Touch of Italy files suit against Frank & Louie’sBaltimore Avenue businesses set to go to court
Rehoboth Beach — The once profitable partnership at the center of the original Touch of Italy on Baltimore Avenue in Rehoboth Beach has turned into a courtroom drama.
In a suit filed in Delaware Court of Chancery, Touch of Italy LLC is suing former partners Louie, Frank and Diane Bascio and seeking an injunction against their new business, Frank and Louie's Italian Specialties, which opened down the block from the original Touch of Italy storefront.
In response, Louie Bascio's attorney, David Hutt, has filed a motion to dismiss the case.
"This kills me," Touch of Italy co-owner Robert Ciprietti said. "Because Louie and I were so close. It hurts me personally. I'm so upset about this, it's killing me inside. I hate doing this. We could have resolved it by just picking up the phone."
For his part, Louie Bascio said he did not understand the suit, referring questions to Hutt, who said the suit is without merit and was brought out of ill will.
“This lawsuit has no basis in fact or law and appears to be nothing more than a transparent attempt by plaintiffs to put a competitor out of business by oppressing a start-up venture with the expense of litigation,” Hutt said in his motion to dismiss.
According to Touch of Italy’s suit, the original Touch of Italy partnership in February 2009 was based on a 50/50 agreement between Ciprietti and the Bascios, who started the original Touch of Italy bakery in Millville. Ciprietti said he had known the Bascios for several years before he became involved in the business.
Ciprietti, court documents say, supplied all the capital for new venture, $100,000. Ciprietti said the partnership agreement specified that Ciprietti would be repaid his investment from earnings or assets of the company within five years.
"I knew there was a need for Italian food here. They had no experience in Italian food; their experience was in baking. I said, 'Let's open up an Italian deli down here as a test,'" he said. Ciprietti said he did not want to be involved in the day-to-day management of the store.
Hutt, in his motion to dismiss, said the operating agreement does not obligate any member to repay Ciprietti’s initial contribution. Hutt said the agreement states Ciprietti could request reimbursement of his $100,000 investment five years after Oct. 3, 2009, with $10,000 monthly payments over 10 months. Under these terms, Hutt said, the time for Ciprietti to demand repayment has not yet arisen and would not arise until Oct. 4, 2014.
Louie Bascio was to contribute labor and goodwill, according to the suit, in return for a 50 percent share of the company. Ciprietti said the Bascios were owners and employees, getting paid a salary and health insurance.
Touch of Italy opened in the fall of 2009 and was very successful; Ciprietti said he and the Bascios began discussing plans for a second, larger location in Lewes. Ciprietti said at no point did the Bascios have any money invested in either location.
In March 2011, a third partner, Joseph Curzi III came in, purchasing a one-third stake in the company for $17,000. Ciprietti and the Bascios' stakes were adjusted and reduced.
As part of the new partnership, Frank and Diane Bascio sold their interest in the company to Ciprietti, Louie and Curzi. Ciprietti said Touch of Italy purchased the recipes as part of buying Diane out.
Ciprietti said the agreement is clear that none of the partners would take any action detrimental to Touch of Italy, a clause he says negated the need for a no-compete clause.
In his response, Hutt said Touch of Italy is trying to impose a no-compete clause on an operating agreement that does not have one.
In October 2012, the lawsuit says, Louie gave notice to his partners that he intended to leave the business by Jan. 1. The partners held discussions on what to do regarding Ciprietti's initial $100,000 investment. The lawsuit says Louie Bascio assured his partners that he would not take any action adverse to Touch of Italy or open a competing business in Rehoboth.
Ciprietti said the operating agreement stated that Louie would have to give 60 days’ notice before leaving. At that time, he said, appraisers were called in to figure out the value of Louie's share. Ciprietti said Louie decided to stay the appraisal process until after the holidays.
On Dec. 15, Louie announced he was leaving that day, giving only six hours’ notice, the lawsuit said. From March 2012 until his departure, Bascio stated he intended to relocate to Pennsylvania and perhaps set up a business there. In March 2013, the Bascios set up a new store, Frank and Louie's Italian Specialties at 48 Baltimore Ave.
Hutt said the operating agreement does not impose any limitations or prohibitions on any members’ future opportunities for work, employment or involvement in other entities.
Ciprietti said that in his resignation, Louie had drawn up paperwork to sell his shares to Curzi and Ciprietti for $1. However, Curzi and Ciprietti did not sign those documents.
"We would have negotiated something. All he had to do is be honest with us from the beginning. You think we wanted to do this? Absolutely, positively not. We wanted to protect the brand," Ciprietti said.
Hutt said Curzi and Ciprietti declined to buy Louie’s share of the company within 60 days after Louie announced he was leaving, which they were obligated to do under the operating agreement. At that point, he said, Louie had two options: stay as a member of the company or terminate the company, which would then have been liquidated. By offering his share for $1 to Ciprietti and Curzi, Hutt said, Louie was allowing a profitable business to continue and allowed Louie to leave the company.
“Louis Bascio had every contractual right to elect to leave the limited liability company and properly exercised that right,” he said.
Hutt also disputed any deceitfulness on Louie’s part, saying if he intended to carefully design and plan a new business, he would have been better served liquidating the business and terminating a competitor. He said the Bascios have no interest in Touch of Italy’s other stores.
Despite the suit, Louie is still a partner in the Baltimore Avenue location, Ciprietti said, although he was offered and chose not to be involved at other Touch of Italy locations in Five Points, Second Street in Lewes and on Route 1.
Touch of Italy's suit is alleging fraudulent representation, breach of contract, negligent representation, breach of good faith and breach of fiduciary duty. The suit seeks an injunction against Frank and Louie's and a minimum of $100,000 judgment.
Louie Bascio has asked the court to dismiss the suit.
No court date has been scheduled.