VOL. 128 | NO. 18 | Monday, January 28, 2013
Beale Bankruptcy Terms Nearly Done
By Bill Dries
A federal bankruptcy court judge has adopted a settlement on the bankruptcy case involving control of the Beale Street Entertainment District.
A federal bankruptcy judge has adopted a settlement on the bankruptcy case involving control of the Beale Street Entertainment District.
(Daily News File Photo: Lance Murphey)
But all sides in the legal action will be reading the fine print of the coming written court order carefully as one part of the long-running legal drama over the storied district nears an end.
Federal Bankruptcy Court Judge Jennie Latta, on Wednesday, Jan. 23, adopted the settlement in the bankruptcy case of Performa Entertainment, the company founded by developer John Elkington that has managed and developed the district since its reopening in 1983.
And for a second time, Latta rejected the claim by the Beale Street Development Corp. that Performa and Elkington owe the nonprofit entity $6 million in proceeds from the running of the district.
“It reinforced the fact that we were never in default,” Elkington said after Wednesday’s hearing.
The decision was a major victory for Performa and the city of Memphis, which had already worked out the general terms of Performa’s departure as manager and developer of the three-block entertainment district. The bankruptcy filing was part of the deal.
Elkington said the bottom line of the settlement is he gets approximately $2.2 million in commissions and legal fees total. That is roughly the amount Elkington said he offered to end his involvement in the district during the administration of Mayor Willie Herenton. But Herenton went from seeking a negotiated end that Elkington wanted to playing hardball in a Shelby County Chancery Court case that is still pending.
The land and buildings on Beale Street between Second and Fourth streets, with the exception of the building at 310 Beale St., are owned by the city of Memphis. Under terms of a long-term lease that began in 1982, the city leased the district to Beale Street Development, which in turn subleased to what became Performa Entertainment.
What remains is the Chancery Court lawsuit with Elkington and Performa no longer part of the litigation between the city and Beale Street Development.
“That takes a lot of wind ... out of a lot of the arguments in Chancery Court. We can argue for years, but we’re obviously not arguing about $6 million.”
–City Attorney Herman Morris
While that lawsuit is separate from the bankruptcy proceedings, City Attorney Herman Morris said Latta’s ruling on the $6 million dispute likely means an end soon to the Chancery Court lawsuit.
“That takes a lot of wind, it seems to me, out of a lot of the arguments in Chancery Court,” Morris said the day after Latta adopted the settlement. “We can argue for years, but we’re obviously not arguing about $6 million.”
Meanwhile, Latta scrapped the way the city of Memphis has been paying the legal expenses of Performa Entertainment.
Memphis Mayor A C Wharton Jr. announced a settlement in 2010 between the city and Performa of the three-way Chancery Court lawsuit. As part of that settlement, $420,000 in legal bills Performa and Elkington had at that point from the dispute were to be paid by the Beale Street Merchants Association in the form of rent credits the city gave to businesses in the district.
It was a key part of the terms that allowed Wharton to say no money would be exchanged between Performa and the city in the settlement.
Latta ruled Wednesday that the city can no longer use the rent credits to pay what it owes Performa for its legal expenses because that is money that should flow to the Beale Street Development.
Morris said an alternative can be worked out.
“That was already baked into the agreement,” he said. “The rent credits, such as they are, will be addressed in a way that will not negatively impact any money that is due to the BSDC.”
Elkington said the change should be easy to work out.
“They can use the money that goes to them,” he said referring to the income that flows to the city of Memphis through BSDC. “That’s a possibility. They can’t use the gross income.”
Elkington and Morris said it might take longer to resolve the separate deal in which Elkington and Performa leased Handy Park from the city. The city later contested the lease. Meanwhile, Elkington was already personally on the hook for a loan to make changes to the park.
“They still have to relieve us of that liability,” Elkington said as he expressed confidence an agreement can be worked out. “Quite honestly, I’ve told them that I think they should want to keep control of the park. Why would you give up control of the park?”
Morris was also confident that with other parts of the case close to resolution that an agreement on the park lease will fall into place.
“Sometimes things have to be sequenced,” he said. “I think we’re rounding third, and the Handy Park component is part of that.”