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Hooters owner fires back in legal battle

Michael Schwartz December 11, 2012 0
The Hooters at 7912 W. Broad St.

The Hooters at 7912 W. Broad St. (Photo by Michael Schwartz)

A local restaurateur isn’t going down easy in its fight to maintain possession of several of its Richmond restaurant locations.

Cornett Hospitality is arguing that one of its landlords and lenders should not be able to evict it from five of its restaurant properties, including two local Hooters locations and a Topeka’s Steakhouse in the West End.

The argument is in response to Spirit Realty Capital, an Arizona REIT that has asked a federal bankruptcy judge to prevent the restaurants from being considered an asset of Cornett’s Chapter 11 bankruptcy estate because the company allegedly defaulted on lease and loan agreements.

Cornett, which operates nine Hooters restaurants and three Topeka’s locations in Virginia, West Virginia and Pennsylvania, filed last month for Chapter 11 bankruptcy protection in an attempt to reorganize its debt.

Spirit is owed more than $3 million from Cornett and is arguing that it terminated its leases with the company on five restaurant properties prior to the bankruptcy filing and should therefore be granted the ability to evict Cornett from the spaces without having to wait for the company’s reorganization.

Cornett fired back in a court filing last week, arguing that the leases on the five properties were not terminated prior to its bankruptcy.

“The debtor’s interests are absolutely necessary to its reorganization as they comprise the majority of what will be the post-reorganization locations,” Cornett’s attorneys argued in the court filing Dec. 4.

Spirit countered two days later by submitting testimony from an employee of the law firm that sent the lease termination notices in early November, weeks before Cornett’s filing. Cornett claims the notices carry no legal effect.

The properties in question include Hooters restaurants at 7912 W. Broad St. and 1211 Huguenot Road in Midlothian, a Topeka’s Steakhouse restaurant at 1776 Parham Road, and two Hooters locations in Roanoke and Pennsylvania.

Cornett is headquartered on Staples Mill Road and listed in its bankruptcy filing 287 creditors and liabilities of between $1 million and $10 million. That debt includes $100,000 owed to Spirit in rent and $3 million Cornett borrowed from the company.

Cornett also previously owned two Max & Erma’s locations in Richmond but closed them after falling behind on rent and after the chain filed bankruptcy in 2010.

The company is represented in its bankruptcy by Bruce Arkema and Kevin Funk, attorneys with DurretteCrump.

Spirit is represented by LeClairRyan attorney Kirk Vogel.

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