Legends has managed to obtain a copy of the arbitration filing that will ultimately determine who will manage the Chelsea Hotel. What happened in this case is that BD filed suit against the hotel (essentially Marlene Krauss, since she is the one running the show), alleging that Marlene fired them without cause, and that she has failed to pay them the Incentive Fee that she owes them.
In a March 14, 2008 letter, Marlene (through a lawyer) charged BD with “Default and Willful Misconduct.” The “default” charge means they didn’t perform certain of their duties (for instance, perhaps, as we speculated in last Thursday’s post, they didn’t renovate rooms as they were supposed to); as for the “willful misconduct,” that, too may involve some of the problems we discussed on Thursday. We will have to wait until we can get copies of the supporting documents in the case to know for sure what Marlene alleged.
Anyway, Marlene used these charges to justify firing BD, and also for withholding BDs Incentive Fee, which BD claims (and they say Marlene agrees) is a whopping $2,717,285! Marlene gave BD a month to leave the hotel, which means they should have been out by April 14, but they will apparently continue to manage the hotel (at least this is what they say) until the arbitration case is decided.
The case is scheduled to be heard on Monday May 5, although, of course, a decision probably won’t be reached for awhile.
(The document also reveals BD’s astonishing claim to have increased net operating income of the hotel by 225%, revenue per available room by more than 35%, occupancy from 73% to 88%, and room nights sold by 41%.) -- Ed Hamilton
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