Case Summary: The Ritz, LLC, et al. v. Buddy’s River Grill and Oyster Bar LLC, et al.

BY LARRY M. PULLEN, CPA/ABV/CFF, CVA, ASA AND BRYAN ENDRES

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The following article was prepared by its author(s). The opinions expressed in the article represent the author(s)’s and may not reflect the view and/or opinion of Vallit Advisors and its staff. Views/opinions are based on the specific facts and circumstances of each Matter.

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Larry Pullen is a Director at Vallit Advisors, LLC. Larry has over 25 years of public accounting experience and has also gained valuable expertise in business valuation, forensic accounting, and litigation over the years. Prior to joining Vallit Advisors, he had over 16 years of experience with a regional CPA firm, where he was a leader in the Forensic and Valuation services practice. He also previously worked as an auditor for a regional public accounting firm. Larry has provided business valuations for both non-dispute and dispute purposes as well as consulting services related to commercial damages involving lost profits and lost value. He has experience in the tracing of marital assets for purposes of equitable distribution of mixed or transmuted property in domestic matters. He has also qualified as an expert witness in litigation cases involving valuation, bankruptcy, and damages matters. Mr. Pullen can be reached at 443-482-9500 Ext. 122 or lpullen@vallitadvisors.com

Bryan Endres is a senior analyst at Vallit Advisors, LLC and primarily focuses on providing dispute advisory, business valuation, and forensic accounting services for our clients. He has written an article in a professional and peer reviewed journal covering valuation topics. Mr. Endres can be reached at 443-482-9500 Ext 108 or bendres@vallitadvisors.com

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*IN THE CASE OF RITZ, LLC V. BUDDY’S RIVER GRILL & OYSTER BAR LLC (THE “APPEAL”) BEFORE THE COURT OF SPECIAL APPEALS OF MARYLAND (THE “COURT”), RELATED TO A 16-DAY JURY TRIAL IN THE CIRCUIT COURT OF ANNE ARUNDEL COUNTY, A VERDICT WAS RETURNED HOLDING THAT THE DEFENDANTS APPEALED. A JURY RETURNED A VERDICT IN FAVOR OF THE NON-MANAGING MEMBERS ON CLAIMS OF BREACH OF CONTRACT, BREACH OF FIDUCIARY DUTY, AND FRAUD. DAMAGES WERE AWARDED INCLUDING COMPENSATORY, PUNITIVE AND PREJUDGMENT INTEREST. MR. BLONDER (THE MANAGING MEMBER) APPEALED RAISING MULTIPLE ISSUES: STATUTE OF LIMITATIONS, SUFFICIENCY OF EVIDENCE (FRAUD, ETC.), DAMAGES AMOUNTS AND PROCEDURAL ISSUES (AMENDED COMPLAINT AT TRIAL, MOTIONS FOR JUDGMENT/JUDGMENT NOTWITHSTANDING THE VERDICT, AND REQUEST FOR REMITTITUR). THE TOTAL VERDICT AWARDED $5,013,330 IN COMPENSATORY DAMAGES, $1,525,404.50 IN PRE-JUDGMENT INTEREST AND $3,090,000 IN PUNITIVE DAMAGES BUT ONLY AGAINST MR. BLONDER INDIVIDUALLY. THE TOTAL AWARDED TO NON-MANAGING MEMBERS WAS $9,628,734.50.*¹

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Introduction

In the Appeal, the main issues were:

1. Whether the trial court abused its discretion by allowing the Plaintiffs (non-managing members) to amend their complaint mid-trial to include new factual details.
2. Whether the fraud claim was supported by adequate evidence: proof of misrepresentation, knowledge of falsity, reliance, causation.
3. Whether legally sufficient evidence supported (i) that the non-managing member’s claims were not time-barred, (ii) that Mr. Blonder committed fraud and (iii) the compensatory and punitive damages awards.
4. Whether the circuit court abused its discretion by denying remittitur.

By way of background, the subject of this appeal is Buddy’s River Grill & Oyster Bar, LLC, (“Buddy’s” or the “Company”) which does business as Yellowfin Steak and Fish House (“Yellowfin”) in Edgewater, Maryland. Yellowfin had both managing and non-managing members and Mr. Blonder was the managing member. The non-managing members presented evidence that Mr. Blonder caused Yellowfin to pay inflated or unnecessary fees to entities he owned. These payments included overcharged repair and maintenance work, commissions for banquets via a related entity, payroll processing fees, duplicated invoices, misallocation of rebated payments, among other claims.

When asked why distributions to non-managing members had ceased, Mr. Blonder allegedly told them he was not receiving any compensation beyond his management fees (i.e. that his economic benefit matched theirs unless they got distributions). He also allegedly disguised part of his capital contribution as a loan to obfuscate his taking of funds.

Non-managing members had earlier litigation over related issues, but in this case, the core of the fraud scheme (payments to Mr. Blonder’s related entities) was uncovered later. The jury found that the non-managing members did not know, and by reasonable diligence could not have known, of the injury (i.e. the fraudulent diversion of funds) before July 1, 2018.

 

Principal Issues Addressed by Appellate Court

The principal issues the appellate court addressed and how they resolved them are discussed below:

i. Amended Complaint During Trial

The nonmanaging members were permitted to amend their complaint at trial in certain respects, to reflect new or clarified allegations (e.g. misclassification of capital contribution as loan, expanded dates for alleged manipulations, etc.). Mr. Blonder challenged this as prejudicial. The court held the amendments did not unduly prejudice him, because the “operative factual pattern” was already part of the case, he had notice, and the amendments did not change causes of action.

ii. Sufficiency of Evidence for Fraud & Fiduciary Breach

Mr. Blonder challenged whether there was sufficient evidence of fraud. The appellate court found there was enough evidence: for example, presentations to the nonmanaging members that Mr. Blonder was only benefiting to the same degree as they were (or only via management fees) when in fact money was being funneled or overcharged to his separately owned businesses; misallocated distributions; bank transfers; internal financial records, etc.

iii. Damages Amounts

Mr. Blonder argued that compensatory damages were speculative or overbroad and that punitive damages were improper (either because no evidence of actual malice, or because amount excessive or ability to pay unproven). The court held that the evidence supported the compensatory damages with “reasonable certainty” (not mathematical certainty) and that punitive damages were supported by evidence of knowing wrongdoing, of repeated or continuous mismanagement and misrepresentations, and that Mr. Blonder had sufficient ability to pay (he had many companies, etc.), and that the punitive award could serve as deterrent.

iv. Statute of Limitations/Accrual

Because of the discovery rule (that a cause of action accrues when a plaintiff knows, or with reasonable diligence should know, of the wrong), the jury’s finding that nonmanaging members lacked that knowledge before July 1, 2018 was key to letting the claims proceed for damages beyond that date. Mr. Blonder’s arguments to the contrary were rejected.

 

Application of Issues in the Appeal to Valuation/Damages Analyses

In the context of a lost profits claim, financial analysis must isolate the actual economic loss resulting from a defendant’s alleged wrongful conduct. This involves estimating the profits the claimant or plaintiff would have earned “but for” the harmful event. This analysis must normalize transactions, including such items as (i) remove non-recurring items, (ii) remove unusual or extraordinary transactions, (iii) adjust for related party transactions, (iv) correct for accounting errors or inconsistencies, (v) remove owner discretionary expenses, to name a few.

In this case, there were many related party transactions whereby Yellowfin paid inflated or unnecessary fees to entities owned by Mr. Blonder. The presence of related party transactions can materially impact the reliability of such calculations. These transactions—occurring between entities under common control or influence—often do not reflect market-based terms, and if unadjusted, may distort both historical performance and projected earnings.

Related party transactions may include sales transactions for amounts above or below unrelated third-party sales, excess rental payments over and above market levels, or payments for services that are above market rates. In a lost profits case, these transactions can lead to inflated revenues, under or overstated costs, or non-sustainable margins, creating a misleading baseline for normalized profit projections.

Related party transactions are present in this case through Mr. Blonder’s use of management fees. Specifically, Yellowfin paid management fees to entities separately owned by Mr. Blonder, which effectively transferred income from Yellowfin to his other business interests. Because Mr. Blonder holds ownership interests in both Yellowfin and the entities receiving the management fees, he benefits economically from these payments regardless of the originating entity. In contrast, the non-managing members, who do not have an interest in the related entities receiving the fees, only benefit from distributions of profits from Yellowfin. As a result, the use of above market management fees allows Mr. Blonder to divert value from Yellowfin—reducing the profits available to the non-managing members—particularly to the extent that such fees exceed fair market value.

 

Summary and Conclusion

The Maryland Court of Special Appeals affirmed the trial court’s judgment in most respects. The verdict of $9.63 million stood, including compensatory, punitive and prejudgment interest damages as the evidence supported the claims. The court found no clear error in the damages, in the finding of fraud, or in denying remittitur. The procedural decisions (allowing amendment, rejecting judgment notwithstanding the verdict, etc.) were also upheld. Mr. Blonder was not successful in overturning these rulings.

 

References

¹ Information for this article was sourced from Westlaw. Cited as Not Reported in 2025f WL 1703469.