City of Santa Barbara says it settled suit simply to avoid costs of a trial; restaurant owner says ‘dream opportunity was squashed unnecessarily’
Newly appointed City Attorney Sarah Knecht has flatly rejected claims by Flightline Restaurant owner Warren Butler that Santa Barbara settled a lawsuit with the restaurant because city officials feared going to trial and losing.
She denied Mr. Butler’s contention that the city chose to settle the case only because a Santa Barbara judge denied the city’s motion for summary judgment to dismiss Flightline’s lawsuit. Her ruling opened the door for the lawsuit to be heard by a jury, which could potentially award Flightline and co-plaintiff High Sierra Grill a lot more than the $225,000 agreed to in the Nov. 15 settlement.
“The settlement represented a nuisance value settlement to avoid the cost of a trial,” Ms. Knecht told the News-Press. “The settlement had nothing to do with the summary judgment motion, which are rarely granted and was made in an attempt to narrow the legal issues to be tried.
“The city wanted a restaurant at the location, and the property is still available for lease.”
The Santa Barbara City Council voted to settle the case with Flightline for $225,000 and a pledge by both sides not to pursue further litigation.
Flightline had accused the city of acting in bad faith by refusing to reassign the restaurant the lease given to High Sierra Grill at 512 Norman Firestone Road, the former site of the Elephant Bar restaurant, at the Santa Barbara Airport. This ultimately caused the restaurant to fail and have to close, which it did in late 2019.
Mr. Butler, brought in originally to manage High Sierra Grill, had changed the restaurant’s theme to one that celebrated aviation, and wanted to take over the operation, doing business as the Flightline Restaurant and Lounge.
Instead, the restaurant has sat empty for three years in an increasingly dilapidated condition.
The city agreed to settle after Santa Barbara County Superior Court Judge Donna Geck denied the city’s request for a summary judgment against Flightline, clearing the way for the case to proceed to trial.
“The city decided they wanted to settle and not go forward,” Mr. Butler said. “The bottom line is the judge ruled in our favor and said these guys have a legitimate case against the city and what they’ve done.”
Mayor Randy Rowse, however, called the council’s decision to settle the lawsuit strictly a “business decision.”
“The city would have spent that money simply preparing for the case, regardless of the outcome,” he told the News-Press. “The situation is unfortunate, but it was the best decision to make financially.”
Mr. Butler, however, reacted angrily to the mayor’s “business decision” comment.
“The mayor’s response seems similar to the Sopranos when defending why they tossed someone overboard with cinder blocks — it’s a ‘business decision.’ If it wasn’t for the bad ‘business decisions’ (the city made), we would not be where we are today!
“I take it personally that we had to let go of 40 employees.
“I take it personally that I let down our (aviation) veterans whose service and history I was going to memorialize,” Mr. Butler said.
“I take it personally that my dream opportunity was squashed unnecessarily. There are many things that are done in the world for a ‘business decision.’”
Especially galling to Mr. Butler is that the same terminology — that it was a “business decision” — was used by Santa Barbara Airport officials, who ultimately refused to reassign the restaurant’s lease from High Sierra Grill to Flightline.
“When I told them about all the employees that would be out of work, they said, ‘They could get new jobs!’ Some had worked there for several years,” Mr. Butler said.
“They said, ‘Nothing personal, Warren, just a business decision.’”
He said city officials at the time wanted to develop the side of the airport where the restaurant stood as part of the airport master plan.
“In the end, they wanted to get out of (the lease),” he said. “They tried every trick in the book. They delayed it for years and threw one curve after another.
“If we made bad decisions like that in the private sector, we would be out of a job and sued,” he said.
He noted that Mayor Rowse was a city council member at the time. “I met with him about it, and he couldn’t believe they were doing what I said they were doing.
“Oscar (Gutierrez) was the only city council guy that actually tried to help. He was a regular guest at our comedy nights and appreciated what I was doing with Hispanic nights.”
Mayor Rowse declined to address any of Mr. Butler’s claims.
“There are a lot of assertions in there which don’t really rise to the level of a response, so I won’t,” he said.
Mr. Butler said the city taxpayers lost more than the $225,000 the city paid Flightline in the settlement.
He said the city also lost $250,000 it paid to an outside attorney to represent Santa Barbara in the case, plus at least another $250,000 it could have earned in sales tax revenue if the restaurant had been allowed to continue to operate.
He said Santa Barbara lost more than the good times and good food the restaurant offered patrons because the Flightline’s theme was meant to honor World War II aviation veterans and celebrate the city’s own rich aviation history. He said the city’s refusal to reassign the lease to the restaurant took away something special from the community.
“We were going to be a gem,” he said.
Finally, he said he and investor Steve Siry lost a lot of money they put into the restaurant to make it a success.
“The settlement amount is much less than expected and hoped for,” he said. “After impacts of COVID and the uncertain economy, it was felt best to accept the city’s settlement offer.”
The majority of the $225,000 settlement will go toward attorney fees and court costs, he said. “High Sierra will recoup their advance for the retainer, and (investor) Steve Siry and I will split the balance.
“I was planning on using my proceeds in the settlement to invest in the Chase Restaurant and Lounge, where I have been consulting since shortly after things shut down with Flightline.
“I still hope there is a chance to find a home for all the priceless memorabilia and open an aviation-theme restaurant.
“I did invest a lot into the Flightline and gave up everything to make it happen so I will have to rebuild to work on something new and exciting!”
Flightline’s attorney, A. Barry Cappello, agrees the city caused a lot of harm by refusing to reassign High Sierra’s lease to the Flightline Restaurant and Lounge.
Former Airport Director Henry Thompson should never have denied the lease transfer, Mr. Cappello told the News-Press, calling his actions “arbitrary and without any legal basis.”
Denying the transfer harmed four constituent groups, Mr. Cappello said.
“Warren Butler, an accomplished restaurant owner/manager with solid financial backing from an excellent company, lost a business opportunity and the funds he had invested in it to date.
“The High Sierra Grill owners were being forced to swallow a lease they had legitimately assigned to Butler but was improperly denied. This exposed them to a claimed lease obligation that an assignment would have removed.
“The employees and customers of the restaurant. Loyal employees were out of work unnecessarily and local customers who loved that location and really enjoyed the Flightline concept, got an empty building.
“City airport coffers were denied multi-year lease revenue from a solid tenant, and the building remains empty today.”
Mr. Cappello said his clients decided to settle because COVID hit two months later.
COVID destroyed restaurant profits nationally, he said. “Thus, proving future profit losses, not knowing how long COVID closures would last or how long the pandemic might affect the bottom line, became the central issue for us. It is never a time to ask a jury to speculate on damages.”
The settlement, he said, ended the High Sierra lease, the funds took care of the fees and costs of the litigation, as well as recouping some of the investment, but not all was recaptured.
“Mr. Butler has gone on to do two more great restaurants, taking over management at Chase Restaurant and opening Courthouse Tavern,” Mr. Cappello said.
“Manuel Medina, one of the High Sierra owners, does a wonderful job at Mulligans at the golf course. The other two gentlemen were from out of town, and they have focused and continue to be successful in their communities.”
Mr. Cappello called the agreement a “fair settlement” for both sides.
“The city was fortunate to have good outside counsel to assist the city attorney,” he said. “The sum they settled for was easily less than what they would have paid out in legal fees alone, much less eliminating the exposure of a damage verdict.