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HomeMy WebLinkAbout1991-12-18 Minutes449 SPECIAL MEETING OF. THE CITY BOARD OF DIRECTORS A special meeting of the Fayetteville City Board of Directors was held on December 18, 1991•at,12:45 in the,Director's Room of the City Administration Building at' 113 West. Mountain Street, Fayetteville, Arkansas. .` PRESENT:. Mayor Fred-Vorsanger; Assistant Mayor Mike Green; Directors Bob HBlackston, Dan Coody;. Ann Henry, Julie Nash, and Shell Spivey; City Manager Scott Linebaugh; City Attorney Jerry Rose; City Clerk Sherry Thomas; members :of staff, press and audience. t € a ' #.... CALL TO ORDER • Mayor-Vorsanger called the meeting`to order and explained that the purpose of this special. meeting was to ask City Attorney. Jerry Rose to present some facts that they did not have'at the last regular session when they voted not to sign the tolling agreement. The special meeting was called in order to hear from all .attorneys representing all parties regarding why theyishould reconsider their vote. City Attorney Jerry Rose addressed the Board,stating that Walter Niblock and Kitty Gay were present to make a major presentation. Due to a misunderstanding, they were not present last evening to give their advice on whetherior not to signthe tolling agreement. Since the Board meeting yesterday, things have changed and Mr. Niblock and Ms. Gay wish ,to give the Board the benefit of their advice based on the new evidence and new events. Rose stated that the reason for this misunderstanding was that the attorneys did not wish to sit through the entire Board meeting to speak at the end of the meeting and be on the meter the entire time. Director.Coody suggested they revamp their procedures where there is flexibility in the agenda for these situations. Walter Niblock addressed the Board explaining thatlate yesterday afternoon they received several calls from Mr. Burke,attorney for the Trustee and FGIC. The bottom line is that if the City does not sign the tolling agreement, the City will be sued by the Trustee, Union National Bank, in Pulaski Circuit Court in Little Rock on Friday. Also, if they do not enter into the tolling agreement, the City will be sued in the state court in Manhattan, New York, on Friday. The rationale in the memorandum is still the same with the big change in the position of FGIC, who had earlier submitted a tolling agreement and then seemed to abandon the idea. Niblock stated that it is their opinion that it would not serve the interest of the City of Fayetteville to be engaged in lawsuits in three geographical locations, New York City, Little Rock and Fayetteville. The City has a reasonable opportunity to win the case in the Arkansas State Court, and if they do, there would be no December 18, 1991 lawsuits filed; but if the State case is lost, they will sue. Niblock stated that from an economic measure, the tolling agreement is in the City of Fayetteville's best interest. In response to Mayor Vorsanger's question, Walter Niblock responded that Mr. Burke is with the Law Firm of Friday, Eldridge and Clark. Burke is the attorney for Union National, but he was speaking for both Union National and FGIC yesterday. Director Green asked if the City chose not to sign the tolling agreement with FGIC and they file suit, what court would it be filed in. Niblock responded that the New York case would be filed in New York state court. Niblock continued to explain that they would then file a removal petition to have it moved from state court to federal court. The next step would be to get it transferred from the State of New York to federal court here since the majority of the witnesses are located here. Kitty Gay stated that they are aware that the Board is concerned about legal fees, and they would be looking at high legal fees to accomplish procedural positioning matters without ever approaching the issues of the case. Director Green asked if it would be based on the 10(b)5 statute. Gay responded that it is entirely possible that the 10(b)5 statute of limitations has already passed based on a recent decision by the United States Supreme Court that shuts them out of the federal securities fraud claim, but they have other claims that they could make against the City. Director Green asked if they were able to obtain a decision through this court system fairly quickly, would that tend to supersede or influence the decisions of the Arkansas State Court. Niblock stated that he didn't believe it would. In addition New York State Court jury trials have ground to a halt, with the exception of criminal cases, due to lack of funding. The litigating law firms in New York State are in serious economic straits because it is known that they can't get cases adjudicated; this would create problems in negotiations. Director Henry asked if these claims were secondary to the case pending in Arkansas State Court. Gay responded that ideally you would get decisions in a logical series, which would happen if all claims were in the same Court. The idea of filing in the case pending in Washington County has been explored; however, it is stayed until the Supreme Court resolves the class action issue. However, the trustee and its attorney have decided that since Christmas is next week, whatever they do, they will do tomorrow. They are not even considering filing a claim in the pending litigation; they will open a new case somewhere. December 18, 1991 Attorneys Gay and Niblock.continued to explain that the New York people believe they can get better justice: in New York than they can in Arkansas; or they feel like they can inconvenience the City a lot more and make you more amenable to their plan. r Director Nash stated that it appears to be either "sue me now, or sue me later". She asked if..it_.would be less expensive for the taxpayers to wait and see..! ., .. o- Kitty Gay responded that it May not prove to be less expensive. There is only a chance that_.it would be, and we would be trading off a. known for an unknown. Director Nash further asked the length of time of the tolling agreement. Gay responded that it is structured to continue until a party terminates it. The two tolling agreements, one prepared by FGIC and one by the trustee, are almost identical with the exception of the effective dates. FGIC had,an effective date of February 1991, and the bank's was effective in November 1991. Gay reported that they have advised these parties that they will not back date anything; and if their statute has run, the City will not give their cause of action back to them. In the alternative, the City may decide to sign the tolling agreement, and the Board authorize the signature of an agreement that is substantially in the form reviewed by the Board, with the exception of some modifications made beneficial to the City. dr Mayor Vorsanger asked whattthe difference was today from yesterday. Niblock responded that the position taken by FGIC is the .real change and the blatant threat of suit in New York City come Friday, which would immediately incur substantial costs for the City in New York at New York rates. Mayor Vorsanger asked whether the attorneys had a proposed resolution, ordinance, or if a simple vote of the Board to authorize signature of the tolling agreement was sufficient. City Attorney Rose responded that a simple motion is adequate. In response to Director Nash's question regarding negating the vote taken at last night's meeting, City Attorney Rose explained that the general rule is that the latest ordinance, or in this case motion, would prevail and repeal by implication the former one. Director Green asked if there would be any advantages at all in entering a tolling agreement with FGIC and not with the trustee. Gay responded that they don't perceive that there are. There is no point in being sued by the bank and then having to deal with FGIC later. Director Spivey asked for an estimate on where the City stands and where they are headed. Gay responded that she is certain they will have a decision out of the Supreme Court within the next two weeks 451 454 December 18, 1991 either that there is a certifiable class or that there's not. Gay stated she felt they would certify a class, and after that, the case goes back to Judge Adams. Gay continued that at that point there would be motions for summary judgment filed. A decision on the merits would come along "very quickly" or six months in her estimation. Gay continued to explain that if Judge Adams would rule in the City's favor, then they would be able to pay off the bonded indebtedness at which time the other parties have nothing to complain about. On the other hand, if he rules against the City, it can be appealed to the State Supreme Court; or not appeal it and get sued by the trustee and then by FGIC. In response to Director Henry's question whether the other side would appeal, Gay responded that it is a matter of economics for them, too, and an appeal of this case would be quite expensive with the kind of record involved. Niblock stated that in the event that the City loses the case, then the other parties will pay and in turn, sue the City. If they obtain a judgment against the City, they could start levying execution on police cars and city property, etc., to collect the judgment that the City couldn't otherwise pay. The City of Fayetteville will pay no matter what. Director Nash inquired whether the tolling agreements would be void in the event that the City loses the suit. Gay responded that someone would terminate the agreements so that they could file suit. Any signatory can give notification of termination in a period of ninety days. Gay stated that they would try to get the 90 day time period reduced that so there would be less lag time. Mayor Vorsanger asked what would occur if the Supreme Court rules that it is not a class. Gay responded that the ball would then be with the plaintiffs' attorneys. The plaintiffs' attorneys are working for an anticipated fee at the end of the case. If there is no class, then their expectation of a fee will be significantly reduced. As the defendant, the City is on the receiving end and doesn't get to make many judgment calls until the plaintiffs' lawyers make their call. Director Nash stated that she could see no reason not to sign the tolling agreement if in fact there is a chance that the City won't be sued at all; whereas if the City doesn't sign the tolling agreement, they know for a fact that they will be sued on Friday. In response to Director Coody's question, City Attorney Rose suggested that the Board rescind its previous vote on the issue and then authorize the City's attorneys to enter into a tolling agreement with Union National Bank and FGIC. Q December 18, 1991 1_ Director Coody made a motion that the previous vote on the issue of whether or not to sign the ,tolling agreement be rescinded and further authorize the City's attorneys to enter into a tolling agreement with Union National Bank and FGIC. Nash seconded. • Kitty Gay recommended that'the Mayor or other Board member and City Attorney should sign the agreement; the authority to sign should be flexible enough to include*a modificationas they fully expect to have some beneficial modifications to the tolling agreement. t City Attorney Rose proposed -the following -motion: "A motion to rescind the previous vote on this issue and to authorize the Mayor and City• Clerk to enter into tolling agreements negotiated by the City's attorneys with Union National Bank and FGIC:" The amendments were accepted by the Board members and the motion and second were amended accordingly. Director Spivey stated if people look.back at this situation, they will wish that they never had paid one dime of legal fees and had paid the $2.02 per month to pay off the bonds. This would have put theincinerator behind them and eliminated all of these extra costs. Sid Davis stated he had talked with Attorney Burke regarding if the City entered into the tolling agreements but the other parties did not. He wondered what the consequences of this would be. Niblock responded that in that event, the other parties will be sued and the City would not at this time. Gay continued to explain that Burke's position is, in fairness to his client, he can not let a statute of limitations potentially run and therefore, who ever did not enter into the tolling agreement, he would have to sue. If in fact there is a statute that runs on December 31, 1991, and they don't do anything about it, they have committed malpractice. Director Coody asked if the City was the only party that will have signed the tolling agreement as of today. Gay responded that the Northwest Arkansas Resource Recovery Authority ("Authority") will do whatever the City does, since their interests are so closely aligned. Gay reported further tolling agreements being signed by Washington County and John Everett on behalf of Jim McCord and Scotsdale Insurance Company. This does not cover or include former directors of the City. Burke has finally acknowledged that he does not have a viable theory or cause of action against former board members as they acted in good faith, and there is no basis to sue them. Burke also had a commitment from A.G. Edwards to sign a tolling agreement if the proper date was applied. Burke did not report any information from West Fork, the Authority, or Rawlings and Jennings. Sid Davis reported that Rawlings and Jennings have not committed to signing a tolling agreement as of that morning. 453 454 December 18, 1991 Gay stated that a tolling agreement was not sought from the Rose Law Firm. Davis responded that David Matthews who represents the Rose Law Firm is under the distinct impression that the Rose firm is included. Mayor Vorsanger called for a vote on the motion. Upon roll call, the lotion passed by a vote of 7 to 0. There was discussion among the directors and it was decided that there is a requirement for notice of a meeting of two hours; and Director Henry stated that she needed to call a special meeting for the "NWARRA", and it was decided that there would be a special meeting of the "NWARRA" at 5:00 on that same day, December 18, 1991. ADJOURNMENT The meeting adjourned at 1:18 p.m.