A Supreme Court jury recently returned a quarter million dollar judgement in favor of a local developer who claimed the Union County Improvement Authority breached a contract for a $16 million Linden redevelopment project that has been on the back burner for more than ten years.
When the city launched the project more than a decade ago, the South Wood Avenue venture adjacent to the train station was supposed to revitalize this blighted area into a SoHo like commuter village comprised of brownstone front apartments, restaurants and office space. But that never happened.
Instead, the area remains a vacant eyesore plagued by legal woes, red tape, delays and an economic downturn that left Linden taxpayers responsible for an estimated $245,000 a year in interest on bonds that funded the demolition of the site.
The UCIA and city, however, claim the project was doomed from the start by delays beyond their control, citing problems acquiring the land from owners, the discovery of asbestos laden buildings and escalating costs that stalled the project for years.
The city of Linden was thrown out of the first case held in Superior Court. At that time the judge determined that because the UCIA was the actual redeveloper on the project, they bore the responsibility and consequences of the project, not Linden.
The UCIA, after losing in superior court, appealed the case, ending up at the Supreme Court level in December.
So why, after all was said and done, did a Supreme Court jury award Linden developer Dennis Valvano $236,000 for out-of-pocket expenses? UCIA Executive Director Charlotte DeFilippo would like an answer to that question, since she believes the developer “never did any work on the project” to warrant any kind of a judgement.
Valvano, president of Verge Properties Urban Renewal, a limited liability company selected by the city in 2003 to develop the South Wood Avenue project, claimed in court documents obtained by LocalSource that the UCIA never abided by the contract that laid down a specific timeline for acquisition and cleanup of the site.
This long winded and failed plan all began back in 2000, when John Gregorio was still mayor, and redevelopment of the stagnant and rundown area near the train station seemed like a viable and worthwhile project that would boost the economic vitality of the downtown area.
City officials methodically went about laying the groundwork for the redevelopment project, ensuring all the proper steps were taken prior to selecting a developer for the venture. The UCIA was selected as the redeveloper for the project and the groundwork was laid for the plan.
The city concept for redevelopment was similar to projects undertaken by towns like Cranford, whose downtown Cranford Crossing project abutting the train station, has attracted much needed foot traffic to the shopping district. Unfortunately, Linden’s foray into a similar redevelopment project hit a roadblock almost immediately, one DeFilippo said was never expected.
“It took much longer than we ever expected to acquire the land,” the UCIA executive director said. After that, the UCIA, which acted as an agent for the city, was hit with another problem. One that put extended delays on releasing the project to Valvano so he could begin construction.
“When they found asbestos in the buildings we acquired, that forced the DEP to get involved, of course, and that delayed things even more,” DeFilippo said, but stressed the UCIA never breached the contract deliberately.
“We were victims just as much as Valvano and the city were,” she added.
As for Valvano bringing the lawsuit against the UCIA, DeFilippo did not hesitate to explain how she felt.
“He wanted his $10 million profit from the project and we didn’t move fast enough for him so he sued us,” DeFilippo said flatly, adding that while Valvano claimed he had hundreds of thousands of dollars in out-of-pocket expenses from the defunct project, she did not believe it.
“My client, the city of Linden, continued to fund this project because there was nothing coming from the developer,” she said adding “quite frankly we breached nothing.”
“I can’t believe anyone would seek a profit from something they never did any work on,” the UCIA director said, pointing out that the authority did eventually get approval to demolish and clean the site.
“There is no reason why Valvano should have prevailed in this,” she said, adding it is her job not just to protect her clients but also the UCIA.
According to the complaint filed in superior court by Valvano’s legal team, the UCIA did not hold up their end of the contract, which legally entitled him to seek financial relief in court for his losses. Although the complaint does not go into Valvano’s exact financial loss because of the years of delay, it does provide significant evidence in the form of contracts, emails and other documents to substantial their case.
Valvano’s legal team pointed out that the UCIA agreed to purchase and clean up the one-block area by August 2004 but when 2007 rolled around the developer had yet to see a title to the land. The fact the UCIA terminated his contract, they maintained, was confusing since it was the UCIA that breached the contract.
Valvano’s lawyers McElroy, Deutsch, Mulvaney and Carpenter sent an email to the UCIA in May 2007, warning them that it was their legal obligation to acquire and demolish the properties within six months of the August 2003 contract date, which they did not do. Valvano did grant the UCIA a 90-day extension when delays stalled the project, though.
His legal team also denies that while the UCIA said Valvano had the “opportunity,” according to the contract, to move forward with demolition and clearance on his own, there was no obligation on his part to do so under the terms of the contract.
They further noted that the fact the cost of the project escalated to $6.5 million was not Valvano’s fault at all, but rather the UCIA’s and city for not obtaining enough funding required to fulfill the obligations of the contract.
After a brief time, Valvano filed a lawsuit against the UCIA and city, claiming wrongful termination and loss of profits from the venture. He maintained he would have made $10 million in profit had the project gone forward in 2004 as stipulated in the contract. As previously mentioned, Linden was dropped from the lawsuit by the court and the UCIA lost the first court round and appealed to the Supreme court.
The Supreme Court ruled in favor of the city in December when it came to one count. They failed to see that Valvano lost revenue for a company that only was formed as a result of the contract between the city and UCIA. The developer, though, plans to appeal that decision.
In the breach of contract count, the court found the UCIA was at fault because they were the managing agency and therefore are responsible for paying Valvano $236,000 in financial restitution.
According to Gerbounka the city and UCIA parted ways and after asking for requests for proposals for the one block area, selected Capadogli Builders of Fair Lawn to take over the project.
According to the mayor, things are moving along and although an actual cost for the redevelopment project is still being negotiated, he is certain that this time revitalization of the train station area is within arms reach.
“This will be the spark that ignites the explosion that will bring redevelopment to our downtown area,” Gerbounka said Wednesday, adding that “this is where the rubber meets the road.”