Lawsuit: Brown Derby owners owe Albany landlord $1.5M

PHOTOGRAPHER: Bethany Bump

An Albany landlord says the Mallozzi Group not only stopped paying rent last summer at the now-shuttered Brown Derby but also alleges that it abandoned and gutted the place, taking equipment and fixtures it didn’t own to help furnish a new restaurant it was planning for Schenectady.

University Development LLC hurled a slew of accusations at the Mallozzi family in a 12-page complaint filed last week in Supreme Court in Albany County. Chief among them was the claim that the Mallozzi Group unfairly benefited at its expense by diverting resources away from lease obligations and using them to pay other obligations and open a new restaurant. In all, University Development wants at least $1.5 million from the family-owned restaurant and catering company.

The Mallozzi Group owns and operates a number of Capital Region establishments. In August 2012, it announced it would close the Brown Derby, a 138-seat restaurant it had opened four years earlier in downtown Albany as a modern and local re-imagining of the original Hollywood Brown Derby.

“The Brown Derby failed to meet revenue projections while our other six locations continue to perform extremely well,” said co-owner Bobby Mallozzi at the time. “As we move forward, we will continue to expand our operations in the Capital Region.”

Soon after, the Mallozzi Group announced its plans for a family-friendly Italian restaurant across from Proctors Theatre in Schenectady. And last month, Johnny’s Restaurant opened to much fanfare by local officials.

In 2008, Mallozzi Group co-owners John and Bobby Mallozzi entered into a 10-year lease agreement with University Development LLC for part of 22 Clinton Ave. Among other things, the lease required monthly payments of $11,500 until January 2012, when an amendment increased the amount to $14,000 a month.

The landlord is alleging that the Mallozzis haven’t paid rent since September 2012, right after they announced the operations would close.

The Mallozzis did not respond to requests for comment on Tuesday.

University Development LLC says it was convinced to enter into the lease because the Mallozzi family had been in the restaurant business since 1965 and University Development was told it “could rely upon that expertise and the personal involvement of the Mallozzi family to insure [sic] a successful venture.”

In addition, the landlord says, it made “significant and costly improvements” to the premises at the Mallozzis’ request, with the family agreeing to pay the more than $435,000 in improvements back over the term of the lease.

“It was restaurant equipment and restaurant fixtures that had been installed at the Brown Derby in downtown Albany, and we believe they have been installed and are now being used at Johnny’s in Schenectady,” said attorney Mary Elizabeth Slevin of Albany firm Stockli Slevin & Peters LLP.

She declined to specify exactly what equipment was taken.

The suit further alleges that the Mallozzis “vacated and abandoned” the Brown Derby property without giving “direct notice of any kind” to the landlord. Since then, they have refused to make any rent payments, even after the landlord notified them Sept. 10 they were in default.

On Sept. 18, University Development sent a letter to the Mallozzi Group demanding it pay the entire balance of the lease, as well as late fees and any other required sums. It has yet to do so, the suit alleges. As of April 16, the Mallozzis owed just more than $1 million.

The suit lists multiple causes of action against the Mallozzis, including breach of contract, breach of covenant of good faith and fair dealing and unjust enrichment — all for failing to pay rent, failing to provide lien releases and other documentation required by its lease, taking fixtures and equipment without consent or compensation and then using them for their own benefit.

The landlord contends that because of breached obligations it has suffered more than $1.5 million in damages, and it is demanding full restoration and restitution.

The Mallozzi Group is in the middle of another lawsuit as well. A former server has accused the company of cheating its servers out of more than $1 million worth of tips. The company denied all accusations in that suit, which has yet to be resolved.