Rochester Business Journal

Facing accusations of wrongdoing by the firm he co-founded and once headed, former Private Label Foods Inc. president and CEO Frank Lavorato Jr. has filed a Chapter 7 bankruptcy petition.
 
The bankruptcy filing on Nov. 9 follows charges leveled by Private Label Foods in an Oct. 24 state court lawsuit that Lavorato, who in his bankruptcy filing identifies his current employer as an out-of-state competitor to Private Label Foods, stole money, customers and trade secrets from Private Label Foods.
 
The Chapter 7 filing puts an automatic stay on any other court actions, at least temporarily halting the state court suit. In an answer to the complaint, Lavorato denies all allegations.
 
A message left at the Rochester law firm named by Lavorato in his bankruptcy filing as defending him against the Private Label Foods complaint, Remington, Gifford, Williams & Colicchio LLP, was not returned.
 
Lavorato was largely responsible for driving the firm into a Chapter 11 bankruptcy in 2009 and put its ongoing court-supervised reorganization in danger by feeding false information to court officials and creditors, Private Label Foods' state court complaint alleges.
 
Private Label Foods attorney Mark Costello of Boylan Code LLP declined to comment on the state court action. The firm emerged from the Chapter 11 last year and is operating successfully under Bonnie Lavorato, the firm's co-founder and Frank Lavorato's wife, Costello said.
 
In a statement filed last year as part of Private Label Foods' Chapter 11, Frank Lavorato blamed the firm's money troubles and Chapter 11 filing on contracts holding Private Label Foods to fixed prices. Escalating prices for ingredients had outpaced the fixed-price agreements, he said.
 
In its state Supreme Court complaint, Private Label Foods accuses Frank Lavorato of stealing from his own company by skimming money from clients in an alleged scheme that gave customers discounts or credits in exchange for cash payments Lavorato secretly pocketed.
 
In a separate Bankruptcy Court action filed this year as part of ongoing post-Chapter 11 proceedings to recover money to pay Private Label Foods creditors, the firm sought to recover some $14,000 from Frank Lavorato, alleging he improperly withdrew the money from company accounts while the bankruptcy was in progress.
 
Noting that Lavorato failed to appear in his own defense, a Nov. 3 Bankruptcy Court order awards a $13,999 judgment against him to Private Label Foods by default.
 
In the state court case, Private Label Foods states it ousted Frank Lavorato after the company's principal creditor, Canandaigua National Bank & Trust Co., concerned by his alleged bankruptcy reporting irregularities, demanded that the company sever relations with him.
 
Lavorato's Chapter 7 petition states that he left Private Label Foods early in 2011. The bankruptcy filing puts the state court action, which seeks an injunction ordering Lavorato to return allegedly stolen secret recipes to Private Label Foods and unspecified monetary damages, at least temporarily on hold.
 
In the Chapter 7 filing, Lavorato states he has been employed for the past three months as a $100,000-a-year executive of Zidian Manufacturing Corp. in Youngstown, Ohio. Zidian produces private label sauces, marinades and dressings. It does business under the name Summer Garden Food Manufacturing.
 
Private Label Foods' state court complaint alleges that Lavorato copied secret recipes from company computer files around the time CNB asked for his separation and that he intended to use the proprietary information to compete against his former company. The files also had confidential pricing and product information, the company claims.
 
At an expedited Bankruptcy Court hearing on Wednesday, Private Label Foods lawyer Devin Palmer of Boylan Code asked Judge John Ninfo II to let the state court case proceed. Enforcing a temporary restraining order already imposed by the state court would be the only way to determine what Private Label Foods recipes Lavorato might have illegally loaded onto a laptop.
 
Arguing against unfreezing the state court action, Lavorato's bankruptcy attorney, William Neild of Fairport, maintained the issue would be better decided in Bankruptcy Court.
 
Ninfo disagreed, saying that if any court would have the power to order an inspection of the laptop, it would be the state court and not the Bankruptcy Court.
 
The laptop belongs not to Lavorato but to his new employer, objected Summer Garden attorney Mark Moretti of Phillips Lytle LLP. Summer Garden is not aware of any purloined materials on the machine and has no interest in any recipes allegedly stolen from Private Label Foods. But it is concerned that if Private Label were to get access to the laptop, it could obtain secrets belonging to Summer Garden, Moretti said.
 
Getting a neutral third party constrained by a confidentiality agreement to examine the computer should not be a problem, Ninfo told the lawyers. If the parties could not reach a mutually satisfactory agreement to do so in three business days, he said, he would strongly consider letting the state court action proceed.
 
In other court actions, Frank Lavorato started and withdrew divorce proceedings against his wife in 2010 and reinstated them in June in an ongoing case, court records filed with the Monroe County clerk show. Court records also show that foreclosure proceedings have been under way on the Lavoratos' $400,000 Pittsford home since March.
 
Frank Lavorato's Chapter 7 petition gives the family home on Whisper Lane as his current address but also states that he intends to surrender the property.
 
The Lavoratos founded Private Label Foods, a maker and supplier of sauces, salad dressings and condiments, some 20 years ago, court papers state. According to the Private Label brief, Bonnie Lavorato primarily developed recipes, while Frank Lavorato was responsible for sales and customer contacts.
 
Lavorato filed the bankruptcy petition in his name personally and as a former officer and shareholder of Private Label Foods. The filing states assets of $666,794 against liabilities of $5.3 million. Lavorato's personal guarantee on a $4 million company loan and his personal guarantee of the business' $630,000 lease constitute most of his stated liabilities.
 
Despite a current monthly net income before expenses of $6,423, Lavorato's bankruptcy petition states that he ends each month some $1,166 in the red. His stated monthly expenses include a $4,650 mortgage payment, a projected child support payment of $2,083 and $427 to pay for the car rental of a friend, Natasha Andrievskia.

11/18/11 (c) 2011 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail service@rbj.net.