Chain of 1950s Diners Files for Chapter 11 : Bankruptcy: Original Mels Inc.’s president says it acted to prevent its Newport Beach creditor from taking control.
The president of a Northern California-based chain of nostalgic diners said Monday that his company has filed for bankruptcy to stymie a takeover effort by a Newport Beach investor.
Mike Weiss, president of Original Mels Inc. in San Rafael, said the chain of six 1950s-style diners filed for Chapter 11 on Friday in San Francisco to prevent its largest creditor, Newport Beach investor Howard Ulene, from taking control.
“I regret the necessity for this filing, but we had no other alternative to protect . . . shareholders and ourselves from Mr. Ulene,” Weiss said in a statement.
But Newport Beach lawyer Allan P. Leguay, who represents Ulene, welcomed the bankruptcy filing and said Ulene would request the appointment of a court trustee.
He said the company has a negative net worth of at least $1 million and has fallen behind in its payments to Ulene, a secured creditor.
“They are losing money hand over fist and they would have been in bankruptcy months ago had it not been for Mr. Ulene,” Leguay said. “The matter is where it should be, and that is in bankruptcy court.”
Ulene could not be reached for comment. Neither Weiss nor Leguay would disclose how much Ulene has invested in the company since June, 1990.
Andrew H. Wilson, the company’s lawyer, alleged that Ulene unlawfully directed the company’s chief financial officer to withdraw money from the company’s accounts ostensibly to seek repayment and to lock Weiss and his father, Mel Weiss, out of the corporate offices.
“The company’s restaurants are actually doing very well,” Wilson said in a statement. “The only purpose of the filing is to prevent Ulene from completing his scheme to loot the company of its assets. The company’s ongoing cash flow should be sufficient to pay its trade creditors, suppliers and vendors.”
Leguay said the allegations are untrue. “We have not taken any money,” he said flatly.
The company has restaurants in Sacramento, Davis, Concord, Berkeley, Stockton and Modesto.
It incorporates a 1950s nostalgia theme borrowed from the original Mels Drive-In opened by Mel Weiss in San Francisco in 1947.
