Key hearing in Burton-Katzman lawsuit this week


Times-Herald Newspapers

    DEARBORN — The long dispute between the city and Burton-Katzman Development Co. finally see could some resolution this week if Wayne County Judge Michael Sapala decides in favor of the city’s motion for summary judgment.

    Summary judgment is a tool frequently used in the courts to help adjudicate cases more quickly than going through all the motions required by a full trial.

    The motion requests that Sapala side with the all of the city’s initial grievances as outlined in a 20-page, two-count complaint filed in January. City officials are seeking nearly $17 million in damages and back taxes – in addition to a court order — to compel Burton-Katzman to finish construction on West Village Commons, the underachieving development on west Michigan Avenue that languishes mostly unoccupied.

    Initial plans for the project called for 48 rowhouse-style condominiums to the south, 75,000 square feet of office and retail space along Michigan Avenue and dual midrise buildings – one a hotel, one an office and retail building – in between. Although the company completed construction on the mixed-use portion in June 2006, to date only 36 condos have been built, and the site of the midrise buildings remains an empty field.

    City attorneys argue that Burton-Katzman’s continued failure to complete construction constitutes a breach of contract. Timelines established in the developer’s agreement called for all work on the three-phase project to be wrapped up more than two years ago. Additionally, city officials contend that the city was defrauded silently by Burton-Katzman because company officials failed to inform them of a corporate dissolution filed in April 2008.

     Named as defendants in the suit are Burton-Katzman, West Village Commons LLC, Abbey Homes LLC, President Peter Burton, partner Robert Katzman, Senior Vice President of Project Development Charles DiMaggio and corporate attorney Daniel Share.

    At the crux of the complaint are two parking decks built by the city in 2004 at a cost of $16.4 million as part of the developer’s agreement.

    They were included in the project for two reasons: in part, to provide more parking for a shopping district short on parking space, but largely because city and company officials believed a completed West Village Commons would provide the requisite demand to necessitate the decks.

    A significant portion of space in the parking decks was purposed for hotel and residential lease agreements, and tax-capture money from the entire project was supposed to pay down the debt. But with those components far from being realized, the decks have sat underutilized and have become a drain on city finances, sapping nearly $2.5 million in general fund money so far.

    The silent fraud allegation stems from a discovery city attorneys made while preparing the lawsuit. On Jan. 9 through a business entity search, city attorneys found that Burton-Katzman Development Co. Inc., the company that the city contracted with, had filed for dissolution. Despite several face-to-face meetings with city officials and a series of letters between the two parties following the April 2, 2008, dissolution, Burton-Katzman never revealed the change in status, city officials say.

    The development agreement obligates the company to make the city aware of any change in its status as a valid business entity.

    Throughout the ordeal Burton-Katzman officials have maintained they did nothing wrong. The incomplete project is a product of the state’s continued economic woes, they say, contending that even if the remaining components were constructed, they would be set up to fail in a real estate market saturated with available properties at discount prices.

    Likewise, with the silent fraud claim, company officials contend no wrongdoing. They say that West Village Commons LLC – an entity created to manage the development – is the responsible party, not Burton-Katzman Development Company.

    But Sapala disagreed at least in part with those arguments when he dismissed an earlier motion for summary judgment by Burton-Katzman’s legal team that sought to have the silent fraud count dismissed.