Despite the drama of a last-minute bid Monday and various legal efforts in bankruptcy court Wednesday, Pittsburgh entrepreneur Gary L. Reinert Sr.'s contentious two-year ownership of the struggling Max & Erma's restaurant franchise came to an end this week.

U.S. Bankruptcy Judge M. Bruce McCullough is expected to sign an order Monday giving the chain to American Blue Ribbon Holdings, owners of the Village Inn and Bakers Square restaurant chains, after the Denver-based company made a winning $28 million bid, including $17.1 million in cash.

"Max & Erma's has a strong brand and a market that we believe will complement our geographic and marketing interests," said Hazem Ouf, American Blue Ribbon's president and CEO. "I personally like the brand, and we think it has potential for growth."

Early on in the case, the idea of shutting down the company and all of its locations -- including nine in the Pittsburgh area -- was seriously contemplated.

"There was a chance Max & Erma's was going to be liquidated," said Mark Freedlander, the creditors' committee attorney. "Lenders were past due, there was a receiver to liquidate, the creditors had to be convinced to let collateral be used for operations. It was a tough time."

All of the assets were valued at only between $4.7 million to $10.4 million, and it was decided to look at all options, said Mark Roberts, the interim manager who has been running the company since January at the court's direction.

"It was a mess" when he took over in January, Mr. Roberts said. "But we looked down every avenue to do a sale rather than liquidate it and, hopefully, save thousands of jobs."

American Blue Ribbon is a 1-year-old company created to run the 266 Bakers Square and Village Inn locations. It is a subsidiary of a company, Fidelity Newport Holdings LLC, which is owned jointly by Fidelity National Financial Inc., one of the nation's largest title companies, and Newport Global Advisers, a private investment manager.

The company's winning bid includes a restructuring plan that will keep open at least 41 of the remaining 51 company-owned restaurants in business and all 22 individually owned franchises.

Most of the 73 sites are in Pennsylvania, Ohio, Michigan and Indiana. Mr. Ouf said the company had not yet decided which, if any, of the remaining company-owned restaurants would be closed.

"For the time being," Mr. Ouf said, the company will be based in Columbus, Ohio.

The judge's decision ends the difficult, two-year ownership by Mr. Reinert, 70, an engineer who owns successful Pittsburgh construction and contracting firms.

But, as angry franchise owners are quick to point out, he had no prior restaurant management experience when he bought what was a chain with 106 locations in April 2008 for $10.4 million cash and the assumption of $31 million in debt, taking the company private by buying out all the publicly traded shares.

"We've had a tough two years. Not just the business in general, but the brand has been through a lot," said Charles Lagarce, who owns three Max & Erma's in Ohio and is president of Max & Erma's Franchise Association.

It was the assumed debt that pushed the chain into bankruptcy last October. A $23 million loan taken out before Mr. Reinert bought the company went into default. The now-defunct National City Corp., one of three banks that backed the loan, obtained a $15.9 million judgment against Max & Erma's last year.

Under terms of the bid by American Blue Ribbon, the secured creditors, including National City Corp.'s successor, PNC Financial Services, will get nearly all of their money within the next few months.

The unsecured creditors, who are owed up to $25 million, are expected to get about 20 percent of what they are owed, Mr. Freedlander said.

There could be more money forthcoming, if the M&E Trust -- set up with $2 million as part of the winning bid -- is able to recover claims of money still owed to the company.

Earlier this year, the creditors' committee alleged a series of frauds, conflicts of interest and mismanagement by Mr. Reinert, including raising questions about $9.1 million paid before the bankruptcy to his G&R Acquisitions Inc. as repayment for equity contributions.

Mr. Reinert could not be reached for comment, and his attorneys in court Wednesday said they could not comment. In January, a spokesperson for Mr. Reinert denied the allegations in an interview with Columbus Business First, a news magazine.

Franchise owners also were angered that, in an effort to cut costs, Mr. Reinert laid off so many people from the corporate superstructure -- including all of the regional managers.

"We just need someone in place who knows what they're doing and has a plan, rather than stripping it down like Gary was," said David Denti, who owns four Max & Erma's in Ohio and West Virginia. "There was no support left. There was no one to do a marketing plan, no one to help with training. Now, hopefully, we'll have some help."

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