Lawsuit Contests Hotel Laguna Lease

By Cassandra Reinhart, Special to the Independent

The operators of the iconic Hotel Laguna adjacent to Main Beach in downtown Laguna have filed a lawsuit alleging they are being illegally forced out by the property’s owners.

Andersen Hotels, Inc., the group that has operated the Hotel Laguna for 32 years, has sued the property’s owners, E.W. Merritt Farms, for breach of contract and fraud.

The lawsuit, filed in Central District Court on Oct. 12, alleges that Merritt Farms, of Porterville, Calif., illegally “sold” the hotel, located at 425 S. Coast Highway, under the guise of a 99-year lease to a group of prominent Laguna Beach businessmen with ties to the real estate community. The lawsuit names the new operators as Kimbark Group LLC, a Delaware company, real estate developer Joe Hanauer, local IMAX filmmaker Greg MacGillivray and James “Walkie” Ray of Corona del Mar. It alleges the local group has been portraying themselves publicly as Hotel Laguna’s new “owners,” saying it further reinforces that the agreement the group reached with Merritt Farms is the equivalent of a sale.

“Had they handled this civilly we could have negotiated a peaceful turning over of the hotel, but at this point my client feels very wronged by the entire situation,” said attorney Proud Usahacharoenporn, representing Andersen Hotels, of the Costa Mesa-based Rutan and Tucker law firm.

Under the current lease agreement between Andersen Hotels and Merritt Farms, Andersen Hotels has the first right of refusal should Merritt Farms decide to sell the hotel property, according to the lease agreement outlined in the lawsuit. The lawsuit alleges that Andersen Hotels, controlled by Georgia Andersen, learned of the 99-year lease to the above named new “owners” in January of 2017, and that Merritt Farms has failed to disclose the terms of the agreement to the hotel despite repeated requests. Andersen Hotel’s lease ends Dec. 31, 2017, according to the suit.

“My client feels she has been treated very poorly,” Usahacharoenporn said. “She negotiated a lease that gave her first right of first refusal if the landlord was going to sell the hotel. We have since learned the landlord has agreed to lease the property to some new entity for 99 years, which we believe is the equivalent of a sale.”

Andersen Hotels also alleges loss of business due to cancelled reservations because of the uncertainty of the hotel’s operating future.

“They are refusing to give us any information about the agreement so that we can determine what to do with the hotel, the employees, the tenants, the guests,” Usahacharoenporn said.   “This has caused a lot of business interruptions to my client because of the uncertainty.”

Jake Shepard, a partner in E.W. Merritt Farms, had little comment, but did acknowledge the Merritt Farms group had been served with the lawsuit.

“Many of the disputes and facts stated in the complaint are false,” Shepard said. “The lawsuit has been given to our attorney who will file an appropriate response as required.”

Merritt Farms, a melon grower, acquired the hotel in 1973, and Shepard said the hotel had “been in the family for decades.” Hotel Laguna has deep roots in Laguna Beach’s downtown history, and the current version of the hotel opened adjacent to Main Beach in 1930. It has remained an operating hotel, restaurant, and destination wedding spot since. Andersen’s husband, Claes, operated the hotel for several decades until his death in 2010. The couple’s son Stefan now manages the hotel as well.

Attempts by the Indy to reach the operators named in the lawsuit were unsuccessful.

Usahacharoenporn wouldn’t specify the damages Andersen Hotels is seeking in the suit, and says jurors will decide for themselves.

“It’s difficult to quantify what a 99 year lease is worth,” she said.