Waterside bars to stay closed, but more legal action to come

NORFOLK

Two popular Waterside nightclubs that were shut down and padlocked by the city last week will remain closed, a Circuit Court judge ruled Wednesday.

Judge Norman A. Thomas denied a request for an injunction from the owners of Bar Norfolk and Have a Nice Day Cafe that would have forced the city's housing authority to allow both nightclubs to reopen. He also refused to grant the city's request for a ban on alcohol sales and entertainment at the clubs, saying the issue is moot because the bars are closed.

The judge's ruling doesn't end the dispute, however. Thomas said his opinion was limited solely to the injunction requests and did not speak to whether the authority and city acted lawfully.

He ordered the city, housing authority and bar owners to begin mediation talks, saying he hopes three related lawsuits will be settled out of court. The talks need to be completed by Sept. 18, Thomas said.

Norfolk attorney Alan Albert filed a pair of suits Tuesday against Waterside Associates, seeking $16 million in monetary damages. Over two days of testimony, attorneys for the nightclubs stressed that anything short of an order allowing them to reopen would destroy their businesses.

"What these folks have won't be worth a plug nickel " if the clubs not allowed to reopen, Albert said.

The $16 million is based on the financial losses both bars are suffering and the damage to their reputations, he said. Both bars are owned by national companies based in Charlotte, N.C., that operate about 35 nightclubs in 20 cities.

Frank Szabo, a regional manager who oversees the bars, testified Wednesday that the management group has invested $1 million or more into each of the facilities.

Bar Norfolk has five years remaining on its lease and Have a Nice Day Cafe has nine years, Albert said.

He said Thomas' decision could be appealed to the Virginia Supreme Court, "but we haven't made that decision."

The brawl escalated last week, when the City Council voted to rescind the special use permits that allowed the nightclubs to serve alcohol and provide entertainment.

After both establishments ignored the council's action and reopened and served alcohol, Waterside Associates evicted the employees and padlocked the doors. Waterside Associates, which owns the downtown waterfront marketplace, is an entity of the city's housing authority.

Because Waterside Associates is funded in part by the city and its board is appointed by the council, taxpayer dollars could be at risk if the bars receive financial compensation.

Thomas was critical of the decision by the bars to reopen, saying the businesses did so in violation of the law. He called Waterside Associates "a very public landlord" and Waterside "a very public facility."

"A public perception that Waterside Associates had in effect lost control... over the facility could cause it substantial harm," he added.

Albert argued that Waterside Associates had no right under the lease to evict the bars.

But a housing authority attorney, Ryan Snow, said the lease required the nightclubs to operate "in accordance with the law" and that they had not done that.

Snow called no witnesses and said Albert had not made his case, and Thomas agreed. The judge said the lease "offers an extraordinary array of strengths to the landlord."

During Wednesday's testimony, Snow said the nightclubs have received "quit or pay" notices for failure to pay rent.

When asked about that issue by Albert, Szabo testified that "we intend to pay them promptly."

Virginia Beach Attorney Kevin Martingayle, who filed a lawsuit on behalf of the bars seeking to overturn the council's decision, said the city did not provide adequate notice of the council vote.

He also said the council voted illegally and that both nightclubs are essentially operating under a 1983 ordinance that the council has not rescinded.

Deputy City Attorney Adam Melita argued the contrary, and Thomas agreed with Melita on many points.

Melita also painted the bars as businesses that flout the law and repeatedly have been cited for violations of Alcohol Beverage Control laws. Melita said that in the last four years, there have been seven ABC violations at the two bars.

Martingayle said the nightclubs "have a good record" on compliance with the law.

"The fact is that the city has made a decision to change the character of Waterside," he said. "Legally, you can't do that by running someone out of business. But that's what they're doing.

"A terrible injustice has been done. This is a situation where cooler heads should have prevailed."

Harry Minium, (757) 446-2371, harry.minium@pilotonline.com