Lawsuit alleging Cordish affiliate misrepresented K.C. development moves forward

A lawsuit alleging a Cordish Cos. subsidiary fraudulently induced restaurateurs to open an eatery in a Missouri development can move forward, a federal judge has ruled.

Young W. Bae and Chan H. Bae claim the Baltimore developer misrepresented a decade ago the number of other tenants committed to opening at the Kansas City Power & Light District and that they would see millions in annual sales, U.S. District Court Judge George L. Russell III wrote Friday in denying the developer’s motion to dismiss.

To date, the occupancy rate of development  is 73 percent, compared to the 85 percent Cordish advertised, all three sites adjacent to the Baes’ restaurant are vacant and planned condominiums have not been constructed, the ruling states.

The Baes are seeking $3.4 million in compensatory damages and $1 million in punitive damages.

“It’s been hard for commercial tenants to be successful, and I think commercial tenants are starting to fight back,” said Avery Strachan, an attorney for the Baes.

Strachan, a partner with Silverman, Thompson, Slutkin & White LLC in Baltimore, compared the case to the dispute between Lord & Taylor and White Flint Mall in Montgomery County, in which a jury recently ruled that the mall’s owners broke their contract with the department store when they put into motion plans to close the mall and build a town center.

The Baes already owned and operated several restaurants in Maryland and Virginia when they were approached by Cordish’s then-director of leasing and development, Michael Morris, about opening a restaurant in the Kansas City Power & Light District, a mixed-use development owned by Cordish affiliate Kansas City Live Block 124 Retail LLC, or KC Live, according to the ruling.

When the Baes visited the district in 2005, Morris told them “time was of the essence” if they wished to open a Kobe Japanese Steak & Seafood restaurant there, became most of the available space was already leased to “well-known and nationally-operated franchises,” Russell wrote.

Considering the “prime location” of the site, the other tenants who would be operating there and the high-rise condominium building set to be built in the district, Morris allegedly told the Baes they could see annual sales of $3 million, the ruling states.

In October 2006, the Baes signed a lease agreement with KC Live, according to the ruling. The district opened in 2008, but problems delayed the opening of their restaurant until October 2009, eight months after they began paying rent, the ruling states.

“[F]or the first two years of operation, annual sales for the restaurant averaged $600,000 — far less than the $3 million projected,” Russell wrote.

KC Live filed suit against the Baes and their restaurant in August 2011 for late opening charges and unpaid rent. The settlement of the lawsuit reduced the amount owed by the Baes from $2.1 million to $350,000, according to the ruling.

However, the restaurant continued to operate at a loss after the suit was dismissed, the ruling states. KC Live refused to allow the Baes to buy out the 10-year lease, instead threatening to fine the restaurant at three times its monthly rent if it did not stay open, according to the Baes’ court filings. In November 2013, they stopped paying rent, and as a result, KC Live filed suit against the Baes again a year ago, alleging breach of contract.

The Baes alleged fraudulent inducement in a counterclaim filed Jan. 30.

Joshua J. Gayfield of Miles & Stockbridge P.C., an attorney representing KC Live, said the firm has no comment on the ruling.

The case is Kansas City Live Block 124 Retail LLC v. Kobe Kansas LLC et al., 1:14-cv-03236-GLR.