119 million to the company that licenses the Palm name, logo, recipes and other intellectual property to those who want to open a Palm-branded steakhouse. The decision was a victory for three grandchildren of John Ganzi, one of the two original owners. As minority shareholders in Just One More Restaurant Corp., the trio had filed the suit against majority shareholders Bruce Bozzi Sr. and Walter Ganzi Jr. (known as Wally), who are also grandchildren of the Palm’s founders.

Bozzi Sr. and Ganzi Jr. appealed. They did something else, too: In Florida, they filed for voluntary bankruptcy on behalf of Just One More Restaurant Corp.

“It is a clear stunt to use U.S. bankruptcy law to circumvent a valid New York judgment,” said attorney Fred Newman in a statement to The Washington Post. Newman is representing Gary Ganzi, Claire Breen and the estate of the late Chuck Cook, who have accused Bozzi Sr. and Ganzi Jr. of self-dealing, breaches of fiduciary duties, unjust enrichment and oppression of minority shareholders.

The corporation’s bankruptcy filing — not long after receiving a multimillion-dollar judgment — is the latest twist in a multigenerational tale of how two ambitious grandsons of the Palm founders turned a family-run business into steakhouse empire, allegedly at the expense of other descendants of the original owners. All of the litigants declined, via their attorneys, to talk about the case. This report is largely based on hundreds of pages of New York court documents and Florida bankruptcy filings.

Pio Bozzi and John Ganzi, two immigrants from northern Italy, opened the Palm on Second Avenue in Manhattan in 1926. They wanted to name their restaurant La Parma, a nod to the northern Italian town famous for its dry-cured hams and hard, salty cheese, but a New York clerk apparently couldn’t understand the men and wrote “the Palm” instead. Seven years later, the founders formed Just One More Restaurant Corp. to own and operate the Palm and, later, manage its intellectual property.

The Palm would become an institution in New York, famous for its steaks, caricatures on the wall and refusal to offer menus. “What bothers anti-Palmists is the combination of noise and crowds, the brusqueness of the waiters, and, most of all, the absence of a written menu that would tell them what they can order and how much it will cost,” wrote Mimi Sheraton in a 1976 review in the New York Times that marked the 50th anniversary of the Palm.

The steakhouse almost didn’t survive to see that anniversary. It owed “more money to our butcher than we did in total volume for a year,” Ganzi Jr. said in a deposition. A 1970 accounting report noted the Palm had been “grossly mismanaged” and that, if not for its large volume and “unrealistically low rent,” it “would have already gone bankrupt,” according to Masley’s decision.

To increase revenue, Ganzi Jr. and Bozzi Sr. — who began working at the Palm in the 1960s when they were in their 20s — suggested the steakhouse expand to a second level, which it did around 1965. The two later recommended opening other locations.

The first Palm outside New York debuted in 1972 in Washington, reportedly at the request of George H.W. Bush. A who’s who of America — at least a who’s who of American men, mostly white — have dined at the Palm on 19th Street NW: Joe DiMaggio, Muhammad Ali, Charlton Heston, Frank Sinatra, even Bob Woodward and Carl Bernstein, who were said to have worked on “All the President’s Men” in a back booth.

The Palm in Washington marked the beginning of a business practice that would lead to the battle between the founders’ descendants. To open the location, Bozzi Sr., Ganzi Jr. and their partners paid $6,000 to license the name and intellectual property, including the famous palm-tree logo, from Just One More Restaurant Corp.

“The license fee between Palm One [the original restaurant] and the D.C. Palm was proposed by Wally and I to our D.C. investors as a way of generating additional revenue for JOMR,” Bozzi Sr. said in court documents. “Neither our fathers nor our grandmothers ever sought any compensation for our use of the Palm name.”

In fact, during the “38 years I was opening new Palms, none of the Bozzis or Ganzis ever objected to our use of the Palm name and logo ... nor did any of them ever suggest that we should be paying more of the new Palms’ income to JOMR,” he continued.

The 1972 deal would become the blueprint for all other Palm restaurants that Bozzi Sr. and Ganzi Jr. opened. (The pair wholly own 18 Palm restaurants and have at least a 50 percent interest in three others, according to a bankruptcy filing.) Each time they opened a new Palm, they agreed to pay $6,000 annually to JOMR.

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These were not tough negotiations, as the attorneys for the plaintiffs pointed out. Bozzi Sr. and Ganzi Jr. were not only partners in the restaurants that needed licensing agreements, they together own 80 percent of JOMR. Gary Ganzi, Claire Breen and the estate of the late Chuck Cook own the rest.

When he became a minority shareholder in JOMR in 2010, Gary Ganzi started looking into the company’s business and discovered the licensing agreements. He knew the deals were below standard market rates: He is, after all, a patent attorney. But Bozzi Sr. and Ganzi Jr. argued in court that family members long supported their efforts to open new Palms, without ever raising a peep about the licensing agreements. The lack of objection, over four-plus decades, constitutes consent, they contended.

The judge didn’t buy it. She pointed out that JOMR had not had an official shareholder or board meeting since 1976. “Family discussions at a kitchen table in the 1970s do not constitute properly noticed corporate meetings,” she added. But even so, the judge wrote, Bozzi Sr. and Ganzi Jr. were warned in 1982 that the “$6,000 license fee was not the industry norm and would be deemed unreasonably modest in only a few years, and that rate could raise red flags and render the transactions vulnerable to shareholder challenges.”

The judge singled out the defendants’ own expert, who testified that restaurant chains similar to the Palm calculate licensing rates as a percentage of sales. “All expert testimony established that the per-restaurant, annual flat-fee is not fair or reasonable,” she noted.

Sales at the 20-plus Palm restaurants from 2006 to 2017, Masley indicated, were huge: an estimated $1.5 billion, according to court documents. In her decision, the judge calculated how much Bozzi Sr. and Ganzi Jr. owe Just One More Restaurant Corp. based on a 5 percent royalty rate of those sales (minus what the pair had already paid to JOMR). She awarded JOMR $68.2 million, plus an additional $41 million in interest. The remainder of the $119 million award came from other transactions Masley deemed improper.

Bozzi Sr. and Ganzi Jr. quickly appealed, putting a temporary stay on Masley’s judgment. At present, the case has had no effect on operations at Palm restaurants.

But on March 6, Bozzi Sr. and Ganzi Jr. also held a special board meeting for JOMR in Naples, Fla., apparently the first in decades. The men approved a plan to put JOMR into voluntary bankruptcy, even though they are the ones responsible for the monetary judgment.

Why? The company’s proposed chief restructuring officer, Gerard A. McHale, perhaps offered some insights in a bankruptcy document. McHale wrote that Masley, in her judgment, had voided all the licensing agreements.

Should the defendants’ appeal fail, McHale argued, bankruptcy laws should prevent either the minority shareholders or the government from taking actions against JOMR, essentially allowing the Palm licensing agreements to stand while Bozzi Sr. and Ganzi Jr. determine what resources are available to settle the $119 million judgment.

One potential funding source, according to McHale? “Renegotiated and new license agreements.” The very thing that Gary Ganzi and the other plaintiffs wanted before they went to court.

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