From: Angie Wang
To: Douglas Sloan; Isabel Birrueta
Cc: Kevin Kozal
Subject: Partial Response to May 15, 2023 Email re Rusty"s on the Pier - Settlement Communication Date: Wednesday, May 17, 2023 8:23:43 AM
EXTERNAL
California Evidence Code Section 1152(a) Settlement Communication:
Ms. Birrueta,
I represent Greg Morena in connection with his obligations under that certain Management Agreement between Hospitality Industry Management Group, LLC, dba Santa Monica Pier Rustys Surf Ranch (“HIMG”) and Greg Morena (the, “Management Agreement”). Kevin Kozal and Mr.
Morena shared with me your email sent yesterday, May 15, 2023, requesting additional information supporting legal claims Mr. Morena may have against the City in connection with the issues repeatedly raised by Mr. Morena during the past four years and which were identified again recently in in the April 27, 2023 letter from Mr. Kozal’s law firm to the City. Mr. Morena appreciates your attention to this matter and is working to separately provide you with the business operations and assignment information you request in your email. Mr. Morena has previously provided the City with much of the information you request, but he is happy to provide it again, collectively with the additional information you request, as the parties work in good faith toward an efficient and mutually acceptable resolution. Importantly, Mr. Morena does not believe that his requests and suggestions for resolution on the items set forth in Mr. Kozal’s April 27, 2023 letter constitute “substantial lease modifications.” Rather, Mr. Morena’s primary objectives are to continue operating Rusty’s under the existing Lease with modifications made to address and clarify certain Lease rights and obligations with respect to which the parties have been communicating over the past four (4) years.
Mr. Morena provided the City with a copy of the Management Agreement on October 9, 2018, and the City approved of the Management Agreement in writing on November 30, 2018 providing, “Greg, or his assignee pursuant to the Management Agreement will work to reopen [Rusty’s] as soon as practicable, but no later than March 4, 2019.” Pursuant to Section 1 of the Management Agreement, Mr. Morena or his assignee is required to operate Rusty’s under the Lease: “All obligations of the operations shall be that of Manager. Manager shall directly pay Landlord rent due under the Lease.” Voluminous correspondence over the past approximately four (4) years exists between Mr. Morena and the City in connection with Mr. Morena’s management of Rusty’s pursuant to the Management Agreement.
The attached Summary of Timelines and Formal Request was submitted to the City on September 2, 2022 (the “Summary”). The Summary provides detailed information on the various issues that were raised in the April 27, 2023 letter from Mr. Kozal’s law firm to the City and that you enumerate in your email. The Summary also shows that Mr. Morena asked the City to address the very same issues as early as May 10, 2019, which was over four (4) years ago. Mr. Morena has verified and confirms that the City paid $125,000 to HIMG in rent credits related to the Phase I improvements, so the total rent credit amount identified as available in the Summary should be adjusted to reflect the subtraction of the $125,000.
In addition to the information set forth in the attached Summary, the extensive correspondence between Mr. Morena and the City in connection with Mr. Morena’s management and operation of Rusty’s reflects clear and, at times explicit, attempts by the City to undermine and interfere with Mr.
Morena’s ability to comply with his obligations under the Management Agreement. For example, in one email dated July 14, 2021, the City asserted, “The tenant owes delinquent rent. The City won’t consent to a sale until this is resolved.” The delinquent rent referred to by the City was in connection with the City’s Covid-19 rent abatement made available to all its tenants city-wide, including those on the Pier. Mr. Morena, on behalf of Rusty’s, signed the rent repayment agreement which became effective October 1, 2021. Despite this resolution, the City still refuses to consent to the assignment of the Lease to Mr. Morena in connection with the exercise of the purchase option available under the Management Agreement. Another example, in the same email dated July 14, 2021, the City encouraged Mr. Morena to engage in “management agreement negotiations” despite knowing that the Management Agreement had already been executed. Similarly, on November 3, 2021, the City encouraged Mr. Morena to breach the Management Agreement and redirect payment of the management fee to the City for the rent that had been abated during Covid pursuant to the City’s rent abatement program. Mr. Morena believes the City’s actions and omissions in connection with Mr. Morena’s management and operation of Rusty’s constitute intentional and tortious interference with Mr. Morena’s contractual relations and such interference has caused and continues to cause damage to Mr. Morena. Mr. Morena also believes that the City has breached its obligations under the Lease (both contractual and the implied covenant of good faith) and that Mr. Morena, as the approved manager who’s been engaged in direct privity with the City in connection with the Lease obligations as required under the Management Agreement, has been and continues to be damaged as a result. The City cannot rely on a waiver and estoppel privilege to justify four (4) years of conduct that has, at best, confused, delayed and obstructed Mr.
Morena’s good faith attempts to comply with Rusty’s Lease obligations as pursuant to the Management Agreement.
Mr. Morena understands that the City is now taking the position that the Phase II improvements must be completed prior to the lease extension as well as a lease assignment to Mr. Morena. Rather than litigate over whether, and the extent to which, the City’s conduct and communications over the past four (4) years constitute actionable legal violations giving rise to damages to Mr. Morena, Mr.
Morena is proposing that: (1) the City and Mr. Morena jointly identify and agree on the Phase II items remaining to be completed on Exhibit 7 – Scope of Work; (2) the City, HIMG and Mr. Morena amend Exhibit 7 – Scope of Work as necessary to address items no longer relevant or appropriate; (3) the City, HIMG and Mr. Morena amend the Lease term to allow for Mr. Morena to complete the remaining Phase II improvements commenced in good faith by Mr. Morena; (4) the City, HIMG and Mr. Morena amend the Lease to effectuate its assignment pursuant to its terms; (5) the City and Mr.
Morena amend the Lease to allow for the name of the restaurant to be changed; and (6) the City and Mr. Morena amend the Lease to effectuate a second five-year extension option pursuant to the terms of that certain Term Sheet dated November 28, 2017 between the City and HIMG. Without waiving any rights, these items are listed in the order of Mr. Morena’s priorities. Mr. Morena desires to address (1), (2) and (3) above immediately as time continues to be of the essence and these items are needed prior to commencing the work on the remaining Phase II improvements.
Mr. Morena is hopeful that this additional information will be helpful to the City as it evaluates paths forward. Mr. Morena and Mr. Kozal will separately provide the City with the business and personal information requested in your May 15, 2023 email. This is not a full recitation of the facts and claims Mr. Morena may have against the City and Mr. Morena reserves all his rights under the law and in equity in connection with this matter. As stated in Mr. Kozal’s April 27, 2023 Letter to the City, Mr.
Morena believes his requests and recommendations to resolve the items that have now been in queue with the City for over four (4) years would achieve results entirely consistent with the intent and purpose of the original terms of the lease and he remains hopeful that the parties will be able to work toward a mutually beneficial resolution that avoids unnecessary litigation.
Sincerely,
Angela K. Wang
The Law Offices of Angela K. Wang
650 Lorna Lane
Los Angeles, CA 90049
P (949) 244-8335
www.angiewanglaw.com
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