Karcher Dealt Financial Setback From Loan Ruling : Courts: Founder of Carl’s Jr. must pay bank $600,000 that he guaranteed. Bankruptcy proceedings are possible.
Hamburger mogul Carl N. Karcher could soon be forced to seek bankruptcy protection from creditors after a legal setback Wednesday on a lawsuit involving the Karcher family trust and a former business partner.
The suit was filed in Los Angeles Superior Court by National Bank of Long Beach regarding a $600,000 real estate loan that Karcher guaranteed in connection with a troubled 1991 real estate development in San Bernardino County.
Judge Eric E. Younger on Wednesday granted the bank’s motion to summarily force Karcher to pay back the loan amount, said Gail B. Greenberg, an attorney whose firm represented the bank.
Karcher was unavailable for comment on Wednesday, but his personal attorney said the decision could push Karcher, 78, toward a bankruptcy filing.
“If we can’t get this judgment stayed, Mr. Karcher is going to have to seriously consider the option of Chapter 11” bankruptcy proceedings, said Andrew Puzder. “But Mr. Karcher remains adamant that he will not have to file bankruptcy.”
The lawyer said that Karcher would ask the State Court of Appeal to reverse Younger’s decision.
The unfavorable legal decision was the latest in a series of recent developments for the fast-food legend who in October, 1993, lost a bitter boardroom fight and was forced out as chairman of the company he founded more than half a century ago.
On Monday, CKE Restaurants announced that Karcher, now the company’s chairman emeritus, would return to his cherished role as television pitchman for the Carl’s Jr. hamburger chain. CKE Restaurants also said it would return the chain’s marketing focus to quality food rather than competing on lower price--a strategy Karcher long has endorsed.
The next day, Donald E. Doyle, CKE Restaurants president and chief executive officer, said he was resigning to become chief operating officer of Hardee’s Food Systems Inc., a larger national fast-food chain with headquarters in Raleigh, N.C. Karcher and Doyle had been at odds over the chain’s direction.
Karcher’s finances remain shaky despite his highly publicized debt restructuring last year, when a group led by businessman William P. Foley II, the current chairman and chief executive of CKE Restaurant, assumed $30 million of Karcher’s personal debt in exchange for about 30% of CKE Restaurants’ outstanding shares.
Karcher and his family trust still hold about 1.63 million, or 9% of the company’s outstanding shares.
Karcher also has been seeking negotiated settlements with other creditors, including National Bank of Long Beach. Failure to reach agreement with any one of those creditors “would be major enough to force Mr. Karcher to consider options that he doesn’t want to consider,” Puzder said.
Wednesday’s court hearing involves a business deal Karcher had with Maurice Monnig, 52, a longtime family friend and business associate. The two men were involved in a series of troubled real estate deals in the Inland Empire through a now-failed company called Monnig Development Inc.
In the Los Angeles Superior Court suit, National Bank of Long Beach contended that Karcher was ultimately responsible to repay the $600,000 development loan because he guaranteed it through his family trust. But Karcher unsuccessfully argued that his obligation was limited because Monnig and National Bank of Long Beach had failed to fully disclose the actual terms of the loan transaction.
