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Founder of Original Brooklyn Water Bagel files multi-million dollar lawsuit against board of directors

September 27, 2017

The founding company of The Original Brooklyn Water Bagel Co. has filed a multi-million dollar civil action against several franchise owner entities and company board members, according to a press release issued by the plaintiff's attorney, Robert Zarco of Zarco Einhorn Salkowski & Brito.

The suit, filed by Brooklyn Water Enterprises Inc. in the 15th Judicial Circuit Court in Palm Beach County, Florida, claims that BWE's founder, Steven M. Fassberg, was fraudulently induced and coerced by John Preston and other named defendants into a merger transaction while allegedly "orchestrating a series of allegedly illegal and highly unethical business maneuvers to deliberately and methodically take over majority control of BWE."

"In my wildest dreams, I never thought I would ever find myself fighting for the company which I founded and having to protect the early shareholders on whose back the Brooklyn Water Bagel concept was built," Fassberg, said in the release. "Prior to Preston's involvement, BWE had virtually zero debt and approximately 12 million shares outstanding. It now finds itself with many more millions of shares outstanding, no franchise growth whatsoever, and minority shareholders' interests having been rendered valueless."

Fassberg's suit alleges that once the defendants schemed to take over control of BWE and its board of directors, they mismanaged the day-to-day operations of the company, including forcing corporate-owned and franchised stores to sign leases containing unfavorable terms in shopping centers owned by Preston's shopping center development company, North American Development Group," according to the press release.

Allegations also include that Preston and the other defendants knowingly used the family savings and assets of several 9/11 first responders from the New York City Fire Department, who had invested in BWE only to then turn around and dilute their interests in BWE.

 "The complaint alleges that some of these billionaire businessmen and their powerful and sophisticated advisors basically engaged in what our investigation revealed to be illegal behavior toward their business partners," Zarco said. "We are looking forward to the judge and jury providing justice to my client in this matter and having all the Defendants pay the appropriate compensation for their misconduct."

Among 12 direct and derivative causes of action, the complaint alleges:

• Several violations of the Florida Revised Limited Liability Act.
• Breach of fiduciary duty by the named company officers and directors.
• Civil conspiracy.
• Violation of the Florida Deceptive and Unfair Trade Practice Act.
• Fraud in the inducement
• Negligent misrepresentation and omission.

The complaint is asking the court for the judicial dissolution of Brooklyn Water Enterprises and a rescission of the company's operating agreement.

The Original Brooklyn Water Bagel Co., founded in 2007, features a proprietary water treatment process which creates artisan bagels and baked goods, in a fast casual, Brooklyn-style setting, according to the release. It has 24 locations and is based out of Delray Beach, Florida.