Facts

Plaintiff T-Bird NV, LLC, through various limited partnerships, owned and operated 56 Outback Steakhouse franchise restaurants in California. T-Bird's principal, Tom Shannon, was a close personal friend of Outback's founders, Chris Sullivan and Bob Basham. Shannon alleged that Sullivan and Basham induced him to develop the risky, but profitable California market for Outback, which was a public company at the time. Shannon further alleged that on behalf of Outback, Sullivan and Basham orally agreed to partner with Shannon by guaranteeing a $35 million line of credit from Outback's bank to help finance the rapid expansion of the Outback Steakhouse California market.

Sullivan and Basham allegedly orally agreed that T-Bird would only repay the loan funds from proceeds of the sale of all of the California Outback restaurants at the time of a major liquidating event, such as the sale of Outback, and that Shannon and his limited partner investors, who included well-known sports personalities, would receive a purchase price that was equivalent to that received by Sullivan and Basham for the sale of their Outback stock.

In June 2007, Bain Capital and Catterton Partners took Outback private, in a deal valued at more than $3.2 billion, which Shannon claimed would have meant a purchase price for the T-Bird Outback franchises of more than $200 million. Shannon alleged that Outback reneged on its agreement to purchase the T-Bird restaurants in connection with the going private transaction.

A year later, the $35 million loan came due; Outback was forced to pay the bank under its guaranty and sued T-Bird, the limited partnerships, and their general partners in Florida to recover the funds.

The very next day, T-Bird and the franchisees sued Outback and the other defendants in California for fraud, breach of fiduciary duty, breach of a joint venture agreement, tortious interference, violation of the franchise laws, and other claims.

PLAINTIFF'S CONTENTIONS:
Plaintiffs contended that the oral agreement by Sullivan and Basham on Outback's behalf that Outback would buy the T-Bird franchise restaurants and that the loan would be repaid only when Outback bought the T-Bird franchise restaurants in connection with the going private transaction was a binding joint venture agreement. Plaintiffs further contended that by developing the California market for Outback, they added substantial value to the going private transaction, which satisfied their part of the joint venture. Plaintiffs also contended that the agreement was not barred by the parole evidence rule, but was a separate agreement that was independent of the franchise agreements and related financing documents.

DEFENDANTS' CONTENTIONS:
Defendants denied all of Shannon's contentions. In particular, Sullivan and Basham denied that they ever promised Shannon that neither he nor his entities would have to repay the loan or that Shannon's restaurants would be bought out if Outback was sold, and they denied that any promise was made that Shannon was entitled to a particular price if Outback ever decided that it did want to purchase the California Outback restaurants. Defendants also contended that all of the rights and obligations of the parties were set forth in the written contracts between the parties, including the written franchise agreements, and that those written contracts contradicted the alleged oral promises. Defendants further contended that they complied with any commitments made to Shannon.

Settlement Discussions

The parties engaged in numerous mediation sessions and settlement discussions in both the California and Florida cases, but no settlement could be reached. The parties engaged in numerous settlement conferences with Judge Emilie Elias.

Result

To settle both the California and Florida cases, Outback bought the promissory note from the bank in February 2009. Outback agreed to a put right, exercisable by plaintiffs for one year of closing an Initial Public Offering, of at least $100 million of shares of common stock of Outback at a price equal to 75 percent of the multiple of Outback's EBITDA that Outback receives in the sale of its stock. Defendants also entered into an exclusive development agreement with plaintiffs so that plaintiffs have the sole and exclusive rights to develop Outback Steakhouse restaurants in California. Defendants also agreed to give up Outback's right of first refusal contained in the franchise agreements on any sale of the T-Bird franchises to a third party. Plaintiffs agreed to repay $33 million of the loan to Outback within 60 days of execution of the settlement agreement and Outback agreed to waive interest that had accrued on the loan since Outback bought the promissory note from the bank in February 2009 and waive attorney's fees under the note.

Other Information

At hearing on August 11, 2011, the Court granted the Motion for Summary Judgment of the investor Defendants Bain Capital Partners, Catterton Management Company, LLC, Bain Capital (OSI) IX, LP, Bain Capital Fund IX, LP. Catterton Partners VI, LP, Catterton Partners VI, Offshore, LP, and Kangaroo Holdings, Inc. The California case was initially dismissed based on a Florida forum selection clause contained in the financing agreements and the franchise agreements. In an expedited proceeding, the appellate court reversed the trial court and reinstated the California case on the grounds that the Florida forum selection clause violated California's franchise laws and therefore was unenforceable. The California Supreme Court denied defendants' petition for review. Case settled following jury selection during a one-week break before opening statements. FILING DATE: Feb. 20, 2009.