Backers of Failed Air Cargo Center Proposal Seek Damages from San Diego

APRIL 12, 2002

The developers behind a controversial Otay Mesa cargo airport project have launched a legal offensive, including a $121 million claim against the city of San Diego, to try to recoup losses from their failed proposal. According to the claim, the city was contractually bound to allow Brown Field Aviation Park LLC, as the development partnership was known, to complete planning of the cargo airport before voting on the project in October.

In a separate action, filed yesterday, the developers are suing engineering firm Parsons Brinckerhoff, a consultant on the airport project, and the group behind the south Route 125 extension, accusing both of breach of contract.

The San Diego City Council voted 8-0 on Oct. 1 to end its five-year exclusive negotiating agreement with the developers, who had sought to transform Brown Field, an Otay Mesa municipal airport, into a specialized cargo airport.

In the claim the developers accuse the city of failing to give them enough time to address council concerns. The claim also says the city improperly allowed Councilman Ralph Inzunza Jr., who resides near Brown Field, to vote on the project. "(The) concept of good faith and fair dealing seems to have been overlooked (or worse, ignored altogether) by the city in its dealings with Brown Field Aviation Park," according to the claim, filed with the city March 29.

The developers argue that the councilman, who owns a home beneath the flight path outlined in the project, stood to lose property value if the airport were approved and should have been barred from voting on its future. Inzunza, a vocal opponent of the development, said council members discussed the matter thoroughly with City Attorney Casey Gwinn and received clearance before their decision to end the association with the Brown Field developers. Inzunza said he checked the conflict-of-interest issue with Gwinn as well.

Attorney Bryan Vess, who represents the development group in both matters, said: "We think that this very beneficial project was derailed for political and personal reasons of some of the politicians. "With that, I have Ralph Inzunza in mind."

Inzunza, however, said the claim has no validity. "I think it's sour grapes," Inzunza said. "In the end it will be seen as much ado about nothing."

The developers are seeking at least $100 million in damages and $21 million to recoup their investment in the project.

In litigation against government agencies, a claim must be submitted before a lawsuit can be filed. The city's risk-management department is reviewing the claim and has 45 days to respond.

The move to file it came as no surprise. A former representative of the development group warned the city months before the City Council's decision that the airport backers could sue if they were not allowed time to complete their proposal. The developers argued that the council should have allowed them at least one more year of planning to address questions not covered in their original agreement with the city, known as a memorandum of understanding.

John Mullen, a deputy city attorney who has worked on the Brown Field issue in the past, called that argument "far-fetched." "They had a period of exclusive negotiation and that's what they got," he said. "At the end of the day, the city had a right to reject the proposal."

The backers -- which included two financial firms, Lehman Bros. and Farallon Capital Management -- had hoped to invest more than $500 million in Brown Field, an aging former military airport near the border.

They said the project would produce thousands of jobs, generate hundreds of millions in revenue for the region and capture a portion of the freight market lost to Los Angeles-area airports.

They struggled amid a storm of political opposition for two years, however, as elected officials joined angry South Bay residents in questioning the developers' financial estimates and the project's potential effect on the growing area.

Noise and traffic estimates and financial data generated by Parsons Brinckerhoff in 1998 lie at the heart of the developers' lawsuit against the engineering firm. That suit names several affiliates backed by the company, including California Transportation Ventures, a group working to extend state Route 125 south to the border.

Correcting mistakes made by Parsons Brinckerhoff cost the developers $17.5 million more than the original $2.5 million they thought it would take to plan the project, according to the suit. "The consultant made what can be characterized only as one bungling mistake after another," according to the document, filed in San Diego Superior Court. The lawsuit alleges that those mistakes helped feed the furor against the cargo airport proposal.

Ted Ono, vice president of Parsons Brinckerhoff Quade and Douglas, said he has not reviewed the suit and could not comment.

The city has faced -- and lost -- some other major cases involving Otay Mesa. Land owner Roque de la Fuente won a $94 million judgment last year after accusing the city of ruining his business by reneging on a development agreement. The city is appealing that decision.

Source: Union-Tribune