Soho Properties sues Dream Hotel for $30M at Margaritaville Times Square over unions
Sharif El-Gamal’s Soho Properties claims Sant Singh Chatwal’s Dream Hotel Group did not disclose that a Dream affiliate was part of a union agreement, which would then bind the new Margaritaville Resort Times Square at 560 Seventh Avenue, to the union regulations, despite Soho Properties’ express desire to keep the hotel non-union. The complaint was filed yesterday in New York State Supreme Court.
The filing is the position of Soho Properties and a court filing is not necessarily accurate or complete. Dream Hotel has not yet filed response papers. Soho is seeking a court order declaring that Dream Hotel is no longer the manager of the hotel, and says it has been harmed by as much as $30 million.
According to the complaint, “[Dream’s] breach materially and substantially defeats the parties’ purpose for making the [hotel management agreement] because Owner’s business model depends on maintaining the Hotel as a nonunionized business.”
According to the complaint, “On September 17, 2021, Manager’s founder and principal, Sant Singh Chatwal, met with Sharif El-Gamal, managing member of Owner. Mr. Chatwal informed Mr. El-Gamal that an entity affiliated with Manager had previously negotiated with the Trades Council and entered into the IWA, which, as noted above, could now apply to the Hotel. While fewer than 20 employees out of approximately 200 at the Hotel are Manager’s direct employees, the IWA would apply to all employees at the Hotel, and would significantly impact Owner’s business model and the value of the Hotel. If Manager is (or holds itself out to be) the manager of the Hotel, then the Trades Council can apply the IWA to all employees at the Hotel.”
On Sept. 24, Soho sent a letter to Dream informing it would terminate the management contract within 10 days if the breaches were not cured. On Sept. 27, Dream responded saying it disputed there was a breach, and that the contract could be terminated.
The complaint says, “Manager’s affiliate’s joining the IWA has a material adverse effect on the operation of the Hotel and the rights and obligations of Owner because of the impact that full or partial unionization of the Hotel will have on Owner’s business model and, accordingly, the value of the Hotel.”
Soho claims the breach, ie having an affiliate of Dream bound by IWA agreements, cannot be cured in 10 days, and so Soho on Oct. 6 purported to terminate the agreement and remove Dream as manager. Then on Oct. 8, a Margaritaville executive called Soho and said Dream continued to represent itself as manager of the hotel. The complaint says Soho hired a new hotel management company, the Real Hospitality Group.
-Adam Pincus