Baldwin County Circuit Court Judge Jody Bishop presided over a bench trial last week in which The Wharf is seeking $1.6 million in unpaid rent from a former anchor tenant, Cowgirls Inc., for defaulting on a lease it signed about a year after opening its doors in early 2016.
The Wharf claims the owners of Cowgirls, Perry and Shirley Leffler, also violated a non-compete clause by opening a second restaurant nearby, in Elberta, and when the Lefflers suddenly locked the doors on Cowgirls toward the end of a lease modification period, they subsequently moved most of their financial assets to an irrevocable trust to shield them from potential damages under the lawsuit.
But the Lefflers claim The Wharf is to blame, arguing that after running a successful business in Idaho, they were lured to Orange Beach by the promises of a “turn-key” facility and business from as many as 1.8 million visitors to The Wharf each year.
In court last week, Leffler attorney Richard Corrigan said what his clients didn’t know was that the previous tenant of that facility, Toby Keith’s I Love This Bar & Grill, was struggling financially and could not pay its own rent at The Wharf. Upon opening, the defendants claim they were immediately on the hook for an expensive and time-consuming HVAC repair and while the early numbers were encouraging, business slowed to a trickle after the summer and the Lefflers quickly expended all their startup cash.
According to testimony in the one-day trial, using information provided by The Wharf, the Lefflers submitted a business plan indicating they would generate $1.5 million in estimated revenue the first year, which would grow to as much as $3 million by 2019. But within months of opening, the business was struggling to stay afloat. Consequently, Cowgirls entered into a confidential, temporary agreement with The Wharf to suspend some payments associated with rent and assist with marketing. Just as the terms of the confidential agreement were set to expire in March 2017, the Lefflers locked the doors and left The Wharf.
Corrigan argued the agreement’s terminology — “all amounts will begin repayment” at the end of the agreement — allowed the Lefflers an opportunity to terminate their original lease four years early without penalty. Further, he claimed, The Wharf did not file a similar complaint against Toby Keith’s when it defaulted on its lease.
But Kristen Hammack, a third-party asset manager at The Wharf, said the agreement was an amendment to the original lease, not a new lease. The amounts due, she said, were all estimated rents, utilities and maintenance fees remaining on the original lease, which is the $1.6 million The Wharf is pursuing.
But Corrigan said with Cowgirls’ rent being percentage-based, even The Wharf’s estimated amount due is faulty. The Wharf is assuming Cowgirls would have generated roughly $500 per day in unpaid rent, but actual profit and loss statements generated during its 11 months of business indicate Cowgirls was closer to owing $154 per day.
Testifying as a witness, Shirley Leffler said she and her husband first reached out to The Wharf after seeing an advertisement for commercial property on a real estate search engine. A realtor, Jeff Barnes of Stirling Properties, followed up with marketing materials and lease negotiations.
“[Barnes] said it was extremely busy and they needed bars and restaurants to support the people coming through,” Leffler said. “We were sold on the fact there was so much urgency, on the numbers of 1.8 million people.”
Hammack testified that the visitorship data was compiled by car-counting machines, and The Wharf used a “conservative” multiplier of 2.5 people per car. There was no discussion of traffic patterns or anomalies that may have inflated the number. But with the exception of a Miranda Lambert concert and one other event in the summer of 2016, Leffler said business was never great. There was one day in December 2016 where Cowgirls reported just $20 in sales.
Hammack and Barnes also acknowledged the financial data from Toby Keith’s provided to the Lefflers were gross sales, not net receipts.
To stem the loss, Leffler explained, the couple sold its successful property in Idaho and opened a pizza restaurant in Elberta, which has also since shut down. The Wharf claims those moves were made to deposit financial assets into a family trust account and shield the Lefflers’ liabilities under its original lease agreement.
Once the subject of foreclosures, The Wharf was purchased out of receivership by Art Favre in 2012. In previous interviews, the Lefflers have claimed they were one of at least 25 retail victims of a scheme to inflate the value of The Wharf while the entire property was on the market. But none of those claims were addressed at trial, where arguments centered on the original lease and subsequent confidential agreement.
The Wharf has sued other previous tenants under similar circumstances and has been able to either reach settlement agreements or favorable verdicts, according to court records.
In this case, Corrigan urged Bishop to recognize the circumstances and find in favor of his clients.
“Let these folks go, they’ve already lost a ton,” he said. “Enforce the [confidential] agreement and dismiss the trust.”
Kris Anderson, attorney for The Wharf, characterized the lawsuit as a “straightforward, breach-of-contract” complaint, telling Judge Bishop the $1.6 million sought is not punitive, but simply The Wharf “mitigating its losses.”
The vacant 16,000-square-foot restaurant space has since been operated by The Wharf as a special-events venue available to the public.
Bishop asked both sides to submit briefs within the next two weeks before he takes the case under consideration and issues a verdict.
This page is available to our local subscribers. Click here to join us today and get the latest local news from local reporters written for local readers. The best deal is found by clicking here. Check it out now.
Already a member of the Lagniappe family? Sign in by clicking here