The concessionaires who operate the Wells Fargo Steakhouse and Bob’s Place in Virginia City have filed for an emergency injunction to stop the Department of Commerce (DOC) from canceling their contracts. Montana Fifth District Court judge Luke Berger has set a hearing to show cause that will take place on Jan. 27 so the DOC can present their case as to why the cancellations are necessary. 

“We filed an injunction hoping that the State sees what an impact their decisions will have on the local economy,” said Jason Lange, whose contract as the concessionaire of the Wells Fargo Steakhouse was canceled on Dec. 29. 

“The purpose of the injunction is to force the state to engage in a real negotiation of our contracts,” said Belding who has stated that he was told the new contracts presented by the DOC were non-negotiable in a meeting with acting Montana Heritage Commission acting executive director April Armstrong on November 26. 

“[The] plaintiffs respectfully request that the Court enter a temporary restraining order and preliminary injunction to enjoin Defendants' termination of Plaintiffs' concession contracts and arrangements in Virginia City, Montana,” reads the text of the filing. “This immediate relief is necessary so as to avoid great and irreparable harm and to maintain the status quo, i.e. 

“[The] plaintiffs respectfully request that the Court order the Defendants to maintain the status quo of the present concession arrangements for these two leased businesses, until further Order of this Court,” the document continues. “[The] plaintiffs also respectfully request that any deadlines in termination notices for these 10 contracts be stayed upon the filing and pendency of this Petition for Temporary Restraining Order and Preliminary Injunction, may it please the Court.”

According to the DOC, Armstrong has engaged in negotiations with Belding. 

“Armstrong met with Mr. Belding prior to him receiving his termination notice and responded at length to an email he sent asking for additional information on the inventory for his business which belongs to MHC,” said a statement to The Madisonian from the DOC on Jan. 5. 

Belding asserted in the original story about the cancellation of the concessionaire contracts in the Dec. 4 issue of The Madisonian that in their Nov. 26 meeting Armstrong had told him the lease was non-negotiable. 

“The terms they have offered are unsustainable for any restaurant anywhere in the country let alone Virginia City with a 3 month window to make a slim profit. We hope to come to a reasonable solution,” said Belding in a Jan. 5 statement to The Madisonian regarding the reworked contracts which require Bob’s Place and The Wells Fargo to pay 15% of the gross revenue earned to the Montana Heritage Commission (MHC) who owns and manages the properties as part of the DOC. 

“15% is just ludicrous and will do more harm than good,” said Lange on January 5. The injunction filing asserts that the concessionaires will have to raise prices by 18-20% to stay in business under the 15% of gross revenue terms. 

“The termination of his contract will cause Lange irreparable harm. The notice and new contract terms are overreaching, oppressive and equitably unreasonable,” reads the filing. “Lange's research also shows that most restaurants survive on a 3-6% profit margin. Being charged 15% of gross sales will put Lange out of business.”

Stephaie Kruer of Kruer Law in Sheridan, MT, is representing Belding and Lange and says that she used her clients’ research for the claims made in the emergency petition for temporary restraining order and preliminary injunction. 

“The notice and new contract sent to Belding this month contain ‘unconscionable’ terms and legal requirements,” reads the filing. Kruer believes that if the judge grants the temporary restraining order and emergency injunction, it could benefit the six other concessionaires who have also received the new contracts with 15% of gross revenue terms.  

The DOC stands behind the 15% terms as being fair due largely to the turnkey nature of the businesses and the investment made by the DOC into the properties. 

“Businesses paying 15% of gross revenue have lower overhead because MHC has invested heavily in their locations to make the businesses turn-key or nearly turn-key through building improvements, machinery, equipment, furniture, furnishing, liquor licenses and more,” said the statement from the DOC. “Since these businesses benefit from MHC investments, the new contracts aim to recognize that fact. While some of those businesses have put in time and effort to improve their spaces, in most cases they were compensated through rent reductions or reimbursements. The current contracts also state that all capital improvements belong to MHC.”

The DOC also addresses concerns in the community regarding the differences between the contracts offered for MHC vendors in Virginia/Nevada City and those at the properties at Reeder’s Alley in Helena. 

“In contrast, the Reeder’s Alley businesses did not have the same level of investment from MHC and supplied their own equipment, which increased their overhead,” read the statement.

“In the case of the bakery [in Reeder’s Alley,] it operates in a smaller space without seating for customers. So, the Reeder’s Alley businesses are significantly different from those in Virginia City and Nevada City due to the limited investment by MHC.”

The DOC asserts that it has made efforts to negotiate with all of the concessionaires who have contacted them with concerns about the new contract. 

“Ms. Armstrong has scheduled a meeting with every concessionaire who has requested one and has listened to their concerns, information they have provided and more,” the statement read. “Like any negotiation, there is a give and take between parties. Again, our goal is to ensure contract consistency and that the long-term vitality of Virginia City, Nevada City and Reeder’s Alley are protected.”

They have indicated that they have reached out to Lange with meeting dates to discuss the terms of the Wells Fargo Lease. 

“Mr. Lange had not requested a meeting with Ms. Armstrong until 12/31, when a meeting was requested by his legal representation. Commerce and MHC have already responded to this request with available times to meet,” the statement concluded. 

The injunction is the latest in a long series of developments regarding the reworking of the concessionaires contracts by the DOC as they attempt to meet budgetary mandates and make up for the losses due to embezzlement and mismanagement by former MHC executive director Elija Allen. 

The DOC has published an FAQ page to help answer questions at https://commerce.mt.gov/About/Boards/Montana-Heritage-Commission/Concession-Opportunities-and-Short-Term-Leases/MHC-Contract-Continuity-FAQs. 

The Madisonian will continue to report on developments in this story as more information becomes available.