The Stage 3 Theatre Co. Board of Directors wants Sonora Armory developer Doug Kennedy to pay $550,000 for what they consider a breach of a five-year lease agreement on the company’s former home at 208 S. Green St. in Sonora.
In an interview on Monday, Kennedy said he “will never settle with Stage 3 for a dime” and would come out “guns blazing” if the company filed a lawsuit against him. He claims the lease agreement wasn’t valid and he spent thousands of dollars providing alternate accommodations.
Stage 3’s attorney, Timothy Trujillo, sent a letter on Dec. 4 to Kennedy’s attorney, Trevor Zink, claiming more than $670,000 in damages because the nonprofit community theater had to cancel most of its 2017 season and all of the 2018 season.
Stage 3 would accept a $550,000 donation from Kennedy as a settlement to terminate the lease and release him from any liability, as long as he also releases the company from any liability, the letter said.
Trujillo sent another letter to Zink on Dec. 5 after Kennedy sent a text message earlier that morning to Connie Williams, who serves as mayor of the City of Sonora and chairwoman of the Stage 3 board.
The text message from Kennedy as reprinted in the Dec. 5 letter stated:
“I’m out of the country but received your insane demand letter. Just wanted you to be aware that we will be filing a lawsuit against you and Stage 3 for fraud. I’m sure that will be a glorious stamp on our [sic] political career, ‘mayor of Sonora sued for fraud’ … it will live on the internet forever. I’m sure your attorney can brief you on the validity of our claims, that is, *if* you’ve been honest with him. I will never settle this claim, so file your lawsuit, we can battle it out in the press and I will simply take it to court, there will be no settlement, fallout.”
Trujillo stated the threat of a lawsuit for fraud against Stage 3 and Williams “frankly borders on harassment and of course has no basis in law or fact.” He added it “would be wise” for Zink to advise Kennedy of the potential liability for malicious prosecution if he moves forward with the claim.
Kennedy confirmed that he wrote the text message and described it as a “factual statement about what’s going to happen” as opposed to a threat.
“When this bar gets held up because of a lawsuit filed by the mayor, that’s not going to bode well for reelection,” Kennedy said. “Her suing me is going to create political fallout for everyone.”
The project would combine Kennedy’s existing Bourbon Barrel, the former Stage 3 Theatre, a retail store, and outdoor beer and wine garden into a new entertainment complex called the Sonora Armory.
Kennedy shut down the Bourbon Barrel on Jan. 2 and laid off most of its staff for work related to the project.
Public records with the California Secretary of State’s Office showed that Trado Restaurant Corporation, the company Kennedy used to apply for the permits to do the Armory project, was dissolved on Dec. 31.
The company listed Kennedy’s wife, Tracie, as the chief executive officer, chief financial officer, secretary, and sole director, according to public filings from 2017.
Kennedy said the dissolution was not related to the demand letters from Stage 3, but rather to take advantage of the new tax law signed by President Donald Trump that will provide up to a $1 million in savings by converting it from a C corporation to a limited-liability company.
The name of the new company is 209 Events LLC, Kennedy said.
Stage 3 board members who spoke to The Union Democrat on Monday said they never wanted the situation to get ugly, but they feel like they have no other recourse than to seek damages as they look for a new place to put on plays in 2019.
“The only reason we moved out is because he promised us a beautiful new theater,” said Stage 3 board member Olga Jones. “If it wasn’t for that, we’d still be in that building.”
Trujillo originally sent a letter addressed to Kennedy directly on Sept. 28 outlining the basis for Stage 3’s breach-of-lease claim.
The lease agreement signed on July 15, 2006, was set to expire on July 14, 2016, but a provision allowed Stage 3 to extend the contract for an additional five years. Trujillo’s letter stated that the company exercised that option on Dec. 1, 2015.
Trujillo’s letter stated that Stage 3 began negotiating with the former building owner, John Day, trustee of the Lorain M. Ramsgard 2000 Family Trust, regarding the price of rent for the extended term.
Kennedy assumed the lease when he purchased the building on March 4, 2016, according to the letter.
The letter stated that Kennedy sent a draft memorandum of understanding to Stage 3 on May 1, 2016, regarding his proposal to renovate the theater and develop a beer and wine garden in an adjacent area where the company formerly built props and sets.
Kennedy’s memorandum also proposed that Stage 3 would sign a lease extending the term to from July 10, 2016 to Dec. 31, 2016, despite the company having already exercised the option for the five-year extension.
Trujillo’s letter stated that Kennedy proposed the rent would remain at $2,000 per month until Stage 3 vacated the building on Dec. 18, 2016, then the company would be able to return when the project was completed on April 10, 2017.
The project remains under construction with no firm opening date.
Stage 3 vacated the building in January 2017 based upon Kennedy’s verbal commitments that occupancy would be restored that April, after which he “unilaterally” removed and/or destroyed all of the company’s previous improvements to the building and reconfigured it without Stage 3’s full participation and approval, according to the letter.
When the theater wasn’t finished by April, Kennedy said he paid $500 to $600 a month for a space on South Washington Street to house Stage 3’s box office, $800 for storage space at Jones’ home, and provided a room in the building rent free for constructing sets and props.
Stage 3 was forced to relocate its first two plays of the 2017 season to Columbia College and Sonora High School, both of which were unsuccessful.
Trujillo’s letter stated that Kennedy sent an email to Williams on July 20 stating he was “cutting [Stage 3] off” and would no longer pay the rent for the alternate accommodations after Sept. 1.
The board announced in a press release on Aug. 29 last year that it had cancelled the remainder of the 2017 season, laid off all employees and put future seasons on hold until it could locate a new, permanent theater.
Kennedy pointed the blame on the Stage 3 board for its handling of the theater’s finances. He said he also spent thousands of dollars on changes to the theater’s design at the board’s request.
“Chalk that up and put whatever word you want on it, whether it’s fraud, poor planning or just not knowing how to run a business,” Kennedy said. “They should have clearly known they were not going to sustain Stage 3, yet they had no problem making me spend thousands and thousands of dollars on infrastructure changes that we will never use.”
The nonprofit theater’s financial disclosures filed with the Internal Revenue Service, which are only available for up to 2015, showed it has operated at a loss since 2013. It’s expenses were $83,335 more than revenues in 2015, according to the form.
Stage 3 board members said the loss of a permanent theater made fundraising more difficult over the past year. The company’s “Jazz, Martinis, and Cigars” fundraiser in August 2016 netted about $60,000, while its “Denim and Diamonds” fundraiser in May of last year hauled in about $22,000.
Jim Jordan, who serves on the board, said he also wanted to clear up a rumor that the company is closed for good.
“We’re trying to find a new home, put together stuff for another season in 2019, and come up with fundraising ideas,” he said.
Jordan said the proposed $550,000 settlement would be enough money to purchase and convert a new place into a black-box theater like the former one. They are looking at several options, but declined to name the specific locations.
The board had been working with other organizations to start putting on children’s plays, but those plans have since stalled. Board members were also hoping to increase cross promotions with other companies in the area, including Sierra Repertory Theatre in East Sonora and Murphys Creek Theatre in Murphys.
“We had a lot of plans in progress and were really excited,” Jones said. “Now, we’re devastated. We never thought it would end like this.”
Williams responded to Kennedy’s threats of political ramifications over a potential delay to his Sonora Armory by saying that her elected position on the Sonora City Council has nothing to do with Stage 3.
Williams also said any matter having to do with Stage 3 should have no bearing on the status of his project.
Contact Alex MacLean at firstname.lastname@example.org or (209) 588-4530.