Dispute Continues Over Apartment Project Developer Says City Has Fallen Through On State Supreme Court Order For Arbitration; Attorney For City Says Settlement Agreement May Be Invalid

One of Spokane’s longest running municipal controversies, the 5-year-old dispute over the Mission Springs apartment project, has prompted another court action.

The developer of the project, Feature Realty, has asked Spokane County Superior Court to appoint an arbitrator because the city failed to respond to its requests to find one who is mutually acceptable.

Arbitration is part of a 1998 settlement agreement between the city and Feature. That came from a state Supreme Court ruling that the city violated Feature owner Richard Lugli’s civil rights when it denied his project a grading permit in 1995.

Under the settlement, the city must help Feature build its southwest Spokane apartment complex, which is now called Canyon Bluffs. According to the settlement, the two parties are to use an arbitrator to settle any future disagreements.

The city and Feature were preparing to go before attorney Richard McWilliams for arbitration in October. However, McWilliams recused himself, citing a conflict of interest because he is a law partner of John Powers, who was running for mayor.

Since then, Feature says it has pressed the city to agree on another arbitrator, with no success. As a result, it filed the petition on Nov. 28 asking the court to select an arbitrator.

Feature argues that an arbitrator must be picked soon because the project has been lagging.

“Unless this dispute is resolved by or not long after Feb. 28 2001, Petitioner will lose another season for construction,” the petition states. “(The city) has engaged in unending delays to thwart the effort to get the issue resolved.”

Mary Gaston, an attorney with Perkins Coie who represents the city, denied the city is stalling.

“In no way are we trying to delay it,” Gaston said. “The city is going to do nothing to impede the developer to begin construction.”

What the city is doing, however, is considering trying to get the court to throw out the entire settlement agreement by declaring it invalid, Gaston said.

The current disagreement between the city and Feature centers on a clause in the settlement that requires the city to install the water system for the apartment complex.

Feature contends the city is required to install the water system for the entire development; the city believes it only applies to the first stage of the project. The difference could cost the city an additional $500,000 to $700,000.

Because the city and Feature have been able to agree on so little, there may be grounds to toss out the settlement entirely, Gaston said. “There was a serious failure to meet on the minds,” Gaston said. “That would make the agreement invalid.” Feature attorney C. Blaine Morley dismissed talk of throwing out the agreement as “saber rattling.”

“I’m not worried about it,” Morley said.“Sooner or later the case will get tried and sooner or later the issue will get resolved one way or another. Washington (laws) favor arbitration, and we’re just trying to get it done.”

One potential wrinkle in the case is City Councilman Steve Eugster’s contention that the 1998 settlement is invalid because it was reached in a closed executive session.

At Monday’s City Council briefing, Eugster called the agreement void and refused to take part in an executive session to discuss the lawsuit.

“I don’t believe we have any authority to discuss the agreement because it is void,” he said. “I think this effort to discuss this in executive session is an ongoing effort to hide the ball from the community on Mission Springs.”

Morley would not comment about Eugster’s argument.

City Attorney Jim Sloane disagreed with Eugster, saying state law allowed executive sessions for that purpose.

But Gaston said Eugster’s argument might have some merit, and that she might pursue it in asking the court for a declaratory judgment ruling that the city and Feature did not have a valid agreement.

“That is something the court needs to consider,” Gaston said.