Texas Chef Paul Qui Is Suing Business Partners

It’s been over a year since Texas chef Paul Qui’s assault charges were dismissed in court, and now the embattled chef is suing his former business partners for more than $1 million in monetary relief, according to the lawsuit originally reported by Statesman and obtained by Eater. Qui alleges that former business partners Bill Stapleton, Filadelfo Trombetta, and their related companies, including Austin hospitality group New Waterloo, deceived him out of wages while also attempting to sabotage his relationship with his Miami hotel restaurant, Pao by Paul Qui. There is no scheduled hearing date yet.

Qui started working with New Waterloo in 2014, according to the suit, under a business agreement which said the company would “represent, advise, counsel, and assist” Qui through “sourcing, analysis, negotiation, and execution” of things like “endorsement, licensing, literary, media, multimedia, public appearances, public speaking, and other personal services,” in exchange for 20 percent of Qui’s earnings.

At the time, Qui had two Austin restaurants, Qui (now closed) and East Side King. He won Top Chef in 2011 and went on to win a James Beard Award in 2012, along with multiple other media accolades. In the complaint, Qui alleges that Stapleton and New Waterloo “sought to take advantage of Qui’s rising fame and success as a celebrity chef.”

The lawsuit goes on to say that, as Qui’s consultant and contact point, New Waterloo was required by Texas law to “act with the utmost loyalty, care and good faith, and to put Qui’s interests ahead of its own.” The lawsuit makes the case that Stapleton and New Waterloo did not uphold those fiduciary duties and “repeatedly took advantage” of Qui, resulting in hundreds of thousands in lost revenue to Qui. Stapleton in particular became Qui’s main contact and advisor in matters both related to business and personal life, the complaint alleges.

New Waterloo, according to the suit, encouraged Qui to create a new company, VCQui, which was half-owned by Qui and half by New Waterloo. VCQui was created in 2014, after the original agreement, as a management company for Qui’s businesses. The suit maintains that Qui now interpreted that decision as the company “set[ting] out on a scheme to usurp more and more control over (and financial benefit from)” him. Because Qui’s businesses were conducted through this new company, New Waterloo “increase[d] its shares [...] from 20 percent to 50 percent without any obligation to provide additional services.”

Then in late 2015, Qui ventured into Miami with his first Florida restaurant Pao by Paul Qui at the Faena, at the insistence of New Waterloo, according to the suit. Because the restaurant business was conducted through VCQui, it resulted in New Waterloo getting 50 percent of the net income, as the suit posits, because of the way VCQui’s ownership worked.

Then, Qui and Stapleton entered into another agreement for omakase restaurant Otoko within New Waterloo’s South Congress Hotel, as the lawsuit explains, in 2015. Stapleton set up SoCo ATX Investments — a separate LLC — for the hotel’s restaurants, through which Qui was contracted as an individual rather than VCQui. As part of the deal, Qui agreed to “provide extensive pre- and post-opening services in connection with the concept, design, branding, marketing, budgeting, and staffing” for “an ongoing share of the restaurant’s revenues and profits for five years,” according to the suit.

The lawsuit maintains that this agreement to provide services was a conflict of interest because Stapleton owned SoCo ATX while also representing Qui through their original contract. A more explicit agreement explaining the participants’ clear roles was supposed to be hammered out, but the suit explained that it never happened.

Otoko opened with a big splash in March 2016 with head chef Yoshi Okai. Right after the opening, Qui was arrested on assault charges when he attacked his girlfriend. He entered rehabilitation shortly afterwards.

Two years after Qui’s arrest, during which “no issues or complaints [were] raised” between New Waterloo and Qui, the New Yorker published what the suit described as a “negative article” in February 2018. The piece was about the responsibility of food critics who review restaurants involving bad actors. Qui was the main focus of the article.

According to the lawsuit, Stapleton then “expressed his desire to disassociate with him.” Qui alleges that they used the article as their “opportunity to cut Paul out of the Faena and Otoko deals,” despite the original contract promising they would act in good faith towards his interests.

While not mentioned in the lawsuit, for further context: later that year, in September, Qui decided to close his acclaimed flagship restaurant, Qui, and flipped it into a new restaurant called Kuneho in January 2017. Kuneho closed several months later.

In the lawsuit section titled “secret revenues,” it alleges that New Waterloo lied to Qui about VCQui’s earnings. According to the suit, Faena Group sent a payment of over $100,000 to the VCQui account in March 2018. Qui alleges that Stapleton and Trombetta blocked his access to the business bank account so that he wasn’t aware of the full amount. According to the suit, New Waterloo presented Qui a payment that was “less than 50 percent” of the $100,000+. Qui also accuses the company of collecting VCQui’s earned money from Faena and “commingling” it into New Waterloo’s other bank accounts unrelated to him.

The complaint says that New Waterloo deterred Qui from looking into the accounting of the company by claiming he would be charged “professional fees” if he contacted VCQui’s tax preparer, which the suit maintains was a lie to “hide that they were improperly diverting VCQui funds to New Waterloo.” The suit claims that New Waterloo hasn’t provided full accounting history to Qui, which includes “an unexplained cash withdrawal,” a check written personally to Stapleton, and “unexplained ‘reimbursements’ all totatling tens of thousands of dollars.”

There is also a claim that New Waterloo lied to the Faena Group saying that the company “‘has withdrawn as a member of VCQui’” at the time of that New Yorker article, which didn’t happen.

As a result of that false letter, the complaint states, Faena Group “immediately cancelled its agreement with VCQui altogether,” with losses estimated at $450,000. However, according to a representative at Pao by Paul Qui, Qui is still involved with the Miami restaurant. His name is still in the title of the restaurant and his photograph and biography appear on the website.

In May 2018, according to the suit, Stapleton through SoCo ATX wrote to Qui that the company was ceasing its Otoko agreement with the chef in terms of forthcoming payments. Qui maintained that he fulfilled his contractual obligation, but wasn’t properly compensated for his promised work. The suit claims that the SoCo ATX company “has collected all of the revenue from Otoko without paying Qui his share.” It estimates that the defendants owe him at least $300,00 from the original restaurant deal.

In summary, the lawsuit claims that “every agreement that New Waterloo entered into with Qui [...] took advantage of their relationship to Qui for the benefit of themselves and their web of affiliates [...] resulting in substantial financial damage to Qui and financial benefit to them.”

In response to the lawsuit, New Waterloo provided the following statement to Eater:

”When Paul Qui was arrested on charges of assault and unlawful restraint, he committed to the New Waterloo team that he would embark on a process to get help for his addictions. Along with his other business associates, we tried to support him and went so far as to find and pay for his treatment. After some time, we were not satisfied with his commitment to improving his behavior and we concluded that the right thing to do for our company and employees was to sever all ties with him. The accusations of the lawsuit are meritless and we stand behind our actions.”

So it could have been Qui’s lack of improvement as described in the lawsuit and/or the New Yorker article, or something else entirely which prompted the severing of ties in 2018.

In other Paul Qui-related lawsuit news, local farm food distributor Farm to Table sued Qui in 2017 for unpaid services. That case closed after the court ordered Qui to pay the company a reduced sum from the original asking price, plus interest. More recently, Qui opened and closed a restaurant in Houston after it became a controversial pinpoint in the conversation regarding restaurants that are owned by chefs accused of domestic violence/sexual misconduct. He also opened and closed a taqueria in Dallas, and is still involved with Austin-based East Side King.

• Chef Paul Qui says business partners took advantage of him, sues for $1 million [Statesman]
• All Coverage of Paul Qui [EATX]