The trustee overseeing Ruby’s Diner Inc.’s chapter 7 proceedings is suing the chain’s co-founders and former officers in Santa Ana, alleging the pair drove the restaurant group into bankruptcy after improperly taking the company’s assets and seeking at least $35 million in damages, MyNewsLA.com reported. The complaint, filed on Thursday in federal bankruptcy court by trustee Richard Marshack, alleges the chain’s insolvency was caused by Douglas Cavanaugh and Ralph Kosmides due to a series of improper decisions. According to the suit, RDI owned and operated the Ruby’s Diner restaurant chain, which Cavanaugh and Kosmides started in Newport Beach in 1982 and grew to include over 40 locations. The company declared bankruptcy in 2018 when it owed over $14 million to its creditors, the suit says. The lawsuit alleges RDI’s insolvency was due to a series of decisions by which Cavanaugh and Kosmides improperly enriched themselves at the expense of the company. Marshack claims that the co-founders used Ruby’s name, expertise, funds and personnel to obtain a lucrative opportunity from the state of California to develop two highly successful restaurants in Crystal Cove State Park: The Beachcomber and The Shake Shack.
