By John Schaffner
After about 18 months of construction at their doorstep and what they term destruction of their business, the owners of the 5 Seasons Brewing Co. have sued the Sembler Co. and its lawyer for breach of contract and fraud, alleging that they reneged on a deal to compensate the brewpub owners for their losses.
Restaurant owners Dennis Lange and David Larkworthy and attorney Joseph D. Wargo filed their lawsuit July 30, claiming breach of city ordinances, breach of contract and fraud resulting from Sembler’s redevelopment of the Prado center on Roswell Road just south of I-285.
“The adventure has resulted in substantial revenue loss to the restaurant,” which was recognized by Sembler, Wargo said. “They told us flat out, ‘We understand you’ve been damaged by the results,’ which we appreciated and we expected would result in some kind of compensation that was satisfactory in order to make amends for the loss of patronage.”
Wargo said that discussion lasted months. “Finally, we had an agreement that was negotiated between counsel and was agreed to by the parties.”
That deal, according to Wargo and the restaurant owners, called for Sembler to reimburse 5 Seasons one year’s rent the company had paid and to further compensate the restaurant’s losses with $260,000 in cash.
“Dave signed it. Dennis signed it. We sent it back for execution by Sembler,” Wargo said.
Wargo said they didn’t hear anything from Sembler for at least 30 days. “I finally got a response indicating that, in fact, we do deserve an answer and (the outside counsel for Sembler) was going to get me one, but nothing happened.”
Wargo finally told Sembler’s attorney on Monday, July 28, that if he did not have his people execute the agreement, “we’re going to sue you on Wednesday.” The suit was filed Wednesday, July 30.
According to Wargo, Sembler’s attorney responded subsequently to indicate that there was “confusion” at Sembler and that the company had another deal to propose. Wargo said he understood the person confused at Sembler was the president of the division, Jeffrey Fuqua.
The new deal proposed by Sembler was unacceptable to the owners of 5 Seasons. “The deal that they proposed cut in half the amount of rent repayment that they were going to provide us,” Wargo said. “We had agreed to a sum of $260,000 that they were going to pay us, in recognition of the fact that we had been cursed financially by customers just unable to attend our restaurant.” The new proposal cut the payment from $260,000 to $110,000.
“The document that we’re relying upon in our lawsuit is a document from their lawyer Roy P. Ruda, who is a defendant in this case,” Wargo said. “He read the agreement and on the left-hand side next to both of those provisions in his own handwriting put ‘OK’ with a bracket next to the whole paragraph that said ‘full rent reimbursement’ and then in the other paragraph that said they were going to pay us $260,000.”
Wargo said the Sembler attorney put his initials and the date on the top of the document. “It sounds like a deal to me, and that is the deal that we sued upon,” Wargo said. “At that point they were refusing to go forward, and we are hanging on by the skin of our teeth as far as being able to keep the doors (of 5 Seasons) open.”
Nick Gold, a public relations spokesman for Sembler, responded that Sembler does not comment on lawsuits. As an aside, however, he added that Fuqua “is known as a tough negotiator.”
“Part of the suit talks about breach of our ability to enjoy the premises, which is found in every lease,” Wargo said. “Well, their redevelopment has made that impossible.”
For instance, he said the restaurant had a temporary closure because of all the banging as the Sembler contractors tried to reroof the restaurant, against the wishes of the owners, during business hours. “A direct result of the roofing caused a lot of debris to fall down, causing a mess, and we had to close.”
The suit also says the restaurant did not have enough parking during the redevelopment. According to Wargo, the lease says that “we could have at least 1,000 parking spaces available, and for a substantial period of time we did not have that, which resulted in the loss to the business.”
The attorney said the last part of the complaint talks about fraud. “That goes to our belief that Sembler never intended to go through with this deal.
“Part of that is our belief that Home Depot has pulled out of this deal. We believe the economics on this property are different from what Sembler would have liked, and we believe those differing economics, at the time they were negotiating with us, gave them the intention of never doing this deal.”
The square footage rate on the 5 Seasons lease is less than what Sembler is commanding for new parts of the development.
“If we are conveniently out of the way, they can put someone else there and double or triple the square-foot cost,” Wargo said.
“To us, this is whether we live or die,” Larkworthy said. “To them, this is nothing.”
Larkworthy said it is hard to say how much 5 Seasons has lost because of the construction work. “I don’t have a crystal ball from what we were doing before vs. what has happened and what we may do in the future. Historically, we grew the business every year, and it was doing very well. Our net sales were over $3 million or thereabouts, and the place was growing annually. Then the development came in. There are so many of our guests that used to come in that don’t come in anymore.”
Getting the year’s rent back plus $260,000 “represented a substantial compromise,” Wargo said. “Adding that together, it is just short of $600,000. That is a substantial amount less than we have been damaged. It represented enough so that we felt we could avoid bankruptcy, keep our doors open until the development was opened. It allowed us to survive.”