By Tracy Record
West Seattle Blog editor
Two months after the owner of the West Seattle (Athletic) Club fitness center filed for personal bankruptcy, he and his landlord were in court today because an order to pay part of the club rent hadn’t been complied with.
As the club is a major West Seattle business with thousands of customers, community interest in its status remains high, so we’ve been following the bankruptcy-court-case filings – almost 100 of them – since Sam Adams and wife Erika Adams filed for Chapter 11 bankruptcy protection in late June (reported here on June 30th).
Today’s hearing was not the first held for various motions since then, but it’s the first one we have attended. Sam Adams and John Pietromonaco, owner of the club’s North Delridge site and building, were both in the downtown federal courtroom as their lawyers argued a key point relating to the three-week-old order for rent to be paid.
First, a bit of background:
The Adamses’ Chapter 11 filing on June 28th came just two days before Sam Adams was due in court related to the second “unlawful detainer” case filed on behalf of Pietromonaco’s H-P Properties (we reported the filing in mid-June), the type of case that can lead to eviction. The bankruptcy filing subsequently put that matter on hold – “stayed” it, in legal terminology. Then two weeks ago, according to the King County Superior Court docket, it formally closed because of inactivity; an earlier “unlawful detainer” case closed in February because Adams had paid an amount of money agreeable to the landlord, according to what his lawyer told WSB at the time.
Pietromonaco had said in court documents that Adams owed almost $600,000 at the time of the unlawful-detainer filing in May. In August, via a “motion for adequate protection” granted by the bankruptcy judge handling the case, Marc Barreca, it was agreed that for now, Adams could just pay “post-petition rent.” That was to start with what was owed since the bankruptcy filing, rent for July and August.
Judge Barreca’s order required payment of the July rent, $110,000, by August 12th, and the August rent by August 19th. The same court order called for Adams to pay the $110,000 rent by the 10th of each subsequent month. If the order wasn’t complied with, the judge ruled at the time, the landlord would have the right to seek relief from the stay of state proceedings, which he could grant “upon failure of Debtors to show adequate cause for failing to make such payment,” and that’s what he did today, after observing that “not a dime of rent has been paid” since his order.
The Adamses’ lawyer, Lawrence Engel, wanted to have Sam Adams testify to Judge Barreca today about his ongoing attempts to get a loan for the club. The judge said this hadn’t been called as an evidentiary hearing, so Adams couldn’t speak. Engel then presented a document he described as a “term sheet” for a $3 million loan Adams has said he is seeking. (So far, this is not filed as an official court document, so we haven’t seen it and don’t know what it says.) Engel mentioned that Adams has appeal to lenders because of his past as an NFL player, which is considered, he said, an asset in the health/fitness industry.
Arguing against the judge granting relief from the stay, Engel also said that while that loan is not a sure thing, at least not yet, a $100,000 loan is, and that Sam Adams could get that money within five days or so and give it to Pietromonaco.
Judge Barreca noted that $100,000 would be less than half what is owed for the “post-petition rent” for July and August, let alone the previously unpaid sum and what is due for September. So he signed an order “granting relief from stay,” which means that Pietromonaco and lawyer David Tall are free to go back to King County Superior Court and pursue action relating to the building’s status.
Also of note, Adams is quoted in court documents since the filing as saying that his brother Jeremy Adams is a part owner of the club and serves as its Chief Operating Officer. State documents list Sam Adams as the only governing member of the LLC, as the landlord’s lawyer pointed out while questioning him for a deposition that he gave under Rule 2004 (explained here), but Adams said that his brother was given an ownership interest last year and that the documents had been changed and submitted.
What happens next? The fitness club’s landlord is just one of the Adamses’ creditors; the Chapter 11 case in general is continuing to proceed. We’ll be watching court files, both federal and state (county), to see what happens, especially in the wake of today’s order. A year and a half has elapsed since Adams took over what had been West Seattle Allstar Fitness, after its former owner’s bankruptcy case led to the court-approved sale of its assets for $75,000.