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Insurance denied: City footing Lee statue, parking garage legal bills

Water Street Parking Garage

Since 2016, Charlottesville has faced a larger-than-usual number of high-profile lawsuits, and in at least two cases, its insurance carrier won’t be picking up the tab. And while the carrier hasn’t seen the most recent suit, filed by Albemarle County over the Ragged Mountain Natural Area April 20, that litigation could join the Lee statue coverage denial as a “willful violation” of state law.

The city’s insurer, the Virginia Municipal League, covered Joe Draego’s federal lawsuit after he was dragged out of City Council for calling Muslims “monstrous maniacs,” and a judge ruled the city’s public comment policy banning group defamation was unconstitutional.

But VML is not covering the lawsuit filed against the city for its 3-2 vote to remove the statue of General Robert E. Lee, nor is it covering Mark Brown’s Charlottesville Parking Center litigation against the city, which heads to mediation May 31.

In that case, the city is paying Richmond LeClairRyan attorney Tom Wolf $425 an hour. At press time, City Attorney Craig Brown was unable to come up with costs of that suit, but a year ago, as of April 30, 2016, before the city had gone to court on Brown’s emergency receivership petition, it had spent $11,593.

Craig Brown says the suits on the statue, parking garage and the dispute with Albemarle have “all generated a large amount of public interest, whereas someone tripping on a sidewalk doesn’t.”

“It’s unusual to be involved in as much high-profile litigation as it is now,” agrees former mayor and CPC general manager Dave Norris.

“There’s only a certain amount of appetite taxpayers have to paying high-priced lawyers,” he says.

The litigation with Albemarle stems from the city’s December 19 vote to allow biking at Ragged Mountain, which is located in the county, despite county regulations that prohibit biking at the reservoir. Before the vote, Liz Palmer, then chair of the Albemarle Board of Supervisors, sent a December 15 letter to City Council asking it to defer action and citing state code that prohibits a landowner locality from adopting regulations in conflict with the jurisdiction where the property is located.

And while the city held a year’s worth of public meetings about uses at Ragged Mountain, conspicuously absent from that process was the county. “We were not involved in that,” says Board of Supervisors chair Diantha McKeel. “It’s unfortunate it got as far as it did without recognizing that.”

McKeel stresses that the city and county are not at odds on most issues, but says, “Both of our localities have agreed this is a legal question that has to be settled in the courts.”

After the City Council voted April 3 to adopt a new trails plan that would allow biking, the city offered binding arbitration, “precisely because we wanted to resolve the underlying legal issues without having to go to court,” says Mayor Mike Signer.

That was an offer the county declined. “The question goes back to state code,” says McKeel. “We can’t mediate our way out of that.”

Attorney Buddy Weber, a plaintiff in the Lee statue suit, sees a pattern with the city’s decision to proceed at Ragged Mountain over the county’s objections—and state statutes. “What you really have to ask is where they’re getting their legal advice,” he says. “Are they doing this to invite litigation?”

An injunction hearing is scheduled for May 2 to halt the city from moving the statue—or selling it, as council voted to do April 17. “We thought it was reckless for them to do what they did to remove the statue,” says Weber.  “Selling it falls in line with that. That’s why we need an injunction.”

But when Councilor Bob Fenwick changed his vote to remove the statue February 6, he said it was an issue that would have to be decided by the courts.

For activist Walt Heinecke, that fight embodies the city’s values on the Civil War statue, and he also applauds council’s funding of $10,000 to Legal Aid Justice Center to support immigrants. “I do think it’s important,” he says.

Other legal battles, like the city’s defense of its 2011 panhandling ordinance or the Draego lawsuit, “seem like a complete waste of money,” he says. Heinecke hasn’t followed the Ragged Mountain debate, but says, “It certainly seems there would be better ways to work this through rather than bull-dogging it.”

Vice-Mayor Wes Bellamy, who had his own day in court recently to fend off a petition to remove him from office, says when he was campaigning, he frequently heard comments that prior councils were “paralyzed” and that citizens wanted City Council to make decisions.

“This council is committed to making a difference and to making bold choices,” he says. “We’re not going to be paralyzed.”

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Hell no: City responds to parking center proposals

Mark Brown says he’s not angry the city rebuffed scenarios to settle the Water Street Garage litigation, but he is selling the Main Street Arena and looking for more hospitable municipalities. Photo Jackson Smith

In the ongoing melodrama between the city and Charlottesville Parking Center owner Mark Brown, a letter from City Manager Maurice Jones says there’s no way the city will sell its Water Street Parking Garage shares to or even work with Brown, who, perhaps not coincidentally, announced plans to sell the Main Street Arena and take at least part of his investments elsewhere.

The latest barrage was in response to an August 8 letter from CPC general manager Dave Norris outlining three scenarios in which CPC would sell its parking spaces in the garage to the city or vice versa, complete with an optimistic plan that CPC would build a parking garage on a Market Street lot jointly owned by the city and county to appease the county, which has threatened to take its general district court out of the city because of the dismal parking situation.

Jones writes that former mayor Norris’ statements that the scenarios represent an opportunity to end the dispute “quickly” and “in the city’s favor” represent a “fundamental misunderstanding” of the city’s position.

He scoffs at the idea that the city would buy Brown’s interest in the Water Street Garage, which includes 390 spaces, the land underneath and commercial spaces, for $8,995,400, the amount CPC contends the city would have to pay if it goes through with its eminent domain threat. Brown bought CPC, including a surface lot across from the garage, for $13.8 million in 2013.

A major sticking point for the city is that while Brown offers to sell his spaces for $18,232 each, his offer to buy the city’s 629 spaces was at a much lower $7,822 each. “That huge discrepancy suggests that CPC either has no interest in seriously negotiating the sale” of its garage spaces or that it “continues to mistakenly believe” the fair market value of its spaces is far greater than the city’s because it owns the land upon which the Water Street Garage sits.

That, says Jones, is like the city arguing its spaces are more valuable because they’re exempt from real estate taxes. Neither “advantage” would be passed on to a purchaser, he says.

And in case there’s any doubt about the city’s position, using both bold text and underlining, Jones says, “City Council has no interest in selling its spaces in the WSPG to CPC.”

As for working together to build a garage on Seventh and Market streets after Brown’s attempts to force the city to sell its Water Street shares, says Jones, “I can unequivocally respond that no one on City Council can imagine any scenario where this type of partnership would be of interest to the city.”

On page three of the four-page letter, Jones lists Brown’s, er, CPC’s misdeeds, including suing the city, secretly negotiating with Albemarle to build a garage on Market Street, allowing downtown businesses to believe he was contemplating closing the garage because the association that runs it had not approved a budget and filing a second lawsuit seeking the emergency appointment of a receiver.

Norris declined to comment on the city’s letter, but Brown had something to say about it: “It seemed like the ramblings of a lunatic. Maurice Jones didn’t write a word of that.” Brown says he believes Mayor Mike Signer and the city’s Richmond attorney, Tom Wolf, wrote the letter.

“Not true,” says Wolf. He also downplays the tone of the letter. “I think it’s just responding to their letter. I don’t think it’s a go-to-hell letter.”

In a September 14 statement, Wolf says, “I would think that after a while people would get tired of Mark Brown’s constant whining and his relentless efforts to twist everything to benefit himself at the expense of others.”

Jones’ letter says, “This dispute is not, however, about parking rates and never has been,” and alleges that Brown’s scheme all along has been to force the city to sell its interest in the garage to him.

“That was an outright lie,” declares Brown. He contends the only time CPC ever made an offer was when the city requested one in writing.

As for an amicable settlement of the increasingly hostile dispute, says legal expert Dave Heilberg, “As of today it doesn’t look like it. It’s hard to tell how much [of the city’s letter] is posturing.”

Heilberg calls such communications in civil litigation “nastygrams.” And if the parties really want to settle, he says, “They’ll come in with offers a lot closer.”

City Attorney Craig Brown says, “Yes, there is a possibility for the case to settle. …CPC just needs to offer to sell its spaces in the Water Street Parking Garage for their fair market value.”

While Mark Brown, who also owns Yellow Cab, has listed the Main Street Arena for sale before as what he calls a “teaser,” this time he says he’s serious and has ordered a for sale sign. The arena is listed at $6.5 million.

“I don’t have any confidence in [city leadership’s] ability to function in a rational way,” he says, as Charlottesville transforms from a town to a small city. He sees “signs of dysfunction” in how the city is run. “You can’t put out patio chairs in the wrong color but they let the Landmark sit for eight years,” he says, referring to the hotel skeleton on the Downtown Mall.

“I’m not angry,” he says, while expressing concerns about the Belmont Bridge (“How long has that dragged on?”), the Strategic Investment Area and the West Main streetscape. “I don’t see any leadership from City Hall,” he says.

Brown believes money invested in municipalities that have “real leadership” will result in a higher return.

As for the fate of the only ice rink in the area, says Brown, “That’s going to be up to the owners of the building. I’m going to be investing elsewhere.”

CPC Response Letter 9-12-16

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No emergency: Judge rejects parking center petition for special receiver

After a judge denies the Charlottesville Parking Center’s petition for a third party to run the garage, CPC general manager Dave Norris says there are much bigger challenges facing parking downtown than one garage. Staff photo

A judge heard Charlottesville Parking Center’s emergency petition to appoint a receiver to run the Water Street Garage June 27, three days before the parking center’s contract with the city expired, and he concluded such a move wasn’t justified.

“This is an emergency of your own making,” said Judge Rick Moore in Charlottesville Circuit Court. “I don’t think there’s a compelling need for the court to intervene.”

The Water Street Parking Garage Condominium Association, the organization that owns the garage, has been deadlocked since late last year when its board, with four seats controlled by the city and four by the Mark Brown-owned CPC, was unable to approve a budget with the higher rates desired by Brown, and has operated without a budget since December 31.

CPC’s own agreement to manage the Water Street Garage expires June 30. “We are standing at the precipice of July 1,” said CPC attorney Christopher Malone.

The city, represented by Richmond attorney Tom Wolf, said the garage had been operating just fine the past six months, the city had okayed expenses, and there was no emergency and no evidence of irreparable harm.

Wolf said the Water Street Parking Garage Condominium Association’s articles of incorporation say owners do “not contemplate pecuniary gain or profit to the members.” Brown testified the city earned $596,000 in profit last year from the garage.

“We’re not saying there’s no profit,” said Wolf. “We’re saying the purpose is not to maximize profit.”

Brown testified he did not accept a city offer to implement the rate increase he wanted over years, instead of in 2016. “It was not acceptable,” said Brown, who has filed suit against the city contending he’s being forced to operate parking at below-market rates.

According to Wolf, Brown’s lawsuit is based on the “bogus theory” the city and CPC were involved in a joint venture and the city was breaching its fiduciary duty by not trying to maximize profits from the garage.

And while Brown, as a condo owner, has a fiduciary responsibility to keep the garage open, said Wolf, there were plenty of other companies that could manage the garage. “It’s not rocket science to run a garage,” he said. Ironically, the city earlier had challenged former mayor Dave Norris’ qualifications to become the parking center’s general manager.

The hearing came after the Downtown Business Association of Charlottesville sent a letter June 23 asking the city and Brown to knock off the “extreme threats” like eminent domain and closing the garage.

The next day, Norris sent a letter to the city offering a resolution in which the city could set whatever parking rates it wished—as long as it compensated CPC for lost revenues resulting from rates “lower than what the market would reasonably bear.”

City Councilor Bob Fenwick said that’s an offer the city has seen before. “That was old news repackaged,” he said after the hearing.

Also present at the latest parking wars skirmish were Susan Payne and Joan Fenwick, who rallied downtown businesses to petition City Council to not sell its shares in the garage to Brown.

susanPayneCraigBrown
Susan Payne and City Attorney Craig Brown after the city prevails in court. Staff photo

Up until a June 2 meeting hosted by the Downtown Business Association of Charlottesville at Violet Crown with 60 riled attendees, Norris says he thought the city and CPC were on the verge of a settlement. “Mark and CPC agreed to all of the conditions the city set forth,” including maintaining the validation system, honoring the monthly parking contracts in place and maintaining his ownership in the garage until the ground lease expires in 2024, says Norris.

The city offered to sell its 629 spaces in the garage for $10 million. CPC offered the appraised value of around $4 million plus a 20 percent premium, says Norris.

According to Norris, Mayor Mike Signer asked Brown to not send representation to the meeting. “He specifically asked Mark Brown to pull me from the meeting,” says Norris. He didn’t go, he says, “as a good-faith gesture because we believed the basic terms had been reached,” a decision he now calls a mistake.

Signer referred a request for comment to the city’s attorney. Wolf said he was not at that meeting.

Wolf also disputes that they were near a settlement. “Absolutely not the case,” he says. “There was absolutely no indication that we think this is a good offer we were inclined to take.” Had Brown offered the $10 million the city wanted, “that would have been a good offer,” says the attorney.

Instead, a “spooked” City Council voted June 6 to offer to buy out Brown’s spaces in the garage, a surprise move to CPC, according to Norris. “Basically it’s a story of how the city snatched defeat from the jaws of victory.”

Along with a June 8 offer to buy CPC’s share was a threat that if CPC didn’t sell, the city would begin eminent domain proceedings.

In a phone call June 24, Wolf backed off that. “The city has not irrevocably committed to eminent domain,” he says. “All we said is we were going to take the first steps.”

Fenton says she thinks eminent domain is a reasonable solution “once Mark Brown said he was going to shut down the garage.”

However, not everyone supports what Norris calls the “nuclear option” to settle the parking rate dispute. Says Charlottesville Regional Chamber of Commerce President Timothy Hulbert, “Eminent domain is a hammer that isn’t necessary.”

The next round in the ongoing saga is June 30, when the deadlocked Water Street condo association meets to make a plan to run the garage. Stay tuned.

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City lawyer: Condemnation of Water Street Garage has begun

Attorney Tom Wolf explains how the city is moving forward to condemn the Water Street Parking Garage. Staff photo

How many lawyers does it take to schedule a hearing? Well, if it has anything to do with the highly contentious battle between the city and Mark Brown’s Charlottesville Parking Center, that would be five attorneys in Charlottesville Circuit Court today to set a date for CPC’s petition for the appointment of an emergency receiver. During the hearing, the city’s lawyer from Richmond, Tom Wolf, told the judge the city had begun the condemnation process of the Water Street Parking Garage.

“We’re moving forward with the condemnation,” said Wolf outside the courthouse. That process involves getting an appraisal, making an offer and filing suit—not to be confused with the suit against CPC the city has already filed.

A June 22 hearing on the emergency receivership had been canceled, and CPC filed a motion claiming the city’s counsel falsely said that change of date was mutually agreeable to all parties. Judge Rick Moore said he was concerned with the representation that rescheduling was okay with everyone. “I don’t want that to happen,” he said.

Wolf blamed an assistant for the error.

The parking center’s attorney, Will Prince, said he was not required to give notice to all parties because of the emergency situation, with CPC’s management agreement to run the Water Street Garage expiring June 30. At that point, management of the garage reverts to the deadlocked Water Street Parking Garage Condominium Association, with its board evenly split between the city and CPC.

“It’s not an emergency,” said Wolf, who said the garage was an ongoing business and the city objected to appointing a stranger to run it.

“It’s not going anywhere,” observed Moore. He said that he wanted to hear from all parties to make an informed decision.

Ty Grisham represents the deadlocked condo association. “We’re in an untenable situation,” he said “It’s difficult for the association to have a position. We urge the court to consider all the concerns about timing.” He noted that the condo association board has to approve a management company. “Because of the stalemate, that’s not going to happen,” he said.

Prince said he had a problem with Wolf’s characterization of CPC “walking off the job,” and said the city had threatened to sue if CPC tried to close the garage. “CPC wants the garage to stay open,” he said.

Brown was not in court, but new CPC general manager Dave Norris was. Earlier today he called the city’s plan to take the parking garage “an egregious abuse of eminent domain power.”

For more on parking garage battle, read this week’s story, “Escalation Clause: City threatens eminent domain of Water Street Garage.”

cpc response to rescheduling 6-14-16

 

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Escalation clause: City threatens eminent domain of Water Street Garage

The city could attempt to end its public/private marriage in hell with Mark Brown with eminent domain, a divorce surely headed to court. Photo: Matteus Frankovich/SkycladAP

In this week’s episode of Charlottesville v. Mark Brown over the Water Street Parking Garage, the city makes an offer to buy Brown’s shares of the garage. If he declines, it plans to initiate eminent domain proceedings, according to the city’s outside attorney.

“For months Mark Brown has been trying to bully the City into giving him control of the Water Street Parking Garage,” says Tom Wolf with LeClairRyan in Richmond in an e-mail. “He has even threatened to close down the garage, which he has no power or authority to do. Mr. Brown’s first lawsuit was meritless and this new one is a transparent attempt at further bullying. The City is not intimidated by Mr. Brown’s threats.”

Wolf calls the Water Street Garage “a public necessity,” confirmed by the recent public outcry demanding accessible, affordable parking in the city’s core. Downtown business owners have circulated petitions asking the city to not sell its spaces to Brown. 

On June 8, the city offered to buy spaces from Charlottesville Parking Center, which is owned by Brown, at the same price per space that CPC offered the city earlier this year. “According to CPC that price is above fair market value,” says Wolf. “If CPC refuses, the City will initiate the statutory procedure to make it possible to acquire CPC’s spaces through eminent domain.”

And that’s in a state that passed a constitutional amendment in 2012 prohibiting eminent domain for private enterprise, job creation, increased tax revenue or economic development.

Delegate Rob Bell wrote the constitutional amendment, and he says the key is that the use of a condemned property has to be public. He declines to weigh in on the city/Brown contretemps, but also notes that just compensation would have to be paid, including lost profits.

“The condemnor has the burden of proving it’s a public use,” he says. “Whether that’s a good use, the voters will decide. Ultimately it’s going to be settled by the court.”

“It’s unprecedented,” says CPC general manager and former mayor Dave Norris. “It’s a very extreme step that only escalates the current situation. Eminent domain is not designed to resolve a pricing dispute.”

The city’s move, says Norris, “creates a frightening precedent for any business wanting to do business downtown. If the city doesn’t see eye to eye on pricing or management, they’ll threaten to seize your property.”

While the two increasingly acrimonious sides had indicated they were going to attempt to settle their respective lawsuits, that conciliatory tone seemed to fall apart when council voted June 6 to make an offer to buy Brown’s spaces in the garage without his knowledge. Brown followed up the next day with a petition for an emergency receivership.

The petition cites the deadlock on the board of the Water Street Parking Garage Condominium Association, whose seats are evenly split between the city and Brown’s Charlottesville Parking Center. Because of a dispute over parking rates, the association has not approved a budget. CPC’s contract to manage the garage expires June 30, and a receiver is needed, says the petition, “to make necessary decisions related to the future operation” of the garage.

Those decisions include making a budget and approving rates. With the current deadlock, claims the petition, the condo association can’t negotiate with CPC to run the garage or hire a new managing agent. And CPC fears the deadlock will keep the association from maintaining appropriate insurance on the garage.

“A receiver is a fiduciary position like a trustee or guardian,” says legal expert David Heilberg. The receiver reports to the court about the assets and property for an entity, he says.

“Obviously Brown must feel like his hands are tied because the city won’t settle,” says Heilberg. “The receiver will sort it out until this is resolved. He’s saying, ‘I don’t want the responsibility of handling a disputed property.’”

And Brown wants $450-an-hour attorney Brian Jackson, a partner at white-shoe firm McGuireWoods, to be the receiver, with the help of $100-an-hour legal assistants.

“That’s pretty pricey,” says Heilberg.

But the city’s attorney, Wolf, is known to be pretty pricey himself. Wolf declines to reveal the rate he’s charging the city because, he says, he doesn’t want his other clients to know how steep a discount he’s offering.

“I agreed to a large discount in my hourly rate because my fees will be paid with taxpayer money and because I love litigating against bullies,” says Wolf.

He points out that all good trial lawyers with decades of experience are expensive and he knows for a fact there are many lawyers in Virginia whose normal hourly rate is significantly higher than his.

Brown declined to comment on the eminent domain threat. The emergency receivership petition was scheduled to be heard in court June 22. Another hearing on that scheduling will take place at 4:30pm today.

Says Heilberg, “It sounds like a mess.”

“The city has taken a situation that was messy and made it messier,” says Norris. “My sincere hope is that sanity prevails.”

Timeline of contention

August 12, 2014: Mark Brown buys Charlottesville Parking Center for $13.8 million.

October 15, 2015: CPC proposes new rates of $145 a month, $180 for reserved spaces and $2.50 an hour at the Water Street Garage.

October 28, 2015: The city counters with $125 and $140 for reserved spaces and an hourly rate of $2.

February 2, 2016: The city declines CPC’s offer to lease parking center spaces to the city, says it will consider a fair offer to sell its 629 spaces to CPC.

February 17: The city refuses CPC’s offer to pay $6,792 per space—nearly $4.3 million.

March 14: Brown sues the city, alleging he’s being forced to run the Water Street Garage at below market rate and below what the city-owned Market Street Garage charges.

March 28: Brown announces he’s hired former mayor Dave Norris to be general manager of Charlottesville Parking Center.

April 4: Chris Engel, Charlottesville director of economic development, sends a letter to Brown questioning Norris’ qualifications to run the parking garage.

April 6: Brown notifies the Water Street Parking Garage Condo Association that it’s in default of its agreement with CPC by not having a 2016 budget and gives the city 30 days to come up with one. Fears that the garage will close May 6 begin to foment.

April 28: Brown writes the city, urging them to work things out. brown letter to City Council 4-28-16

April 29: Charlottesville countersues CPC, claiming the city didn’t get its right of first refusal for Wells Fargo’s parking spaces that the bank sold to CPC. city counterclaim 4-29-16

May 25: Violet Crown hires PR firm Payne Ross, calls for petition urging city to hold onto its shares in the Water Street Garage.

June 6: City Council passes resolution authorizing the purchase of CPC’s spaces in the garage.

June 7: Brown petitions for an emergency receivership.

June 8: City offers to buy out CPC for the same price Brown offered to buy the city’s shares.

June 10: The lawyer representing Charlottesville says the city will use eminent domain if Brown doesn’t sell.

Updated 11:33pm June 15 with Dave Norris comments.