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One day last September, the Curtain Club's Doug Simmons received a call from his banker, who delivered the following news: His bank account had been frozen; the company he helped start seven years ago, Congress Street Nights (which owns Curtain Club, as well as several other Deep Ellum nightspots), was being sued; in fact, he had already lost the case. In short, the company owed $2 million, and Simmons had no idea why.
"At that point, we knew nothing," Simmons says. He didn't know, for instance, that three years ago, a 21-year-old from Fort Worth named Sonya Hyden had come into the Curtain Club late one night, topped off her evening with more drinks and died in a gruesome traffic accident on Interstate 30. He didn't know that Sonya's parents, Sandra and Ronald Hyden, had filed suit against, among other parties, the Curtain Club and the Village Station, a dance club Hyden had visited earlier in the evening. While the Village Station settled--for about $15,000, Simmons says--the Curtain Club continued on as usual, blissfully unaware of their own legal tangle. Last March, their court date arrived, but they never showed. A default judgment was awarded to the plaintiff for the full amount of $2 million. The judgment is on appeal.
With their accounts frozen, the Curtain Club filed for Chapter 11 in December. The Hydens' lawyer claims the family has placed a lien on the property; the Curtain Club says they've only "attempted" to do so, and they're fighting it. What all this means for clubgoers is very little--for now. The much-loved live music venue appears as healthy as ever, hosting bands and good times throughout the week. They even celebrated their seventh anniversary last weekend. But behind the scenes, a legal battle of potentially devastating consequences is placing a strain on the Deep Ellum mainstay. Longtime Curtain Club manager Ed Lamonica quit a few weeks ago, and while Simmons attributes that to Lamonica's new baby, the club's current financial headaches couldn't have helped much. Three months of legal snarls take their toll. When we spoke, Simmons remained optimistic about the situation, but after a while, his anxiety couldn't help but show. "We feel like we've worked hard, and we've built something," he says, "and now we could just lose it and not even really know why."
How things got to this point is an interesting study in bad luck or bad business--maybe a little of both. It begins like this: When Congress Street Nights first incorporated seven years ago, the CPA who helped them set up their account listed himself as the company's registered agent--that is, the person designated to accept official documents. "At that time, it meant nothing to me," Simmons says. Although the CPA eventually stopped working with the company, his name remained on the books.
In itself, the slip-up wouldn't have been fatal, since the court also sent Simmons, as the president of the corporation, notice of the suit. Only problem was, the papers went to the wrong address. "It went to my old home," Simmons says. "Whoever lived there signed for it." Neither of them forwarded the papers.
On one hand, these are fairly understandable mistakes--the corporate equivalent of not renewing your drivers license (for several years). And yet, as the Hydens' lawyer, Gregg Schelhammer, points out, "They were sent several notices after the judgment, during which time they could have done something about it, and amazingly, they just managed not to get any of their mail or their registered mail or anything else. It's a puzzling thing. I believe Mr. Simmons when he says he never got it, but it's the old story--hey, heck of a way to run a business."
Unlike a lot of nightclubs that take their chances with the dicey business of alcohol sales, the Curtain Club actually does have liquor liability insurance, which theoretically should protect them in this instance. Simmons estimates the club spends, on average, $20,000 a year on the insurance. This can shield clubs against Texas' controversial "dram shop" liability laws, which state that vendors can be held legally responsible for contributing to a patron's intoxication. But because the club's insurance firm, Terra Nova, claims it was not notified of the situation promptly, it also filed a suit against the Curtain Club, stating it didn't have to pay. The case is pending. I could get into this more, but trust me--it's a messy situation. Seriously. You should see the paperwork.
At this point, both sides are trying to negotiate a settlement, but it's a slow and tedious process.
"They were originally willing to settle for a half a million, and that's more than our club is even worth," Simmons says. "We can't afford to buy our club again. And why is the Village Station only liable for $15,000, and yet they're trying to get us for a half a million? There's got to be a judge out there, somewhere, who's going to say that's not right."
"I feel like the bad guy," Schelhammer says, "because I might shut them down, but they're shutting themselves down." Still, he remains hopeful they can work out a settlement. "Right now, they're going through what they need to in order to accept that they have accountability here and they need to do something about it," he says. "Their fate is in their hands."
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