© 2017 The Texas Lawbook.
By Natalie Posgate
(Nov. 14) – Dallas celebrity chef Kent Rathbun can continue using his own name to promote his endeavors in the restaurant industry, but he cannot use his name to incite damage or detriment on his former business partner’s reputation, a Dallas appellate court upheld on Friday.
The ruling is tied to a bitter legal dispute going on in state District Judge Tonya Parker’s court that is slated to go to trial Dec. 4. It pits Rathbun, the former executive chef of upscale favorites Abacus and Jasper’s, against H2R Restaurant Holdings, the majority owner of the two restaurants.
The heart of the upcoming trial will revolve around an agreement that Rathbun signed in 2009 with William Hyde, Jr., the majority owner of H2R, that gave H2R the exclusive use of Rathbun’s name and likeness – even if Rathbun were to ever leave the restaurant group.
Rathbun resigned from the restaurant group in May 2016 after a business dispute with Hyde, who is the former CEO of Ruth’s Chris Steak House.
According to court documents, Rathbun seeks to recover more than $1 million from H2R on claims that Hyde tricked him into signing the contract that he misrepresented as a “mere formality.”
Rathbun claims the agreement is unenforceable because “it is not a contract. There was no offer and acceptance, no meeting of the minds, and no consideration given to Rathbun for its execution.”
“As Rathbun testified, ‘I would have never signed anything like that if I had thought that this meant my whole life could end up being controlled by someone else,’” one legal brief notes. “Defendants’ threat that the assignment agreement means that they ‘own’ Rathbun forever, that he can no longer work in his chosen field, nor rely on his international reputation to be gainfully employed is a real and present harm.”
Rathbun, who still maintains a minority interest in H2R, also contends that Hyde has breached many fiduciary duties, such as secretly carrying over liabilities and debts from previous restaurant franchises to their H2R partnership.
But H2R’s lawyers contend in their filings that Rathbun’s agreement does not restrict the chef’s professional mobility; in fact, he’s made a “substantial” amount of money doing various types of work for direct competitors of H2R.
H2R argues in court filings that the agreement does not limit Rathbun’s “ability to work as a chef for a different employer,” nor does it keep him from “associating with another company, even if it competes with” H2R.
They also argue that Rathbun owes Hyde an overdue promissory note of $250,000, the amount Rathbun agreed to put into the formation of H2R in 2007 for his 25 percent stake.
H2R sought a temporary injunction to bar Rathbun from using his name or likeness in the restaurant industry after Rathbun launched a marketing campaign in December 2016 to promote his new ventures, including Chelsea’s Corner and the 1018 Club, identifying himself as the “Chef With No Name” and creating a #ChefWithNoName hashtag that went viral and garnered ample media coverage.
In court documents, H2R argued that Rathbun’s campaign was designed specifically to “circumvent the assignment agreement and to disparage, embarrass and harm” H2R and that the campaign achieved its purpose, since H2R restaurants lost substantial revenue as a result.
“The public response has been vicious, ranging from promises to boycott the H2R restaurants to vilifying H2R and its principles with vulgar language,” court documents say.
Judge Parker issued a TRO against Rathbun from using his own name or calling himself “Chef With No Name” in March, but after a temporary injunction hearing in May, lifted that ban. But she did bar Rathburn from “utilizing his name, any variation thereof, his likeness, or his image in any manner which would be likely to be derogatory to H2R.”
Michael Hurst and Craig Florence, the lead trial lawyers for Rathbun and Hyde/H2R, respectively, both declined to comment on the specifics of the case, noting Judge Parker’s request for the attorneys not to do so.
However, with respect to Friday’s Court of Appeals ruling, Florence said the opinion did not address the core legal issue his team brought regarding whether Judge Parker erred when she ruled the contract between Rathbun and Hyde was governed by the Covenants Not to Compete Act.
“That remains open and will be subject to any future appeals,” Florence said.
Florence led argument for H2R and Hyde in the Dallas Fifth Court of Appeals. Lynn Pinker Cox & Hurst partner David Coale led argument for Rathbun.
The judicial panel that handed down Friday’s opinion included Justices Douglas Lang, David Evans and David Schenck.
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