By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
When Chen met Dao in 2000, she already had signed a lease in the Centrum for Steel Restaurant & Lounge and was trying to raise sufficient capital to finish out the restaurant. Impressed with her vision and sophistication, Chen became a partner in the restaurant, purchasing a majority interest in the limited partnership in exchange for $100,000. He subsequently made unsecured loans to the partnership totaling more than $187,000.
The restaurant was an almost-instant hit. "It's going to have lots of great lighting," Dao said before it opened. "That's the key part, great lighting." Dao said she consciously structured her restaurant to resemble a stage, giving diners a subtle sense they were participating in a show. Steel was a favorite for visiting celebrities, including Elizabeth Hurley, Matthew Perry and Angie Harmon. Celebrity chef Stephan Pyles was a regular.
Dao insisted then that most restaurateurs fail because they're calcified in conventional thinking. "They're afraid of bending over backwards," she explained. "They're afraid of going the extra mile. People who think in the box, they go so far, and they stop. Status quo, and they'll stop."
But Dao's thinking went a little too far outside the box for Chen's comfort. Though he refused to comment on the details of the lawsuit for this article, Chen sued Dao in February, charging her with breach of contract. In the court documents, Chen alleges that while Steel had revenues of between $4 million and $6 million annually, he never received partnership disbursements or financial statements and has received very little in loan repayments. Instead, he alleges that Dao diverted Steel funds to make rent, mortgage and car payments for family, friends and employees; used the restaurant's corporate credit card for personal expenses; diverted Steel resources to open Drálion, the restaurant she launched with another investor last winter; and "utilized the restaurant's petty cash account like a cash machine for personal use." Dao denied all of Chen's charges.
A Dallas district court judge issued a mutual restraining order in the matter barring Chen from Steel and Drálion while forbidding Dao from diverting Steel resources to Drálion or for personal use and demanding she permit Chen to inspect Steel's financial records.
But in May, Chen filed a contempt motion claiming Dao violated the restraining order, alleging she failed to produce all the records for inspection and that she used Steel's checking account to cover her attorney's fees. Even more damning, based on a sworn affidavit from one of Drálion's managers, Chen alleges that Dao directed the shredding of Steel financial documents just hours before his attorney arrived to inspect them. Dao denies the charges and has produced affidavits of her own questioning the credibility of the Drálion manager who lodged the charges on which Chen bases the allegation.
But Chen has taken off the gloves. He is asking the court to throw Dao in jail until she fully complies with the restraining order. A special master has been appointed to resolve the case. The fate of her restaurants could be in question.
"I really don't like to do business with too many investors or too many partners," Chen says. "But if you have a good business, a good idea, I like to share with friends. So everybody makes a little money."
Just about everyone who has been exposed to Grove's concept believes she is onto something with her small restaurant with simple, chic appointments and strong European menu influences at modest price points.
"When they had finished with me in half an hour, I could actually get my teeth in it," says Jack Gosnell, a real estate broker who helped Grove secure the Martini Ranch space. "It just was there. What I liked about it was the European connection and having a real international-style menu...which, I think, has been missing broadly. If you look at the mix of restaurants, the only European restaurants [in Dallas] are dinosaurs. There's nothing on the cutting edge."
Still, there are those with reservations. "It's a great leap of faith," says one male industry professional familiar with Grove's concept. "I'm not sure that it's achievable. I'm not sure exactly where she fits in."
But to skeptics jaded to the buzz rhetoric spouted by hot shots positioning themselves to roll over Dallas' dining princes, Grove has one thing to say: "Don't listen to what I say. Watch what I do."