Posted: June 08, 2017
Rapid City
Agenda Item Summary

Agenda Item Ref. #: LF061417-05

Agenda Item Title:

Authorize Mayor and Finance Officer to Sign Settlement Agreement Between the City of Rapid City and President's Plaza, LLC

Origination Group:
Legal & Finance Committee
Origination Meeting Date:
06/14/2017
City Council Hearing Date:
06/19/2017
Petitioner:
President’s Plaza L.L.C.
Staff Contact:
Joel Landeen, City Attorney
Agenda Item Summary:
There is a covenant of good faith and fair dealing incorporated into every contract. This provision allows an aggrieved party to sue for a breach of contract when the other contracting party, by its lack of good faith, limited or completely prevented the aggrieved party from receiving the reasonably expected benefits of the contract. Good faith is defined as honesty in fact in the conduct of the transaction concerned. A lack of good faith in performance of a contract can be identified by conduct including, but not limited to, the following: 1) evasion of the spirit of the contract; 2) abuse of power to determine compliance; and 3) interference with, or failure to cooperate with the other parties’ performance. Based on my analysis, President’s Plaza would not need to prove that but for Mayor Kooiker’s actions they would have received the tax credits. They would only need to show that he acted in bad faith in an effort to prevent them from obtaining the credits. The second point Mr. Carpenter makes is that a party who acts in bad faith cannot escape the consequences of their behavior by arguing that the damages are speculative or uncertain. As President’s Plaza points out in their letter, there are several public statements made by various elected officials that they believe former Mayor Kooiker prevented, or at the very least interfered with President’s Plaza’s ability to obtain New Market Tax Credits. There is also Mayor Kooiker’s statement that if they were awarded the credits he would ask for a justification for how they complied with the requirements for the award. Beyond the statements that have already been made publicly, I have good reason to believe that many elected officials, past and present, agree with this assessment and will testify as such in a deposition or at trial. Having prominent members of the defendant organization testifying under oath they agree with the plaintiff’s assertion regarding Mayor Kooiker will make this an extremely difficult case to defend. It also puts the City’s legal defense team in the unenviable position of having to impeach or discredit the testimony of current and former elected officials.

Funding Source & Fiscal Impact (if applicable):

Funding Cost Center
Funding Source & Fiscal Impact Notes:
The City will pay the settlement amount out of the approximately $2,073,000 currently held in escrow by Pennington Title Company. The balance of the money held in escrow will be returned to the City.

Recommendations:

Origination Recommendation Action:
Approve
City Council Options:
You can approve or deny. If you approve, the money will be disbursed from the escrow account and the contracts with President’s Plaza and any claims related to this project will be completely resolved. If you deny, it is likely that President’s Plaza will file suit. The City will likely have to file suit to get the money released from escrow. Since this is a breach of contract claim, the City’s insurance does not cover any judgments or the cost of defending the case.

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