Woodstock approves settlement with Public House to avoid lawsuit after restaurant’s sudden closing

The Woodstock City Council approved a settlement late Tuesday with the company that owns Public House after a few months of back-and-forth and threats of lawsuits.

Public House had been located in the Old Courthouse on Woodstock Square for years before the building’s renovations wrapped up last year. The eatery had been previously closed due to the renovations but received a loan from the city to help it rebound from that and COVID-19.

The city released a series of letters from city attorney Ruth Schlossberg to Public House owner Kathryn Loprino in the days and weeks following the restaurant’s abrupt closure at the end of March. In April, the city in one letter asked Katlo to pay about $345,000 in outstanding loan payments, interest and late fines. The city attorney gave Katlo Inc., Loprino’s company, a 10-day window to pay up or said legal action could come next.

Emails released by the city in response to a Northwest Herald request show a draft, non-binding Letter of Intent, which outlined the terms for a sale of the restaurant. Among the terms on the Letter of Intent include a purchase price of $130,000 for “property, goodwill, and assets.”

Loprino wrote to the city March 31 that “the decision to close was one in ‘real time’ nothing was planned.” She has not responded to requests for comment.

City officials had written in a March 28 letter to Loprino about the closure, but claimed Loprino had quitclaimed the title to her home. Loprino told the city March 31 that was a way to try to get more money into the business, but wrote in an email, “Putting more money into it would just be a bandaid for a short period.”

City Manager Roscoe Stelford replied April 2: “We appreciate your outreach and will of course work with you ... to get this matter resolved in a timely manner as well as with the intent to reach a positive outcome for both sides. We also appreciate your clarifications regarding your personal finances.”

Records indicate Loprino emailed the city April 30 about raw sewage backed up into the restaurant space.

In a May 10 email to the city, Loprino said she felt optimistic about a purchase offer or letter of intent coming through within the next week, writing: “We are continuing to market the restaurant aggressively with our broker and currently have three very serious and promising perspective operators interested.”

Loprino emailed the city May 16 to share letters of intent received.

Schlossberg wrote to Loprino on May 17 that city’s stance is “you are now liable for the entire outstanding balance.” She wrote that if the city gets rent and a new business opens shortly, the city council might “be asked to consider a settlement of the City’s claims related to the loan and the lease.”

The city council did just that Tuesday evening.

After about an hour of closed-door discussions, the council took a vote on a settlement. Before voting, officials weighed in on the settlement.

While the Northwest Herald has asked for but not yet received a copy of the settlement, officials outlined some of the terms, including that it’s for $75,000, which is about a quarter of what the city demanded in April.

City council member Tom Nierman said the city is getting $75,000 and interest plus equipment, saying it comes out to about “50 cents on the dollar.”

“Is it ideal? No. But is it the best situation for moving forward and looking down the road, not looking back? Yes,” Nierman said.

City council member Bob Seegers was the sole “no” vote. Seegers, who had voted no on the Katlo lease two years ago, said he’d be willing to risk $100,000 of taxpayer dollars to try to recoup more than what they got in the settlement.

“I’m trying to look at this as [if] this were my own money, how would I handle that?” Seegers said.

Councilmember Natalie Ziemba said that she’s “putting on a dollar value on every single day that the Public House is closed. I’m not interested in retrospectives and looking backwards. I’m looking at today and moving forward.”

Danielle Gulli, the city’s executive director of business development, said the city has gotten three letters of intent that were prepared from the broker handling the sale of the business and several others who want to get involved once the city takes over the space.

Mayor Mike Turner said he believed the shutdown and inflation hurt the business.

“The city gains unquestioned, absolute control over this,” Turner said. “We no longer have to work with Katlo because they did have an opportunity to do that.” He added the city is not “encumbered” by future legal issues.

“The closure changed the dynamic of the flow of people that went back to the restaurant,” Turner said. “And without question, the owners, the operators of the Public House bear culpability and responsibility for the failure as well.”

Turner said the settlement “provides a clean break and an opportunity for us to focus solely on moving forward, getting somebody in there.”