Dahyalal Patel filed an action seeking to enforce his ownership rights as a shareholder in Subway No. 43092, Inc. ("the corporation"), against shareholder Ashish Shah ("Shah"), Shah's father, Ramesh Shah ("Ramesh"); and the corporation (collectively,"the Shah defendants"). In 2007, Shah, the owner of eight Subway restaurants in and around Madison County, Alabama, prepared to open a ninth Subway restaurant in Huntsville ("the restaurant"). In July 2008, Shah formed the corporation for the purposes of owning and operating the restaurant. Shah owned 90 percent of the stock of the corporation and Ramesh owned 10 percent. In 2008, Patel met with Shah about Shah's plan to open the restaurant. At some point, Patel and Shah orally agreed that Patel would purchase a 25 percent ownership interest in the corporation. Because Shah estimated that start-up costs for the restaurant would be $240,000, Patel agreed to purchase a 25 percent interest in the corporation for $60,000, payable in monthly installments. After the restaurant opened in December 2008, Shah began making periodic distributions of profits to Patel. Patel eventually paid back the $60,000, and agreed to pay an additional $12,000 for an additional five percent interest. In September 2012, Patel sued the Shah defendants, alleging that Shah had misrepresented the start-up costs for the restaurant in calculating the price of Patel's 25 percent interest. Patel alleged that the actual start-up costs were $140,000 rather than $240,000, as Shah had represented. Accordingly, Patel alleged that he either overpaid for his interest or acquired more than a 50 percent interest in the corporation. Patel further alleged that the distributions of profits he received were not proportional to his interest, even assuming that his interest was 30 percent. In addition, he claimed that Shah had withheld Patel's share of franchise-sales commissions that the corporation received from its franchisor. The Shah defendants raised a number of defenses, among them, statute of frauds and statute of limitations. The trial court granted the Shaw defendants' motion for summary judgment, effectively dismissing Patel's claims. After review, the Alabama Supreme Court affirmed summary judgment in favor of the Shah defendants on Patel's tort claims, other than conversion, and on Patel's conversion claim insofar as Patel alleged conversion of profits, commissions, and his ownership interest in the corporation. The Court reversed the summary judgment on Patel's breach-of-contract and unjust-enrichment claims and on his conversion claim insofar as Patel alleged the conversion of corporate property. This case was remanded for further proceedings. View "Patel v. Shah" on Justia Law
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