The Nederlander Organization has filed a lawsuit against the Sunset Strip Business Association (SSBA) and the Sunset Strip Music Festival (SSMF) seeking reimbursement of $619,000 stemming form losses from last year’s music festival and a loan to the SSMF.
The lawsuit, filed in L.A. County Superior Court, shows last-minute panic before the September 2014 music festival. “In the weeks leading up to the festival, the Sunset Strip organizations and Nederlander concluded that it was likely that the festival would generate losses totaling hundreds of thousands of dollars,” a filing in the lawsuit states. “As such, the parties engaged in conversations and negotiations about ways to address these circumstances, including, for example, possible canceling the festival altogether.” On Sept. 17, three days before the festival was to begin, the SSMF asked Nederlander for a loan of $150,000 so that it could pay deposits to vendors.
The lawsuit contends that the SSBA and its executive director, Todd Steadman, made promises to repay Nederlander “without any intent to fulfill these promises.” As evidence, it cites a decision by the SSBA’s board on Sept. 18 to assign revenue from street banner advertising to repay Nederlander’s $150,000 loan. When the losses became clear after the festival, Steadman did not reply to several requests by Nederlander for repayment of the loan, the suit alleges. Eventually the SSMF made a payment of $10,000, the only money Nederlander has received thus far.
Nederlander contends that the SSBA and SSMF are jointly responsible for repaying the debt because the business association’s board effectively managed the music festival, which was incorporated as a separate organization.
Nederlander’s lawsuit alleges that the SSMF and SSBA misled the event organization when it contracted with it to help manage the 2015 music festival.
In its lawsuit, Nederlander says that the “SSMB … boasted … that the 2013 festival had a total ‘media/promotional value’ of 1.95 million. However (it) failed to disclose that the festival had never turned a profit in its history and that the 2013 event had been dependent upon an emergency loan from the West Hollywood City Council.”
Nederlander said it believed the festival would be more successful if it were a one-day event held in October. Despite that, the SSMF board decided to make it a two-day event in September.
It is unclear what options Nederlander has for repayment given that the SSMF has no money and the SSBA’s last official report to the City of West Hollywood showed it was substantially in debt. The SSMF owes money to as many as 19 vendors who provided services to the music festival. It also owes $250,000 to its president Mikael Maglieri, owner of Whisky A Go Go and the Rainbow Bar & Grill, who made a loan to the music festival.
In August the West Hollywood City Council removed the SSBA as the manager of the Sunset Strip Business Improvement District and named a new board of directors to oversee the BID. That means the SSBA no longer is eligible to receive revenue from banner ads for Jack Daniels along Sunset Strip or collect assessments from businesses on the Strip. The BID was formed to provide services such as security, street cleaning and marketing for Sunset Strip businesses.
The City Council authorized the formation of the Sunset Strip Business Improvement District in 2004 after the BID received the support from businesses in the area representing a majority of the revenue there. For the last several years the SSBA has served as its advisory board and Todd Steadman as its executive director.