July 13--DURHAM -- A California-based insurance company involved in Durham's failed-development struggles wants a federal judge to force city officials to abide by their offer in April to settle a lawsuit with it for $111,300.
William Sturges, lawyer for Developers Surety and Indemnity Co., filed a motion on June 20 that in essence claimed the city is trying to renege on an offer it made during a mediation session nearly two months before.
Sturges wants U.S. Magistrate Judge Patrick Auld to force the city to accept a payment that would resolve Developers Surety's liability for road and sidewalk in two neighborhoods, Ravenstone and Stone Hill Estates, left unfinished by a developer that went bankrupt amid 2008's real-estate/Wall Street crash.
Developers Surety acted on the city's offer by mailing it four checks totaling $111,300, but city officials returned those checks because they haven't been able to make a deal with a second firm, Selective Insurance Co. of America, that's also on the hook.
Sturges represents both firms, but they're otherwise independent. He argues that the city can't insist on a package deal. Nor, he says, can it back away from the offer its lawyers made to Developers Surety during the mediation.
"Courts have repeatedly said that it is error to deny enforcement of a settlement agreement merely because it was oral," he said in a brief supporting his motion, invoking several prior cases involving disputes between private-sector firms.
Senior Assistant City Attorneys Don O'Toole and Fred Lamar are handling the city's end of the litigation. O'Toole said they will respond formally to Sturges' motion this coming Monday.
He added that in city officials' view, the "mediation was left open and to be continued at a later date." Thus, the "negotiations were not concluded."
Sturges' claim that city officials are reneging on a de facto settlement deal paralleled an otherwise-unrelated case that O'Toole argued and won in state court on Wednesday.
A lawyer for former City Transit Administrator Steve Mancuso complained that officials rescinded an offer of binding arbitration in a severance pay dispute.
But Senior Resident Superior Court Judge Orlando Hudson accepted O'Toole's argument that state law and city policy combine to give the City Council sole authority to approve or reject lawsuit-settlement offers on the city's behalf.
O'Toole, in arguing the case, said precedents that otherwise make a lawyer's offer binding don't apply because "cities are different" from private-sector firms, legally.
"Cities only have the powers the legislature gives them," he told Hudson during Wednesday's hearing on the Mancuso case. "Anyone involved in a case with a city, nothing gets done until it's approved by the City Council."
In the failed-development case, other documents Sturges filed indicate that city officials signaled a willingness to settle with New Jersey-based Selective Insurance for $245,700. Selective rejected that offer.
The combined $357,000 offer from the city appears to be less than the two companies had pledged when they wrote infrastructure-completion bonds for Ravenstone and Stone Hill's developer in the mid-2000s.
City officials are seeking payment because the developer's 2008 bankruptcy left no one other than Durham'sPublic Works Department available to orchestrate the completion of the two neighborhoods' streets, sidewalks and runoff-control facilities.
Engineers' latest estimates suggest it will cost nearly $1.1 million to complete infrastructure in the two neighborhoods to city standards, said Robert Joyner, head of development review for Public Works.
Of that, $586,000 would be for Ravenstone and the remaining $501,000 would be for Stone Hill.
City Council members over several meetings have made it clear that in failed-development cases, affecting their neighborhoods and others in a similar boat, they want lawyers to get what they can from insurance companies.
The council has signaled it's willing to use public money to subsidize 10 percent of any gap between insurance payments and the actual completion costs.
Homeowners in the affected neighborhoods would have to cover whatever is left, paying through a special assessment process that likely would offer relatively easy credit terms.
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