The future of one of Southern California’s most beloved music venues hangs in the balance of an ongoing legal feud.
Pappy + Harriet’s, a popular desert oasis for music fans visiting Southern California’s Mojave Desert, is the subject of a bitter legal battle between ex-partners who bought the venue last year.
JB Moresco and Lisa Elin, a Los Angeles couple managing the iconic restaurant, bar and concert venue since April 2021, are being accused of illegally seizing the business from an investment group two months after investors funded the purchase. Attorneys for the group, led by Knitting Factory Entertainment CEO Morgan Margolis, filed a nine-count lawsuit in June 2021 against the couple, alleging Moresco concocted a fake crisis involving Pappy + Harriets’ outdoor concert permit and falsely claimed his role managing the restaurant side of the venue gave him veto power over the concert calendar.
According to emails reviewed by Billboard, Moresco solicited a $2.5 million investment from Margolis’ group to buy a controlling stake in Pappy + Harriet’s, which included exclusive rights to book the venue, then seized the property for himself two months later and canceled a concert series Margolis had booked for the venue.
The series in question, Desert Daze Deconstructed, was to be a new format for the Desert Daze festival, which Margolis and festival founder Phil Pirrone had partnered on since 2016. Margolis had booked the series at the venue prior to the acquisition to include 21 performances over 21 days in October and November. War On Drugs, Primus, Ty Segall and Courtney Barnett were all set to perform. On June 15, the day before tickets went on sale, Moresco emailed Margolis and said he was canceling the series, claiming it violated Pappy + Harriet’s’ permit for outdoor concerts. He then ordered Margolis to immediately fire Pirrone from his new role as talent buyer for Pappy + Harriet’s and amend Margolis’ own exclusive talent buying agreement from 10 years down to one.
This came as a shock to Margolis, whose investment group had put up the $2.5 million to purchase the venue just two months earlier. That deal included a term sheet that Moresco signed acknowledging that Margolis and the investors held majority control of Pappy + Harriet’s — not Moresco and Elin. On June 18, three days after the festival showdown, investors voted to officially fire the couple as the venue’s managers and cancel their restaurant management contract. But over the past nine months, the couple have refused to leave the restaurant property, while allegedly locking the investors out of the venue’s business accounts and canceling Margolis’ remaining concert bookings at the venue.
The actions have cost Margolis “hundreds of thousands of dollars in lost revenue,” the lawsuit claims. Margolis says Moresco’s behavior has hurt both Pappy + Harriet’s and Knitting Factory’s reputation and, according to the complaint, “There has already been one agent who has threatened to pull all future business as a result of [Moresco’s] actions.”
Problems in Pioneertown
Margolis has spent the last few months scrambling to rebook his shows elsewhere and tried to minimize his contact with Moresco and Elin, but he still receives inbound complaints about the couple. Last year, he had his lawyers begin documenting the complaints as sworn declarations, so they’d be admissible in court. Several residents allege Moresco and Elin screamed at a 70-year-old Pioneertown resident during an argument about her fence and allegedly called her “a fucking liar” in front of “dozens of longtime community members,” filmmaker Julian Pinder wrote in a Nov. 2 declaration. Another filmmaker, Tao Ruspoli, wrote in a Nov. 8 declaration that an employee at the restaurant approached his table while he had stepped away to greet a friend and told the guest that Ruspoli was “being investigated for murder.”
So far Margolis has collected 17 declarations, including one from the Pioneertown general store owner Sarah Tabbush, who says Moresco terminated her lease inside of a barn adjacent to Pappy + Harriet’s for no reason, ruining her business and angering locals.
Moresco submitted his own declaration in the case, writing how he and his wife met previous owners Linda Kranz and Robyn Celia and were asked to bid on the business when it was put up for sale. The cantina was first built in 1947 to anchor Pioneertown, a Hollywood film set built by film stars like Roy Rogers and Gene Autry to film Westerns including The Cisco Kid and Annie Oakley TV shows. In 1972, Kranz and Celia’s relatives converted it into a biker burrito bar, before those relatives’ daughter, Harriet, and her husband, “Pappy” Allen, took over in 1982 and turned the roadhouse into a working venue.
Kranz and Celia, second cousins to Harriet, who bought the venue in 2003, were “’worried sick’ that PH would fall into the hands of someone who would seek to exploit the name and attempt to turn PH into another Coachella,” Moresco wrote in his declaration. “They wanted me and my fiancé́ to purchase PH because they believed that we would be the best stewards of what they had built.”
Kranz and Celia did not respond to requests for comment.
Moresco says he signed a letter of intent to buy Pappy + Harriet’s and began approaching investors. While the deal was valued at $7.5 million, Moresco and Elin needed $2.5 million in cash to close the sale for Pappy + Harriet’s restaurant business. Under the terms they worked out, the remaining $5 million for real estate could be paid out over five years through rent charged at 10% of food and beverage sales. Once the new owners had paid the couple $3.5 million in rent, they would have an option to make a one-time $1.5 million payment to buy and own the land.
A $2.5 million price tag for a restaurant is high by most standards. The National Restaurant Association estimates the median price to buy a restaurant business (and not the real estate) in the U.S. is $150,000. But, as Moresco explained in a February 2021 email to a member of Margolis’ investment group, Pappy + Harriet’s generated $6 million a year in food and beverage sales in 2019. Besides, the real opportunity in Pioneertown was the real estate, writing that “the next phase of the plan” was to “target neighboring properties and co-brand them with the Pappy + Harriet’s name which will make them more desirable.”
The Partnership Goes Sideways
Moresco and Elin’s goal when buying Pappy + Harriet’s was to both raise all of the money from outside investors and maintain a controlling stake in the project. So they structured the deal with Margolis’ group as a limited partnership, a commonly used business entity to organize companies where one or more parties simply serve as a passive, or silent investor that provides capital, while a general partner manages the business and makes management decisions on behalf of the partnership. The benefit for investors is that limited partners face limited liability beyond their initial investment and passthrough tax benefits.
Limited partnerships are more commonly used for investment pools, hedge funds or to fund film projects or artist endeavors where investors buy into a person’s vision. In the case of Moresco and Elin, they too were asking investors to buy into their vision for Pappy + Harriet’s, and Maresco had experience with projects in Hollywood and L.A. that he felt allowed him to demand majority control of a project without making his own significant capital investment.
This didn’t jibe with everyone. At least one investor, Mumford and Sons member Ben Lovett and his new company TVG, passed on investing into Pappy + Harriet’s because of how Moresco structured the deal.
Margolis and his investors also wanted to make changes to the structure of the agreement when they met Moresco in December 2020. And while they thought the iconic venue was a great match that easily routed with Knitting Factory’s own venue holdings — which included the 1,100-cap Regent Theater in L.A. and three Knitting Factory venues in the U.S. — they refused to put up any money unless the investors had majority control. Eventually, Moresco agreed.
On April 1, 2021, Margolis and the investors closed the purchase, paying $2.5 million to Kranz and Celia in exchange for majority control of Pappy + Harriet’s and the exclusive booking rights to the performance space. Moresco and Elin received a 40.5% minority interest in the business and an annual management fee equal to 5% of food and beverage sales, which penciled out to $300,000 annually.
Less than 60 days after closing the sale, the passwords for the venues social media pages and banks accounts were changed. Margolis and investors were also told not to set foot on the property. While Moresco insists he trying to protect the venue’s permit, the investors attorney believe Moresco was looking for an excuse to force them out after accepting their money. So far, Margolis and his investors have not had much luck regaining control. In the days immediately following the lockout, LA County Superior Court Judge Michael Stern rejected a request for an emergency injunction to remove the couple from the land and set a hearing date for July 2022.
Next Stop: Court
In November, four waitresses contacted Margolis and complained about a COVID-19 outbreak at the restaurant. Margolis’ attorney petitioned Judge Stern to sign a protective order but was denied. A month later, Margolis learned that Moresco’s attorney had begun subpoenaing and deposing Pappy + Harriet’s waitresses to find out who complained. One waitress said a process server posing as a customer served her with a subpoena while she was waiting on her table. Still holding the court files in her hand, Elin allegedly laughed at the waitress and said, “You’re going to perjure yourself.”
Margolis filed a motion to quash the subpoenas, calling them harassment, but was denied. Margolis then filed a motion asking the judge to reconsider. That request was also denied.
“The plaintiffs have not won a single part of a ruling in any hearing in this case. They are losers and so is their case,” Moresco’s attorneys Bryan and Brandon Fernald said in a statement to Billboard, calling the lawsuit “a case study in malicious prosecution” and “frivolous and nothing more than an unethical attempt to bully and defame the owners of Pappy and Harriet’s.”
Margolis remains hopeful that he will prevail in July.
“There is a pending motion for injunctive relief that speaks for itself,” he said in a statement. “The court has not heard it yet. We did not lose, it’s on for July. The sworn community declarations detail the unprofessional, unlawful, and damaging behavior Defendants are engaged in.
“They can say whatever they like and call us any names they like, however the fact remains, we 100% funded everything, they got our money and have locked us out since June of 2021.”
