December 24, 2004 in City

Garage trial delayed until April

By The Spokesman-Review
 

The federal trial over the River Park Square parking garage is being delayed until April to sort out some of the proposed settlements between the city of Spokane and some of its former legal opponents.

The long-awaited trial was scheduled to begin the first week of January, but U.S. District Judge Edward Shea ruled Thursday that there are too many settlements to review, and too few working days left on the calendar to do that.

Shea granted a request from the city’s former bond counsel, the Perkins Coie law firm, for additional time to prepare for a trial that is changing as it is shrinking. The trial is now scheduled to start April 22. A hearing on the four most recent settlements involving the city is scheduled for Jan. 4, the day jury selection had been set to start.

“These four settlements have complicated the final stages of trial preparation for the remaining two defendants with trial just five business days away,” the judge said.

Laurel Siddoway, the city’s special counsel for River Park Square litigation, said the city had objected to the delay because it was ready to begin trial. It had also asked that the judge split the trial by asking the jury to consider in January who was liable for the financial problems surrounding the garage, and then hold a trial later on what damages, if any, should be awarded.

“This thing has been pending for several years now, and everybody just wants this concluded,” Siddoway said.

Mayor Jim West said he was disappointed with the delay, and feared it would wind up costing the city more money.

“Best efforts to reach a settlement generally need a deadline,” he said. “I’m not pleased, but I’m not the judge, and who am I to second-guess what he’s thinking?”

Legal problems involving the various entities that planned, financed and built the expanded garage began shortly after the renovated mall opened in late 1999. Within a few months, it became clear that the garage would not generate enough revenue to pay off some $31 million in bonds sold by a nonprofit foundation that bought the garage, as well as cover other expenses such as rent, operations, maintenance and taxes.

When the city agency set up to oversee the garage asked the Spokane City Council for a loan to pay some of those expenses, the council refused, saying the loan might never be paid back, which would make it an illegal gift. But a previous council had passed an ordinance requiring the city to loan money from its parking meter fund for those expenses, and the mall’s developer sued for a court order to make the council follow its own law.

That began a cascade of lawsuits, first in state court and later in federal court, where investors who had purchased the garage bonds sued almost everyone connected with the project for fraud, contending they had been misled about the garage’s real financial potential.

That trial was scheduled to begin last April, but a week before that happened, the city reached a settlement with investors. It borrowed money, bought up their bonds, and received the right to continue the lawsuit against other defendants. Shea rescheduled the trial for September, then moved it to January 2005, with stern warnings that the attorneys were to settle or be ready to go to trial.

Since that time, the city reached settlement agreements with seven of the nine defendants, including a proposed settlement with the Cowles Publishing Co. affiliates that own and operate River Park Square, approved by the City Council on Dec. 11.

Cowles Publishing also owns The Spokesman-Review.

Shea must still decide whether the settlements with the Cowles development companies and with three other defendants are reasonable, and whether those companies can have protection from claims by the remaining defendants. Each settlement is complicated and unique, Siddoway said.

At a hearing last week, attorneys for Perkins Coie argued the settlements also dramatically changed the scope of the trial. Ralph Cromwell, who represents the law firm, said the settlement between the city and the mall developer – which would give the developer title to the garage and the city control of its parking meter money – was “a fundamental restructuring of the basic business transaction.”

“I have a lot of concern about who got what and what the value is,” Cromwell said.

A week ago, Shea had said he would keep the January trial “if we can possibly manage it.” But after reading legal arguments filed by the remaining defendants, he was convinced the trial should be delayed.

The original trial was scheduled to last about six weeks, but the slimmed-down version is scheduled for four. Although that would mean less time in the courtroom, Siddoway said any time a trial is delayed, there are extra costs as more witnesses are interviewed and motions are argued – unless the city reaches settlements with Perkins Coie and Prudential, the bond underwriters.


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