Louisiana Record

Thursday, August 22, 2019

Two Canal Street Investors: Senate bill an unconstitutional attempt to circumvent the judiciary

By Karen Kidd | Apr 8, 2016

NEW ORLEANS – Two Canal Street Investors, suing over its losing bid to develop New Orleans' World Trade Center, claims the mayor's office is attempting an end run around the judiciary by backing a new state Senate bill that could cost the developer millions.

"The proposed change is terrible public policy that would be very costly to citizens and a violation of the constitution," Charline K. Gipson, an attorney with the New Orleans Davillier Law Group that represents the developer, said in a Louisiana Record interview.

Meanwhile, New Orleans Mayor Mitch Landrieu's office is being quite candid about its part in developing the new legislation, introduced earlier this week by District 9's Republican Sen. Conrad Appel.

"We’re working with Sen. Appel on this legislation, which intends to clarify the process for public benefit corporations to select a developer," Landrieu's Press Secretary said in an email to the Louisiana Record. "It also clarifies the appeal process in the event a party challenges the selection of a developer so as not to permit an unreasonable delay of an approved project."

Senate Bill 447, introduced on April 5, does not name Two Canal Street Investors. The bill would require a developer to post millions of dollars in cash or security to maintain a lawsuit against the city and the New Orleans Building Corp., the public benefit corporation responsible for developing city-owned property.

The required bond "shall be required to furnish security to assure the satisfaction of any damages, costs or expenses, or losses to the public benefit corporation, political subdivision, state, lessee or sublessee which may result, directly or indirectly, from the filing of the appeal or suit, in such amount as may be fixed by the court," the bill says.

The bond amount would be based on two sets of calculations, depending on whether leases were for more than 25 years, or 25 years or less. For leases of more than 25 years, a suing developer would have to post an amount equal to the first 10 years of the rent. For leases 25 years or less, a suing developer would have to post an amount equal to the first five years of rent.

The bill also would change rules pertaining to the process by which public benefit corporations may award leases. Current law does not require public benefit corporations to use a standard public bidding process to award a lease, but does require a lease award "provide for a fair and equitable return of revenue." The bill would remove the current "fair and equitable return of revenue" language for such awards.

Appel did not immediately return a Louisiana Record request for comment.

The bill was referred to the Committee on Judiciary A before being recommitted Thursday to the Committee on Transportation, Highways and Public Works.

"Two Canal Street Investors, Inc. has sued to prevent the citizens of New Orleans from losing over $2 billion in rent as a result of the city's selection of Carpenter Woodward to lease former World Trade Center public property," Gipson said. "Such lease award to Carpenter Woodward violated the public lease law as it currently exists. Now, after a year of litigation, the city and Carpenter Woodward are attempting to change the public lease law and eliminate protections for the public."

Those protections include using objective criteria to award public leases, and a fair and equitable return of revenue for the public, Gipson said.

"To make matters worse, with the introduction of this bill, the city and Carpenter Woodward are attempting to circumvent an entire branch of government -- the judiciary -- and propose an amendment that would: (i) block court access to challenge violations of the public lease law, except for those with wealth and power; (ii) unconstitutionally threaten an existing lawsuit by retroactively imposing a cost-prohibitive bond; and (iii) give the city the best designed process to hand deliver contracts to favored parties -- exactly the opposite of what the public lease law is intended to do," Gipson wrote in an email. 

Rainey said the Senate Bill is a way for the city to defend itself and that the controversy over the World Trade Center's development was the catalyst, not the target.

"When a losing bidder files multiple baseless lawsuits to disrupt redevelopment of public property, the public’s best interests must be protected," he said. "This has implications beyond just the redevelopment of the former World Trade Center property. Public procurements like the potential development of the Piazza d’Italia parking lots, redevelopment of Charity Hospital and other public facilities could be negatively impacted as well by similar baseless lawsuits."

Late last month, Two Canal Street Investors filed suit in Orleans Civil District Court against members of the real estate consulting team who advised the city in that process. The named defendants in that case are the Stone Pigman law firm, attorneys Scott Whittaker and Angela Crowder, consulting firm Jones Lang Lasalle, and consultants Greg Hartmann and Judd Stensrud.

That case was in addition to Two Canal Street Investors' lawsuit filed last spring against the city and New Orleans Building Corp., which is scheduled to go to trial in October.

The development of New Orleans' 33-story World Trade Center, located on the riverfront, was leased last year to the development team led by Carpenter & Co. of Massachusetts and Woodward Interests of New Orleans.

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