Pappas Set to Leave Hobby After Judge Rejects Bid to Stay Amid New Fight Over Fixtures

May 5—Pappas Restaurants is set to vacate Hobby Airport after a state district judge on Friday denied the company's request to remain in the terminals while its ongoing legal case against the city proceeds.

After providing food and beverage services at the airport for two decades, the restaurant chain lost its lucrative contract in March to a competing vendor and sued the city of Houston over what it alleged to be an unfair and improper procurement process.

Friday's decision marked the second time a district judge has rejected Pappas Restaurants' request for a restraining order that would allow it to remain at Hobby. In April, State District Judge Beau Miller rejected the company's initial request to keep the status quo and continue to operate at the airport while the court reviews its lawsuit.

In an amended lawsuit filed Thursday, the company demanded again to have the city rescind its termination notice to Pappas Restaurants and suspend its new contract with the replacement vendor. Judge Kristen Hawkins denied the request during a hearing Friday morning.

"The temporary restraining order was unfortunately denied," said Christina Pappas, the marketing director for the restaurant company. "Our legal team is focused on our next legal steps. Our team at Hobby is working extremely hard to close our restaurants properly."

In the 515-page amended lawsuit, attorneys for Pappas Restaurants reiterated their allegation that a flawed procurement process led to the city awarding a 10-year, $470 million food and beverage contract to Areas USA, a subsidiary of a Spanish company, and its local partners in March.

Mayor Sylvester Turner has accused the restaurant group of running a "smear campaign" against the city's procurement process. City officials have cited the companies' different cost proposals as the driving factor behind the decision to award the contract to Areas. The winning company offered the city 22 percent of its revenues, while Pappas offered 15.5 percent.

"Today, for the second time, a Harris County Judge has denied an application for a temporary restraining order sought by Pappas to delay the expiration and move-out of Pappas' Hobby Airport operations," City Attorney Arturo Michel said Friday. "This ruling thwarts Pappas' latest attempt to obstruct Hobby Airport's newest vendor from timely beginning operations. Pappas' newest allegations do not undercut the legitimacy of the city's procurement process."

As the May 11 move-out date approaches, Pappas Restaurants and the city are clashing over which fixtures, such as sinks, refrigerators and water heaters the company can take when it leaves the premises, according to attorneys from both sides.

The city has sent a default notice to recover the costs of some disputed fixtures, which Pappas Restaurants' lawyers say would affect the company's credit. The newly denied temporary restraining order also sought unsuccessfully to force the city to take back the default notice and avoid similar actions in the future.

During the hearing, the city's legal representatives questioned why a corporation the size of Pappas Restaurants would quibble over kitchenware and defended the default notice as a means to cover costs arising from such disputes.

Pappas said the city's refusal to compensate the restaurant group for some fixtures and forcing it to leave these items for Areas USA serves as further proof of the administration's favoritism toward the new vendor.

"In addition to the City of Houston's egregiously flawed procurement process, the city continues to work directly on behalf of Areas Group," she said. "Failing to recognize the startling issues in the procurement process and the city's continued forceful attempts to promote Areas Group is a disservice to all Houstonians."

The latest filing came weeks after attorneys for Pappas Restaurants withdrew their original lawsuit, saying they needed more time to arrange witnesses and review evidence before bringing the case to a hearing.

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