Monday, December 11, 2017

Scottrade Litigation Proves You Can't Fight City Hall — Even From Inside It

Posted By on Mon, Dec 11, 2017 at 6:59 AM

Cara Spencer settled her lawsuit against the city and the St. Louis Blues last weekend. - STEVE TRUESDELL
  • STEVE TRUESDELL
  • Cara Spencer settled her lawsuit against the city and the St. Louis Blues last weekend.
In the past week, the owners of the St. Louis Blues beat back the last two obstacles standing between them and a veritable pile of taxpayer money. And they did it in a way that leaves no doubt who's running this town.

It's whoever can afford the most aggressive lawyers.

Faced with two principled stands against a giveaway of money for Scottrade Center that could cost St. Louis taxpayers $107 million, the Blues fought hard. Through their lawyers, they threatened City Comptroller Darlene Green with being held in contempt of court, and fines of up to $1,000 a day, because she wanted to hold their paperwork in escrow while appealing. Then the lawyers threatened Alderwoman Cara Spencer with their own six-figure bill, all because Spencer dared to file a lawsuit opposing their taxpayer-funded windfall.

Those kind of threats tend to get people's attention.

And so, last week, Green released the paperwork. Spencer settled the lawsuit. The Blues will get their renovations, and you and I will be stuck with the bill. Another day, another private entity raiding the public purse. C'est la vie in St. Louis.

But before we close out this chapter and resign ourselves to paying $107 million to accommodate an already profitable franchise, it's worth remembering just how terrible this deal is.

Late last year, the team went to the Board of Aldermen for legislation authorizing $64 million in bonds to fund renovations at Scottrade Center. Their timing couldn't have been better — the city's progressives were already busy fighting a plan to increase taxes to pay for an MLS stadium. A hard-fought mayoral election had board members both distracted and fractured.

And it wasn't just that then-Mayor Francis Slay's longtime chief of staff, Jeff Rainford, was running point for the Blues. The campaign of board president Lewis Reed, himself running for mayor, pocketed a $100,000 donation from a minority owner of the team just one week before the vote, joining the $75,000 he'd previously raked in from various members of the ownership team.

Then-Alderman Antonio French, by far the sharpest critic of the proposal, noted that the Blues enjoyed the use of Scottrade without paying taxes or rent to the city, the facility's ostensible owner. He noted that the Blues owners profited not just from the team's games, but from other events at the center. Then he pushed for a copy of the lease.

He never got one. But pushing for clarity on which parties are responsible for what under the terms of the 1992 deal, he did get this statement, from attorney David Richardson of Husch Blackwell: The lease "is pretty much silent on major capital improvements such as this." (See 1:51 in the video below for the key quote.)

Who could argue with that? Especially when the city seemed frustratingly unable to produce any documents to confirm or deny that assertion? Just ask Cara Spencer; the alderwoman filed a Sunshine law request and still couldn't get the thing.


Aided by the confusion, Reed pushed the bill through less than a month later. Indeed, it won approval so quickly, in the end, even Reed decided it had been too fast — or at least politically toxic — and voted no.

Only after that was the lease unearthed, and — go figure — it wasn't silent at all. As Spencer learned after a third party finally slipped her a copy, "repair and replacement of improvements" are the obligation of the lessee — the Blues' owners.

scottrade_leasehighlite.png

"When I finally got my hands on the lease, I was disgusted," she told the RFT in August.

Because of those lease terms, Spencer believed the $106 million in taxpayer money was a "gift" to the private Blues' organization — which could, she believed, make it illegal under the Missouri Constitution. That's when she, along with activist Jeannette Mott Oxford and former city counselor James Wilson, filed suit. Attorney Eric Vieth took on the case pro bono.

Now, reasonable people could debate the suit's merit. On one hand, the city certainly benefits from having Blues games (and concerts) downtown. On the other, by this point, the city has crossed the line from generous benefactor to total sucker. This is why we have judges: Both sides have their point, and it takes a legal expert to figure things out.

But the Blues upped the ante. Arguing Spencer's suit was "frivolous, without substantial legal grounds, reckless, punitive or in bad faith," attorneys at Husch Blackwell — yes, the same firm whose partner misrepresented the lease terms at that committee meeting in January — recently demanded that the parties bringing it ought to be saddled with their legal fees. This was no idle threat. Partners at Husch Blackwell command some of the highest hourly rates in the city. 

Spencer's side had lost some of their arguments, as the Husch Blackwell attorneys pointed out in their filing. But it's not like the expensive lawyers had prevailed in getting the suit thrown out. It was headed to trial this week.

Nevertheless, the fee demand was a game-changer. As Spencer admits, the prospect of having to pay what was surely a giant legal bill was horrifying. "I cannot put that burden on my family," she says.

The fact that Spencer, Oxford and Wilson settled their case so soon after Green signed the bond paperwork is no coincidence. For one thing, St. Louis Circuit Court Judge Joan Moriarty was hearing both cases — and by ruling against Green, the judge suggested at minimum a certain sympathy for the Blues' legal arguments.

Second, Green's intransigence had given the other group some cover. Once Green signed the bond paperwork, Spencer's lawsuit was "the sole impediment," in the words of the team, to having the bonds issued. And with the GOP's proposed tax reforms actually banning tax-exempt bonds like the ones involved in the Scottrade financing, the team made it clear it was determined to stop at nothing to get the deal through before it was too late.

Of the threat of attorneys' fees, Spencer says, "We knew they had only a five percent chance of winning [them]. But even though the chance was low, the reality of that going through would be unbelievably devastating."

Not two weeks after the Blues' demand for its attorneys fees, the parties settled.

The fact is, the Board of Alderman is to blame for the terrible Scottrade deal. Once President Reed got his votes, the deal was done. And what a deal — based in part on the city's mind-blowing generosity to the team, Forbes recently assessed the Blues' value at $450 million, up 45 percent from the year before.

Still, it's striking how many parties lined up in opposition after that — and how little headway they were able to make in pushing for the deal to be reexamined in light of the lease or alternative funding sources to be explored. Everyone from the city's longtime comptroller (Green) to the city counselor at the time the lease was originally signed (Wilson) to a sitting alderwoman (Spencer) did everything in their power short of personal ruin to stop the expenditure. It simply wasn't enough.

You could argue that their cause was quixotic, that they never had a chance — and wasted everyone's time by refusing to believe it. You could argue that if you can't afford big-time lawyers, you shouldn't file a lawsuit. You could, I suppose, even argue that we need our gadflies willing to risk destroying their own lives and bankrupting their families to pursue the cases they believe in.

But you can't argue that things aren't broken at City Hall. We've all seen the lease by now. We know who was supposed to pay — the same parties that are already benefiting from the costly upgrade. And it's galling that a broke (and broken) city is nevertheless the party on the hook.

Sarah Fenske is the editor in chief of the Riverfront Times. Email her at sarah.fenske@riverfronttimes.com or follow her on Twitter @sarahfenske


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