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By BRIAN DONOHUE
It’s a lawsuit that could roil Red Bank’s swankiest health club like the froth in a high-end jacuzzi.
In a complaint filed in May, Sea Bright resident Michael O’Shea says he agreed in 2000 to loan a million bucks to Manasquan resident Patricia Laus for a new business that would become a fixture of Monmouth County’s upscale fitness scene with members ranging from Wall Street bigs to Bruce Springsteen: the Atlantic Club in Red Bank.
Laus, he says in court documents, needed the loan because banks wouldn’t lend to her in the wake of her ex-husband Robert Brennan‘s headline-grabbing penny stock fraud conviction six years earlier.
Fast forward 25 years, and O’Shea now argues he’s the one getting ripped off.
In a lawsuit filed in May, O’Shea says Laus and Chief Operating Officer Kevin McHugh wrongly sold the club last year for $20 million without his required consent, then shut him out of the profits by funneling the proceeds into an entity over which Laus had sole control.
The Atlantic Club in Red Bank. (photo by Brian Donohue)
“This wrongful and improper allocation allowed at least Laus to pocket the proceeds from the sale, while depriving Red Bank and O’Shea of their proportionate share of the funds,” the suit reads, referring to Red Bank Partners LLC, the company in which his $1 million investment gave him a 20 percent interest.
In a June 18 response, Michael Yellin, attorney representing Laus and McHugh, strongly denies the charges, calling them “frivolous and without any reasonable basis in law or fact.” The sale complied with the partners’ operating agreement, which did not require O’Shea’s consent, the defendants’ reply states. The pair asked a judge to dismiss the suit and award them attorneys’ fees.
“Plaintiff’s damages, if any, were caused by its own acts, negligence, and/or omissions or acts of third parties, and not by any acts or omissions of the Defendants,” Yellin’s response reads.
Yellin also blasts the pair for including in the written complaint 30-year-old background information about Laus’s need for the initial loan and details about her infamous ex-husband, calling them “allegations that are scandalous and impertinent, in addition to being entirely irrelevant to the claims asserted.”
Yellin and the defendent’s co-counsel Yasaman Mahdi did not return numerous emails and phone messages seeking additional comment. O’Shea’s attorney, Amy Blumenthal, declined to comment on the case.
The Atlantic Club in Red Bank. (photo by Brian Donohue)
It is a bitter fight over a sale that was heralded in press releases as a rebirth for the club at 325 Maple Avenue.
In January 2024, Kansas-based Genesis Health Clubs, which calls itself “the largest privately owned fitness provider in the nation” with 68 clubs under its control, bought both the Red Bank and Manasquan locations of the Atlantic Club.
“We’re excited to be able to jump into something that’s already working so well, and re-invest in it and help them keep doing what they’re doing, ”Genesis Health Clubs Owner and President Rodney Steven II said in the press release.
O’Shea says he had loaned the club $1 million in January 2000, making him a 20 percent owner of Red Bank Partners, which ran just the Red Bank, and not the Manasquan location.
Laus needed the loan, the suit reads, because her husband “had just been convicted and sentenced in connection with defrauding elderly investors in 1994.”
“As a result, Laus was unable to obtain financing from traditional banks or other financing sources to allow The Atlantic Club to keep operating and instead requested a loan from O’Shea,” the complaint states.
The club opened in 2002. And despite a downturn during the Covid-19 lockdowns, remained successful for years, with net income in 2021 of $414,849 according to O’Shea’s complaint.
In 2023, the complaint reads, Laus notified O’Shea of a possible sale of the club, which, despite the club having “negative value,” would be “good news” for O’Shea. O’Shea disagreed with the assertion that the club had a negative value and said he did not consent to the sale, according to the filing.
In a Zoom meeting at which he was informed of the sale, Laus’s attorneys say O’Shea “cursed and yelled that he was hiring an attorney and hung up.”
Despite his objections, O’Shea’s suit claims, Laus sold the club last November with $2 million of the $3.7 million in profits going to a separate company TAC, of which Lau was the sole shareholder.
The entity in which O’Shea owned 20 percent, Red Bank Partners, received $1.7 million, which was negated by liabilities and net, leaving Red Bank with “zero dollars of net cash” the suit reads.
After O’Shea hired lawyers last December, the suit says, the defendants “suddenly indicate the sales proceeds were actually $18.3 million, with $2 million – “significantly reduced by a number of unexplained or unsupported deductions” going to the Red Bank Company,” the initial complaint reads.
In addition to his request to have the suit dismissed, Laus’s attorneys also ask a judge to transfer the case to the Chancery Division because it seeks to reverse a sale that occurred two years ago.
“Although this extreme relief is entirely unwarranted and without any legal or factual basis, for purposes of this motion, the critical issue is that Plaintiff principally seeks equitable relief in its Complaint,” Yellin’s motion reads. “Indeed, this matter presents a textbook equitable issue: the unwinding of a $20 million commercial transaction.”
redbankgreen editor Brian Donohue may be reached via email at [email protected] or by calling or texting 848-331-8331 or yelling his name loudly as he walks by. Do you value the news coverage provided by redbankgreen? Please become a financial supporter if you haven’t already. Click here to set your own level of monthly or annual contribution.
