Earlier this year, Tom Kennedy thought his case to collect $308,000 and regain control of his namesake coffee venture in Bentonville was winding its way to resolution through arbitration.
Instead, that script was flipped.
What began last year in Benton County as an action by Kennedy to recover money owed for selling part of his business turned into a highly unfavorable judgment rendered against him in Washington County.
The founder of Kennedy Coffee Roasters was hit with a $690,703 judgment and the possibility of losing all of his ownership in the business he started in 2002. Two months later, that May judgment and ensuing garnishment of $17,513 from his bank accounts sent Kennedy to bankruptcy court.
The coffee entrepreneur never really got his day in court because a judge’s orders and more went ignored by his attorneys at the Story Law Firm in Fayetteville. It’s an allegation supported by the court docket.
“This was basically like a Pearl Harbor attack,” Kennedy said during an Aug. 20 meeting of creditors in bankruptcy court. “I had no clue any of this was coming because I was left in the dark by my attorney, Travis Story.”
Story couldn’t be reached for comment. Kennedy couldn’t be reached for additional comment either.
But the unusual turn of events prompted Jill Jacoway, trustee of Kennedy’s Chapter 7 bankruptcy case, to explore malpractice claims against Travis Story and his law firm.
Jacoway received court approval to hire Fayetteville’s Cox Cox & Estes law firm to settle or prosecute any malpractice claims subject to her consent and court approval.
Queries about unanswered motions from lawyers representing Kennedy’s courtroom adversary, Tom Smith and his Espresso LLC, went unanswered by the Story Law Firm.
“Those guys never returned our phone calls or emails,” said Fayetteville attorney Jason Wales.
The lack of response by the Story Law Firm led to judge’s orders and dire legal consequences for Kennedy, which led to talk of potential malpractice claims as a possible asset in his bankruptcy.
Kennedy said that he was led to believe that any judgment would be dismissible and that court-ordered arbitration from a lawsuit he filed in Benton County Circuit Court was pending and still in play.
“That was the way it was explained to me,” Kennedy said in the August meeting of creditors. “I didn’t take the judgment seriously.”
The May 25 ruling in Washington County Circuit Court amounted to a default judgment against him, which erased his arbitration action from Benton County Circuit Court.
Kennedy didn’t answer the allegations of fraud brought by Espresso’s lawsuit in Fayetteville, which went unchallenged by the Story Law Firm.
Those claims were tied to allegations that Kennedy failed to disclose that shares in his business sold to Espresso were encumbered by debt and not owned free and clear by him.
Who was responsible for that alleged omission remains undetermined for now, as are any actual damages suffered by Espresso.
Courtroom Timeline of Kennedy Coffee Dispute
2017
July 17
Tom Kennedy sues Tom Smith and his Espresso LLC in Benton County Circuit Court seeking $308,000 owed on the October 2016 sale of shares in his coffee ventures.
Aug. 31
Smith and Espresso deny the allegations.
Espresso also sues Kennedy in Washington County Circuit Court to recoup $50,000 paid for 30 percent of Kennedy Coffee Roasting Co. Espresso claims Kennedy failed to disclose the stock was encumbered by debt and alleges fraud.
Oct. 6
Travis Story of the Story Law Firm in Fayetteville enters the now dual-court dispute as Kennedy’s lawyer. The move follows the withdrawal of Karen Freeman and Bryce Crawford of the Mitchell Williams Selig Gates & Woodyard law firm as Kennedy’s attorney in his Benton County
litigation.
Oct. 13
Story files a motion to dismiss Espresso’s lawsuit in Washington County Circuit Court because the dispute falls within the scope of an arbitration agreement between the parties.
Oct. 19
Jason Wales, Fayetteville attorney for Espresso, files a response noting that the Kennedy Coffee Roasting sales agreement in contention in this case has no arbitration provision.
Nov. 1
Benton County Circuit Court Judge Doug Schrantz orders the dispute to be resolved through arbitration, an option requested by Espresso on Aug. 31.
Nov. 17
Washington County Circuit Court Judge Doug Martin denies Story’s motion to dismiss, and on Dec. 15, a trial is set for May 7-8, 2018.
Dec. 11 and 17
Espresso files amended complaints alleging Kennedy failed to disclose debts of $300,000 owed by Kennedy Coffee Roasting and $109,000 owed by Kennedy Coffee Retail when the sales agreements were finalized.
Espresso seeks to recover $472,500 paid toward a $540,000 deal to acquire a 70 percent stake in Kennedy Coffee Retail from Kennedy plus $176,241 paid to cover operating expenses of the businesses.
Dec. 29
Jacob Worlow of the Story Law Firm files a motion to dismiss claims involving stock in Kennedy Coffee Retail, which is denied on Jan. 25. The dismissal is sought on the grounds that the purchase agreement is covered by an arbitration clause in the operating agreement between Kennedy and Espresso.
2018
Jan. 9
In response, Espresso’s lawyers, Kael Bowling of the Friday Eldredge & Clark firm and Wales, note that fraud claims aren’t subject to arbitration under Arkansas law. Espresso also asks for an order from Judge Martin to halt the arbitration ordered in Benton County Circuit Court, so its fraud case in his court can move forward.
Jan. 31
Judge Martin orders a halt to the arbitration, pointing out that no motion was filed to oppose it. Kennedy later claims his lawyers didn’t advise him in this matter.
Feb. 20
Espresso files a motion to compel Kennedy to answer questions and provide documents as part of the discovery process in advance of the trial. Espresso’s attorneys served the requests by mail to the Story Law Firm on Dec. 11 and 18. Kennedy claims his lawyers didn’t tell him about this.
Feb. 23
Story and Gregory Payne of the Story Law Firm file a third motion to dismiss, arguing that the Benton County suit was filed first and should take precedence.
Feb. 26
Kennedy’s deposition is scheduled for March 28.
March 12
Judge Martin orders Kennedy to comply with Espresso’s request for discovery information. Kennedy later claims no one at the Story Law Firm ever informed him about this.
March 30
Espresso files a motion for sanctions after Kennedy fails to respond to the order, prompting cancelation of his deposition. The motion also points out:
“It is interesting to note that rather than complying with the court’s order and participating in discovery as required by the rules and the court’s order, defendant has instead chosen to spend his time and resources filing serial motions to dismiss, which raise the same arguments the court has repeatedly denied.”
April 6
The Story Law Firm files a motion to reopen the Benton County lawsuit in an effort to re-establish the arbitration order.
April 13
Judge Martin denies Story’s third motion for dismissal.
April 19
Because of the failure to respond to the order to compel and motion for sanctions, Judge Martin orders that Espresso’s version of the facts be upheld as true and Kennedy barred from entering any evidence countering Espresso’s claims.
May 7
The April 19 order turns what was supposed to be the beginning of a two-day trial into a slam-dunk default judgment in Espresso’s favor.
May 22
Benton County Circuit Judge Doug Schrantz denies the motion to reopen the case, noting that the fraud claims raised in the Washington County lawsuit aren’t subject to arbitration.
May 25
Washington County Circuit Judge Doug Martin awards a $648,741 judgment against Kennedy plus attorney fees of $37,395 and additional costs of $4,567.
July 18
Kennedy files for Chapter 7 bankruptcy listing both assets and liabilities of nearly $1.3 million.
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