The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A downtown Nassau resort "risks total failure and collapse", its owner fears, after a dispute with its management company saw it "frozen out" of the hotel's accounting and reservation systems.

Sunset Equities, owner of the 201-room Courtyard by Marriott on West Bay Street, is alleging in new legal filings that Donald J Urgo & Associates is "threatening to wreak havoc" on its plans to bring in a new management company, Trust Hospitality.

The owner and its principal, New York-based developer Ron Hershco, last week took their case to his home state by seeking an injunction and temporary restraining order (TRO) to prevent Urgo from blocking access to the property's accounting and reservation systems, plus its historical financial data.

Legal filings with the New York State Supreme Court on September 14, 2017, which have been seen by Tribune Business, claim that the dispute threatens the Courtyard by Marriott's winter tourism season when it is expected "to be at or near full capacity".

And Sunset and Mr Hershco are also alleging that it will harm the property's relationship with Marriott, the operating flag; interfere with attempts to refinance the property; and create "reputational damage" for the business.

The New York court filings are the latest episode in what appears to be an increasingly bitter legal battle between Sunset and Urgo, which was exclusively revealed by Tribune Business last month.

Mr Hershco and his Bahamian attorney, Valentine Grimes, had previously told Tribune Business that Sunset's various legal woes, which include separate court battles with its former lender and still-15 per cent equity partner, David Kosoy's Sterling Global Financial, would not affect the Courtyard by Marriott's operations or it 100-plus staff.

However, the contents of its New York case cast doubt on that assertion. "Without a temporary restraining order and a preliminary injunction enjoining defendant [Urgo] from freezing plaintiff out of the hotel's accounting system and reservation management system, the hotel, which has been successful to date, risks total failure and collapse," Sunset's lawsuit alleged.

"Plaintiff will suffer immeasurably in that it will not have access to any of its historical financial or reservation information. This is a critical time. Tourism to the Bahamas generally picks up after the summer, and plaintiff expects the hotel to be at or near full capacity for the near future.

"Furthermore, plaintiff will suffer irreparable harm without the requested relief in that plaintiff's relationship with Marriott Hotels will be negatively impacted, and plaintiff will suffer reputational harm that will similarly be impossible to quantify with money damages."

Urgo, though, has initiated legal action of its own in the Bahamian Supreme Court, alleging that Sunset Equities owes it $556,000 in unpaid fees amid allegations of numerous contractual breaches.

Its lawsuit cited 10 different management agreement violations allegedly committed by the Courtyard by Marriott's owner, including that it had failed to make due payments to Marriott and the financiers that own the Junkanoo Beach property's mortgage.

Anticipating Urgo's counter argument over the disputed fees, Sunset denied any funds were outstanding and argued that the issue could be resolved as part of the New York lawsuit.

Describing its action as "both urgent and compelling", the Courtyard by Marriott owner alleged: "Rather than effectuate a smooth transition of management of the hotel, defendant [Urgo] is threatening to wreak havoc on the hotel.

"Defendant is threatening to curtail certain essential services to the hotel, and has refused to provide plaintiff and its new manager, Trust Hospitality, with access to its accounting system or provide the hotel's historical financial information.

"Plaintiff requires immediate access to the hotel's accounting system in order to determine its financial position, create monthly reports for audit, and to make adjustments. All of this information is based on servers located in the United States," Sunset continued.

"Plaintiff is in the midst of refinancing a loan on the hotel, and needs this accounting information to complete the transaction. Without this, plaintiff will suffer immediate and irreparable harm. Defendant has also threatened to terminate plaintiff's access to the hotel's reservation management system, which will throw the hotel into chaos if it is unable to access reservation information for its customers."

Sunset alleged that Urgo's Don Urgo had written in a September 6, 2017, e-mail that it would cease providing management services to the Courtyard by Marriott property on Friday, September 8, and "terminate" all the resort's EIDs.

"The 'EID's' are necessary for Plaintiff, or any manager of the hotel, to make reservations for customers," Sunset alleged. "Without access to the EIDs, plaintiff will not have access to the reservations made by customers."

Following a letter from Sunset's attorneys, Urgo wrote on September 13, 2017, that it would not terminate access to the 'EIDs' due to Hurricane Irma, "but left open the threat it would do so imminently".

The Courtyard by Marriott owner then alleged that Urgo terminated its access to the resort's Integrated Data Services (IDS) system, which tracks the accounting and finances, on September 11.

Urgo is likely to point to the fact that Sunset allegedly terminated their management agreement in February 2017, and question why the resort owner has decided to litigate a dispute involving Bahamian-based assets in New York rather than Nassau.

Recognising this, Sunset's legal filings devoted significant space to why the action could not be heard in the Bahamas. An affidavit from its Bahamian attorney, Charles Mackay, of Mackay & Moxey, alleged that Urgo was not licensed to do business in this jurisdiction.

As a result, Mr Mackay argued that Urgo had no legal standing in the Bahamas, while the blocking of access to financial and reservations data was taking place in the US.

"As such, a Bahamian court would have no jurisdiction to prevent such actions as defendant [Urgo] is outside its territory," Mr Mackay alleged. "The Bahamas does not have long-arm jurisdiction in the same fashion as in the United States."

Sunset again alleged that it had terminated Urgo's management agreement because it had violated obligations to obtain the necessary Bahamian government approvals, such as exchange control and hotel and Business Licenses, to enable it to operate the Courtyard By Marriott.

However, Michael Scott, Urgo's Bahamian attorney, previously alleged to Tribune Business that Sunset Equities' "interference" had delayed his client's efforts to obtain the necessary licenses and permits from the former Christie administration.

And, pointing out that Urgo's management agreement obligations only kicked-in once it possessed the necessary licenses, Mr Scott questioned why Sunset Equities had allowed the operator to continue providing accounting and other services at the Courtyard by Marriott after it had supposedly been 'terminated'.

"Why was Sunset accepting performance by my clients of accounting obligations and the rest of it?" Mr Scott asked. "The hotel could not function without my clients doing the accounting and running the place.

"How could you terminate the agreement and be accepting accounting services? It makes no sense. It's bizarre. It's unreal."