The Old Post Office and Trump Old Post Office, LLC

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This case is based on a real situation between Trump Old Post Office, LLC and the entities partially owned by famous chef Geoffrey Zakarian. The lawsuit that resulted from the situation was settled out of court in a confidential settlement. Cases may settle out of court for a number of reasons – the parties do not want the expense of a lawsuit, the parties are uncertain of their likelihood of success, the parties want to avoid any potential negative publicity associated with the situation, etc. Because this case was settled out of court with a confidential settlement, we truly do not know who might have won the lawsuit. There is no real indication of admission of wrongdoing. As such, this case is a good case for discussing the ethical aspects of the decision.

 

The Old Post Office and Trump Old Post Office, LLC

The Old Post Office in Washington, D.C. is located in the heart of the capitol at 1100 Pennsylvania Avenue N.W, approximately five blocks from the White House. The Post Office was built between 1892 and 1899 and currently is on the National Register of Historic Places.[1] It is taller than any building in the capitol other than the Washington Monument and was the original headquarters of the U.S. Post Office. The bells in its bell tower are rung at the opening and closing of Congress and on national holidays.[2]

On August 8, 2013, Trump Old Post Office, LLC, signed a 60-year lease for the Old Post Office building, paying $3,000,000 per year in rent beginning with the opening date of the hotel.[3]  The hotel opened for reservations in September 2016 with a grand opening ceremony in October 2016.[4]

Trump Old Post Office, LLC is a limited liability company formed under the laws of Delaware on June 30, 2011. It is owned by a trust that acts for the sole benefit of Donald J. Trump, President of the United States since January 20, 2017. As of February 3, 2017, President Trump resigned as an officer of the LLC and his son, Donald Trump, Jr., took over as president of the company.

 

CZ-National, LLC and BVS Acquisition Co., LLC

As privately held limited liability companies, there is very little information on CZ-National, LLC or BVS Acquisitions Co., LLC. What is known is that they are the primary members of a joint venture between Geoffrey Zakarian, a celebrity chef, and Louis Ceruzzi, a real estate developer and investor in high-end restaurants.

Zakarian has over 30 years of experience in high-end restaurants across the world.[5] After working for professional chefs during his early career, he became an Executive Chef in 1987. He opened his first restaurant in 2001, with several of his restaurants receiving tremendous ratings including his restaurant, Country, which received a Michelin Star.[6] He has opened restaurants in New York, Miami, Los Angeles, and on the open seas, working with Norwegian Cruise Lines. Zakarian has authored several cookbooks, and has hosted talk shows on Sirius XM radio. He was one of the celebrity judges on the Food Network show, Chopped, and has participated in several other Food Network shows. He has served as Chairman of the City Harvest Food Council, fighting hunger in New York City.

Louis Ceruzzi was the founder and president of Ceruzzi Properties, LLC.[7] Ceruzzi Properties merged with Starwood Capital Group and formed Starwood Ceruzzi, LLC in 1997. He began his career as a real estate tax lawyer in New Haven, Connecticut but moved into real estate development after 5 years of practice.  His firm developed more than 10 million square feet of real estate in New York City and owned more than eight restaurants in New York City, Massachusetts, and Connecticut at the time of his death in September 2017.

 

The Interaction

On February 19, 2015, Trump Old Post Office, LLC entered into a 20-year sublease with CZ-National, LLC.[8] According to that sublease, Geoffrey Zakarian would operate a “first-class restaurant” in 9,344 square feet of space in the Old Post Office building.[9] On that same date, BVS Acquisitions Co., LLC signed a guaranty to ensure performance by CZ-National.[10]

 

The Situation 

During his presidential campaign, President Trump stated that Mexico was “not sending their best” citizens to the United States and that Mexico is, “sending people that have lots of problems, and they’re bringing those problems to us. They’re bringing drugs. They’re bringing crime. They’re rapists.”[11] After those comments were made, Zakarian stated, “The recent statement surrounding Mexican immigrants by Donald Trump do not in any way align with my personal core values. In light of this, I am unable to move forward with the restaurant in the Trump International Hotel… Zakarian Hospitality employs many immigrants from nations all over the world, and I look forward to continuing this business culture in my future restaurants. We are a nation built from immigrants, my family included.”[12]

 

The Question

Participants may be asked to serve in the role of advisor to Geoffrey Zakarian. The language of the contract is vague enough that there is no clear legal answer to whether the statements made by candidate Trump would trigger the ability to terminate the contract. As such, participants must analyze the ethical implications of a decision to remain or cancel the contract.

 

The Epilogue

On July 17, 2015, Zakarian sent a notice to Trump Old Post Office, LLC indicating an intention to terminate the sublease for cause, based on then-candidate Trump’s violation of the covenants of quiet enjoyment and good faith and fair dealing by creating a situation that “materially interfered with Mr. Zakarian’s ability to perform.”

On August 3, 2015, Trump Old Post Office, LLC filed a complaint for breach of contract against CZ-National, LLC and BVS Acquisition Co., LLC in Superior Court for the District of Columbia. In response, CZ-National filed a counterclaim for violation of the implied agreement to act in good faith.[13]

On April 10, 2017, after nearly two years of court processes, including the deposition of then-candidate Trump during his campaign for the presidency, Trump Old Post Office, CZ-National, LLC, and BVS Acquisitions Co., LLC entered into a confidential settlement agreement.