The owners of Chicago Cut Steakhouse, a critically acclaimed high-end restaurant known for serving the political and business elite, agreed to pay more than $5 million to settle a lawsuit filed by a group of well-connected investors, according to a private settlement proposal obtained by WBEZ.
The legal battle began when four of the restaurant’s investors filed a lawsuit in 2018 in Cook County that accused Chicago Cut co-owners David Flom and Matthew Moore of withholding financial documents “in blatant violation of their statutory and fiduciary duties.”
The group of investors argued they had a right to inspect the restaurant’s books, and the lawsuit alleges they became worried about the “health of the business and the defendants’ good faith in managing it” when they were not provided with the financial information they requested.
Flom and Moore strongly denied the lawsuit’s allegations in an undated letter to the restaurant’s more than 40 investors. The co-owners wrote the lawsuit made “baseless allegations beginning with challenging our integrity and transparency.”
But on June 26, a notice was sent to all investors that a proposed settlement had been reached after the matter went to arbitration. According to the notice, both parties involved in the legal dispute supported the terms.
Flom, Moore and their attorneys “believe that the settlement is in the best interest” for everyone involved because “it avoids continuing additional litigation expenses, inconvenience, and distraction attributable to this burdensome litigation,” the document states. Flom and Moore continue to deny the allegations made against them.
Under the financial terms of the proposed settlement, Flom and Moore would almost immediately pay $2.5 million in cash, and Chicago Cut would pay a total of $3 million to the rest of their investors by Jan. 30, 2023. The steakhouse would also cover $2 million in legal fees from investors, who said they racked up about $4 million in fees, according to the document.
Flom and Moore declined to comment, a spokeswoman said.
Attorneys Richard Prendergast and Michael Layden represented investors in the settlement. They also declined to comment.
Chicago Cut has made millions of dollars in sales, putting it among the city’s most profitable restaurants. The steakhouse made an estimated $17.4 million in 2018 and $17.8 million in 2019, according to Restaurant Business magazine. The steakhouse is known for its pricey menu, where a porterhouse steak costs $80 and bottles of red wine range from $45 to nearly $400, without tax and tip.
Those big bucks were matched with big-name diners, such as Oprah Winfrey, the Chicago cast of Hamilton and actor Colin Farrell. President Barack Obama visited the steakhouse in 2014 and even signed a menu. And former Chicago Mayor Richard M. Daley and his family reportedly held an annual St. Patrick’s Day party at Chicago Cut that then-Gov. Bruce Rauner attended in 2015.
The attraction of high-profile guests wasn’t just left to chance. The restaurant’s deep-pocketed investors played a role in bringing their rich and famous friends to Chicago Cut, Flom told Crain’s Chicago Business in 2012. And the steakhouse itself is located next to the offices of powerhouse law firm Kirkland & Ellis along the Chicago River.
Given the carefully crafted image of the steakhouse as a dining hall for the wealthy and powerful, the 2018 lawsuit raised some eyebrows.
The lawsuit was filed by investor Michael Forde, an attorney who represented Rahm Emanuel in his residency challenge during the 2011 mayoral race. Emanuel later appointed Forde to the IIllinois International Port District, a city-state agency that oversees the Port of Chicago. In 2019, Gov. JB Pritzker appointed Forde to the board of the Illinois Sports Facilities Authority, which owns Guaranteed Rate Field.
The other investors who sued Chicago Cut in 2018 were Marc DeFife, a New York-based executive vice president of Hunt Companies; investment banker John Koutoupis and financial trader Frank Phillips.