The landlord of Freebird Kitchen and Bar in White Plains claims the restaurant reneged on a commitment to use a coronavirus relief Payroll Protection Program loan to pay rent.
Group 5 Limited Partnership of Boca Raton, Florida, sued Freebird owners Nick and Caitlin Fusco on Oct. 20 in Westchester Supreme Court for $367,753 for allegedly violating a personal guarantee to pay the rent.
“Most of the allegations, if not all, are false,” Nick Fusco Jr. said in a telephone interview. “PPP doesn”™t say Landlord Protection Program.”
Fusco said he used the loan to hire back 22 to 23 full- and part-time staffers. Still, business is down 50% from a year ago, or 70% if a two-month closing is included.
“Businesses have to suffer and property owners may have to absorb some of the suffering to make it work, and there should be some negotiation as to what is fair,” he said. “Our landlord doesn”™t see it that way. He wants full payment for everything.”
Group 5 is owned by William and Nancy Christopher of New Canaan, Connecticut.
Freebird, established in 2017, serves Southern-style food at 161 Mamaroneck Ave. The parent company, Crafted American Kitchen & Bar LLC, initially leased a space formerly used by Elements Restaurant, for $14,500 a month plus expenses, and agreed to spend at least $400,000 refurbishing the property.
Caitlin Fusco, Crafted American”™s managing member, and Frank G. Palazzolo, of Bedford, guaranteed the lease. Palazzolo is also named as a defendant. His attorney, Lawrence Gottlieb, did not respond to a request for comment.
Group 5 claims that the rent has not been paid since Feb. 1. If it had declared a default, according to the lawsuit, Crafted American”™s PPP application would not have been approved.
“That”™s a misrepresentation,” Fusco said. Â “For three years, rent was always paid on time.”
Crafted American applied for the loan in April and received between $150,000 and $350,000, Group 5 claims. Fusco would only say that the loan was for less than $150,000.
Up to 40% of the relief money could be used for rents, according to the complaint. Group 5 claims it repeatedly reminded Crafted American of its understanding that PPP money would cover rent, and said Fusco kept it apprised of the status of the loan application.
Fusco acknowledged that 40% could have been used to pay rent, but said there was no requirement to do so.
There was nothing on the application about rent, he said, most of the loan was used for payroll, and the business has spent twice as much on payroll as it got from the loan.
If PPP money had been used, he said, it would have covered “a bit more than one month rent.”
The coronavirus crisis is a burden on everyone, he said, including property owners, and possibly the government will offer relief for landlords.
But “the purpose of PPP was payroll, not rent,” he said. “I chose to use it for payroll. ”¦ The rest we”™ll deal with in court.”
The lawsuit charges breach of contract and fraud. It is demanding $267,753 in rent and expenses and $100,000 in punitive damages.
The landlord is represented by White Plains attorney Kristine D. Holden.
The loan be used for rent and mortgage obligations and could have been factored into the loan application. If it in fact was declared on the application then a fraud was committed. Plaintiffs attorney needs to see that application through the discovery process.