M Waikiki LLC, owners of the Waikiki Edition hotel, filed for bankruptcy protection Wednesday afternoon, an eleventh-hour legal twist in what has become an unparalleled high-profile battle among major players in Hawaii’s hotel industry.

On one side is Marriott International Inc., with 3,600 properties in 71 countries, which was ousted as manager of the Edition at 2 a.m. Sunday. On the other side is M Waikiki, an affiliate of San Diego-based eRealtyFund LLC, which invested a quarter of a billion dollars over the past five years to buy and renovate the Edition.

The bankruptcy was the latest move by M Waikiki to keep out Marriott as manager of the hotel. M Waikiki installed a new management team on Sunday and renamed the hotel the Modern Honolulu.

Marriott said Monday it would fight back and it did, winning an order from a New York state judge early Wednesday that forced M Waikiki to reinstate Marriott as the management company by 2:30 p.m.

More than a dozen Marriott employees, including General Manager Michael Rock, gathered Wednesday near the harbor-side door of the hotel, expecting to return to work at the 2:30 p.m. deadline. Employees inside the building smiled and flashed a hand-lettered sign, "We are Waikiki Edition," in support of the Marriott managers.

But before the Marriott team could enter, they learned of the bankruptcy filing, which effectively barred their return.

Under bankruptcy reorganization, the sweeping management changes that were made by M Waikiki will remain in place. That means Modern Management Services LLC, an affiliate of Aqua Hotels & Resorts, will continue to oversee the hotel and the name change will be remain.

Marriott did not return calls from the Star-Advertiser seeking comment on the bankruptcy filing.

M Waikiki’s lawyer, William Brewer, a partner at Bickel & Brewer, issued a statement on the bankruptcy filing and the ruling by the New York judge. "We respectfully disagree with today’s court decision and remain confident that the owner acted within its rights terminating its contract with Marriott," Brewer said. "In any event, the owner has filed for bankruptcy protection, which will permit it to continue the operation of the hotel under its present management with Modern Management Services."

M Waikiki’s bankruptcy petition, which was signed by Damian McKinney, manager of eRealtyFund, estimated company creditors to number between 100 and 199 and listed both assets and liabilities at $100 million to $500 million.

"In our view, filing for bankruptcy protection is the only prudent option for protecting our investment in this asset," McKinney said. "We look forward to reorganizing as a new corporate entity, continuing the employment of a new management company, and making this a leading lifestyle hotel for guests and employees."

Earlier this week, owners cited "gross mismanagement" and soaring financial losses estimated at $6.4 million this year as the reason for their aggressive action. The owners, who filed a lawsuit in May against Marriott and hotel designer Ian Schrager, also have sought court permission to terminate their 30-year contract with Marriott without liability. That claim, which also seeks tens of millions in damages, is still pending in the New York Court system.

In the meantime, Modern Management Services, which registered with the state Business Registration Division on July 27, will operate the property that it took over on Sunday. Modern Management Services said that it has employed about 220 of the 275 former Marriott workers. Workers who have not signed an employment agreement with the new company will have to reapply for their jobs, the company said. A handful of senior managers, including GM Rock, were not offered a job.

"It is unfortunate the actions of the previous management company to mislead and confuse employees has complicated the situation," said Ben Rafter, president and chief executive of Aqua Hotels & Resorts. "We will continue to operate the Modern Honolulu at direction of ownership."

The confusion also spread to unite here Local 5, which was working to represent employees under Marriott management. While a petition to get rid of the union was not legally permitted as of Tuesday, it is now unclear as to what role Local 5 would have under new management.

Carlie Reagan, who has worked as a greeter at the hotel for the past five months, said she expected to come back as a Marriott employee on Wednesday even though she had signed an agreement with the new company and had been working for them since Monday.

"All signs were gone. Everything that said ‘Edition’ was gone," Reagan said. "We just tried to take care of the guests and provide excellent service. That’s what they come for."

Reagan said that she plans to continue working at the property regardless of the current climate.

"I love this job," Reagan said. "No matter who is managing the hotel, I’ll stay."

Another Marriott employee, who asked not to be named for fear that his comment would threaten employment prospects, said he and some other co-workers did not want to work for the new manager.

"My personal feeling is that I wouldn’t sign with a company like Aqua that would willingly go along with a takeover," the employee said. "Marriott, on the other hand, is all about putting its employees first."

At the time of its opening last September, the 353-room, 18-story hotel received considerable publicity, in part because it represented Marriott’s first foray into the boutique hotel market and had been featured on the popular TV show "Hawaii Five-0." Also getting attention was the seemingly unlikely partnership between Marriott, better known for its traditional hotel design and concepts, and the hip Schrager, who had owned and operated Manhattan’s famed celebrity nightclub Studio 54 before serving a stint in prison for tax evasion.

Passion Jennison, who had planned a Sept. 24 wedding at the hotel, said she is enamored of the new brand and has been watching management struggles with interest.

"I’m concerned for my event," Jennison said.

Guest comments on TripAdvisor and other hotel discussion boards have been mixed since Sunday’s changeover.