Turmoil continues to engulf the city’s oldest restaurant.

According to a lawsuit filed in San Francisco Superior Court on Oct. 19, the owners of Tadich Grill are being sued by the operators and partners of the restaurant’s 2-year-old Washington, D.C., location for breach of contract and negligent misrepresentation, among other actions.

Court documents allege that Tadich’s longtime owners, the Buich family, failed to disclose to their new partners what they later dubbed as “dirty laundry” surrounding estrangement of an immediate family member that was said to be racially motivated. As a result, the D.C. outpost has lost money every month since opening in 2015, the partners claim. They are seeking more than $2.5 million in damages.

In 2009, Icon Inc. — a Seattle company known for acquiring rights to well-known restaurants such as Joe’s Stone Crab and Krispy Kreme and taking them national — partnered with the Buich family to spread the Tadich brand across the country. Though the Buich family retained full ownership of the California Street flagship, Icon would be official partners in its sequels, in addition to managing the original. The first stop was Washington, D.C., where a new Tadich, more than twice the size of the San Francisco version, opened in fall 2015, marking the restaurant’s first expansion in 166 years of business.

It was a splashy debut, attended by the likes of House Minority Leader Nancy Pelosi and U.S. Supreme Court Justice Anthony Kennedy. But less than three weeks after the opening, Tadich made national headlines for another reason when it was reported that the Buich family, led by patriarch Steve Buich, had ostracized a daughter, Terri Upshaw, for marrying a black man, NFL Hall of Famer and former Oakland Raider Gene Upshaw. Some members of Terri Upshaw’s family hadn’t spoken to her in three decades, cutting her out of the family in 1983, the day she told them about her love for Gene Upshaw.

After the story broke in 2015, Steve Buich told The Chronicle that the issue was a personal matter and not about race, and that it had nothing to do with Tadich Grill, because he retired from the business more than 20 years earlier. Icon later discovered that Buich continued to serve as the restaurant’s secretary and said that he may still have an ownership interest.

No one from the Buich family responded to requests to comment for this article.

Since the controversy, the East Coast spinoff has lost money every month, despite some positive reviews — Washington Post critic Tom Sietsema lauded the sand dabs and service in a 2-star review, for example. But the restaurant couldn’t shake the scandal.

“It affected business adversely,” said Gerard Centioli, president and CEO of Icon. “It affected the public perception of the restaurant. It showed up immediately in reviews online and in social media, where the restaurant would be pummeled.”

At the time, Centioli said that the Buich family incorrectly assured him that Steve Buich had not been involved with the restaurant for decades, having passed it along to his son, Michael Buich. Icon represented the relationship as such not only to the press and customers, but also to the staff at both restaurants.

“Just as the general public reacted negatively to the accusation of ownership being racist, that was also troubling to everyone at every level,” he said.

In September, the Buich family ended Icon’s management of the San Francisco restaurant — in breach of contract, according to the lawsuit.

In the years since the racism allegations, business at San Francisco’s Tadich Grill has remained steady, according to general manager David Hanna, who has worked at the restaurant for seven years. “It’s been doing very well,” said Hanna, who would not comment on the lawsuit but said that the restaurant serves between 500 and 700 diners per day. “It is what it is. It’s still as popular.”

With far less of a history, the larger Washington, D.C., location has not been as fortunate. It has struggled, resulting in “net losses in the millions” in 2015 and 2016, according to court documents. As such, the restaurant’s future is “certainly in peril,” according to Centioli. He blames the racism allegations and the way that the Buich family handled the situation.

“We had been operating for 17 days. The restaurant has failed to build a local base,” Centioli said. “That devastating local press prevented us from ever developing that local base.”

Paolo Lucchesi is the food editor of the San Francisco Chronicle. Email: plucchesi@sfchronicle.com Twitter: @lucchesi