Legal battle bakes between 2 central Ohio bagel businesses

COLUMBUS, Ohio (WCMH) -- One morning in early October, storefronts in North Market and Bexley bore the familiar Block’s Bagels branding. The next morning, they did not: a newly-erected “Fox’s Bagel & Deli” sign with a bagel in lieu of an “O” dangled above each. 

The month and a half since have boiled into a legal battle in civil court between HB3 LLC, the family company that owns Block’s Bagels, and Jeremy Fox, a longtime business partner who owned and ran the two then-Block’s, now-Fox’s locations for more than six years. 

Before that, Fox was buying bagels from the family for his food cart: Short North Bagel Deli.

In October, HB3 files lawsuit against Fox, Fox’s Food

The legal back-and-forth stems from a complaint HB3 filed against Fox, his food companies, and his father Ronald in the Franklin County Court of Common Pleas on Oct. 12 -- a little over a week after the name change. 

In it, HB3 alleges that Fox intentionally breached a 2016 ten-year license and product supply agreement between himself and the Block family, under which Block’s was the sole supplier of bagels, cream cheeses, and other deli goods to the Bexley location -- which Fox opened under the Block’s name and branding in early 2017. 

The Blocks and Fox pursued a similar, oral agreement for the stand at North Market, which Fox opened at the start of the pandemic, according to the complaint filing. 

But both of Fox’s storefronts have been toasting and schmearing as Fox’s Bagels and Deli for close to two months, and HB3 alleges they are doing so after Fox fired and immediately rehired all of his workers, switched out the signs overnight, reformatted the menus, and began receiving goods from another dealer. 

“It was his theory that changing the name of his store allowed him to avoid the obligations he had,” plaintiff attorney James Arnold of Arnold & Clifford LLP said in an interview. Arnold said this bit into HB3’s business.

The initial complaint also cites equipment from the original, now-shuttered Block's location that Fox's possesses and performance bonuses that have gone unpaid.

Preliminary injunction granted Wednesday

On Wednesday, a magistrate judge granted HB3 a preliminary injunction, which pushes Fox to continue to abide by their original supplier agreement through a final trial. This means while Fox attempted to cut ties with Block's, his shops will still have to source bagels from the company they were formerly named after.

The injunction extends a temporary restraining order, first handed down on Oct. 14, and comes after testimony from both sides. Fox’s lawyers plan to file objections to the preliminary injunction, according to a statement. 

“It is always unfortunate when parties find themselves in a court battle trying to protect their business,” said defense attorney Andy Clark, of Onda LaBuhn Ernsberger & Boggs Co. “In this case, both businesses were struggling financially and have had to make very difficult decisions.”

For Fox, those difficult decisions included reconsidering his partnership with the Block family when the pandemic struck blows to the business sector. That was compounded by what the defense characterized as HB3’s “unfair” wholesale prices for bagels and other products, according to a pre-hearing defense filing.

Last October, Fox formed a limited liability company under the name of Sammy’s Bagels, and in March used it to buy HB3’s direct competitor: Sammy’s Foods. HB3 did not know this, according to court filings. 

In September, Fox sold most of the assets of Fox’s Foods LLC -- formed when he entered into the original supply agreement and opened his first Block’s Bagels location -- to FRG Enterprises, another LLC formed by Fox in July that stands for “Fox Restaurant Group.” 

The morning of the name change -- when a "Fox's Bagel and Deli," sign hung outside -- Fox’s lawyers informed HB3’s lawyers that the two locations would now be run by FRG, under the new name and absent any affiliation with Block’s.

Magistrate Judge Pamela Broer Browning wrote in her decision Wednesday that Fox pursued the asset purchase for two reasons: to skirt liability, and to be able to buy bagels from Sammy’s rather than Block’s. From Oct. 3 until the restraining order was handed down Oct. 14, Fox's began to get bagels and other products from Sammy's.

Fox outlined his plan in a July email to his father and his business associate Michael Gasbarro, according to court filings, writing that he could not continue with the agreement.

“OK guys, I’ve had it,” he wrote.

According to court filings, Fox owns 75% of FRG Enterprises, while Gasbarro owns the other 25% through an LLC that was formed in September.

“He literally sold from his left pocket, what he had in it, to his right pocket,” Arnold said. The plaintiff attorney added that HB3’s ultimate goal is for Fox to see the supply agreement through.

In a statement, Clark said the defense would like to see the judge "relieve FRG Enterprises from any ongoing obligation to purchase products from Block’s Bagels." The preliminary injunction granted Wednesday now forces Fox to purchase bagels and other products solely from HB3 through at least late 2023, when a trial is likely to be scheduled.