- Michael Avenatti, whose public profile has skyrocketed as Stormy Daniels’ attorney, purchased a coffee chain called Tully’s with actor Patrick Dempsey in 2013.
- In March all remaining Tully’s locations suddenly closed.
- Tully’s parent company has faced more than 45 lawsuits in recent years, including owing the IRS $US5 million in unpaid federal taxes in 2017.
- Avenatti says that he sold his stake in the company for a profit at an undisclosed time and now serves as an outside attorney.
President Donald Trump and Michael Cohen aren’t Stormy Daniels’ lawyer, Michael Avenatti’s, only opponents.
Avenatti is representing the adult-film star and producer Daniels as she attempts to free herself from a nondisclosure agreement between her, Trump, and Trump’s longtime attorney Michael Cohen.
But the outspoken lawyer has been a central figure in dozens of lawsuits over the last four years related to the cult Seattle-based chain Tully’s Coffee.
Avenatti purchased Tully’s out of bankruptcy in 2013, in partnership with actor Patrick Dempsey, who is best known for his role as Derek “McDreamy” Shepherd in the TV show “Grey’s Anatomy.” Dempsey sued Avenatti in August 2013 to break off the partnership.
Since then Tully’s has struggled. More than 45 suits have been filed against the chain’s parent company, which Avenatti says he no longer owns. In 2017, the company owed about $US5 million in unpaid taxes to the Internal Revenue Service. And in March the coffee chain abruptly closed all locations.
Here’s how Tully’s mysteriously disappeared as Avenatti’s profile has soared.
A coffee chain looking for a saviour
Tully’s was founded in Washington in 1992 by Tom O’Keefe. The chain grew quickly – including a 2006 franchisee deal in Japan – and attempted to set itself as an independent, scrappy rival to Starbucks. But while Starbucks thrived, Tully’s struggled to become profitable.
In 2012 Tully’s filed for Chapter 11 bankruptcy, with more than $US3 million in debt.
The chain never managed to truly compete with Starbucks, another Seattle-based chain whose thousands of locations dwarfed the 131 Tully’s opened globally at the time. Keurig parent company Green Mountain Coffee Roasters had purchased the chain’s wholesale business in 2009 for $US40 million. The purchase turned Green Mountain into Tully’s supplier, and the chain struggled to find the necessary money to pay for its coffee.
Then Dempsey swooped in, in an apparent effort to valiantly save the Seattle coffee chain – the perfect role for an actor best known for his part as Derek “McDreamy” Shepherd in the Seattle-based “Grey’s Anatomy.” In January 2013, Dempsey served as the public face of Global Baristas LLC when the company beat out Starbucks and five other bidders with a $US9.15 million offer to buy Tully’s more than 40 locations in Washington state.
“We met the green monster, looked her in the eye, and … SHE BLINKED! We got it! Thank you Seattle!” Dempsey tweeted, a reference to rival Starbucks.
Yet while the media focused on Dempsey, “McDreamy” was working with Avenatti – who had allegedly promised to fund the entire project.
A ‘McDreamy’ deal gone sour
By the time he entered the coffee business, Avenatti had already worked on several high-profile cases, including a $US10 million defamation case involving Paris Hilton and an $US80.5 million class-action lawsuit against the Jewish cemetery Eden Memorial Park.
At the same time, Avenatti was also racing as a professional driver. It was likely on the racetrack that his path first crossed with Dempsey, a fellow race-car driver.
It didn’t take long for Avenatti and Dempsey’s business partnership to fall apart. The Tully’s deal closed in late June 2013; by August, Dempsey was suing Avenatti.
Avenatti was originally the sole owner and manager of Global Baristas before Dempsey joined as a partner, according to a complaint filed by Dempsey against Avenatti in August 2013. Dempsey said in the complaint that Avenatti had promised to provide all funding for the deal.
According to Dempsey, Avenatti didn’t actually have the funds to buy Tully’s. In the suit, Dempsey claims his business adviser found out through an internet search that Avenatti had borrowed $US2 million with an “exorbitant” interest rate of 15% to fund the deal, sparking Dempsey’s decision to sue his way out of the partnership.
“Avenatti concealed the Loan and the Security Agreement from Dempsey,” the complaint says.
It continues: “He provided no advance notice that he was going to cause Global Baristas to borrow two million dollars, pay an exorbitant interest rate, and secure repayment in borrowed funds by pledging all or substantially all of the company’s assets and future income.”
The case was settled out of court, with Dempsey dissolving his relationship with Avenatti and cutting ties with Tully’s. In a statement, Dempsey wished “the Company and Michael all the best,” saying he was “happy to have been a part of the effort that brought awareness to Tully’s brand.”
Tully’s mysterious disappearance
Avenatti apparently had big plans for Tully’s, with the company’s representative Suzy Quinn telling Bloomberg in 2013 that the brand had planned to open more than 25 stores in the US and 200 in China.
But with Dempsey out of the picture as the famous face of the company, Tully’s dropped from the headlines. The roughly40 locations that Global Baristas purchased for more than $US9 million dwindled to 15 locations in the Seattle area opened in early 2018.
Then, out of the blue, every single one of the locations suddenly shut down in March.
Originally, representatives said the locations had closed because they ran out of coffee. Then Quinn told the Associated Press in March that the company was “rebranding,” an effort that could take months.
While Tully’s Coffee Shop’s website remains online, social-media accounts have not been updated since February. According to data from consumer-credit reporting agency Experian, updated in early March, Global Baristas has only eight employees. When Business Insider emailed Quinn in late April at an address provided as Tully’s and Global Baristas press contact with questions for this article, the message bounced back the next day.
According to Quinn’s LinkedIn, she began working to manage media relations on Stormy Daniels’ lawsuit in March.
Tully’s parent company has been swamped by financial and legal troubles over the past few years.
Global Baristas failed to pay $US4,998,198 in federal taxes last year, according to a tax lien filed by the IRS in August. That is in addition to thousands of dollars in state taxes the company failed to pay over the years, according to more than 20 state tax liens filed in California and Washington. Most recently, in early April, Washington state issued a warrant claiming Global Baristas owed more than $US721,000 in state taxes.
Avenatti told Business Insider that, to the best of his knowledge, Global Baristas has paid the taxes it owed, though he also said it was not his responsibility.
Taxes aren’t the only issue at play. Since 2013, 46 cases have been filed against Global Baristas US LLC and Global Baristas LLC (which owns 100% of Global Baristas US LLC) in Washington’s King County Superior court.
In addition to unpaid state taxes, Global Baristas has been sued by several landlords over claims it failed to pay tens of thousands of dollars in rent, with 13 unlawful detainer cases since 2017. One case, filed in April, claimed Global Baristas owed more than $US25,000 after failing to pay rent starting in December. Suppliers also filed suit against the company, with Real Greek Yogurt suing Global Baristas in April over charges that it failed to pay invoices.
“So what?” Avenatti said in an email when asked for comment. “Many companies abandon locations and have landlord tenant disputes. How many landlord tenant disputes has MacDonald’s [sic] or Starbucks had during their lifetime?”
Tully’s parent company is also at odds with Keurig. Keurig owns the Tully’s brand, reaching an agreement with Global Baristas in 2014 in which the coffee chain pays $US250,000 a year for the use of the brand. According to a suit filed by Keurig Green Mountain last year, Global Baristas failed to pay licensing fees for 2016 and 2017.
“Because Global Baristas failed to timely cure the breach, the Licence Agreement terminated by its terms as of December 1, 2017,” a January complaint said. “As of that date, Global Baristas was required to immediately cease use of Keurig’s Licensed Marks and business names, with the exception of any authorised Wind-down activities, which must be completed on or before March 31, 2018.”
On April 19, Global Baristas filed a counterclaim, saying that the company did nothing wrong and that Keurig was at fault for failing to treat Global Baristas as a franchisee under the law. The case is ongoing, and the companies are set to meet in court again in May. Keurig Green Mountain did not respond to Business Insider’s request for comment on the case.
“The company looks forward to prevailing in court and collecting significant damages,” Avenatti said.
A ‘Stormy reopening’?
With so many financial and legal issues, would it be possible for Tully’s to reopen? And what is Avenatti’s role in all this?
Avenatti is still listed as Global Baristas’ sole “governing person” in Washington state business filings. Avenatti said he sold his stake in Tully’s before the chain’s downward spiral over the past year, telling The Washington Post in late March he had made a profit by selling his piece of the firm at an undefined time. Now, he says he essentially acts as the company’s general counsel.
“Timing is everything,” he told The Post. “I exited at the right time.”
Avenatti declined to provide further information about the deal to Business Insider, saying it was a “private transaction and it will remain that way.”
“My only role is as an outside attorney – the same role I play for countless other clients,” Avenatti said.
David Nold, a Seattle lawyer who has represented a number of Tully’s suppliers and landlords in court, is more sceptical of Avenatti’s relationship to Tully’s and Global Baristas.
“Michael Avenatti told the Federal Bankruptcy court in 2017 that he was the owner,” Nold told Business Insider, referring to an April 2017 bankruptcy-court filing involving Avenatti’s previous law firm. “I take him at his word.”
Nold is similarly unconvinced that there are any plans to reopen Tully’s.
“I have been contracted by no fewer than five different landlords, three different suppliers, and half a dozen employees,” Nold said. “I have not seen a shred of information that indicates Tully’s will ever reopen.”
At least two Tully’s in the Seattle area have already reopened under new names and ownership. The owner of a Tacoma building that used to host a Tully’s opened a new coffee shop, called Bostwick Cafe, in the space in April, The News Tribune reported. Café Hitchcock Express opened as a pop-up in another former Tully’s, with plans to become a permanent coffee shop in the future.
Avenatti said that while he has a limited role as an outside attorney, he believed Tully’s was still planning to open rebranded locations.
Though he has not indicated any plans to do so, if Avenatti wanted to play a role in relaunching the brand, he would no longer need Dempsey as star power. With his around-the-clock appearances on cable news, Avenatti himself – or his client Stormy Daniels – are on television sets more than most actors in Hollywood.
“Maybe he’s planning a Stormy reopening,” Nold joked.
If you’ve worked at Tully’s and have a story to share, get in touch at [email protected]
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