Litigation Avoidance
THE LEAKY NIGHT CLUB
The owner of a night club in the Los Angeles area decided to purchase another club in the desert. The new club was located in a chic area of a well known oasis and featured jazz, drinks and limited food service. It was located on the second floor of a building over a clothing store.
Shortly after the new owner’s takeover of the club, he received a call one night that water had leaked from the club down into the clothing store below destroying inventory and impairing the business of the store. Further, he was informed for the first time that this was the fourth time this had happened, a fact not disclosed at the time of his purchase of the club.
The former owners protested that the leakage problem had been repaired prior to sale. The landlord disclaimed any responsibility. The store owner downstairs hired aggressive counsel to pursue damages on behalf of his client as well as mandatory, immediate repair of the leak condition.
The leakage was caused by faulty water and drain lines associated with the bar fountain equipment as well as by the fact that the floor drains in the club were installed incorrectly.
In response to the claim by the store owner below, the new club owner insisted that the former owner and the landlord take responsibility for this condition which had been concealed from him and which was very expensive to repair. After much threatening back and forth, and virtually at the courthouse doors, Mr. Dallinger persuaded all parties to engage in a private mediation process to avoid what would have been very expensive litigation.
In the mediation process, Mr. Dallinger creatively persuaded all involved that the most rational approach was (i) to arrange for the sale of the club to a new owner, (ii) for the landlord to repair the condition of the floor forthwith and to accept reduced rent for a period of time while the business was up for sale, and (iii) to disburse the proceeds of such sale on an equitable, though somewhat complex, formula.
Ultimately this plan was realized and the parties were thus able to avoid litigation and its intensely negative effects on all concerned. By virtue of Mr. Dallinger’s lengthy experience in the sale of businesses as well as his expertise in litigation and dispute resolution in the related areas of real estate and business, he was able to facilitate the sale of the business to all parties' satisfaction.
 
 
 
 
 
 
 
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