2007-10-12 Executive Session Meeting
@
IVERSON REUVERS
ATTORNEYS AT LAW
October 12, 2007
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Mayor and City Council
CITY OF ALBERTVILLE
5975 Main Avenue NE
P.O. Box 9
Albertville, MN 55301-0009
RE: City of Albertville
Dear Mayor and City Council:
I will be meeting with you on Monday night in executive session to discuss the
status of this litigation and a -settlement demand made by Gold Key Development,
a copy of which I am enclosing. As you can see, Gold Key plans to seek damages
in the amount of$3,033,729.69, which is exorbitant under any analysis.
As you know, we recently received a decision from Judge Halsey finding the City
breached the development agreement with Gold Key, leaving only the issue of
damages for trial. The only good part ofthe Order was that the builder's direct
claims against the City were dismissed. The decision was frustrating since the
Court was presented with conflicting expert affidavits, which should have
justified both the liability and damages issues proceeding to trial. Unfortunately,
we will have to proceed through trial before we can appeal the Judge's ruling.
We have had the damage claim reviewed by our financial expert, Art Cobb, and
based upon his preliminary analysis, he believes the true exposure is in the range
of $200,000 to $400,000. For example, there is no legal basis for the $797,383.64
claim for the builders' losses. The option agreements between the builders and
developers specifically preclude any breach of contract claims. In fact, Gold Key
is bringing a motion on November 27 to dismiss all breach of contract claims.
We will be joining in that motion.
Similarly, the loss of hotel ownership and profits damages ($1,229,165) is not
recoverable because it is based upon pure speculation and involves a completely
different corporate entity. In addition, the claim for $230,027.41 for attorney's
fees, expert costs and miscellaneous expenses is not recoverable. Therefore, we
are able to deduct $2.2 million right offthe top. Mr. Cobb is then able to further
reduce the damage claims based upon his review ofthe documents.
IVERSON REUVERS, LLC I 9321 ENSIGN AVENUE SOUTH I BLOOMINGT.ON, MN 55438 I 952.548.7200 I FAX: 952.548.7210
PAUL D. REUVERS
DIRECT: 952.548.7205
PREUVERS@IVERSONLAW.COM
JON K.lvERSON
PAULO. REUVERS
JEFF M. ZALASKY
JASON J. KUBOUSHEK
PAMELAJ.F. WHITMORE
JASON M. HtVELEY
SUSAN M. TINDAL
JEFFREY A. EGGE
WWW.tVERSONLAW.COM
October 12, 2007
Page 2
Obviously, we view damages quite differently than Gold Key. To the extent there
is liability, we view the damages as the carrying charges for the delay of
approximately 18 months, which is significantly less than alleged by Gold Key.
Mr. Cobb will be putting a detailed report together in the near future and we will
forward that to the City when it is completed.
We have broached the subject of settlement with the other lawyers and doubt
there will be any serious settlement discussions at this point. The suggestion has
been made the City should simply pay $2 million to settle all claims. Frankly, I
do not-see that result on our worst day in'court. To 'further complicate things, the
attorney for TIC Homes has indicated he will appeal the dismissal of the builders'
claims after the trial is complete. It is difficult to recommend paying any money
to TIC Homes when the builders' claims against the City have been dismissed and
we believe its claims against Gold Key will be as well. Under the circumstances,
I think it will be necessary to proceed through trial and an appeal before any
realistic settlement discussions take place.
Trial has been reschedu.led and is currently set for May 12, 2008, with District
, Court Judge Michelle Larkin. This trial will involve Gold Key's damage claims
against the City and we anticipate the trial will take three to four days. The bulk
of the testimony will be from financial experts.
In any event, I look forward to discussing these issues with you on Monday
evenmg.
Sincerely,
IVERSON REUVERS
p~-~~
Paul D. Reuvers
PDR:be
Enclosure
cc: Larry Kruse, City Administrator
Michael Couri, City Attorney
Mark Rossow, LMCIT, Claim Nos. 11056480/11057039
Brian Gaviglio, LMCIT, Claim Nos. 11056480/11057039
.'
Damage Calculations -
FOR SETTLEMENT PURPOSES ONL V, NOT ADMISSIBLE UNDER RULE 408
Property Taxes
A'Ss6ssments
Assessment tnter-est
Penalty Interest
Penalty
Lost Price Increases (5% per Yr)
Association 'Fees
AssociatiOl113ills
Additional Gold key BWs (Mowing)
Additional Dev Loan Inte~est
Additional Lett.er of Cr-edit 'Fees
Attorney Fees
John Brennan
Ciodi Matt {through 8117/07)
'Biersdorf & Associates
,Expert Wito€ss Costs
Misc. ~egal Expenses
Mediator
Coping
Court Reporter
Misc. Legal :Expense
Total
'future Lossed Profits
Loss of Value on UnsoJdLots
Large Lot Single Family
Smali Lot Single Family
Loss of Hotel Ownership and Profits
Loss of Use of Profits on Unsold Lots ( 5 sates I yr)
Total
Builder Losses
legacy Homes
TIC Construction
Total
$25,738A31
$43,849.52
$31,214.1.2
$49.~56.4S
$80,213,50
$8,835.00
'$2,463.65
$4,200.00
$80,313.44
$43,851.37
$7,812.01
$136,171.25
$2,4S0.DO
$72,207:65
$98825
$257.25
$6,835,32
$3,305.68
$600;563.37
$10;800.00
$171,700,00
$1,229,1B5.00
$224,117.68
$1,635,782.68
$201,250.08
$596,133.56
$797,383.64
Grand Total $3,033,729.69