In June 2017, David and Dana Bain sold their upscale French cuisine restaurant The Outside Inn after more than 23 years of operation. On Tuesday, they learned a judge has ordered them to participate in a settlement conference in hopes of resolving a breach of contract lawsuit they filed against the new owners who closed the popular restaurant last year.
Legal action was initiated against Malarchik Hospitality LLC, as well as Patrick and Ayana Malarchik in October 2019 just weeks after they shuttered The Outside Inn at 4907 State Route 92 and terminated a 15-year lease-to-own agreement they signed with the Bains. Patrick Malarchik had worked on occasion for the Bains as a chef.
During an April 7 review hearing, Judge Laura Cardinal of the Cochise County Superior Court agreed to arrange for another judge to preside over an in-person conference between the Bains, the Malarchiks, and their attorneys in June. Cardinal would preside over a jury trial if necessary which would present a conflict if she took part in the settlement negotiations.
According to court documents, the Malarchiks sent the Bains a six-month notice of their intention to shut down the restaurant effective September 1. At the same time, the Malarchiks were moving ahead with plans to open Tandem Upscale Dining and Lounge at the Windemere Hotel and Conference Center, the city’s largest hotel.
The Bains filed suit, arguing that Malarchik Hospitality, LLC and its two owners are liable for no less than $50,000 in damages.
“Defendants have breached the Agreement by, among other things, terminating the Agreement without cause; by failing and refusing to honor the payment terms; and by refusing to operate the Restaurant,” the Bains’ complaint states.
But in November, the Malarchiks filed a counterclaim which argues that the decision to close The Outside Inn was due to myriad problems with the property and building, including roof leaks and a faulty septic system.
“Long before April 1, 2019, it was determined the Property could not be made ‘usable’ while operating a viable restaurant,” the counterclaim states. “For proper repairs to be completed, the restaurant would have had to have been closed, inoperable, for a period of time that would have bankrupted the restaurant.”
The Malarchiks are asking for reimbursement of a $25,000 origination payment and nearly $20,000 in repairs they claim were made prior to closing.
The parties’ attorneys, Neal Eckel for the Bains and Michael Capp for the Malarchiks, were required to participate in the April 7 hearing by phone due to closures of the courthouse to non-emergency proceedings. No trial date has been scheduled but Cardinal ordered that all deadlines in the case will be extended by 60 days due to COVID-19 restrictions.
The Bains and their restaurant garnered national notoriety in 2016 when it was announced they planned to give away the business and commercial property as the grand prize of an essay contest. The contest, with a $125 entry fee, was cancelled in May 2017 and fees were refunded.
Earlier this year, area resident Chris Bourlier announced he purchased The Outside Inn with plans to reopen as a fine-dining experience. He was issued an interim liquor license in December, but the restaurant’s reopening was delayed while a full remodel was undertaken.
Bourlier is hopeful to reopen the restaurant this summer. He is not a party to the current litigation and now owns the property outright.