Mini Doughnut Factory shuts down as legal battle heats up

Sprinkles topping the Homer Simpson doughnut at the Mini Doughnut Factory, which has now closed its Tampa and St. Petersburg shops. [DIRK SHADD | Times]
Sprinkles topping the Homer Simpson doughnut at the Mini Doughnut Factory, which has now closed its Tampa and St. Petersburg shops. [DIRK SHADD | Times]
Published Apr. 16, 2019

TAMPA — The legal drama is not over, but the Mini Doughnut Factory is.

Less than a month after shuttering its St. Petersburg location, the doughnut shop announced on its website that the flagship South Tampa location on S Dale Mabry Highway also has closed.

A statement on the Mini Doughnut Factory website says, "We doughnut want to break your heart, but we are officially closed." Lee Kearney, an investor, held the majority stake in the business and is the one who closed both shops.

Meanwhile, shop founders Patrick and Zezura Ruddell are counter-suing Kearney and his associated companies for damages. They're accusing the real estate agent and entrepreneur of unlawfully taking control of the Mini Doughnut Factory.

"Really, (the investors) damaged the entire population of Tampa Bay, because those doughnuts were amazing," said the Ruddells' attorney, David Fernandez. "This is what happens when you get greedy investors who go after a mom-and-pop shop."

In court documents filed early this year, Kearney accused the couple of owing him $875,000. He also said failures by the couple to run the business broke an agreement and turned ownership rights over to him — something the Ruddells are now disputing in court.

The founders argue Kearney and another investor, Chris Mercer, failed to create a board of directors and appoint a chair when they joined the company in 2016. When Mercer signed over his stake in the company to Kearney, it made the Ruddells "a minority interest" without their consent, according to court documents. A chair should have overseen that transfer, according to the Ruddells' attorney.
Kearney called the argument a "red herring." In a statement to the Tampa Bay Times Kearney said the Ruddells siphoned money and employees away from the doughnut shop and into a new pizza parlor venture.

"The Ruddells ran the Company into insolvency," the statement said.

Fernandez said the trouble began because Kearney and Mercer wanted a quicker return on investment than was realistic for a family-run business.

"They squeezed the Ruddells," Fernandez said, "in a very fast, legally strategic way."

Kearney filed two blistering lawsuits against the Ruddells in December and January, which accused the couple of mismanaging its budget, spending business money on personal matters, missing bill payments and losing tens of thousands of dollars in sales.

The Ruddells asked the court last week to combine those two lawsuits into one.

Kearney said in filings that the Ruddells were uncooperative in handing over needed information to run both doughnut shops, which closed temporarily during the height of the dispute.

"They wanted the business, and the Ruddells gave it to them," Fernandez said. "Kearney ran it into the ground and now he has to deal with the fallout."

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Kearney said the Ruddells held onto information such as passwords and client orders as long as possible to sabotage the business.

Contact Sara DiNatale at Follow @sara_dinatale.