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Brawl on the Boardwalk

The shiny, sparkling, so-family-friendly-it-hurts Kemah Boardwalk is, in many ways, a perfect symbol of Houston and its environs at the booming turn of the century.

Take a collection of comfortably ramshackle seafood restaurants, stuck just far enough off the beaten path to give patrons the cachet of going where the tourist-hating natives eat. Add $75 million in the form of a high-octane advertising campaign and a string of chain restaurants whose ramshackleness has been carefully researched and art-designed -- hell, throw in a Ferris wheel, a miniature train and a 52-room hotel while you're at it -- and you've got a scrubbed-up, Disneyesque money machine that offers a vague approximation of the original setting. Just as you can walk down a "Paris street" in a Disney park without the hassle of dealing with actual French people, at the Kemah Boardwalk you can take the kiddies to a seaside experience knowing the food and atmosphere will be safe and -- if the marketing-department studies are to be believed -- fun.

It's not much different from what happened at NASA, where tours were low-key and free until they were replaced by the expensive "entertainment destination" of Space Center Houston, or with Enron Field, which has a Ye Olde Railroad Days motif that harks back to an alleged train-related past that most Houstonians know nothing about.

But like those faux brethren, the Kemah Boardwalk has been a cash-cow success, raking in money from tourists and locals alike.

On most weekends, visitors flock to the 40-acre location, backing up traffic on State Highway 146 and clogging the few roads on the site as cars circulate in a vain attempt to find a parking space.

More than three million people are expected to visit the Boardwalk this year, eager to play the games, ride the rides, eat at the restaurants or just sip a beer and watch the constant stream of recreational boaters parading along Clear Lake Channel, one of the more misnamed bodies of water in the state.

As they happily spend their money, most folks probably think they're at a pleasant bayside spot. What they don't know is that they're really at ground zero in a war of attrition between two millionaires who love to litigate and have the money to do so -- two local boys made good who began their work lives doing menial restaurant jobs and now seem to take great pleasure in battling each other.

In one corner is Matt Wiggins, a grandson of Jimmie Walker's, whose eponymous restaurant was for decades the main reason to head to Kemah. He's well-plugged-in to the local community, although he also spends a lot of time in Mississippi. Wiggins owns a big chunk of land in the Boardwalk area.

In the other corner is Tilman Fertitta, descendant of some of Galveston's most famous restaurant-and-nightclub families, who now is king of the Landry's Seafood chain, the nation's second-largest. He's a big buddy of President Clinton's, thanks to some enthusiastic fund-raising. Landry's leases a big chunk of land at the Boardwalk from Wiggins.

The two are at each other's throats. Wiggins says Landry's is obligated to build yet another restaurant on the land he leases, a restaurant that will pay significant rent to Wiggins, and that the chain is weaseling out of doing so. The Landry's people say Wiggins has never met an agreement that he hasn't broken somehow, and that the City of Kemah won't let them build a new restaurant until more parking is available.

And the people of Kemah are learning the wisdom of the old African proverb that says when two elephants fight, it's the grass underneath that fares the worst.

Matt Wiggins, most everyone says -- even the folks at Landry's -- is one affable guy. Most everyone also says -- especially the folks at Landry's -- that he can be a real pain to do business with.

"Matt is a lawyer by training, so he understands the system and he understands loopholes," says one lawyer who fought Wiggins in court on a matter not related to Landry's. "To me, if the loopholes are there, they're there, and it's your fault for putting them there, but Matt really pushes the envelope sometimes.He's a likable guy, but sometimes he just goes too far."

There is some documentation of that. In a lawsuit pending in Galveston, a district judge sanctioned Wiggins for filing false evidence. But people who know Wiggins view him more as a character than a malevolent type: "That's just Matt being Matt" is a common phrase when word hits of yet another legal dispute.

Wiggins, of course, has a different view. He says he's a victim of a string of broken promises from Landry's, and he's chapped every time he looks at the vacant plot of land that should be the site of the Chop House, a steak restaurant the chain promised to build, a restaurant that would be paying 10 percent of its proceeds to him.

 

Right now he gets $1 million a year in rent from Landry's. With the Chop House, he'd be getting up to $500,000 a year more, he says. Over 30 years that's $15 million.

"The bottom line is that I'm getting zero income off a waterfront site in Kemah," he says.

To Wiggins and his lawyers, the story is straightforward. "Tilman has a habit of breaking his agreements," says David Tidholm, who has represented Wiggins for years.

The marriage from hell began ten years ago. Wiggins had long owned the land around Jimmie Walker's place, even taking over the operation after his tenant, who was running the legendary eatery, filed bankruptcy in 1986. But Hurricane Jerry did a million dollars' worth of damage to the place in 1989, and Wiggins listened when a broker told him Fertitta was interested in becoming a tenant.

"I was not particularly interested in leasing, but I had a million dollars in damage and an insurance payout of only half a million," Wiggins says. "At that period of time, banks were not interested in loaning money to restaurants and real estate deals -- it was like putting the words "leprosy' and "cancer' in the same sentence."

So he leased the land to Landry's for a portion of the restaurant's income. Part of the lease specified that the new tenant couldn't build a competing restaurant within five miles, because such a business would obviously cut into revenues at Wiggins's place.

Not soon after, Landry's broke ground on a Joe's Crab Shack next door. "They initially said it wasn't a seafood restaurant, which was kind of odd for a place named Joe's Crab Shack," says Tidholm, who apparently would rather not let Wiggins do too much talking in a group interview. "Then they said that our tenant was "Landry's Inc.,' but the company building Joe's Crab Shack was a publicly traded company named "Landry's Seafood Restaurants Inc.' "

The two sides worked out an agreement that increased Wiggins's take. Within a few years, though, Fertitta started to think big about what could happen at Kemah. He purchased the Flying Dutchman and the Brass Parrot, two other longtime bayside restaurants. And he thought about expanding his empire, leasing more land from Wiggins to put in other restaurants and an amusement park.

"There were more contentious negotiations, but we worked out a deal," Tidholm says. "The key to it was that in exchange to control what was developed on most of Matt's land along the bayfront, they agreed to put in two new restaurants and amusements, of which we would get a percentage."

Landry's officials were eager to deal because they wanted to make sure no one encroached on their Boardwalk turf with a store or restaurant they didn't feel was appropriate. "They didn't want some guy from Mississippi who they'd been fighting for six years to do something tacky there on Galveston Bay, like opening an all-you-can-eat shrimp place with picnic tables and a shack," Tidholm says. "So their solution was to lease all of Matt's property on the bayfront."

The February 1998 lease called for a Willie G's (part of the Landry's Seafood chain) to open by the beginning of 1999, and the Chop House to open a year later.

The Willie G's opened nine months late, but Landry's made it up financially to Wiggins. As 1999 dragged on, though, there seemed to be little effort on Landry's part to build the Chop House.

Wiggins went to City Hall to see if the chain had filed any plans in order to get a building permit. He saw a floor plan that was identical to Willie G's. If the second restaurant was built as shown, the big windows already in place at Willie G's would open up not to a bay view but to the side wall of the Chop House.

"If you intended to build the Chop House, why build a Willie G's with windows just five feet away from where the new building was intended to be?" says Richard Daly, another of Wiggins's lawyers.

"Landry's was looking at their investment and saying, "Son of a bitch. If I put in another restaurant, it's not going to bring anyone new to Kemah, it's just going to take business away from our other stores there,' " Tidholm says. "They'd be stuck with a $2 million investment that wouldn't bring any new profit.A cynic would say that Tilman never intended to develop the second restaurant at all. He just wanted to keep the land so no one else would develop something."

 

Landry's was also carping about the commitment letter from a local bank that Wiggins was required to provide as part of his agreement to pay $1 million as each new restaurant opened. He provided one for the Chop House that was absolutely identical to the one he had provided for Willie G's. The Willie G's letter -- one that said the bank was "excited" about the investment opportunity -- had been good enough for Landry's. However, now that the chain was looking to get out of its Chop House agreement, it was saying the new commitment letter was inadequate.

As all this was going on, complaints began to build about the parking and traffic situation around the Boardwalk. Weekdays were fine -- in fact, Wiggins says, weekdays were so slow that Landry's was beginning to get antsy about its $75 million investment -- but weekends were another story.

Cars took up spaces at the quaint local shops located just outside the Boardwalk area, and beer cans and other trash began to litter residents' yards.

The city started to tackle the problem. For one thing, it sent a letter September 2, 1999, to Landry's saying the plans for the Chop House needed to show 97 more parking spaces. It was just the escape hatch Landry's was looking for desperately.

A few days later, Landry's put out a press release announcing that "the City of Kemah has rejected Landry's request for the issuance of a construction permit to build a new restaurant.Tilman Fertitta, chairman of the board, president and CEO, stated, "While we are disappointed that the City has rejected our construction permit due to failure to provide adequate parking, we truly understand. There has been a tremendous parking problem since the opening of the Kemah Boardwalk Development.' "

The press release incensed Team Wiggins. The city didn't deny a building permit, for crying out loud -- it just asked for more details on parking. And Landry's never submitted any of the other half-dozen types of plans, such as those detailing electrical or plumbing work, that are needed to get a permit.

"We believe they never intended to build the second restaurant, and they were looking for a justification or excuse not to build it, and they found it in the parking problem," Tidholm says. "They decided to make a halfhearted attempt to get a building permit, get it denied, and then say, "Hey, no can do.' "

Wiggins decided to evict Landry's from his property for breaking the lease. Just like any landlord seeking rent, he filed the case in a local justice of the peace court. (Sure, Landry's complains that the JP was, like many Kemah residents, a longtime friend of Wiggins's. But hey -- Landry's had donated to the judge's re-election campaign.)

Landry's fought the move, saying the dispute was better suited to district court, but lost. And on August 16, after an eight-hour hearing, JP Mark Foster issued a ruling evicting Landry's and Willie G's from their Kemah sites.

Any eviction was stayed pending appeal, but the victory was nevertheless sweet for Wiggins. Landry's had carpet-bombed him with five separate lawsuits, "of which they know a couple are without merit," he says. "But they know I'll have to respond and spend legal fees. My trick is to just stay alive while they burn all the hair off me."

Wiggins and his lawyers say Fertitta should be grateful to them for what they've done. The Kemah site they leased to him became the most lucrative Landry's in the then-small chain.

"We believe we played a major role in opening doors and letting the company go public and sell stock and make Tilman Fertitta a very rich man," Tidholm says.

But instead of gratitude, what do they get?

"There has been an arrogant disregard of what they've agreed to do," Tidholm says, "and we don't like it. We have rights, and we intend to prevail. We'll either settle this case or Matt is going to be back in the restaurant business."

By now, if Steven Scheinthal is reading this -- and as general counsel for the Landry's chain, it's his job to do so -- his blood pressure has likely reached dangerous levels. He has marked up nearly every paragraph above, muttering (if not screaming) about how Wiggins's outrageous claims and characterizations have gone unchallenged. He's probably got an assistant already working furiously on a letter to the editor. He may be thinking of suing somebody, because his boss is Tilman Fertitta, a man who has shown no hesitancy about going to the courthouse (see "http://www.houstonpress.com/issues/1994-06-30/feature.html/page1.html">Food Fight," by Alison Cook, June 30, 1994).

 

For if there is one thing that steams Scheinthal, a little bulldog of a guy, it's Matt Wiggins.

Matt Wiggins, who has broken agreement after agreement. Matt Wiggins, who will twist the truth until it's unrecognizable. Matt Wiggins, who was peddling law books until Landry's came along.

"Matt in our opinion is not an operator," he says. "He was a Westlaw salesman that we helped to make a millionaire by paying him a lot of rent."

Like Wiggins, Scheinthal is somewhat restrained by his nearby lawyers during an interview. The effort to hold his tongue makes him noticeably fidgety, and occasionally something bursts out before his high-priced team of attorneys can signal him to stop.

Wiggins, for instance, was required to pay Landry's $1 million after each of the new restaurants was opened. Landry's struggled to collect the first million, and wasn't happy with the bank documents Wiggins provided to show he was good for the other million.

"He already owes me a million, and I don't want him to owe me two million," Scheinthal says. "I was not supposed to be his bank. I am his tenant, and I am supposed to be entitled to the dignity and respect that comes from taking a salesman and making him into a multimillionaire."

Scheinthal's lawyers are, naturally, more circumspect, but in their lawyerly way just as harsh.

"Talk about keeping your word -- that's what this is all about, the words that are on paper" in the contract, says Daryl Bristow.

"Wiggins we have found to be a very difficult landlord, and a very astute one on how to be a very difficult landlord," says James Ware.

The Landry's chain has more than 100 landlords across the country, and not one of them comes close to being as vexing, as annoying, as exasperating, as Matt Wiggins.

When Landry's decided to go into Kemah, the hurricane-ravaged Jimmie Walker's "was just a vacant building with seagulls flying around in it," Scheinthal says. "It was dilapidated."

The chain turned the building into a roaring success -- despite Wiggins's amateurish attempts to cash in on the phenomenon beyond the rent he was getting.

"Wiggins did things that made no sense whatsoever from the tenants' perspective," Scheinthal says. "Next door to Landry's, on his land, he tried to have a festival that was not appropriately capitalized and [was] done in a haphazard way. When you have a first-class establishment, you don't create something next door that's not in good taste, but [for example] there was the type of fencing he used: chain-link instead of something that would be more appropriate from an aesthetic standpoint. And the banners were like that, too. Why would he do something right next door that's a nuisance to our business?"

Wiggins had thrown a fit over the opening of Joe's Crab Shack next door, but "we had 100 percent the legal right to do it," Scheinthal says, and Joe's only increased business at Landry's.

"This man [Wiggins] now makes over a million dollars a year, and if you had listened to his vision in 1985 or 1989, you wouldn't have this development in Kemah," Bristow says. "There may have been differences of opinion, but history has demonstrated the decision Landry's made was right."

The next phase of that development, of course, also involved negotiating with Wiggins for more property to lease. Given the angst he had caused already, the folks at Landry's were determined to nail down anything and everything in the February 1998 agreement. It was pretty airtight, they thought.

Construction on Willie G's was delayed when a big storm hit in September 1998, heavily damaging the Boardwalk. "The big issue to us was to clean up the existing Boardwalk," says Scheinthal, "and we had a force majeure clause, so any construction could be delayed because [the storm] was an act of God. I can show you pictures of Kemah at that time, and it looks like a war zone. But he's pounding the table saying, "Goddammit, build me a restaurant and get me my goddamn money.' I'm saying to him, "Look at Kemah -- we need to get it cleaned up.' He was more interested in himself and getting a new restaurant opened."

Not to mention the half-assed, you've-got-to-be-kidding "commitment letter" he provided from a local bank supposedly saying it would lend Wiggins the million he was required to come up with as each new restaurant opened.

"With the first letter [the one for Willie G's], we had some problems and we wrote him a letter saying, "This isn't a commitment letter,' " says Edward Perkins, another Landry's lawyer. "But being the "difficult tenant' he says we are, we went ahead and started building the place anyway."

 

Sure enough, Wiggins didn't pay up when Willie G's was completed. Eventually, after hours of wasted energy and protracted discussions, he did. And then when it came time to build the Chop House, he sent the same type of goddamn letter.

"We're not going to get burned twice, is what we said," says Ware. Landry's was not required to start construction until Wiggins had secured a proper commitment letter, and he hadn't, despite Landry's bending over backward to help him.

"I asked my outside lawyer what the commitment letter should include, and he sent back a 20-page form," Scheinthal says. "I said, "If I sent this to Matt, he'd think we were being unfair.' So I called him and said, "Rather than me sending you this, just go and get a letter that says Matt's been approved, subject to the bank's satisfaction with an appraisal and building plan, etc., etc.' Instead, Matt sends us a letter telling us we're in default."

By this time, both Landry's and Wiggins had heard grumbles about the parking situation.

"Because of the phenomenal success of the development, it has carried with it some community issues like parking," Bristow says. "Landry's has tried to deal with them, but Wiggins has not."

Fertitta went to a Kemah City Council meeting in October 1999 and urged the passage of a parking ordinance that would require new restaurants to provide sufficient parking contiguous to the building, not on satellite lots across the street or across Highway 146.

He emphasized the seriousness of the problem. Fast-food chains might move into sedate Kemah -- right next door to you, Mr. Resident.

"You are going to start getting Sonic Drive-Ins, you start getting Jack-in-the-Boxes, you are going to get a McDonald's, right next to your house, because you don't have zoning down here," he said. "But you make it difficult for them if you make them provide parking next door."

Such an ordinance would, of course, make it difficult to build the Chop House. But working together with Wiggins, perhaps something could be ironed out.

In fact, the two sides worked out an agreement. Wiggins met with Fertitta and Scheinthal in March, with no one else present. Maybe another restaurant wasn't what Kemah needed at that point, Landry's said. And besides, the vacant lot in question was on the wrong side of the development, away from the synergy of the hot new Aquarium restaurant with its four-hour weekend waits. Maybe instead the lot should be used for more amusements, which would help bring people in the middle of the week and bring them over toward the Willie G's side of the Boardwalk as well.

So Scheinthal wrote out two pages summarizing their agreement, and Wiggins initialed it. No restaurant on the site for at least seven years, and Wiggins would get a nice cut of the income from the new amusements. Both sides would work together on the parking problem.

All they had to do was type it up and translate it into legalese. But a few months later Wiggins is suing them and saying that no agreement was ever finalized.

Of course Daly, Wiggins's lawyer, tries to play it smart by saying, "Especially with the history between these guys, nothing is finalized until everything is documented and signed." But hell, that's just more attorney double-talk from Wiggins's hired guns. The fact remains that he signed off on the deal and -- once again -- is trying to back out.

He even took Landry's to court on an eviction suit. And won. For the moment, at any rate.

"When the smoke finally clears, Landry's is still going to be in charge," Bristow says.

"And if Wiggins is wrong, then he has filed a wrongful eviction suit, and that could result in very substantial exposure for Mr. Wiggins," Ware says.

Brian Sawyer is watching the Battle of the Peeved Titans with some amusement. "I think they're just two guys who have got a lot of money and enjoy jacking with each other," he says. "I know Matt's that type of person, and Tilman is sort of that banty-rooster type. I don't know really why they're jacking with each other except that Matt thinks he has him by the nuts."

But despite the entertainment value of the fight, Sawyer is concerned about what's happening to his town.

For six years he was president of the Kemah Community Development Corporation, a taxpayer-supported organization designed to attract business to the city. He quit a few months ago.

"Kemah is a wonderful community but what it is not is a Landry's Boardwalk development. People don't seem to realize that," he says.

 

Whether the beneficiary is plugged-in local guy Wiggins or 800-pound gorilla Fertitta, Sawyer worries that city officials are too eager to keep the tax revenue coming.

"Parking is a problem, but it's just a symptom of the problems in Kemah," he says. "The basic issue to me is that everyone comes to Kemah to make a buck off Kemah, and the decisions by the mayor and the city council are related not to the quality of life of the citizens of Kemah, but for the developers."

(Mayor Rick Diehl put off an interview with the Houston Press, then did not return phone calls.)

Already the Boardwalk provides up to three quarters of the city's tax revenues, Sawyer says, adding that "I am worried that we're becoming Landry's junkies."

There's talk of expanding the two-lane roads that make up the short trip from Highway 146 to the parking lots. Maybe the city will even be convinced to spend some of its own money, or to donate land, for a second parking garage.

It's not clear if the 4,000 or so residents of Kemah will benefit from that. As to who will benefit from it, that depends on who you talk to. If Wiggins somehow prevails, he'll be the owner of Landry's, Willie G's and the amusement area between the two restaurants.

The lawyers representing Landry's foresee a long court battle, but they can't give in and risk losing all that the Boardwalk now represents and having it turn into some schlocky, doomed, get-rich-quick development that Wiggins would no doubt build, adding businesses that lack the class of what Fertitta has built so far.

"What a shame it is that Landry's and Wiggins can't join together and look to the long view. Landry's has tried," says Bristow, Landry's lawyer. "I don't get the sense that the other side of this dispute is the least bit interested in the long view, and as long as he isn't, we're gonna have this gaggle of lawyers looking out for Landry's best interests."

Daly, Wiggins's lawyer, also talks like there will be no compromise. "We'll have a trial before January, I believe.If I have to go through all that, I'm not interested in settling."

Wiggins's other lawyer probably has a more realistic view. The marriage from hell is not likely to end when both sides are raking in the bucks.

"It's hard to get divorced when both sides are doing so well," Tidholm says. "Even if you deduct legal fees and the aggravation, the Boardwalk's still been pretty good for Matt Wiggins and for Landry's. We're joined at the hip."

Of course, Tidholm has reason to be cheerful. He's a lawyer, and if anyone is happy to see the war to determine who will be King of Kemah, it's the attorneys who will be fighting it out in the courtroom.


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