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What do you get when a businessman, a lawyer, and a self-described “Greek guy with a big nose” try to open a comedy club together?

A lawsuit.

When Riot Act Comedy Theater opened last August, it was supposed to shake up the established rhythms of D.C.’s comedy circuit: It boasted bookings like Dick Gregory and Paul Mooney, suggesting the region could support comedy venues beyond the Improv and its alt-comedy competitor across the Potomac River, the Arlington Cinema ‘N’ Drafthouse. The capacious venue—13,000 feet over two floors, with a 320-seat basement performance space—had a bright and glossy (if perhaps weirdly sanitary) interior and a choice downtown location. To hear co-owner John Xereas describe it at the time, you might have envisioned Riot Act as a temple to the form: a spot for national comedians as well as one that nurtured local talent.

Last month, the club announced it was ditching the Riot Act name and its concept. “The business model just hasn’t worked out financially for this space,” the club’s general manager, Peter Bayne, said. “It wasn’t the place where you go out with your buds after work to get a beer.” On July 14, the E Street NW space reopened as a bar, Penn Social.

If nothing else, Riot Act was an ambitious move for Xereas, who had worked at the D.C. Improv as a co-owner and manager from 1993 to 2005. He then started his own company—called Riot Act—and a small, short-lived comedy venue (which was named Riot Act, too) in the basement of the former HR-57 jazz club on 14th Street NW. In 2010, he met restaurateur Geoff Dawson, who owns a string of game-focused spots including Rocket Bar and Bedrock Billiards, and lawyer Marjorie Heiss. They were looking for a partner in order to lease the space on E Street, which like many downtown buildings is zoned to include some sort of arts use. Why not a comedy club?

On first blush, the failure of Riot Act appears to speak to the limits of D.C.’s audience for comedy: Beyond the Improv and the Arlington Drafthouse, you can catch smalltime comics in hotel bars, while marquee acts will book venues like the Warner Theatre, D.A.R. Constitution Hall, and the city’s universities. For D.C.’s market, that might’ve been crowded enough.

Oh well. At least they tried.

But the shuttering of Riot Act isn’t quite so simple. For months, the club’s major partners have been arguing in court filings over what went wrong at the venue. In a lawsuit, Xereas, a long-time fixture of D.C.’s comedy scene, claims his Riot Act co-owners Dawson and Heiss forced him out of the business in January. In a court filing in response, Dawson and Heiss say Xereas mismanaged Riot Act from the get-go.

Xereas, who remains an owner of Penn Social, filed his suit in U.S. District Court in March, alleging claims against Dawson and Heiss that include copyright infringement, defamation, and libel. According to filings, he believes Dawson and Heiss tried to steal the Riot Act name from him after forcing him out of the day-to-day operations in January. Without his expertise, the suit claims, the club failed. “They’re the two people who should be fired,” he says. “I should still be running the club.”

Dawson and Heiss responded in May, asking the court to dismiss the case on the grounds that they “repeatedly afforded Xereas opportunities to change what they viewed to be his ineffective and improper management practices, but he refused to do so.” They say Xereas was “neither an effective manager nor a reliable partner” because, they say, he paid comedians in cash, didn’t submit signed contracts to Heiss, a lawyer, and hired friends and relatives who “did not perform effectively in their roles.” (The filing also said that with the opening of Penn Social, Xereas could have the name “Riot Act” back.)

By Dawson’s estimates, Riot Act was losing $20,000 to $40,000 a month, which he says he paid for out of his own pocket. “I’m very serious about this as a business, and it hasn’t been an easy run,” he says. “Comedy wasn’t making it. We lost money steadily.”

To Xereas, however, comedy was never the problem. He claims in his complaint that his business partners began trying to force him out in October, not long after the club opened. The month he was left out, he says, Riot Act brought in $220,000 in revenue. “We were just exploding,” he says. Dawson wouldn’t comment on the $220,000 figure, and when pressed, Xereas was unable to substantiate it. (Dawson wouldn’t reveal how much Riot Act pays in rent, though he says it’s similar to what nearby Rocket Bar pays.)

According to Xereas’ complaint, he was removed from day-to-day operations on Jan. 26—his 43rd birthday. Days earlier, Dawson and Heiss had fired his longtime friend Mike Farfel and Ted Xereas, his brother, both of whom helped run the club. (Xereas’ mother also volunteered at Riot Act.) “When they did that, I walked out with my brother and Farf. I didn’t come back for a whole day. I needed time to think. They threw my family on the street, basically,” Xereas says. Soon afterward, he claims in his suit, the locks and security codes to the building were changed, and he was blocked from accessing his Riot Act email account.

The motion filed by Dawson and Heiss to dismiss the lawsuit tells a different story. They say in court papers that Xereas “never returned to work” after his brother and Farfel were fired, and even attempted to sabotage Riot Act’s social media accounts. (Dawson declined to elaborate on details of the lawsuit, and Heiss did not respond to repeated interview requests.)

Eventually, the comedy club took a turn for the worse, former employees say. “It was a clusterfuck,” says Jamela Williams, who worked in the box office and ran the sound booth on weekdays. “At the end of Riot Act’s run, they were handing out free passes to anybody who walked by because they couldn’t get people to come in.”

Former employees point to an uncomfortable atmosphere in the club. With Xereas gone, many of the employees he hired suddenly found themselves on the chopping block: Managers told Williams that she lost her job in May because Riot Act needed to “cut their budget,” while Terrance Hawkins, a doorman who was fired over the phone in late March, says that “everybody that was hired under John” faced increased pressure from management.

“[Xereas] was trying to create something good for D.C. and comedy,” says Al Goodwin, a local comedian who has known Xereas since the mid-1990s. Goodwin performed at Riot Act “four or five times” during the club’s first six months. “It was successful. It was really rocking. And as soon as they fired him, it didn’t,” he says.

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Although Penn Social has vestiges of its comedy predecessor—namely, according to advertisements, an open-mic night—the new concept is much more familiar territory for Dawson. It has skeeball booths and shuffleboard tables, cornhole and bocce. You go to a comedy club to watch someone else perform, but at Penn Social, that’s what the customers do. (Quite literally, in fact: The downstairs stage that featured stand-up comedy under Riot Act banner has been repurposed for interactive game shows, among other uses.)

Turning a failed comedy club into a profitable bar, Dawsons says, is his No. 1 priority—and something he says he owes to Riot Act’s investors, which include several minority partners. “This is what I’m doing, full-time, and it’s driven completely because I took checks from a lot of people to open a business that isn’t working. And so now I’m doing my level-headed best to make this thing work,” he says.

For Penn Social, it seems, making it work means falling back on a proven formula. The bar follows the pattern of Dawson’s other businesses: It’s a “place to play” that features arcade-style games and entertainment. Meeting the zoning requirement of the space, though, means that the bar also has to have an arts component. According to Dawson, Penn Social complies because it will have live music—a solution similar to that of Hill Country Barbeque, whose 7th Street NW location is also zoned for arts use.

“Here’s a question for you: Define art. Define art. I’m employing artists, I’ve got art coming in. I’ve got music—that’s art,” Dawson says. “Is it art to have a performance on the stage? Sure, that’s art. So we’ll have performances on the stage. What are those performances? I don’t know, but they will be art.”

On a tour of Penn Social earlier this month, Dawson seemed collected, pitching his new business with a subdued confidence. “The landlord insists that we continue to operate within the appropriate zoning and we fully intend to,” he says. “For now, it’s all up in the air. We’ll do whatever fits the space best and however it works economically best.”

When we go downstairs to the theater space, where stand-up comics once performed, Dawson beams about the projection screens that emerged from the ceilings. I ask him how he plans to use them. Will he continue to hold film festivals? Will the stage be used for other performances? At first, he seems reluctant to commit to anything.

Then his voice lightens up. This space and these screens, he says, would be perfect for showing football games on Sundays. He grinned. “That’s definitely a big economic part of the puzzle.”

Photo by Darrow Montgomery. The article originally misidentified the role of John Xereas’ mother at Riot Act. She was a volunteer, not an employee.

John Xereas’ Amended Complaint

Heiss & Dawson’s Motion to Dismiss

Xereas’ Response to Heiss/Dawson’s Motion to Dismiss