When Southern Season abruptly shut down last year as one of the anchor tenants of the massive mixed-use development Libbie Mill, the retailer’s closing left more than an empty building in its wake, according to a lawsuit filed in Richmond federal court this month.
An entity tied to Richmond-based Gumenick Properties, the developer of Libbie Mill, is suing former Southern Season CEO W. Clay Hamner and CFO Brian Fauver for fraud and more than $350,000 in damages over an agreement tied to the store’s lease in its short-lived local location.
The Chapel Hill, North Carolina-based gourmet market opened a 53,000-square-foot store in Libbie Mill at 2250 Staples Mill Road in July 2014 – its first in Virginia.
It closed the location less than two years later, in April 2016, citing weak sales and too large a space. Gumenick has yet to announce a new tenant for the vacant box, while the rest of Libbie Mill has continued to take shape around it.
The lawsuit, initially filed in Henrico County Circuit Court but moved to Richmond federal court last week, claims Southern Season struggled out of the gate in Richmond.
It alleges the Libbie Mill store failed to make its first three rent payments on time. After the retailer asked for a rent reduction shortly after opening, Gumenick agreed to help prop it up by floating an equity investment of $25,000 per month for 12 months, up to $300,000.
That agreement, according to the lawsuit, was based on an alleged assertion by the defendants that Southern Season had a letter of credit in place to cover a $500,000 security deposit for its 20-year lease in Libbie Mill. Gumenick alleges the letter of credit was not in place at the time of the cash infusions, which the lawsuit contends amounts to two counts of fraud.
Gumenick is seeking $100,000 in damages after floating the store $25,000 in August 2015, January 2016, February 2016, and April 2016, according to the lawsuit. It also seeks $350,000 in punitive damages – the maximum allowed under state law.
Southern Season filed for Chapter 11 bankruptcy in June 2016, after its expansion plan was unable to replicate the success of its Chapel Hill store and it shuttered locations in Mount Pleasant, South Carolina; Charleston, South Carolina; Raleigh and Asheville, North Carolina.
The brand ultimately was sold last summer out of bankruptcy to Delaware-based private equity firm Calvert Retail.
Hamner and Fauver filed responses to the lawsuit last week, denying Gumenick’s claims, and asking that the case be dismissed. Fauver filed a separate motion to dismiss him from the suit, arguing the case does not assert a claim against him specifically.
Gumenick is represented in the case by Hirschler Fleischer attorneys Courtney Moates Paulk and Emily Scott. Paulk said their clients do not comment on ongoing litigation.
Hamner and Fauver are represented by Spotts Fain attorneys John Erbach, Edward Bagnell Jr. and Tara Badawy. Erbach said he could not comment on the case.