The operator of a restaurant slated to occupy the former Rusty's Surf Ranch space at Santa Monica Pier has sent the city a formal legal notice threatening litigation over what he alleges was an illegal backroom deal between city officials and a hospitality union to condition his lease on specific hiring demands.
California Roadhouse, Inc. CEO Sean Ahaus sent the notice June 14 to the City Attorney's Office, with copies to the City Manager, Economic Development Department director and all seven City Council members, warning of "reasonably foreseeable litigation" and demanding the city immediately preserve all relevant communications and records.
The letter accuses the city of illegal labor collusion, coercion, violations of federal labor preemption doctrines and potential civil rights violations under color of state law.
At the center of the dispute is a Dec. 19, 2025, meeting at California Roadhouse's corporate offices attended by company representatives, a Unite Here Local 11 organizer identified as Noel Rodriguez and Wendy Saio from the city's Economic Development Department.
According to the letter, Rodriguez explicitly stated during the meeting — in the presence of Saio — that the city had entered into an agreement with the union to block any lease with California Roadhouse unless the company agreed to hire the entire pool of former workers who had been employed at the pier location approximately one year prior, all of whom were union members. The letter states Rodriguez told Ahaus the city would "never lease to the Company" unless all specific former workers were brought on, leaving California Roadhouse with "zero hiring discretion."
Ahaus contends that Saio, as the city official present, did not dispute, deny or correct the statement.
The legal notice demands the city issue an immediate litigation hold covering all personnel in the Economic Development Department, the City Manager's office, City Council and city technology administrators. The hold would cover all records from Jan. 1, 2025, to the present, including internal emails, text messages, instant messages on platforms such as Slack, Microsoft Teams and WhatsApp — on both city-issued and personal devices used for city business — as well as meeting calendars, agendas, handwritten notes, audio and video recordings, and any logs of political campaign contributions from the union or its affiliated PACs to city officials.
Ahaus also gave the City Attorney 10 business days to provide a formal written statement confirming or denying whether the city has conditioned the lease on mandatory hiring from a specific historical workforce pool.
The legal threat is the latest escalation in a lease saga that has stretched for months over the 4,100-square-foot space at 256 Santa Monica Pier that housed Rusty's Surf Ranch for more than three decades before it closed.
The City Council voted unanimously to approve a lease framework with California Roadhouse after the company was selected from nine proposals following a competitive process that drew more than 100 initial inquiries. The concept was chosen in part for its commitment to daily live music programming.
Under the approved terms, California Roadhouse would pay roughly $26,728 per month in base rent — calculated at $6.25 per square foot — with a 3% annual escalator and Consumer Price Index adjustments, plus Common Area Maintenance charges. The city agreed to a one-time capital contribution of up to $500,000 for kitchen, HVAC, electrical, stage and bar upgrades, along with approximately $125,000 in pre-occupancy repairs and roughly $100,000 in waived rent during a 60-day stabilization period, bringing total public expenditure to approximately $725,000. The city projects the deal will generate $325,000 annually in pier fund revenue.
The lease was twice delayed at the request of Unite Here Local 11 — first over a procedural objection and then over proposed lease terms — before the council ultimately approved it with worker retention language embedded in the agreement.
Ahaus has said he has no objection in principle to hiring back former Rusty's workers and has offered to bring on more than the union-backed mandate requires, including managers and supervisors not covered under the original ordinance. His objection is to what he characterizes as the city's lack of legal authority to impose the current terms.
The lease has been delayed most recently due to disputes over the details of the lease, with a current disagreement over hiring practices. Ahaus wants to interview former Rusty’s employees before offering employment but the terms of the lease prevent Ahaus from conducting interviews and instead only allow him to require “an employment information form identifying prior experience, certifications, skills, availability , and position preferences for purposes of job assignment, training, scheduling and compensation.”
Ahaus has previously warned he could relocate the California Roadhouse concept to Venice Beach if an acceptable lease is not reached, adding that he would offer the same former Rusty's workers jobs at the new location — without any legal mandate requiring it.