Head of Marie Callender Shops Accuses Ramada Inns of Fraud

Donald W. Callender, president of Marie Callender Pie Shops, has accused Ramada Inns, the chain’s corporate parent, of engaging in fraud and breaching a multimillion-dollar contract.

The charges are contained in a lawsuit filed in Orange County Superior Court. Ramada, a Phoenix-based hotel and casino operator, bought the Long Beach-based pie-and-sandwich-shop chain from its 60-year-old founder in early 1986 for about $80 million.

In his lawsuit, Callender asks for at least $66.7 million in actual and punitive damages. He also wants to void an agreement that prohibits him from selling his 2.5-million shares of Ramada stock.

Callender, an Orange County resident whose offices are in Newport Beach, owns 6.5% of Ramada’s 39.7 million shares outstanding.

Observers said the lawsuit, filed Jan. 20, could have a bearing on possible attempts by the Pritzker family of Chicago to take over Ramada or force changes at the company. Callender, for example, could side with the Pritzkers in a possible showdown with Ramada management.

The wealthy family owns 7.2% of Ramada’s stock, making it the company’s largest shareholder. In a Securities and Exchange Commission filing about two weeks ago, the Pritzkers said they were discussing a possible restructuring or acquisition of the company.

Ramada officials were unavailable for comment late Friday.

In his lawsuit, Callender claims that Ramada’s management has excluded him from decision making and has not lived up to its contractual obligations under the terms of the Marie Callender sale agreement.

Management “obviously doesn’t want Mr. Callender involved,” said James F. McGee, the Irvine attorney who filed the lawsuit on Callender’s behalf. After the sale, “there was a concerted plan to breach the various agreements” that Ramada made, McGee said.

Specifically, when Callender sold the chain two years ago, Ramada agreed that he would remain as president and be actively involved in management of both the Marie Callender shops and the parent company.

“Despite many assertions that he would be involved in management, he is not involved in any real sense,” McGee said. Moreover, Ramada’s board of directors recently recommended his removal from the post, he said.

Under the sale agreement, Callender received Ramada stock plus royalties and franchise fees from the sale of Marie Callender bakery products.

He, in turn, agreed not to sell his Ramada shares until May 30, 1991. At that point, Callender can force Ramada to buy back his stock at $8 per share. Ramada stock closed Friday at $7.125 per share, up 12.5 cents.

According to the lawsuit, Richard Snell, Ramada’s chief executive, and Thomas E. Martin, an officer and director, also “made numerous false representations” related to the subsidiary’s intentions and the payment of royalty fees.

The company also has failed to correctly determine the gross sales of its products, the lawsuit states. Callender’s suit seeks an accounting of those sales.

In addition to money damages, Callender is seeking court approval to sell his Ramada shares, McGee said. “Obviously, if the offer were right, he would sell,” he said.