Medieval Times Files Suit Over Firm’s Advice
Two Medieval Times franchises have filed a lawsuit against Coopers & Lybrand LLP, claiming that the accounting firm gave professional advice that forced the themed restaurants into bankruptcy.
In the lawsuit, filed Monday in Orange County Superior Court, Medieval Dinner & Tournament Inc. of Buena Park, and Medieval Show Inc. of Florida claim federal and state tax authorities assessed more than $90 million in taxes and penalties against the franchises as a result of Coopers & Lybrand’s advice.
The restaurant-entertainment franchises also are facing “financial ruin,” the suit contends.
Coopers & Lybrand has since merged with Price Waterhouse under the name Price Waterhouse Coopers, which is based in New York. The firm could not be reached for comment.
The lawsuit claims that Coopers & Lybrand devised a complex corporate restructuring, an intricate loan financing structure and an elaborate plan for licensing and paying royalties for the use of the medieval dinner and tournament theme, none of which passed muster with the Internal Revenue Service or the U.S. Tax Court.
The IRS audited the businesses’ federal tax returns and determined that the companies took improper deductions for royalties, loan interest and management fees. The companies were required to pay back taxes for 1987 and 1989.
The rulings were appealed to the Tax Court, which sided with the IRS. Last year, the franchises filed for protection under Chapter 11 of the federal bankruptcy laws.
The Medieval Times dinner theater concept--the brainchild of a family from Spain--features a banquet-style meal and medieval entertainment, including jousting and knights on horseback.
The first Medieval Times restaurant in the United States was opened in Kissimmee, Fla., in 1983. The Buena Park “castle” opened in 1986.
There are six Medieval Times restaurants in the United States and one in Canada. Each franchise is owned by Dutch-based investor groups, often with overlapping partners, and all are managed from the Buena Park headquarters.
Only the Florida and Buena Park franchises are embroiled in the legal dispute over taxes.
