Stephens, Rudd in better days.
It's the crispy fried chicken Oprah Winfrey called "the best." But it has brought out the worst among the friends and relatives who started up Ezell's Famous Chicken (EFC) a quarter-century ago near Garfield High. They're fighting over the choice pieces--assets and trade secrets--of today's six-store chicken-to-go chain, with namesake founder Ezell Stephens accused by his corporate board of going rogue and misappropriating his own recipes.
Stephens, Rudd in better days.
He came to that conclusion after they ousted him as vice-president of the board and filed a lawsuit for breach of contract. In effect, the board says, Ezell is no longer Ezell's.
In court papers, Stephens says he is the founder of the company, and his family recipes that spawned the original and spicy chicken dishes are his alone; he doesn't need agreements to use them. He claims he has never approved a transfer of his rights to the recipes and other intellectual property. He still holds a 25 percent interest in the EFC corporation.
Because of the legal action, Stephens can't comment further, says his attorney, Lish Whitson. "We just think that he's been treated poorly and we hope that justice will prevail," Whitson added. In a statement, EFC board members say they "conducted extensive, repeated negotiations and informal mediations over several years to try to resolve these issues," to no avail. "Mr. Stephens' claims," the board adds, "that he alone founded EFC are simply untrue."
It's a nasty squabble, complete with name-calling. The popular chicken institution, which grew from one store to a dozen in the 1980s and '90s, shrank back under heavy debt, documents show, but has been an overall success. Yet the discord has been quietly stewing for more than a decade.
Launched with a Small Business Administration loan in 1984 by Stephens, his then-wife Faye Rudd, her brother Lewis Rudd, and Stephen's brother Sam, Ezell's has been in an ownership and trademark dispute going back to 1998, according to court records and interviews.
EFC says Lewis Rudd and Sam Stephens were two of the original co-owners, but Ezell Stephens says they were "employees" and didn't invest until two years later, when the business was officially incorporated. Rudd trademarked the name and Ezell's chicken logo in 2001, says Ezell Stephens, without his knowledge.
The current dispute, laid out in a U.S. District Court case in Seattle, seems in great deal a clash of boyhood friends who became devoted relatives and business partners--Stephens, 58, and Lewis Rudd, 55, who is EFC's president. Their business was especially successful in its early years and got a big boost from Oprah when she praised Ezell's on her TV show in 1990. (Stephens and Rudd also later flew to Chicago to cook for Winfrey's birthday party.) But EFC wound up carrying heavy debt in the 1990s, related mostly to its first expansion, to the University District, where that store was shuttered in 1994 after six years. The original store was also hit by a fire in 1999, suffering a long closure.
Autographed to Ezell.
Rudd says his brother-in-law Stephens first branched out without board approval in 1998. He claims Stephens wrongly used corporate funds and assets to open the Lynnwood store, which Stephens denies. Stephens allegedly first asked ex-wife Faye and Rudd to partner with him, then backed out and decided he and new wife Thistle would operate the biz, says Rudd. The two sides eventually worked out an agreement, but Stephens currently operates that store, and the Lake City store he opened in 2009, without a license to use the EFC brand, says Rudd.
Stephens, in turn, accuses Rudd of losing $180,000 in a real-estate deal and a Tacoma expansion in which five stores failed; a West Seattle store also failed. (The expansion was part of a plan to take the operation nationwide against KFC and Popeyes.) The corporation still operates Ezell's franchises in Renton, Skyway, and Woodinville, and an employee eatery at Microsoft. EFC claims an interest in the Lynnwood and Lake City stores run by Stephens under his separate company, Take It Home, Inc., which he operates with his wife Thistle. (He and Faye were divorced in 1992; she remains part owner and secretary/treasurer of EFC).
It was apparently the Lake City operation that brought the dispute to a head last year. Stephens allegedly threatened to "bust up" the board if it didn't approve his solo venture (he denies that). But Rudd and other EFC board members wouldn't go along unless EFC was a partner. Stephens finally agreed, then went ahead and opened without signing a promised EFC operating agreement, the board claims.
Though the board eventually compelled Stephens to sign the pact, he has not abided by it, EFC claims, including not reporting quarterly financial results as required. The corporation filed a lawsuit for breach of contract last July, and in August removed Stephens from the Ezell's board. They seek to end his use of the EFC brand at his two stores and to collect $44,000 from him for legal costs and unauthorized use of assets.
He has also made disparaging comments to others about board members, they say. That's clear from court files, too. Stephens says it was "directly or indirectly from the incompetence of Lewis Rudd" that altogether seven EFC stores failed over the years, while Stephens has been the corporation's savior. "From time to time, it had been acknowledged [by the board] that but for Ezell Stephens, there would be no Ezell's Fried Chicken, Inc."
Witson, Stephens' attorney, says the federal court is currently entertaining a motion to dismiss the lawsuit; failing that, it could go to trial later this year.