Callender’s Legal Battle With Ramada Continues : Pie-Chain Founder Permitted to Sell Holdings

Donald W. Callender, founder of the Marie Callender Pie Shops chain, can sell his 2.5 million shares of Ramada Inc. stock, an Orange County Superior Court judge has ruled.

But the preliminary order issued Thursday by Judge Eileen C. Moore does not end Callender’s legal skirmishes with Ramada.

And according to Robert Crockett, an attorney for Ramada, restrictions remain on the number of shares Callender can sell each month without first getting Ramada’s approval.

The court order stems from a long-simmering dispute between Callender and Ramada over the terms of a 1986 agreement in which the pie-and-sandwich chain’s founder sold the company to Ramada for nearly $57 million in cash and Ramada stock.

Callender, in turn, agreed not to sell any of his Ramada shares until May, 1990, when he could sell 1 million shares. The remaining 1.5 million shares could not be sold until May, 1991, under the agreement.

Since selling the chain, Callender has filed four lawsuits accusing Ramada, a Phoenix-based hotel and casino company, of fraud and failing to live up to its obligations under the 1986 sale contract. Ramada has denied any wrongdoing.

Meanwhile, Ramada sold the Marie Callender chain to Wilshire Restaurant Group Inc. for about $54.5 million in May. The transaction was part of a restructuring by Ramada, in which the company’s hotel and restaurant businesses are being sold.

On April 17, Ramada agreed to sell its 800 hotels to New World Development Co. Ltd. of Hong Kong for $540 million. A shareholder meeting to approve the transaction is scheduled for July 31, and the sale is expected to be completed within 60 days.

Callender sought court approval to sell his Ramada shares because he wanted to be able to sell the stock before the hotels are sold. “Every other shareholder can sell right now if (he or she) wants to,” said Callender’s lawyer, Robert Waier of Santa Ana.

Don Callender “certainly doesn’t intend at this point to cast all of his 2.5 million Ramada shares into the open market,” Waier said.

Waier said he does not know how many shares of Ramada Callender actually plans to sell.

What is certain, according to the attorney, is that the court order prevents Ramada from trying to enforce any contractual restrictions that would prevent Callender from selling his 6.3% stake in the company. With the court order, “they can’t withhold their consent,” Waier said in a telephone interview.

But Crockett, Ramada’s lawyer, disagreed.

According to Crockett, a provision of the 1986 contract bars Callender from selling more than 100,000 Ramada shares within a 30-day period without the company’s consent. With the court order, “he can now sell less than 100,000 shares” at a time on the open market.

Ramada’s lawyer said the company “has no position” on whether it would allow Callender to sell more than 100,000 shares per month. But he added that if Callender asks Ramada for permission to sell more than that at a time, the dispute could end up back in court.

The Orange County lawsuit, which actually is two consolidated cases, is scheduled to begin trial on Nov. 27 to address other issues still in dispute.

A second trial is set to begin on Nov. 21 in U.S. District Court in Los Angeles concerning Callender’s alleged failure to pay franchise fees on eight restaurants. A class action suit by Callender also is pending in Orange County Superior Court.

Marie Callender has about 150 restaurants in 17 states. Of those, 105 are in California.