|By Penni Crabtree, The San Diego
Union-TribuneMcClatchy-Tribune Regional News
May 12, 2009 - The long velvet gloves are off in an escalating legal dispute between the owners of the luxury Aviara resort in Carlsbad and the prestigious Four Seasons Hotels and Resorts, which manages it.
The resort's owners, Broadreach Capital Partners, had planned yesterday to bring in new managers after announcing Friday that it had fired the Toronto hotel management firm for failing to run Aviara in a cost-effective manner.
But Four Seasons said in a statement issued Saturday that it had "no intention to voluntarily relinquish its role as manager" of the resort. The management firm said Broadreach loaded the resort with debt in a refinancing, and now is having difficulty meeting its loan obligations.
"We will treat any action taken by you or your agents to force a change in management at the resort as an attempted breach of the peace and will respond appropriately," Four Seasons attorney Anthony Feeherry said in an e-mail Saturday to attorneys at Bickel & Brewer, which represents Broadreach.
William Brewer, an attorney for Broadreach, yesterday said the company was forced to delay its move to install a new management firm, New Jersey-based Dolce Hotels and Resorts, because Four Seasons erected barricades and checkpoints at the entrances to the 329-room resort to thwart the move.
"We have no intention of sending people into harm's way," Brewer said.
Asked about the checkpoints, Four Seasons management said in an e-mail statement that it took "prudent measures to protect (guests) from the improper actions threatened by Broadreach."
Both sides were in federal court yesterday. Four Seasons was seeking an order to require Broadreach to continue its employment until issues are resolved in arbitration. Broadreach was seeking an order to allow it to take possession of the resort.
Oral arguments on the motions are scheduled May 27.
The dispute between Aviara's owners and the Four Seasons management group is the subject of pending arbitration and a lawsuit filed by Broadreach. The April 1 lawsuit seeks to prohibit Four Seasons from operating the hotel pending the outcome of the arbitration.
Broadreach alleged in the suit that Four Seasons refused to act in its best interest by "failing to operate the hotel in a financially efficient and cost-effective manner."
Four Seasons countered in a written statement yesterday that the dispute concerns the 2009 operating budget for Aviara and the owner's "obligation to provide working capital necessary to fund debt service."
Under terms of the management agreement, Broadreach is responsible for providing all working capital, including any funds needed to service loans on the property, according to Four Seasons.
The resort is profitable at an operational level, but the owners refinanced the resort in 2006, significantly increasing the debt and "making it impossible for the resort to service this amount of debt in the current economic downturn," Four Seasons said in a statement.
Four Seasons said that it will seek "substantial damages" from Aviara's owners and its counsel for "damaging the operation and reputation" of the resort.
Four Seasons signed a 30-year contract in 1995 to manage Aviara, according to the owners'lawsuit. That contract has three 20-year options, giving Four Seasons a potential 81-year management reign.
Jerry Morrison, a San Diego hotel consultant, said such disputes are common between hotel owners and management companies, particularly when owners want to switch management because they hope to make more money -- or lose less.
In the best of times, maintaining the ambience and service required of a luxury brand such as Four Seasons is costly, Morrison said. And in the current recession, it may be a money-losing endeavor.
"Apparently, the budget showed a cash flow shortfall and the owners have to put up additional capital," Morrison said. "That's not surprising in this economy."
Morrison said the legal wrangling between Broadreach and Four Seasons is "pretty messy."
"It's hard to know what the outcome will be, but these things can get very, very messy and can be very hurtful for the employees and the resort," he said.
Penni Crabtree: (619) 293-1237; firstname.lastname@example.org
Penni Crabtree: (619) 293-1237;
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