Forest City threatens City of New Rochelle with Lawsuit over failed Echo Bay project

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New Rochelle, NY -- Forest City has sent the City of New Rochelle a Demand Letter for $2 million in connection with the failed Echo Bay project.

The letter claims that Forest City spent roughly $3 million on legal, consulting and lobbying fees in connection with the project.

UPDATE 2/10 8:10 PM FC-DemandLetter-2014-02.pdf [This is the letter, still working to get the attached spreadsheet]

UPDATE 3/10/14: Talk of the Sound obtained the spreadsheet.

Forest City Residential "Invoice" to City of New Rochelle for Echo Bay Project

In the letter, lawyers for Forest City claim that the Memorandum of Understanding signed two years ago and due to expire this week, obligated the City of New Rochelle to approve the project. Forest City is contending that the 1-6 vote against a City Council resolution to approve a Land Disposition Agreement on November 26, 2013, prevented Forest City from fulfilling its obligations under the MOU and therefore Forest City is cancelling the MOU. New Rochelle Mayor Noam Bramson was the sole vote in support of the LDA resolution.

In plain English, the letter has the effect of Forest City breaking up with New Rochelle before New Rochelle breaks up with Forest City.

The claim for money is based on Section K.2. of the 2012 Extension of Memorandum of Understanding Between City of New Rochelle and Forest City. The section allows Forest City to seek reimbursement up to $2 million.

...if the MOU is terminated by Forest City as a result of the willful misconduct of the City, then the City shall be liable for and shall reimburse to Forest City all Municipal Expenses incurred and previously paid by Forest City, and all other out-of-pocket "soft" costs incurred and paid by Forest City for the design of the Project and review of the Project under SEQRA, said amount not to exceed $2.0 million. For purposes of this paragraph, willful misconduct shall be defined as the City arbitrarily and/or unilaterally terminating this MOU or revoking the designation of Forest City as the preferred developer hereunder without any substantive justification or cause, or taking or omitting to take other deliberate and conscious actions intended to undermine the spirit and intent of this MOU.

The full text of the relevant section of the 2012 Extension of Memorandum of Understanding Between City of New Rochelle and Forest City follows:

K. Default:

2. City Default: In the event that the City fails to materially comply with any of the terms and conditions of the MOU and the City fails to cure such default within ninety (90) days after written notice from Forest City, or, with respect to defaults as not reasonably capable of cure within 90 days, fails to commence to cure such default within 90 days or thereafter fails to diligently prosecute such cure, then Forest City may in its discretion (i) terminate the MOU, in which event the City shall refund to Forest City any excess amounts held in the Escrow Account and thereafter neither Party shall have any obligations or liabilities to the other except as set forth below, or (ii) seek any other equitable or legal relief, provided however, that in no event shall the City be liable for consequential damages, nor required to exercise any power under the EDPL or condemn any property. In no event shall a reduction in the overall floor area of the Project, or other modifications required by the City under SEQRA or in connection with any City Approval, constitute a default by the City. Notwithstanding anything to the contrary, if the MOU is terminated by Forest City as a result of the willful misconduct of the City, then the City shall be liable for and shall reimburse to Forest City all Municipal Expenses incurred and previously paid by Forest City, and all other out-of-pocket "soft" costs incurred and paid by Forest City for the design of the Project and review of the Project under SEQRA, said amount not to exceed $2.0 million. For purposes of this paragraph, willful misconduct shall be defined as the City arbitrarily and/or unilaterally terminating this MOU or revoking the designation of Forest City as the preferred developer hereunder without any substantive justification or cause, or taking or omitting to take other deliberate and conscious actions intended to undermine the spirit and intent of this MOU. (emphasis added) Willful misconduct shall not include, among other things (i) the City terminating this MOU in the event of Forest City's default hereunder or the failure of the City, for whatever reason, to relocate the Public Works Yard to another location, (ii) the failure of the parties to agree to the final terms of the LDA after good faith negotiation, (iii) the City's determination not to provide any form of Public Funding for the Project, (iv) the City's denial of or proposed modification to the Project or other conditions imposed upon the Project based upon the administrative record for the Project, (v) the acts or omissions of any City employee or elected official outside the scope of his/her employment or statutory legal duty, or with respect to which there is no requisite authorization, and (vi) any other good faith action taken by the City in the exercise or performance of any of its legislative, regulatory, policing or permitting functions or obligations in relation to the Project, except as provided hereunder.

The Demand Letter was sent by Mark Weingarten of DelBello Donnellan Weingarten Wise & Wiederkehr. The law firm has strong connections with the Westchester County Democratic Party and was, along with Forest City, a direct and indirect source of large amounts of campaign funds for New Rochelle Mayor Noam Bramson in his failed race for Westchester County Executive.

The DelBello law firm has represented the City of New Rochelle in many high profile matters.

UPDATE: Feb. 12, 2014 5:00 PM

City of New Rochelle Issues Statement on Forest City Threats Over Echo Bay

The City of New Rochelle has issued the following statement:

On February 6, 2014, the City of New Rochelle received a letter from Forest City’s counsel, notifying the City that Forest City is terminating the Memorandum of Understanding (“MOU”) between the City and Forest City relating to the Echo Bay Waterfront Redevelopment Project (the “Project”), and demanding reimbursement of the costs and expenses it voluntarily chose to invest in the Project.

While the City appreciates Forest City’s efforts and cooperation during the course of the public review of the Project, the City’s position is that there is simply no legal contractual or other basis for its claims. Public waterfront land is an important asset of the City. While it is unfortunate that the parties were not able to reach full agreement on the Project, there is no question that the City diligently and in good faith performed all its obligations in accordance with the relevant agreements. In the event that Forest City determines to pursue its claims against the City, the City is prepared to take all necessary actions to defend itself.

With the termination of the MOU, the City will continue to explore new opportunities for the redevelopment of its waterfront in accordance with the stated goals and objectives of the citizens of New Rochelle, and the best interests of the City.

This story has been updated since originally published.

Commenting on this Blog entry is closed.

Anthony Galletta on Mon, 02/17/2014 - 22:39

While my preference would be to have the Echo Bay waterfront proerty developed with tangible commercial tax-paying entities there should be no new RFP or any other consideration until the Army Corps of Engineers report sees the light of day. This study needs to be reviewed, digested and maybe updated to see what is truly the best use. A twentysix acre development would probably require some type of residential component BUT if the Army Corps' findings discourages residential development because of the degree of contamination in Echo Bay, upgrading the current city yard may be the "best use" of the land. Either way, the Armory should be converted to a multi-use community center with Veteran space/services, restaurants etc.

The Armory was deeded to NR for pubic use not to fatten the pockets of wealthy private developers. Other communities have found productive ways to renovate & recycle their Armorys why can't NR?

Let Forest City file a lawsiut, it's time someone takes on the bully in the schoolyard!

Brian Sussman on Wed, 02/12/2014 - 01:11

This is a bogus lawsuit that will not succeed if New Rochelle fights it.

The intention of Forest City is to make it too expensive for NR to go through lengthy judicial proceedings and a trial, so the solution is to quickly eliminate the lawsuit, rather than to let it fester. New Rochelle has to treat this as a chess game, rather than playing Tiddlywinks.

Probably the quickest, best way to cut the Gordian Knot, is by utilizing the following language from Section K.2:

"Willful misconduct shall not include, among other things (i) the City terminating this MOU in the event of Forest City's default hereunder or the failure of the City, for whatever reason, to relocate the Public Works Yard to another location".

New Rochelle must simply declare that the only viable location for City Yard, is its current location. As that is obviously true, it would not only destroy Forest City's lawsuit, but would save New Rochelle the time and expense of moving City Yard, and allow reconstruction of City Yard at its current location.

This would provide New Rochelle the opportunity to completely start anew, to determine what development is really needed to improve New Rochelle's commerce and tax base.

Doing so is consistent with what I have been advocating since 2007.

Martin Sanchez's picture
Martin Sanchez on Wed, 02/12/2014 - 04:32
Title: Yup

I agree _ leave the City Yard where it is. Refurbish what is there; including building a simple salt dome.

John Imburgia on Tue, 02/11/2014 - 12:42

This is typical of the deals. These developers manipulate politicians so they can get these projects approved since day one. It doesn't matter if the public supports the project or not. They want it approved and will buy or bribe anyone they have to in order to get approved. Bramson did this to the City and it is HIS failure and no one else's. Disgusting.

Watch at 12:51 as this developer talks about losing his investment: "We had to make whatever political deals were necessary..."

http://youtu.be/4-sGkfmIgzk

This is how things work. The public assumes the risk, not the developer.

John D'Alois on Tue, 02/11/2014 - 09:06

Let me render my own opinion here.
While this latest farce of action comes as no surprise, it does seem backwards. Shouldn't FCE be taking action against Del bello for failing to provide advice that would advance project terms that would be consistent with a favorable decision from the city? Maybe instead of applying grease to the political machinery, they could have formulated a plan that would have offered a favorable return on the investment the city was making as it handed over the last prime waterside property (hee hee) in Westchester? Im sure DelBello et al got a pretty penny to lobby for FCE in hopes of pushing the project through and the folks in Cleveland have to be just a little hot under the collar by now. ( I wonder if anyone actually said " you told us it"s a no brainer" or I thought you said Bramson would deliver) Who knows, maybe FC is holding back Del's money, as in "we'll pay you when you fix this mess"

They almost pushed it through until people started to take a really close look at what they were proposing. As you cut through the fog of vague promises, "net benefits" and overreaching projections, it appears the end project didn't quite live up to the rhetoric. As we've seen in reports from United Citizens for a Better New Rochelle, Cause of Action, Develop Don't Destroy Brooklyn, et al, Forest City has had difficulty in delivering on its promises. Does this rise to the level of Anticipatory Repudiation? Would the folks at DelBello condone this potential behavior? If they thought this could be a clear and present possibility, wouldn't there be some consideration in the language to protect against such behavior?
As local professionals began to drill down on Forest City's demandsterms, they were able to undo the ambiguity and technical language allowing a clearer understanding of the risk/reward the city was facing. When you put the city's ability to negotiate up against heavy hitters like Del Bello and FC, who do you think will come out ahead? Huge specialty law firm coupled with a multi billion REIT (FC) versus a city that has problems managing a 180 million plus budget? Need I say more. The city was at a clear disadvantage throughout this "sales pitch". Was FC taking advantage, bullying or just very shrewd. Contra Proferentum I say. FC should be suing DelBello for the 2 mil since, in all likelihood, they blew the deal for FC. After all, the revised PDEIS did not address all concerns raised contrary to what was stated in the document. The document, in my opinion, was flawed and I believe there were some council members who didn't even read it. As pushback mounted (even supporters of the mayor saw the truth and rejected his diatribes) 6 council members exercised their sworn duty to act in the best interest for the city. The gang of 6 could not be accused of acting in a manner that could be considered Unconscionable when they place the best interest of the city first and foremost. THEY made the right choice. No person, mentally competent would enter into this agreement as written.

"Willful misconduct shall not include"….
"... any other good faith action taken by the City in the exercise or performance of any of its legislative, regulatory, policing or permitting functions or obligations in relation to the Project, except as provided hereunder."
Yeah, they got it right.

RFP going out regarding legal representation for the city. Any takers, it could be your finest hour. (billable, of course) Contact city hall.

So odds anyone?
DelBello attempts lawsuit, Forest City embarrassed Nationwide

Countersuit by city under "Malicious use of process"
"Unconscionable"
"Unclean hands"
"Ex turpi causa non oritur actio"

Both suits dismissed under extreme absurdity - cost to city $215,000.00

FC takes action against DelBello reaches settlement for undisclosed amount.

City gets to go back to business, restores Armory, area flourishes and grows unimpeded by outside carpetbaggers, or as the board of ed lady calls them "bona fide developers"

Res ipsa loquitur

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