Niagara Falls firm sues Hotel Niagara developer for breach of contract

Faisal Merani and his Niagara Falls-based Merani Hotel Group Inc. sued Edward Riley and his Brine Wells Development last week, saying Riley broke their January 2023 agreement when he terminated the relationship in a letter on April 30, and then proceeded to seek approval for the project from Empire State Development Corp. and tax breaks from the Niagara County Industrial Development Agency.

In the lawsuit, Merani asserts that, under their agreement, he was supposed to act as the “sole agent and representative” for seeking approvals and signing contracts for the $50.8 million development project. And, the lawsuit says, Merani and his firm spent more than 1,000 hours advancing the project – work that Riley and Brine Wells would now benefit from.

The lawsuit, filed by law firm Hodgson Russ LLP in State Supreme Court in Niagara County, cites breach of contract and unjust enrichment by Riley, noting that Merani was not compensated for his work.

“Plaintiffs did not gratuitously provide Defendants with services related to gaining approval for the Project from ESD,” the lawsuit said. “It would be inequitable for Defendants to retain the benefits received from Plaintiffs with respect to the development of the Project without compensating Plaintiffs for those benefits.”

The suit demands at least $2 million in damages for “lost profits and loss of reputation,” and an injunction to block the project from proceeding without Merani’s involvement.

“Defendants’ conduct will cause irreparable harm to Plaintiffs that cannot be readily remedied by monetary damages,” the lawsuit continued. “More specifically, Defendants’ conduct has and will continue to cause damage to Plaintiffs’ reputation with its financing partners, contractors and governmental officials.”

Reached by telephone on Sunday, Riley declined to comment, saying he was still working on a response with his attorney in Syracuse. Empire State Development officials also declined to comment, citing pending litigation, while NCIDA attorney Mark Gabriele said the lawsuit doesn’t affect the agency’s potential action right now since a developer would only benefit from tax breaks if work is performed.

Merani is a family-owned hotel developer with holdings on both sides of the international border, including the 140-room Niagara Riverside Resort, the 189-room Holiday Inn and the 192-room Doubletree by Hilton, all on Buffalo Avenue in Niagara Falls. The company also owns the 41-room Cannery Lofts, the Sterling Inn & Spa with 41 rooms, and the 155-room Days Inn & Suites, all on the Canadian side of the falls.

The lawsuit and potential for at least delaying the project marks the latest hurdle for Riley’s eight-year effort to renovate and revive the historic century-old hotel. Located at 201 Rainbow Blvd., the Hotel Niagara was designed by Buffalo architects at Esenwein & Johnson and opened in 1925, with a large ballroom, a second-floor balcony overlooking the lobby, a restaurant and a bar that offered live entertainment.

But the 12-story luxury hotel declined over many decades. It was last operated as the Travelodge Fallsview and then the Ramada Niagara before it was acquired in 2007 by a Houston developer promising a $15.2 million renovation. That never happened, and it never reopened. After several false starts, it was acquired for $4.4 million by Empire State Development, which then selected Riley a year later as designated developer.

Riley now plans to renovate it into a new four-diamond hotel with 160 guest rooms, a main ballroom, a secondary ballroom that would serve as a three-meal restaurant during tourist season, a full-service sports bar and restaurant for the rest of the year, a lounge that opens to the sidewalk, an exterior patio, a rooftop patio next to the penthouse, and a space for private dining and meetings. But the project stalled when the pandemic disrupted its financing.

According to the lawsuit, the contractor that Brine Wells had hired approached Merani in 2022 “to get the project off the ground,” and Riley and Merani signed a joint development proposal on Jan. 31, 2023.

Under the agreement, Merani was to be the “sole agent and representative” with Empire State Development, and Riley and Brine Wells were to “use their best efforts to assist.” It also envisioned the formation of a new joint venture that would be 51% owned by Merani and 49% by Riley, but only after ESD gave its approval.

Merani says he and his firm “worked ceaselessly” over the next 15 months to pin down the project funding, and paid $45,000 in application fees to arrange the financing. They also spoke regularly with state officials to justify several extensions, as well as provided “frequent updates” to Riley, and ultimately obtained a $4 million allocation from Empire State – including $1.9 million that was originally supposed to go to a different Merani project.

But according to the lawsuit, Merani says Riley “began conversations with another developer” early this year, “in violation of their obligations under the agreement.” Then, the lawsuit continues, Riley wrote to Merani on April 30 to terminate the agreement, claiming that Merani “failed to advance the project and that the project was in danger of being canceled for lack of progress.” Merani denies both assertions.