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HomeMy WebLinkAbout08-394OCTOBER 14, 2008 08 -394 RESOLUTION (CARRIED 7 -0 LOST LAID OVER WITHDRAWN ) PURPOSE: APPROVAL OF POST MEDIATION AGREEMENT WITH RELIANCE ENTERPRISES / DELTOX COMPLEX INITIATED BY: LEGAL DEPARTMENT BE IT RESOLVED by the Common Council of the City of Oshkosh that the attached Post Mediation Agreement between the City of Oshkosh and Reliance Enterprises, a Wisconsin partnership, with members Russell L. Thill, Jack D. Steinhilber, Robert Albright, and Jack Schloesser for litigation related to the Deltox Complex is hereby approved and the proper City officials are hereby authorized to execute and deliver the agreement in substantially the same form as attached hereto, any changes in the execution copy being deemed approved by their respective signatures, and said City officials are authorized and directed to take those steps necessary to implement the terms and conditions of the Agreement. TO: Honorable Mayor and Members of the Common Council FROM: Lynn A. Lorenson, City Attorney DATE: October 9, 2008 RE: Approval of Post Mediation Agreement with Reliance Enterprises — Deltox Complex BACKGROUND Reliance Enterprises, a Wisconsin partnership with members Russell L. Thill, Jack D. Steinhibler, Robert Albright, and Jack Schloesser, leased from the City of Oshkosh the Deltox complex located at 35 Wisconsin Street. The lease was originally entered into in the 1980's and continued until terminated on December 31, 2007 to allow for the completion of construction of the Wisconsin Street Bridge project. The monthly lease amount for the time period in question was $4694.00. Former City Manager Richard Wollangk directed legal staff to pursue litigation when Reliance failed to pay monthly rent due beginning in June 2007. In addition to the lease payments, the City was seeking reimbursement of $1935.02 for costs of repair of a water lateral servicing the property which broke in June of 2007. The City's total claim was approximately $33,000.00. Reliance disputed that any lease amounts were owed arguing that it did not have quiet enjoyment of the premises due to problems caused by construction of the Wisconsin Street Bridge and problems caused by sale of a portion of the property to the University of Wisconsin for the construction of the Health and Wellness Center. Reliance alleged that the construction of the Wellness Center and accompanying landscaping interfered with its' ability to fully use the loading docks that were located on the Osceola Street entrance to the premises. Reliance also raised issues with sewer gas odors that caused some tenants to vacate the premises earlier than anticipated and difficulty with parking due to the presence of construction equipment. In addition, Reliance argued that the City, as the owner of the property, should have been responsible for repairs to the water lateral and to a fire damaged roof heater. Reliance alleged that the costs to them in lost rent and other expenses were in excess of $40,000. Reliance and the City participated in a mediation session on October 6, 2008 and with the assistance of the mediator were able to reach a settlement agreement in the amount of $11,500.00 to be paid by Reliance Enterprises to the City of Oshkosh in complete settlement of all claims by each of the parties related to this matter. ANALYSIS I believe that settlement of this matter for $11,500.00 is reasonable and I recommend that the Post Mediation Settlement Agreement be approved by the Common Council. Reliance alleged a number of offsets against the lease payments that the City was seeking. One of the offsets that has merit is the replacement of the rooftop heating unit. The unit had caught fire and the cost of replacement of the unit was approximately $7000, which Reliance paid. Under the terms of the lease, Reliance was responsible if the damage was caused by mechanical failure, the City was responsible if the damage occurred due to natural occurrences. The contractor who removed and replaced the unit gave conflicting statements as to the potential cause of the fire. The fire may have been caused by either mechanical failure or by the effects of a wind storm. There were several other of the issues that were alleged by Reliance with varying degrees of legitimacy, while the City may be successful on some of these issues, the costs of litigation make some degree of compromise reasonable. Reliance alleged that the sale of part of the property to the University for the construction of the Health and Wellness building interfered with Reliance's ability to use the loading docks on that side of the property causing two of its tenants to leave the premises. When the property was sold, the City did retain an easement for the benefit of tenants in the Deltox Complex and was unaware of problems with access that may have been created by the landscaping done in connection with the University's building project. Reliance indicated that it was unaware of the easement and was considering filing a counterclaim for the lost rental income in order to recover its losses for the warehouse tenants leaving the premises before the end of the lease year. Another consideration in this case is that the City must prove its contentions in court. In this case, the primary individuals dealing with this lease arrangement have left the City's employment. The files that we were able to locate related to this matter were not extensive. While the City could obviously compel the attendance of those witnesses at a court hearing, there is some question as to the effectiveness of such testimony. If those individuals do not have a clear recollection of events that they have now been away from for some period of time and for which there do not appear to be significant notes in the files to assist them in their recollection, then the City will have a much more difficult time refuting the claimed offsets. In light of these reasons, I am recommending the resolution of this matter for the $11,500.00 in accordance with the mediation agreement. FISCAL IMPACT The fiscal impact of approval of the mediation settlement is the receipt by the City of $11,500.00. $1935.02 of that amount would be paid to the water utility for the expenses associated with the lateral repair. The remainder would be revenue to the City's general fund. RECOMMENDATION I am requesting that the City Council approve the Post Mediation Settlement Agreement with Reliance Enterprises for the amount of $11,500.00 in full and complete settlement of all claims and issues related to the lease of the Deltox Complex by Reliance Enterprises. Re ctfully Sub 'tted, OA L Lorens City Attorney Approved: M rk A. Rohloff City Manager FROM :SPOEHR,SMITS,BLAZEL LAW OFFICE FAX NO. :920 -361 -4447 Oct. 07 2008 08:37AN P2 PDST MEDIATTON AGREEMENT The parties hereto City of Oshkosh and Reliance Enterprises, a Wisconsin partnership, with members Russell L. Thill, Jack D. Steinhilber, Robert Albright,. and Jack Schloesser having submitted this case to Joseph J. Beisenstein as the mutually selected mediator, have fully and completely resolved the dispute as follows: subject to the approval of the Oshkosh City Manager, the partnership shall pay City of Oshkosh the sum of $91,500.00 In exchange fora full settlement of all claims giving rise to this dispute. Payment shall be made not later than 20 days following written notification of the City Manager approval. The above consideration is paid in exchange fora full, final, and mutual settlement between the parties concerning all issues giving rise to this dispute. Each party releases the other from any and all claims and liability arising out of the underlying facts. Case No. 07 CV 9835 now pending in Circuit Court, Winnebago County, Wisconsin shall be dismissed on its merits and without further costs to either party. This agreement is binding upon the parties signing this document and is enforceable in any court of general jurisdiction. Dated this 6th day of October, 2008. V, P) F� n J Johh M. Blazel Atty. for City of Oshkosh Russell L. Thill, Partner - L, �� - Andrew Wagene Reliance Enterprises and its partners