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.
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:
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
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.
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