Hearing on ‘POKO’ lawsuit begins in Stamford

Updated, 11 a.m., photo removed; 8:09 a.m.: Copy edits

NORWALK, Conn. – Legal arguments and preliminary explanations marked the first day of an expected days-long hearing on the Redevelopment Agency’s and the City’s attempt to stop real estate broker Jason Milligan from doing anything with the properties he bought from Richard Olson of POKO Partners.

Olson and his attorney did not attend the hearing, except by telephone; Milligan’s attorney, David Rubin, argued that Milligan’s rights had been subverted, while Attorney Joseph Williams at one point accused Rubin of “a precedent-setting attempt at having cake and eating it too.”

The hearing concerns the plaintiff’s request for a temporary injunction; a trial for a permanent injunction, should the matter get that far, is months down the road.  Judge Charles Lee upheld a subpoena issued to Corporation Counsel Mario Coppola ordering him to testify as part of the proceedings. Redevelopment Agency Executive Director Tim Sheehan testified for more than an hour, explaining for Lee the building blocks that led to the current situation, the creation of the Wall Street Redevelopment Plan and the selection of POKO Partners as the company to carry it out.

Milligan and Olson are being sued by the City and the Redevelopment Agency because Olson sold Milligan, without obtaining Redevelopment Agency approval, properties that POKO had purchased ­– or, in one case, was given by the City – for use in Wall Street Place phases II and III.

POKO began construction on Wall Street Place phase I but that halted in mid-2016, and Citibank foreclosed on its construction loan for the project. Wall Street Place phase I cannot proceed without a large chunk of the property now owned by Milligan, as some of the project’s needed parking spaces were shifted to phase II.

The plaintiffs are seeking a temporary injunction to stop Milligan from:

• Selling the properties, including transferring their ownership to Komi Ventures, another LLC controlled by Milligan, which holds a mortgage on the properties
• Getting permits or approvals for the properties
• Making alterations to the properties

“The city and RDA are preventing me from placing tenants! I would have likely had all these spaces filled by now if they weren’t playing such hard defense,” Miligan said in a late-Monday text message. “Part of their temporary injunction is to stop me from leasing my properties to people like Mr. Mango.”

Milligan and Olson filed two “motions to stay,” requests to pause the hearing, last week. Milligan also filed a motion to strike.

Arguments on last week’s motions

Monday’s hearing began late, as everyone in attendance waited for Olson and his attorney, Thomas Katon. The clerk eventually announced that the team had misunderstood, having not seen the hearing listed on the docket.

Katon attended by telephone for half an hour. Lee mentioned that Katon had left the Nov. 16 status conference hearing and missed the setting of the court date.

First up was a debate on the subpoena Milligan issued on Coppola.   Lee ruled that Coppola would be compelled to testify, that the questions could be individually reviewed for compliance with attorney-client privilege.  Coppola, as Corporation Counsel, is the City of Norwalk’s top attorney.

As part of that, Rubin said Coppola was necessary as a “fact witness,” to address the claim that the “Milligan defendants” had been treated inequitably.

Within days of Milligan buying the properties, Coppola filed for a prejudgment remedy, which prevented Milligan from getting title insurance or financing the properties, Rubin said.

“We believe the claim for fraudulent transfer was a sham,” Rubin said.

That initial mid-June request for a prejudgment remedy, defined by Russo & Rizio as a preliminary motion that attempts to attach a defendant’s assets to assure that the funds will be available if the plaintiff wins a suit, was withdrawn and replaced by Coppola and the legal team with the current lawsuit, on Sept 17.

“There was not a minute, not an hour, where there was not an application that was pending before this court that purported to affect an interest in the property … that would allow my client to obtain title insurance, that would allow my client to obtain financing,” Rubin said. “They were able basically, improperly, based on an improper claim as a matter of law, to tie up this property. That is inequitable.”

The plaintiffs were fully aware that Milligan was going to buy the properties, Rubin said.

“The argument is going to come, your client had no right to the property, so he had no complaint,” Lee replied.

The plaintiffs have no business seeking a temporary injunction against Milligan because it’s based on their expected success in voiding the sales, which won’t happen, Rubin said, as part of an argument regarding the Land Disposition Agreement, the tri-party contract that governs the properties and how they would be developed.

Milligan is not a signatory to the contract, the judge said, asking, “how can you invoke the contract if you don’t agree to its terms?”

Rubin and Milligan are pressing for mediation, as outlined in one segment of the LDA, but say they don’t want arbitration, which is outlined in another.

“You are trying to stop this proceeding on the basis of that section, you are being very clever because you are saying ‘I’m only going to accept mediation but the section says both mediation and arbitration,’” Lee said to Rubin.  “I don’t understand your argument” and “you can’t have it both ways,” Lee said later.

There’s a state statute under which Milligan could invoke mediation but “We don’t want to be disingenuous” because “We don’t want arbitration,” Rubin said.  He argued that the City and Redevelopment Agency have waived arbitration by virtue of the fact that the case has gone to court rather than mediation, which is outlined as a remedy in the LDA.

“That could be a precedent-setting attempt at having cake and eating it too.  I am not sure I’ve seen a more transparent effort,” Williams said.

The request for an injunction is to “protect the people of the City of Norwalk, the City and the Redevelopment Agency and to restrict the redeveloper from doing anything else that violates the agreement,” Williams said. “… It’s clear that they want to pick and choose just the part (of the LDA) they like so that they can walk out and keep doing what they are doing and evade the court’s jurisdiction.”

Katon weighed in to point out that ILSR is a signatory to the LDA and “doesn’t have position on arbitration.”

Lee elected to delay the ruling on both motions to stay.

Williams said he hadn’t had time to review the motion to strike.

Most of what is in the motion to strike addresses the standard the plaintiffs will have to meet to show a likelihood of prevailing in the case based on its merits, Lee said.

The complaint filed by the City and the Redevelopment Agency lacks a listing of the allegations needed to support an injunction, Rubin said.

“That’s largely true I think but the motion papers do have them,” Lee replied. “…I think we are on decent grounds to proceed.”

The plaintiffs “wedged” their complaint under the Connecticut Unfair Trade Practices Act (CUTPA), Rubin said.  “The plaintiffs have a relief in their head that they want to get to. That is voiding these transfers. They are looking to shoehorn that relief into something.”

The complaint alleges that Milligan didn’t want to go through the process to become the redeveloper, Lee replied. Rubin called that “patently false.”

The plaintiffs can’t get their relief, the voiding of the sale, Rubin said.

“The complaint is a footprint of a lawsuit and you are bound by your complaint,” Lee said. “It may be that there are some things missing from that complaint.”

“Everything they are arguing can be dealt with fairly easily,” Williams replied, calling it “routine” to amend a complaint and promising evidence to show a likelihood of success on the merits of the case.

The rest of the hearing

Also in attendance was Assistant Corporation Counsel Darin Callahan, who hadn’t said much when Lee shut him down, after Katons’ phone appearance ended.

“I think there is sufficient unity of interest between the City and the Agency here that I am only going to hear from one counsel during the hearing, I don’t want you double teaming the other side,” Lee said.

Sheehan explained the lengthy process by which the 2004 Wall Street Development Plan was created and approved; a number of developers responded to a Request for Qualifications and a task force narrowed the pool down to  finalists, until there was only POKO and another company, Sheehan said.

POKO’s competitor had a good project but “their financing scheme was ultimately too heavily dependent on the municipality,” Sheehan said.

Milligan did not respond to the Request for Qualifications, Sheehan said, when asked by Williams.

Lee asked him about POKO, and Sheehan said the Redevelopment Agency spent “quite a bit of time” with Ken Olson, and went to New York to tour a POKO project. POKO was just emerging into Connecticut, and a third party reviewed the company’s financials, he explained.

Lee asked if there had been a performance bond. Sheehan said no, but, “There is a discussion on a performance bond going forward, an issue now.”

Rubin attempted to pin Sheehan down on a document that is not in the LDA: Exhibit A would be a list of properties to be taken by eminent domain.

“I am assuming that at some point there must have been an Exhibit A or there wouldn’t be a section that said Exhibit A,” Sheehan said.

These are properties that would be needed for the project to move forward, Rubin said. Williams objected, calling it a legal argument; Lee overruled the objection and on that point, the hearing ended for the day.

Addendum

Neither Coppola nor Planning and Zoning Director Steven Kleppin, who also received a subpoena, are expected in court Tuesday, as Rubin said the hearing is obviously going to continue a while before their testimony is needed.

Milligan in a late Monday text message explained Rubin’s comment about him wanting to finance the properties.

His equity is tied up in the properties, preventing him from doing other projects, he said.  “I could be doing three to four times the projects when financing is put in place. I actually don’t mind using most or all equity until properties are stabilized with tenants. Then I prefer to put financing. That is also when banks prefer to finance.”