VIRGINIA CITY — A Madison County judge has dismissed a preliminary injunction filed by two Virginia City businesses seeking to stop the state from terminating their lease contracts for historic properties.
The ruling states that the temporary restraining order and injunction that would have prevented the state from ending lease contracts was declined on Feb. 3. The judge determined that Lewis and Clark County District Court is the proper venue for the legal action because the contracts are offered through state agencies at the Montana Heritage Commission and the Montana Department of Commerce located in Helena.
The attorney representing Bob's Pizza and the Wells Fargo restaurant says the change of venue is not an issue for the plaintiffs, and they will file a follow-up complaint in Lewis and Clark County.
"We are not litigating the terms of the existing contracts which would require venue in Helena. We are litigating the Department's/Commission's actions to overburden these businesses and otherwise force a shutdown of these businesses by requiring unreasonable and unachievable (if you intend to pay yourself or make a profit) terms in light of their legislative charges and stated governmental purpose to promote, assist and support small businesses in Montana," Stephanie Gehres Kruer, of Kruer Law Firm said.
Kruer said the injunction was meant to maintain the status quo and come to reasonable terms for her clients so they can continue to operate their businesses in the 2026 tourist season. She said the injunction was meant to engage in negotiations with the State.
In a statement to MTN News, a representative with the State said the case was properly dismissed.
"The district court properly dismissed this case. Commerce will continue to ensure the long-term viability for the properties owned by MHC at Virginia City, Nevada City and Reeder's Alley by filling vacant MHC properties with new lessees and promoting that 17 out of 21 businesses, not to mention the privately owned properties and businesses, will be open for business in 2026. Of the open vacancies, Commerce and MHC are optimistic that those lease opportunities will also be filled before the 2026 season begins," Mitch Staley of the Montana Department of Commerce said.
Half of the town once belonged to the Bovey family who made money in the wheat milling and banking industries before settling in Virginia City. In the 1900's the Boveys sought to preserve the historic buildings that are some of the last remnants of America's Wild West history.
The town became state-owned after the Montana legislature voted to take over the properties in the 1990s. Each year, the tiny southwest Montana town that consists of about 150 full-time residents welcomes thousands of visitors.
In December, existing lease agreements were terminated for 14 businesses operating out of historic state-owned properties that offer shopping, dining, lodging, and entertainment. New lease agreements with different stipulations for different businesses were issued. For one restaurant and one of the theaters, the new lease agreement asking for 15% of their gross revenue for the roughly three-month operating period was simply too much to bear.
The theater company operating out of the Virginia City Players and opera house declined to sign a new lease agreement, telling MTN News in January that it costs too much to operate the theater as it is but with the new agreement, their business would be operating in the red.
"The state never even looked at our expenses when they put this 15% increase on this," Bill Koch of Koch Productions said in January.
He said the theater company is not just a money-making entity.
"It is the heart and soul of this town," Koch said.
Kruer said the Montana Heritage Commission and the Montana Department of Commerce are forcing small businesses out.
"These entities are forcing these small seasonal businesses out. We have no problem filing the follow-up complaint in Lewis and Clark County. The judge entering this ruling in advance of our February 23 hearing has done us a favor in terms of time, costs, and resources," Kruer said.
