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December 10, 2013
City wants to appeal lawsuit loss

It looks like Tooele City and the developer of Overlake are headed back to court.

Attorneys representing Tooele City have filed documents with the Utah State Supreme Court announcing their decision to appeal a Nov. 8 judgment by 3rd District Court Judge Randall Skanchy that awards Tooele Associates, the developer of the Overlake subdivision, $20.7 million.

“This is hogwash,” said Bruce Baird, attorney for Tooele Associates. “But it doesn’t surprise me given the city’s past history of bad faith litigation.”

However, according to Tooele City Mayor Patrick Dunlavy, “We believe that there are some important legal principals that need to be reviewed.”

As part of the appeal, Tooele City is faced with a new state law that requires municipalities to provide security, usually in the form of a bond, to cover the amount of a judgment that is in excess of $5 million.

The security allows the judgment to be put on hold during the appeal process. It also guarantees that if the appeal is eventually denied, there will be money to pay the judgment.

The new law is the result of legislation sponsored by State Sen. Curtis Bramble, R-Provo, which was passed during the 2013 legislative session. It eliminated an exemption for cities from the law that requires an appellant to provide security when appealing a judgment.

Bramble’s legislation keeps the exemption intact for the state and all of its other subdivisions, except municipalities.

At the time the legislation was passed, the only current case it would apply to was the Tooele Associates v. Tooele City case. As far as Tooele City officials know, it is the only municipality in the state of Utah facing a judgment exceeding $5 million.

In order to comply with the new law, Tooele City consulted with Ballard Spahr, a national law firm with offices in Salt Lake City. Public finance and arranging municipal bonds are two of the firm’s specialties.

Randall Larsen, partner with Ballard and Spahr, wrote to Tooele City in a letter dated Dec. 2. In the letter Larsen advises the city that it has the statutory right to pay the judgment, or a form of the judgment that may be modified following an appeal, in ten annual installments of equal size.

Larsen also asserts that state constitution and law restricts the city from financing a possible judgment or obtaining a bond to secure the amount of the judgment. A judgment creditor is also barred from taking any property of the city or funds that have been appropriated for other specific purposes.

With Larsen’s counsel in mind, the city council passed a resolution at last Wednesday’s council meeting that reads, “To the extent that the judgment, or some portion of it, is affirmed after the exhaustion of all of Tooele City’s appeal rights, Tooele City hereby elects and opts to pay the judgment and any post-judgment interest that may accrue in ten ensuing annual installments of equal size …”

The resolution is the only security the city can provide in compliance with state law, according to Dunlavy.

Baird questions the veracity of the city and the validity of the resolution as a form of security.

“The city had a development agreement with Tooele Associates,” Baird said. “The jury agreed that the city broke that agreement. Now the city wants us to trust them when they pass a resolution and say they will pay the judgment. I don’t think so.”

Tooele Associates has prepared its own appeal of Skanchy’s final judgment.

Skanchy ruled against Tooele Associates request for legal fees and pre-judgment interest.

Before hearing about Tooele City’s appeal, Baird filed his own appeal on behalf of Tooele Associates seeking an additional $13 million for legal fees and pre-judgment interest.

The appeal process requires the state Supreme Court to decide if it will hear the appeal or if it will ask the Court of Appeals to hear the appeal.

Written briefs will be prepared by attorneys on both sides for the court that hears the appeal before oral arguments are scheduled.

The length of the appeal process is uncertain, according to Tooele City Attorney Roger Baker.

Tooele City has spent a total of $4.5 million defending itself from the Tooele Associates lawsuit. Baker estimates that the city’s bill for the latest appeal will run between $10,000 and $50,000.

Tooele Associates appealed Skanchy’s declaration of a mistrial in June 2010. The Court of Appeals issued its decision reversing the mistrial in August 2012.

The Tooele Associates v. Tooele City lawsuit dates back to 2009 when attorneys for Tooele Associates argued in a jury trial that Tooele City breached a development agreement approved by the city in 1997 for the 3,000-acre Overlake subdivision on the northwest side of Tooele.

The jury found that both Tooele City and Tooele Associates violated the development agreement and awarded a net judgment of $20.7 million in damages to Tooele Associates.

However, Skanchy, who presided over the jury trial, issued a mistrial ruling in 2010, citing irreconcilable conflicts in the jury’s verdict.

In 2012 the Court of Appeals reinstated the jury verdict and sent the case back to Skanchy for final judgment.

Skanchy denied a motion from Tooele City to invalidate the jury verdict and a request for a new trial. On Nov. 8 Skanchy entered a judgment against the city for $20.7 million plus post-judgment interest.

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