The $737K default letter

The mayor is asking the Pensacola City Council to approve the sale of the Pitts Slip Marina and a ground lease for city-owned land on South Palafox Street to pay off legal fees due Seville Harbor and net the city about $1 million.

The attorney’s fees were incurred over three years when Seville Harbor, owned by Ray Russenberger, and The Fish House, owned by the Merrill brothers, fought to clear their names after Mayor Ashton Hayward had his attorneys send a default letter to the two companies claiming that they owed the city millions of dollars and threatening to shut down one of the town’s most popular restaurants.

According to media reports, the Seville Harbor legal fees total $425,000. Mayor Hayward had already paid Beggs & Lane $312,823.29 to defend the city in the lawsuit and appeal the lower court decision that was in favor of Seville Harbor, according to the invoices received by the Inweekly through public record requests. Total legal fees: $737,823.29.

The default letter arose because Hayward was upset that Collier Merrill had enough votes on the city council to block his recommendation to bring Chick-fil-A to the Pensacola International Airport. 

Hayward had recommended to the city council at its Sept. 26, 2013 regular meeting that a 10-year concession contract be awarded to OHM Concessions—which included Chick-fil-A, Einstein Bros. Bagels, Surf City Squeeze and Corona Beach House. Collier Merrill’s The Fish House had joined forces with Bagelheads, Varona’s, and Pensacola Bay Brewery to offer a more local option that had placed second to OHM during the selection process. The item was tabled before the final vote.

In October 2013, the mayor attacked Merrill in his “Upwords” newsletter and in a “Mornings with the Mayor” press conference. He accused the restaurant owner of ambushing him at the September meeting.

Beggs & Lane invoices show that the law firm began working on the Pitts Slip lease on Oct. 22, 2013—a week after the “Morning with the Mayor.” The mayor reviewed the default letter by phone the day was sent, Nov. 15, 2013. Read default letter.

The default letter might have been handled between the parties without fanfare, except the mayor’s office or one of the mayor’s supporters leaked news of the letter to Pensacola News Journal, which published a front-page article with the headline – “Mayor Accuses Fish House of Cheating City Out of Millions.” Seville Harbor filed its lawsuit in January 2014.

Mayor Hayward never got council approval for OHM to take over airport concessions. The city attorney ruled that the mayor had the authority to change the vendor without a council vote. OHM is the current concessions vendor.

Had the mayor understood that he had that authority in September 2013, the “ambush” wouldn’t have happened and the default letter wouldn’t have been sent. The city would have saved $737K.

Plus, records show that former City Attorney Jim Messer and Chief of Staff John Asmar had discussed selling Pitts Slip in 2011, but it never got past the discussion stage. Seville Harbor exercised the renewal of the lease by letter on July 21, 2011. The City never protested the lease payments until November 2013, which is one of the reasons Judge Duncan ruled in favor of Seville Harbor.

Had the mayor negotiated a sales agreement or new lease agreement in 2011 before the renewal, the city would have saved $737K.

Read Judge Duncan’s ruling on the lawsuit dated April 1, 2016: 14-CA-81 Seville Harbour v. City of Pensacola – Final Summary Judgment


Editor’s notes:  Collier Merrill owns a five-percent interest in Inweekly. Ray Russenberger owns 2.5 percent of the paper. Neither has, or has ever had, any control over the paper’s editorial coverage or this blog.

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2 thoughts on “The $737K default letter

  1. The term “net” used in the opening sentence is misleading. It implies the city’s balance sheet will increase by $1M more from the attempt to sell this property than what it has, currently. In actuality, the city will only net approximately $360,000 after other financial concessions are deducted. Those being, of course, the legal settlement and city’s legal fees associated with the lawsuit. The city’s balance sheet will only increase by $360,000 due to the sale of the property.

    Alternatively, if the city/Mayor’s office had offered to sell it to the group instead of filing the lawsuit, the net proceeds from the sale would be $1M and the balance sheet would reflect that.

  2. As a reminder, the inclusion of Chick-fil-A meant that OHM Concession’s bid did not comply with the requirements of the city’s Request for Proposal. There is no doubt about that “fact.” Hayward could have redone the RFP process but did not. While it may be a bit true to say that City Attorney Jim Messer said that Hayward could ignore the City Council, keeping in mind that Messer was ultimately fired because he was found to be incompetent and lacking a knowledge of municipal law, what actually happened was that Hayward usurped the legislative authority of the City Council and got away with it. Hayward many times has said that he is not subject to those state and city laws and city policies to which he objects and especially those adopted before he took office that he does not consider binding upon him. Yet, the City Code includes a city law that expressly requires the City Council to approve the contract that Hayward just gave to OHM Concessions in violation of city law for sure and perhaps state law too. For years, I urged the City Council to sue Hayward in state court for violating the City Charter and City Code or at least to request the Florida Attorney General issue an Advisory Legal Opinion to assess if a secret state law no one has ever seen gives Hayward and all future mayors the power to nullify all city laws and city policies (“resolutions”) adopted using the state law method. Hayward does it all the time to include twice issuing vetoes not authorized by the City Charter and yet he always has an overwhelming majority of impotent City Council lackeys eager to genuflect before him and do as he orders. A lone brave City Council members should still sue the City to get a court to rule that the contract with OHM Concessions violates city law and is so invalid. The City Council could direct a new RFP process expressly prohibiting OHM Concessions from bidding because of their role in the scandal and directing that local bidders get preference sufficient to ensure that the concession contract profit stay in the community.

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