Judge orders additional time in Von Maur transfer decision

BY BETH BRATSOS | MARCH 21, 2012 6:30 AM

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Johnson County court officials said they hope Coralville officials will delay the transfer of Sycamore Mall department store Von Maur from Iowa City to Coralville until March 26.

Eighteen Iocal business owners and other individuals filed a lawsuit March 1 requesting an injunction on the transfer, saying the city of Coralville set up unlawful transactions with independent contracting firm Oliver McMillan that would have "devastating effects" on local business interests. These transactions include granting McMillan the exclusive right to develop the new property site for fees above $3 million, a $1.5 million grant allowing McMillan to purchase the Von Maur property and then sell it to Von Maur Inc. for $10, and a $9.4 million grant for Von Maur to construct a new department store, according to court documents.

Sixth District Judge Marsha Bergan said during a hearing Tuesday she would like the parties opposing and supporting the transfer to have more time to provide supporting evidence and additional witness testimony. She said depositions and other evidence must be submitted by Friday afternoon and a final ruling on the initial injunction will be issued March 26.

Robert Hatala, an attorney for the plaintiffs, said McMillan acted less as an independent contractor and more as an agent for Coralville, doing for the city what the city could not legally do itself. He said the transactions, including the gifting of the Von Maur property to Von Maur, Inc., are illegal and outside the Coralville City Council's scope of power. The council has adopted resolutions and approved proposals regarding the property sale since 2010, he said.

"Using someone to do something that you can't do is not appropriate, and there is a citation [for that]…" Hatala said. "[We want to] prevent Coralville from unlawfully conveying property to Oliver McMillan."

Additional testimony, he said, would provide expert opinions and evidence of potential harm the transfer will cause to Iowa City business owners and taxpayers.

David Tank, an attorney for Coralville, said he opposed delaying the transfer because Tuesday's hearing was originally set to either grant or deny the plaintiff's request for a temporary injunction. A motion to dismiss the case was also filed March 19, he said.

"This case is not as interesting or complicated as the plaintiff would like to make it sound," he said. "The city has broad authority to make decisions."

The lawsuit also claims much of the deal was constructed through undisclosed, private deals avoiding transparency and fairness of competitive bidding. The request for other competitive proposals completely failed, Hatala said, giving McMillan an unfair advantage.

"The city was not out to seek competitive bids," Hatala said.

However, Tank said Coralville made an announcement in June 2010 stating McMillan had submitted a proposal for development that would be approved if no one proposed against it. No one showed up to a public hearing or submitted a proposal, he said.

Tank also argued the request for injunction was poorly timed.

"It will be irreparable if you stop this process in its tracks now," he said. "[To] come in and get an injunction on the brink of construction … is simply wrong and not authorized by law."

However, Kevin O'Brien — who owns the McDonald's near Sycamore Mall and filed the lawsuit's affidavit — said the plaintiffs did not have enough information on the transfer until the press released it.

"We were shocked to find out what the details were," he said.

Parties are ordered to reconvene in the Johnson County Courthouse this week to continue discussion and additional witness testimony.

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