Belly Up Mediation Talks Flounder Out Of Court
A business fallout between two partners in the Belly Up Aspen nightclub is back in litigation after out-of-court mediation failed to produce a resolution.
According to a recent Pitkin County District Court filing, Belly Up investor David Gitlitz’s civil complaint against the nightclub’s majority owner and family members will proceed when a court-authorized pause on the lawsuit expires Sept. 18.
Gitlitz took his partner in Belly Up Aspen, Michael Goldberg, to court on Nov. 20, 2023, with a lawsuit alleging he and his three sons engaged in “one-sided business practices” kept secret from Gitlitz.
The Belly Up and Goldberg defense has not formally responded to the lawsuit’s allegations because of a stay in the litigation that has been in place since Jan. 30.
Aspen lawyer Matt Ferguson represents Gitlitz in the suit.
“We’re going to seek eviction and damages and all other things,” Ferguson said. “That’s what’s going to happen. It’s unfortunate, but partners have to treat each other fairly, and Mr. Gitlitz is not being treated fairly in the least. He’s being untreated unfairly.”
Michael Goldberg was notified about this story on Monday. He has not commented about the dispute since it became public last year. Attorneys with the Denver law firm defending the Goldberg and Belly Up Aspen in the dispute, Lewis Roca Rothgerber Christie LLP, also did not respond.
The suit seeks court approval for one of three options — terminate the nightclub’s tenancy and order the sale of the 450 S. Galena St. address it occupies; order Belly Up to enter a lease reflecting the current Aspen commercial real estate market and terms; or terminate Belly Up’s lease agreement and lease the space to a tenant approved by Gitlitz and Goldberg.
Parties on both sides jointly agreed to the stay to try to hammer out something privately through mediation. An agreement could not be reached at the end of an all-day session on April 2 in the offices of an Aspen law firm but “with the encouragement of the mediator,” they agreed to “extend their settlement discussions to permit them to gather additional information relevant to the parties’ disputes,” says a plaintiff’s status report on the case filed Sept. 2 by Ferguson. “The process was complex and required additional time.”
The parties received approval from Judge Chris Seldin for a 90-day extension of the stay on April 16 and again on July 17 with a 60-day extension. According to the Sept. 2 filing, they were deadlocked.
“Counsel for the parties have conferred and agree that, though their efforts were diligent, there is no present prospect for a resolution out of court,” it says.
Goldberg opened Belly Up Aspen in January 2005 in the subgrade space at 450 S. Galena St., a spot the Double Diamond used for national live musical acts before closing in 2003. The Belly Up spot was initially leased from a different landlord before Gitlitz and Goldberg formed a business entity, 450 South Galena Investors LLC, to buy the space for $1.8 million in April 2006, the suit says.
The purchase was financed by Community Holdings Corp, which was owned and operated by Gitlitz, the suit says.
Gitlitz is a minority owner of Belly Up LLC, the corporate name of the nightclub, which pays rent to 450 South Galena Investors. Gitlitz’s suit alleges that the rent paid is below market rates.
As well, Gitlitz’s lawsuit says he was an original investor in the Belly Up Aspen, putting $1.4 million toward its remodeling and buildout.
The Belly Up Aspen nightclub, as a paying tenant, agreed to an initial lease term starting in March 2006, of up to 10 years, with the lease-payment amounts equal to the installment payments on the Community Holdings loan, “which would then be refinanced with a bank as soon as possible, i.e., within two years,” the suit says.
Gitlitz was not made aware of the lease agreement’s details, which included a 10-year renewal option after its expiration in March 2016. The suit says Gitlitz opposed the extension option.
The Belly Up nightclub property currently is undergoing renovation and expansion.
The lawsuit’s five claims are for judicial dissolution, declaratory judgment, breach of fiduciary duty, breach of the implied duty of good faith and fair dealing, and breach of operating agreement.
“It’s going to be a long, arduous case,” Ferguson said. “This is going to get a bit haywire and will get a bit complicated.”
By: I Aspen Daily News I September 10, 2024