Ex-Operator of Failed Nightclub Sues Partners : Manhattan’s: He says they didn’t contribute enough money and then took the club’s equipment; but his ex-partners accuse him of mismanagement.

SANTA ANA —  Contending that his former partners and two lawyers conspired to drive him out of business, the former operator of Manhattan’s, a defunct rock music nightclub in Stanton, sued them Thursday for more than $4.1 million.

Suing in Orange County Superior Court, Kenneth W. Scheiler and his wife, Valerie A. Scheiler, said that the partners, Ezra K. Joseph and Mark Larsen, weakened the business by failing to contribute enough money to put the club on sound footing, then sank it by stripping it of its equipment. Joseph is the owner of Foul Play (formerly Night Moves), a rock music club in Huntington Beach, and Larsen owns the Out Of Bounds nightclub in Huntington Beach.

Scheiler’s suit also accuses Joseph, the partnership’s bookkeeper, of embezzling $35,000 in Manhattan’s funds that belonged to Scheiler. Scheiler further claims that attorneys Jerome D. Stark and Jay R. Taylor failed to look out for his interests in legal matters concerning the partnership.

The defendants’ motive, according to the suit, was to “oust” Scheiler and “take over . . the business he had created and built up.”

Joseph and Stark flatly denied all of the suit’s allegations. Taylor had no comment, and Larsen was out of town Thursday and could not be reached, according to an employee at Out Of Bounds.

It didn’t take any conspiracy to drive Manhattan’s out of business, Joseph and Stark said in interviews Thursday. Scheiler, they said, accomplished that himself by mismanaging the club in his role as operating partner.

“(Scheiler) had complete control for the whole time we were involved in the partnership and complete control over the money,” Joseph said. “He had complete control of everything, and we got nothing. If he had run the place correctly, it would have been very successful. The suit is meaningless, and we’re not even concerned about it.”

Stark termed the suit “ridiculous . . . more or less a red herring to cover up his inability to run a club.”

Joseph said that he and Larsen each lost $38,000 on the Manhattan’s venture. Still, they said, they now plan to turn the same building, at 7910 Katella Ave., into a pizza restaurant--which is what it had been before December, 1988, when Scheiler and his first partner, Bruce Davis, opened a dance club there called Pazzazz.

Scheiler, 34, who said he has been in the nightclub business for 10 years, including brief operation of a teen club at Lion Country Safari in 1985, said he invested savings of about $40,000 to open the Stanton club.

Pazzazz closed early in 1989, after Scheiler and Davis had a falling out. Joseph and Larsen bought out Davis’ share in the club in April, 1989, and formed a partnership with Scheiler that called for Scheiler to handle the club’s day-to-day operations. The club reopened in May as Manhattan’s and began staging live rock shows in August, featuring local alternative rock and heavy metal bands. The 300-capacity club went under in January, although Scheiler said he sporadically continued to put on shows during February.

During the partnership, according to the suit, Joseph and Larsen failed to contribute their specified share to cover advertising, remodeling and equipment purchases needed to launch the club successfully. On Jan. 11, the suit charges, Scheiler’s partners stripped Manhattan’s of sound and stage lighting equipment, furniture, and restaurant and kitchen equipment, leaving the club “effectively shut down.”

Joseph said that he and Larsen had heard from club employees that Scheiler was preparing to sell the equipment, so they carted it away to preserve their own share in it.

A conflict between Scheiler’s and Joseph’s accounts concerns the way club revenues were handled. Scheiler said he would turn the receipts over to Joseph, the partnership’s secretary and treasurer, but that Joseph left taxes and other bills unpaid. Joseph denied that, adding that it was impossible to pay the bills because Scheiler kept most of the cash proceeds himself instead of depositing them in the partnership’s bank account.

“That was a continuing argument,” Joseph said. “Mark (Larsen) and I should have taken action a lot sooner. That was our mistake.”

Scheiler said his mistake was entering into the partnership in the first place and letting its corporate legal work be handled by Stark, who previously had handled legal work for Joseph.

“Unfortunately I was very naive about it, very trusting,” Scheiler said. “It was my biggest downfall.”

Scheiler noted that Joseph earlier this year changed the name of his Huntington Beach club from Night Moves to Foul Play.

“That’s so fitting for him, it cracked me up,” Scheiler said.

The suit filed by attorney Joseph C. Rosenblit on the Scheilers’ behalf seeks damages for loss of income, loss of the business and punitive damages. Joseph said he plans to counter with a suit of his own against Scheiler to recoup nearly $24,000 in unpaid back rent on the Manhattan’s building, the amount he said must be paid off before he and Larsen can reopen it as a pizza restaurant.