TurZak files chapter 11
The next chapter in the ongoing saga between Embassy Suites Resort and its food and beverage company is Chapter 11.
TurZak, Inc., the company that runs Turtles Sports Bar, Zackary’s Restaurant and other services in the state line-area hotel, on Friday filed for reorganization with the U.S. Bankruptcy Court in Sacramento.
The action comes in the midst of two pending lawsuits between TurZak, management company Promus Hotels and property owners KOAR-Tahoe Partners.
George Echan, TurZak’s attorney, said the move will allow the struggling company to get out from under allegations of lease default made by Embassy Suites and KOAR, which he believes are unfounded.
“The sole reason we are in this situation is the relentless choke hold KOAR and Embassy have applied to TurZak. They have slowly and meticulously cut off my client’s economic lifeline,” Echan said. “TurZak is confident that a bankruptcy judge will allow TurZak to remain on the premises, and that the company will emerge free of KOAR and Embassy’s tactics.”
KOAR attorneys could not be reached for comment Tuesday.
TurZak in April filed a lawsuit seeking damages from Embassy and KOAR, claiming they breached the lease agreement and forced TurZak to lose its once lucrative wedding business. KOAR in August filed an unlawful detainer suit against TurZak, seeking possession of the property and legal fees.
Complicating things further is a separate dilemma KOAR is in with the city of South Lake Tahoe. The company is asking the city to lift the five-year moratorium on time shares so KOAR can convert 188 of its suites to vacation ownership units, claiming they will go bankrupt otherwise. TurZak officials believe the potential conversion is a factor in KOAR’s action against the food and beverage company, although KOAR representatives deny the allegations.
Echan cites three primary examples of “tactics” the owners and management company allegedly used to force TurZak out before the expiration of the 10-year lease: changing policies related to the wedding business, changing the way meeting rooms are scheduled and attempting to bring in an outside company to handle audio/visual arrangements at the hotel.
Court documents filed by KOAR attorneys last month say the owners terminated the lease with TurZak because of the company’s unwillingness to comply with provisions of the lease, an alleged failure to pay about $150,000 in rent on time and TurZak’s alleged lack of cooperation with hotel management and policies in general.
Echan said the basis of the Chapter 11 filing is the fact that if KOAR and Embassy continued to allegedly breach the lease agreement, TurZak would not be able to survive financially.
“Unless we do something about it, it will result in all cutting off of sources of income,” he said. “KOAR and Embassy should be called to answer to a U.S. Bankruptcy Judge.”
Advantages of going to bankruptcy court as opposed to settling the eviction issue in Municipal Court are that bankruptcy judges have the interest of the debtor at heart, and have more authority to reorganize a business and determine the outcome of a dispute, Echan said.
“Even if there is a determination of minor default, the bankruptcy court has the ability to have TurZak stay with Embassy,” he said. “If the court determines that these multiple alleged defaults were not in good faith, it will be difficult for KOAR and Embassy to engage in that kind of conduct in the future.”
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