RPS trial may be off until next year

The River Park Square garage bond trial is likely delayed until next year.

U.S. District Judge Edward Shea told a gaggle of lawyers Thursday that he can give them five weeks for a trial starting in mid-August if all of them agree. Because some had already expressed concerns about that date as settlement discussions continue between the city of Spokane and other parties to the lawsuit, Shea said he’d put off the trial until Jan. 3 unless they were unanimous in wanting the earlier date.

Shea also said the city will likely have to release a memo from the Internal Revenue Service regarding the tax-exempt status of the bonds, which were sold to purchase the expanded garage for the downtown mall. He delayed until June 7 a ruling on proposed settlements between the city and two of its co-defendants.

The city, the mall’s developers and others involved in the planning, financing and operation of the mall’s garage are being sued by investors who bought some $31.5 million in bonds to purchase the parking facility. The trial was scheduled to start in mid-April, but was delayed a few weeks before its start because of a potential settlement between the city and the bondholders.

Because the trial is expected to take about five weeks, Shea had to search for a large enough block of time in his court calendar. Earlier this month, he told lawyers the trial could start on Aug. 16, but some have already raised concerns about being ready by that date.

“I think we all know it’s going to be Jan. 3,” he said at the close of a hearing Thursday. But there would be no delays beyond that, the judge warned the 17 attorneys who filled the tables and spilled into the jury box in front of him.

“Accidents happen. People become ill,” he said. Because of that, everyone should have a backup who can try the case should any emergency come up around the new year, Shea said.

The city has a tentative agreement with the current investors to buy back the bonds sold in 1998. The city would then own the garage, and if all the other co-defendants agree to a monetary settlement, a trial wouldn’t be needed.

But if only some of the co-defendants can reach a settlement, the city wants to assume the bondholders’ rights to pursue legal claims against those who don’t agree to a monetary settlement.

Two co-defendants have agreed to payments. Walker Parking Consultants, which produced a 1996 study that projected revenue levels which the garage has yet to meet, has agreed to pay the city $1.49 million, the limit of its liability insurance. Foster Pepper Shefelman, a law firm that advised the bond’s underwriter Prudential Securities, has agreed to pay $1.35 million.

The attorneys spent much of Thursday’s hearing arguing over whether those amounts are reasonable at this point in the case. The city has said the total settlement could be $40 million, while Shea at one point had limited the total liability to about $22 million if the jury agreed with all of the bondholders’ claims. Defendants’ attorneys had put the liability at $10 million, and if the jury sided with the defendants, it could be zero.

“If this is a $10 million case, which we believe it is, the settlements are reasonable,” said Ladd Leavens, attorney for the River Park Square developers. “If it’s a $40 million case, it’s not.”

The mall is owned by affiliates of Cowles Publishing Co., which also owns The Spokesman-Review.

Ralph Cromwell, an attorney for Foster Pepper, said any settlement is a balancing of risks, and the city and his clients agreed to an amount “they could both live with.”

“I settled to get out of this suit,” Cromwell said.

Shea said he would post a ruling on June 7 about issues surrounding the proposed settlements.

The judge also ruled that any documents that detail settlement discussions between the parties in the lawsuit and their financial advisers are likely covered by a confidentiality order tied to mediation of the case.

Camas Magazine, an online publication, is seeking the documents under the state’s public records law, arguing the settlement talks are going on outside of the mediation.

The confidentiality order would include documents from Betsy Cowles, the mall development firm’s president, to Councilman Joe Shogan after he was sworn in, Shea said, even though Shogan isn’t a member of the city’s negotiating team.

But it likely would not apply to a memo from the Internal Revenue Service to the city about problems with bonds being tax exempt. The IRS, Shea noted, is not a party to the case.

“I don’t see how anything from a government agency itself can be anything but public,” Shea said.