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image Tooele City Mayor Patrick Dunlavy at Tooele Applied Technology College on Oct. 17. The Tooele City Council chose to appeal a ruling by 3rd District Court Judge Randall Skanchy that upheld a 2009 jury verdict where Tooele City must pay $20.7 million to Tooele Associates.

December 31, 2013
Top Stories of 2013 – #3 Judge rules Tooele must pay $20.7M to Overlake developer

The 11-year-old legal battle between Tooele City and the developer of Overlake almost came to an end in 2013.

On Nov. 9, Utah 3rd District Court Judge Randall Skanchy issued a written judgment that supported a 2009 jury verdict that ordered Tooele City to pay $20.7 million, plus interest as of Nov. 9, to Tooele Associates, the developer of the Overlake subdivision.

After a few weeks of deliberation, the Tooele City Council, which has already spent over $5 million defending the city from lawsuits filed by Tooele Associates, decided to appeal Skanchy’s judgment.

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

“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.”

During a candidates’ debate last October for Tooele City council and mayor seats at Tooele Applied Technology College, which was just days after Skanchy released an oral opinion upholding the $20.7 million verdict, it appeared city officials were ready to stop spending money on appeals and pay the settlement.

At that debate, Council Chairman Dave McCall, who was a mayoral candidate, said in response to a question about Skanchy’s oral opinion, “We have not met yet as a council to discuss a collective decision on how to proceed. … Personally, I feel we have spent enough of the taxpayer’s money. We can pay it. But I have no specifics on how and when.”

In response to the same question, Dunlavy said:

“For the last year, I have worked with financial advisors on a plan. Twenty million is a staggering amount. I have a plan to pay the $20 million. It won’t be easy, but I believe we can do it with minimal impact to our taxpayers.”

Dunlavy added that he inherited the lawsuit and, “if you knew what I know, you would have taken the same steps.”

Also during the debate, Tooele City Council members Scott Wardle and Debbie Winn said they had seen and agree with the mayor’s draft plan to pay the amount set by a jury trial.

Yet, weeks later, the city council passed a resolution in response to a new law that requires the city to post a bond to cover the amount of the award in excess of $5 million to stay the judgment during the appeal process.

That resolution 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.

Tooele Associates’ attorney, Bob Baird, said the resolution is not sufficient nor legal security and that he and his client do not trust a piece of paper from the city saying it will pay the judgment.

“The city had a development agreement with Tooele Associates,” he 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.”

The Tooele Associates vs. Tooele City lawsuit dates back to 2002 when Drew Hall, managing partner for Tooele Associates, filed several lawsuits in 3rd District Court against Tooele City claiming the city had violated the development agreement for Overlake.

Hall alleged that Tooele City misapplied public improvement ordinances; required public improvements in Overlake to meet standards not required of other developers; created an arbitrary punch list of items that needed to be fixed for public improvements to be considered complete; slowed down or refused to make final inspections; and refused to recognize prior admissions that some public improvements were complete.

In 2004 Tooele City filed a countersuit against Tooele Associates for violations of the Overlake development agreement. The case went to jury trial in 3rd District Court in June 2009.

The jury found Tooele City was guilty of breaching agreements with Tooele Associates and awarded the developer $22.5 million in damages. That amount was reduced to $20.7 million because the jury also ordered Tooele Associates to pay the city $1.8 million for its own failure to honor agreements.

In 2010, Skanchy, who presided over the jury trial, declared a mistrial, citing irreconcilable conflicts in the jury’s verdict.

Hall appealed the mistrial ruling. The Utah Court of Appeals reversed the mistrial ruling in Aug. 2012 and sent the case back to Skanchy for final judgment.

Tooele City asked the Utah Supreme Court to review the Court of Appeals decision to overturn the mistrial ruling in Sept. 2012. In Nov. 2012 the state Supreme Court announced it would not review the Court of Appeals’ decision.

Prior to entering his final judgment in favor of Tooele Associates on Nov. 9, Skanchy denied several motions filed by Tooele City, including a request to set aside or modify the jury verdict and a request for a new trial.

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