September 6, 2011

State files countersuit against property owners trying to stop State Center in Baltimore

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By Megan Poinski
Megan@MarylandReporter.com

The Herbert O'Conor state office building will be torn down and replaced by State Center.

The Herbert O'Conor state office building will be torn down and replaced by State Center.

The state fired back at the Baltimore property owners who have sued to stop the $1.5 billion State Center project, filing a countersuit on Friday demanding hundreds of thousands of dollars that delays in the project are costing the state.

The countersuit states that the group of property owners – who collectively call themselves the Coalition to Save Downtown Baltimore – filed their initial lawsuit in December because they “cannot compete” with the State Center project.

The project is slated to occupy about eight city blocks, and will contain about 1 million square feet of office space. Most of that space will be for government offices.  Meanwhile, downtown property owners have said that there is already more than 2.2 million square feet of vacant office space in Baltimore’s central business district.

“They have filed and maintained the case not in a good faith effort to seek judicial relief but instead for the express purpose of delaying and derailing the Project’s progress and forestalling perceived business and economic competition from the Project,” the state’s countersuit says.

Attorney Alan Rifkin, who represents the property owners, said that the countersuit was frivolous.

“It smacks of intimidation in a sophomoric belief that we can be silenced in retaliation,” Rifkin said.

What the lawsuit does

David Paulson, a spokesman for the Attorney General’s office, said that the countersuit has been in development over several weeks.

“It speaks to the various reasons why the plaintiffs are attempting to interfere with policy decisions of the state,” Paulson said.

The initial lawsuit from the property owners claims that the contract to develop the planned mixed-use development on government land was not put out for competitive bids, as the law requires. It also claims the development agreement for the complex includes dubious finances and government subsidies of hundreds of millions of dollars/

The lawsuit asserts that the project would pull business away from the central downtown district, exacerbating the already high vacancy rate in downtown commercial buildings and removing the vitality from a downtown that had once been the focal point for development.

The countersuit charges that the property owners are just trying to get state offices to rent space in their buildings, and they want to get businesses that would be supported by so many workers to locate there. By using a lawsuit to try and increase their own business, the state’s countersuit claims that the property owners are “attempting to usurp the discretion of elected and appointed state officials to locate state offices where they serve the best interests of the State and not the best interests of particular persons or businesses.”

Additionally, the countersuit states, the property owners waited until December to file the suit – six years after talk about the project began – in order to cause the maximum disruption and financial blow to the project’s going forward.

The lawsuit does not seek a specific monetary amount from the property owners, but asks the court to order them to pay damages of more than $100 million that come from:
·      Lost rents received for the State Center office space.
·      Increased construction and financing costs.
·      Lost revenues from the on-site parking garage.
·      Increased project development costs.
·      Higher rents because of higher project costs.
·      Higher costs to maintain old office spaces that would be replaced by newly built ones in State Center.

Similar to motion to dismiss

If some of these arguments sound familiar, it’s because they are similar to what was put forward by the state in a previous motion to dismiss. That motion was denied in July.

The motion to dismiss did not state that the property owners were motivated by the potential of lost profits, but argued that there were several problems with the filing of the suit and its timing.

Even though the original case has survived the motion to dismiss, the countersuit states, “Plaintiffs/Counter-Defendants know and understand that there is no merit to the underlying claims.”

Rifkin said that the property owners will be filing a motion to have the countersuit dismissed.

“This is nothing more and nothing less than an attempt to intimidate and silence us,” Rifkin said. “It has no chance of working, and is likely to have the opposite effect.”

Documents withheld

The property owners also argued that the state has not turned over several vital documents demanded in the litigation. A motion to compel the release of the documents has been filed.

Rifkin said that this motion is “quite extraordinary” because the documents in question pertain to a state project – meaning that they are public records and should be available.

“This is stonewalling of the worst kind,” Rifkin said. “The state has an obligation to be forthcoming.”

In response to that filing, the state has filed a motion of its own. This one asks the court to issue a protective order, meaning that it would not force the documents to be filed.

Rifkin said that this motion itself is galling because the state cannot “magically declare” that government documents are not public records when someone is asking for them.

Paulson replied that the motion was filed because there are documents that the property owners seek that are legitimately confidential under the Maryland Public Information Act. The Public Information Act states that records can be kept confidential if:
·      The information in them is privileged and confidential.
·      Inspecting them would violate federal, state or case law.
·      The information contains trade secrets.
·      The information has confidential commercial, financial or geological details.

Paulson said that the state will comply with whatever is ordered by the court.

  • Whcampbell

    This is outrageous!  Unless the State already has some contracts or leases from private sector renters in hand how can they possibly sue for lost rent.  This project is a bad idea that needs to be stopped as soon as possible.  Even Comptroller Peter Franchot has spoken against it.  This countersuit is nothing more than bullying.  I hope that the Baltimore property owners continue to press forward with the suit.  Using the power of the State to intimidate citizens is an abusive and questionable step.