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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE

FEDEQ DV004, LLC, and FEDEQ DV005,
LLC, Florida limited liability companies
Plaintiffs,
v.
CITY OF PORTLAND, a Maine body
politic and corporate,
and
JON. P. JENNINGS, an individual,
Defendants.

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Case No..:_______________

COMPLAINT
Plaintiffs FEDEQ DV004, LLC (“Federated 04”) and FEDQ DV005, LLC (“Federated
05”) complain against Defendant City of Portland (the “City”) for injunctive relief,  breach of
contract, breach of the implied covenant of good faith and fair dealing in the context of a fiduciary
relationship, declaratory relief, and fraudulent inducement and misrepresentation, and against
Defendant Jon P. Jennings (“Mr. Jennings”) for tortious interference with a contractual
relationship, and in support thereof allege as follows:
INTRODUCTION
Federated 04, Federated 05, and their related-party predecessors-in-interest including The
Federated Companies, LLC (“TFC”), Legacy Park Apartments, LLC (“Legacy”), and FEDEQ
DV001, LLC (“DV001”) (hereinafter collectively or individually, as the context requires,
“Federated”) have spent nearly a decade and millions upon millions of dollars in vain developing

 

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and pursuing plans for a vibrant mixed-use development project consistent not only with the City’s
comprehensive plan for its Bayside neighborhood, but also with the City’s express request therefor.
In early 2014, the parties’ relationship reached its apogee when the City approved the first iteration
of what one staff member later described as “likely the largest project in the history of the city”—
a multi-tower urban development project consisting of parking, retail, housing and countless public
benefits.
The City came under attack, however, when an administrative appeal of the decision it
issued with regard to the Project was filed in Cumberland County Superior Court (“Superior
Court”) during the winter of 2014. The result was a settlement based upon a compromise calling
for revisions to the above-described project and leading to a more modest plan consisting of 450
residential units, nearly 100,000 gross square feet of ground floor retail space, and structured
parking for more than 800 vehicles.
As the project shrunk in size, the City’s support for it correspondingly lessened, and the
temper of the City’s interactions with Federated noticeably changed.
In what would become a significantly detrimental pattern of ‘bait and switch’ ultimately
leading to (1) failure to abide by relevant contractual obligations, (2) failure to pay sums rightfully
due under said agreements, (3) expiration of project approvals, (4) denial of Federated’s building
permit application, and (5) a corresponding and massive deflation in Property value rising from all
of the foregoing, the City ultimately abandoned Federated, its longstanding partner, and left the
developer in the lurch.
After inflicting millions of dollars of damage upon Federated through its years-long pattern
of imprudence and obstruction, the City finally repudiated the applicable agreements between it
and Federated as an obvious act of seller’s remorse and in an express attempt to retake valuable

 

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real and intellectual property from Federated and extinguish its remaining rights in the same. The
results have been nothing short of catastrophic for Federated and, equally and unfortunately, the
public at large.
Federated now sues to enjoin the City from depriving it of rights the City has recognized
for nearly a decade and for damages to remedy what it has lost as a result of the City’s inability to
adhere to the simple terms of a partnership it agreed to over and over again throughout the course
of nearly one-tenth of a century.
PARTIES AND JURISDICTION
1.

This is an action with respect to the City for injunctive and declaratory relief,

contractual rescission on the basis of a breach of the implied covenants of good faith and fair
dealing and fraudulent inducement, and for breach of contract damages exceeding $75,000.00
exclusive of interest, costs and attorneys’ fees, and with respect to Mr. Jennings for tortious
interference with a contractual relationship.
2.

The Court has subject matter jurisdiction of this case pursuant to 28 U.S.C. § 1331

and 28 U.S.C. § 1367 for pendent state law claims. 
3.

Plaintiffs Federated 04 and Federated 05 are single purpose Florida limited liability

companies formed for the purpose of owning and developing real property which have their
principal place of business in and are principally controlled and managed by a common individual
residing in, Miami-Dade County, Florida. 
4.

Defendant City of Portland is a municipal corporation and the largest city in the

State of Maine. 
5.

Defendant Mr. Jennings is a natural person upon information and belief residing in

the City of Portland, County of Cumberland, State of Maine. 

 

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6.

Venue is proper in this District because the relevant acts and transactions took place

here, Defendants exist and conduct business here, and the real estate at issue in this action is located
here. 
7.

All conditions precedent to bringing this action have been performed or waived.

8.

By duly authorized entry into the agreements hereto relevant, the City has expressly

waived sovereign immunity from suit, if any, on the claims asserted herein. 
GENERAL FACTS
The Midtown Project
9.

Leading up to 2011, the City aggregated from private parties more than three acres

of former scrap metal properties and railyards located along its Somerset Street (hereinafter, the
“Property”) with the intent of transforming the same through the private construction of a new
development project. 
10.

The subject project was intended as a lively mixed-use neighborhood to be located

on the periphery of its urban core in an underdeveloped low-income community long planned by
the City as a new gateway to downtown Portland.
11.

Originally dubbed ‘Maritime Landing’, the project is now known as ‘MiDTOWN’

[SIC] (hereinafter, “Midtown”, or the “Project”).
12.

As originally conceptualized, Midtown called for up to eight-hundred fifty (850) of

the nine-hundred forty (940) new housing units envisioned by the City’s comprehensive plan for
its Bayside neighborhood known as ‘A New Vision for Bayside’, spread across seven (7) high-rise
apartment towers.
13.

In 2011, the City selected Federated to acquire said Property and develop said

Project.

 

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14.

Federated’s decision to move forward with the purchase of the Property and

development of the Project was based on the City’s express contractual commitment to play an
active and financial role alongside it, as both parties acknowledged in writing was a necessity for
the Project’s feasibility.
15.

The City also entered into a number of Interlocking Partnership Agreements, as

hereinafter defined, governing the development and financing of such improvements, agreeing to
partially fund, in exchange for certain enumerated deliverables, a project it expressly agreed was
“not otherwise commercially viable.”
16.

In early 2014, the City approved a multi-tower urban development project

consisting of parking, retail, housing and numerous public benefits (the “2014 Approval”).
17.

The 2014 Approval consisted of permit approval for all phases under the recently

enacted “Master Development Plan” section of the City’s site plan ordinance, as well as
conditional use, site plan, traffic movement, subdivision and Site Location of Development Act
approvals for Phase I of the Project.  
18.

As contemplated, the 2014 Approval would have activated surrounding street life

on what was then, and is now, a vacant stretch of former industrial blight, and enlivened the
Bayside Trail—a paved pedestrian path connecting to the City’s popular Back Cove and Eastern
Promenade trail systems, effectively shifting the center of downtown Portland northward.
19.

The Project came under attack, however, when an administrative appeal of the 2014

Approval was filed in Superior Court during the winter of 2014 alleging numerous procedural and
substantive errors in the City’s decision-making process (the “Appeal”).
20.

The Appeal was principally aimed at the City’s record of decision underlying the

2014 Approval, but Federated was consumed by the matter given its role as Project applicant.

 

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21.

Months later, after considering the allegations against the City, learning the City

had deleted its mandatory meeting minutes related to one of the Project’s public meetings, and
funding a costly legal defense of the City’s record of decision, Federated weighed the risks of
protracted litigation and the potential jeopardy it could place federal contributions to the Project
in, and reluctantly decreased the Project size, at tremendous cost to itself, as a means of settling
the Appeal and in an effort to move the Project forward on a timely basis.
22.

The City was well aware of, directly participated in negotiations related to, and

tacitly approved of Federated’s settlement of the Appeal through the many verbal blessings of the
staff members involved.
23.

As a result of the Appeal’s settlement, it was agreed amongst the parties that a

revised version of Federated’s Project would be submitted for re-permitting, without the
abandonment of the underlying Master Development Plan permit comprising the 2014 Approval.
24.

The revised Project concept was attached to the Appeal’s settlement and well

understood by all involved at the time of the settlement’s execution.
25.

Before settling the Appeal, Federated met with City representatives in order to

request, and in response it received, assurances, which it relied upon, that if the Appeal was settled
as contemplated the revised Project could and would be processed quickly.
26.

Thereafter, following multiple additional public hearings, staff meetings, and

replacement of its design team, the City’s planning board approved Midtown as the second
iteration of Federated’s project by a vote taken at a valid public hearing on March 3, 2015 (the
“2015 Approval”).

 

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27.

While the City planning board is independent from City staff, it largely relied upon

an extensive list of pre-drafted staff recommendations in rendering the lengthy decision underlying
its 2015 Approval.
28.

The revised plan continued to embody the characteristics of a dense, urban and

walkable neighborhood center, except in a low-rise configuration consisting of four buildings in
the six (6) to seven (7) story range.
29.

The 2015 Approval consisted of 450 residential units, nearly 100,000 gross square

feet of ground floor retail space, and structured parking for more than 800 vehicles (the “Parking
Garage”)—all to be constructed in a single phase.
30.

In connection with the Project, Federated committed to directly design, construct,

and pay one-third of the total cost for a major public street improvement project long planned by
the City and intended to raise the height of adjacent Somerset Street by several feet in an effort to
improve antiquated stormwater infrastructure and better configure the neighborhood’s road
network.
31.

The extent of Federated’s financial commitment to this public improvement project

was well in excess of One Million Dollars ($1,000,000.00), and Federated not only took on the
task of having its third-party consultants fully design a public street for and at the direction of City
staff, with little input of its own, it was also thereafter billed by the City for City’s staff’s review
of this entirely public project.
32.

In addition, Federated designed Midtown to dramatically enhance and widen the

Bayside Trail by, amongst other things, inclusion of brick pavers as opposed to the basic asphalt
then in place, and to install a new transit stop for public use, to expand proximately located sewer
infrastructure, and to enhance nearby intersections and traffic signals.

 

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33.

In addition, the City reserved to itself, at the time of conveyance of the Property to

Federated, numerous easements over the Project site, effectively depriving Federated from the use
of same notwithstanding its payment for such property.
34.

The Parking Garage, which for a period of thirty years was to have remained open

to the public for general use and even snow ban vehicle storage, was a central component of the
Project.
35.

Federated accordingly paid painstaking detail to its design in order to ensure it

(a) maximized efficiency, including through the inclusion of a significant bicycle storage
requirement and related amenities, and (b) met a design standard suitable for its location.
36.

As most recently contemplated, the Project would have generated substantial tax

benefits for the City, as well as created significant temporary construction jobs in addition to
permanent jobs related to, among other things, management of the related facilities and staffing of
its expansive retail components.
37.

And these benefits would have been significantly amplified in the Revised Project

Concept, as hereinafter defined.
38.

Federated fully underwrote, designed, and priced the Parking Garage with multiple

reputable national construction managers, and as of Spring 2018 had nearly completely designed
all other Project components as well – the process of which was temporarily suspended while
related vendor contracts were renegotiated to reflect a Revised Project Concept, as hereinafter
defined, in line with City guidance.
39.

By March 2018, Federated had negotiated contracts with various environmental

remediation and site-work firms for the initial steps required to prepare the Parking Garage site

 

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within the larger Property (“Lot 6”) for construction in accordance with mandatory environmental
cleanup plans impacting said site.
40.

Before it could engage these firms, however, the City notified Federated it would

not permit construction of the Project.
41.

Had the City granted Federated a building permit prior to the expiration of its site

plan approval, in March 2018, the Parking Garage was scheduled to have been completed in under
eighteen months, by September 2019 at the latest.
42.

The Parking Garage possessed all required State-level permits and its plans were

100% designed and approved by the City when the City denied its building permit.
The Interlocking Partnership Agreements
43.

On June 23, 2011, the City and Federated entered into a certain Purchase and Sale

Agreement (the “PSA”) , attached hereto as Exhibit A, related to the four parcels and
approximately 3.25 acres comprising the Property.
44.

The PSA specified a per acre sale price, rather than a static price, in recognition of

the likelihood that the Property’s legal description would change upon finalization of Midtown’s
subdivision plat during the related Project entitlement process, as eventually occurred four years
later by virtue of the 2015 Approval.
45.

Under the PSA, the City was obligated to provide environmental insurance for the

Property (the “Environmental Insurance”) in order to relieve it from deed restrictions imposed by
a former grantor partially prohibiting residential use (the “Environmental Deed Restrictions”).
46.

Aside from a non-binding email from an insurance agent nearly two years prior to

denial of its building permit, Federated was never provided evidence of any Environmental
Insurance as required before it could construct the Project.

 

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47.

The City also initially committed to remediating the Property directly itself and

agreed to perpetually serve directly as the subdivision applicant for Federated’s planned
development.
48.

Per the PSA, and as a means of enticing Federated to purchase the Property in a

down market, the City agreed to fund a certain public parking facility, which would later become
the Parking Garage, in order to serve the City, its residents and visitors as part of Federated’s
Project.
49.

Federated consented to building said facility for the City’s benefit, with the

parameters thereof to be detailed at a later time and in a separate written instrument.
50.

Under the PSA, various conditions preceded Federated’s obligation to consummate

the purchase and sale transaction contemplated thereby (hereinafter, the “Closing”), some of which
were matters of practicality and others of which were expressly enumerated, including recordation
of any subdivision plat required to convey the Property and receipt of a building permit—the latter
of which was specifically negotiated by Federated to mitigate its associated risk.
51.

Assuming such conditions precedent were met, the Closing was to have occurred,

per the PSA, within thirty (30) days of the expiration of the 180-day timeline afforded to Federated
following its inspection of the Property for receipt of Project permits.
52.

Notwithstanding the foregoing timeline, pursuant to the PSA’s conditions

precedent to Closing section, in no event was Closing to occur earlier than Federated’s receipt of
a building permit for the Project.
53.

On October 15, 2012, the City and Federated entered a certain Parking Garage

Funding and Contribution Agreement (“Garage Agreement”) related to the Parking Garage, as
contemplated by the PSA. The Garage Agreement is attached hereto as Exhibit B.

 

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54.

In the Garage Agreement, the City agreed to contribute $9,007,000.00 (“Grant

Funds”) to Federated or its nominee toward development of the Parking Garage.
55.

Under the Garage Agreement, Grant Funds were available for at least the

specifically itemized purposes of the design, planning, permitting, environmental testing and
remediation, and construction of the Parking Garage, as well as related purposes (collectively, the
“Grant Uses”).
56.

Subject to the full receipt of Grant Funds, Federated committed to constructing the

Parking Garage in a specified period of time.
57.

The City’s source of the Grant Funds originates under various grant(s) and/or

loan(s) provided to the City by the U.S. Department of Housing and Urban Development (“HUD”)
pursuant to the Maine BEDI Grant and Section 108 Loan Program.
58.

The extent of HUD requirements and parameters for requisitioning and disbursing

such funds were specifically established in and by the parties’ direct agreements, as opposed to by
reference to any broader set of HUD or other requirements stated outside the context of the parties’
agreement.
59.

In further consideration of the receipt of the Grant Funds, Federated committed to

creating forty (40) new full-time permanent jobs within two (2) years of the issuance of a certificate
of occupancy for the Parking Garage, which the parties documented by concurrently executing,
together with the Garage Agreement, a certain Job Creation Agreement (“Jobs Agreement”). The
Jobs Agreement is attached hereto as Exhibit C.
60.

On the same date as the Garage Agreement and Jobs Agreement, the parties further

executed a certain Corporate Guaranty Agreement (the “Guarantee”) which expressly states the

 

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Grant Funds were offered to Federated in order to induce it to guarantee the construction of certain
components of the Project.
61.

The Guarantee, which is expressly contingent on the full payment of the Grant

Funds, also establishes certain penalties for noncompliance, and is attached hereto as Exhibit D.
62.

Also on October 15, 2012, Federated and the City executed that certain First

Amendment to Purchase and Sale Agreement (“First Amendment”) wherein the parties
acknowledged the Environmental Deed Restrictions prohibiting development of residential uses
on the Property would be lifted by one of the prior owners of the Property in exchange for the City
providing the Environmental Insurance. A copy of the First Amendment is attached hereto as
Exhibit E.
63.

Under the First Amendment, the City shifted the burden of the Property remediation

that it failed to timely complete in breach of its contractual obligations to Federated, but agreed to
contribute $50,000 as the estimated cost of remediation to a commercial standard toward the
completion thereof, and additionally increased the required size of the Parking Garage as well as
detailed a modified repurchase remedy for failure to timely complete construction—which remedy
was expressly conditioned on the City not being in default.
64.

On October 14, 2014, Federated and the City executed that certain Second

Amendment to Purchase and Sale Agreement and Amendment of Guaranty and Parking Garage
Contribution and Funding Agreement, effectively entering a second amendment of the PSA (with
regard to the related part of such agreement, the “Second Amendment”), first amendment of the
Guarantee (with regard to the related part of such agreement, the “First Amended Guarantee” and,
together with the Guarantee, the “Amended Guarantee”), and first amendment of the Garage
Agreement (with regard to the related part of such agreement, the “First Amended Garage

 

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Agreement”) (collectively, the “October 2014 Amendments”). Copies of the October 2014
Amendments are attached hereto as Collective Exhibit F.
65.

Appended to the October 2014 Amendments was that certain “Agreement by and

Between FEDEQ DV001 and City of Portland on Costs for Off-Site Improvements Improving
Somerset Street, to be Partially Funded by City of Portland”, executed by the parties on the same
date (the “Somerset Street Agreement”). A copy of the Somerset Street Agreement is attached
hereto as Exhibit G.
66.

In the Second Amendment of the PSA, the City acknowledged DV001 as a

permitted assignee, transferring all rights under the PSA as amended, the Garage Agreement as
amended, and the Jobs Agreement, to it, and insisted on leaving the Guarantee, as amended, with
Legacy and TFC despite the virtual irrelevance of those entities to the Project at that point.
67.

In recognition of the then-pending Appeal, the parties further expressly extended

the “Permit Period,” originally defined in the PSA to mean 180 days following the buying entity’s
initial sixty (60) day inspection of the Property, for a period of time (a) necessary to allow all
permit appeals to be resolved, and (b) ending when the time period for further appealing any type
of permit had expired (such date, the “End of Appeals”).
68.

By extending the Permit Period, the parties simultaneously and knowingly clarified

that the Closing date was expressly tied to receipt of all desired permits—previously absent from
the calculation of the Closing timeline but nevertheless a condition precedent to Closing.
69.

The City also again assumed responsibility for remediating the Property, which it

agreed to do, but defaulted on its obligation to do, during the pendency of the Appeal.

 

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70.

In the Somerset Street Agreement, the parties agreed to a general scope of work for

the related improvement, and further agreed that the timeline for completion of said scope was
“TBD” for “to be determined”.
71.

They further estimated a total project cost (“TPC”) of $4 million, while

simultaneously acknowledging said estimate may change in the future.
72.

The parties agreed that Federated would pay for one-third (1/3) of the TPC, and the

City would pay for two-thirds (2/3) of the TPC, in addition to the Grant Funds.
73.

Included in the express definition of TPC are items such as design, staging,

procurement, project supervision, permit fees, insurance and bonding costs in addition to actual
construction.
74.

Additionally, Federated agreed to deliver the City evidence of its financial capacity

to the extent of 1/3 of the TPC, or $1.33 million, prior to the issuance of a building permit for
Somerset Street specifically, which entitlement it later confirmed was not required for site work
improvements at all.
75.

Federated further agreed to deliver a copy of its construction schedule to the City,

prior to commencing construction.
76.

In the First Amended Garage Agreement, in light of the Appeal, the parties

extended the deadline for the initial disbursement of Grant Funds to the date falling one year after
the End of Appeals and agreed upon an additional three months thereafter for the requisition of the
first One Million Dollars ($1,000,000.00) in Grant Funds.
77.

They further agreed the Parking Garage would reach its so-called “start-up” phase

(i.e., the point at which a certificate of occupancy for the parking portion thereof was issued) within
two (2) years following such date.

 

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78.

On February 2, 2015, Federated and the City collectively amended the Amended

Guarantee further (the “Second Amended Guarantee”) to update the original deliverables required
thereunder in order to reflect the revised Project application, which was filed after settlement of
the Appeal and ultimately resulted in the 2015 Approval. A copy of the Second Amended
Guarantee is attached hereto as Exhibit H.
79.

In addition, the parties agreed that, in light of the likelihood of final City planning

board approval impacting the final legal description of the Property, they would execute an
additional amendment to the PSA following such approval in order to properly document same
prior to Closing.
80.

On October 13, 2015, with the City’s assurance that staff would issue a construction

permit for the Project once Federated met certain enumerated conditions, Federated voluntarily
and without obligation agreed to proceed to Closing prematurely in order to alleviate what the City
described as political pressure.
81.

The parties documented this agreement by execution of that certain Third

Amendment of Purchase and Sale Agreement (“Third Amendment”) which replaced the concept
of a Closing date tied to the amorphous End of Appeals concept with a date certain of February
29, 2016 (the “Amended Closing Date”)—but only in the event such date fell at least thirty (30)
days after the issuance of a building permit for the entire Project (the “Building Permit Condition”).
A copy of the Third Amendment is attached hereto as Exhibit I.
82.

In this amendment, Federated was granted a termination right by the City, with

respect to the Third Amendment only, in the event the Building Permit Condition was not timely
met.

 

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83.

In addition, the parties agreed Federated would take on full responsibility for

remaining environmental remediation needs at the Property, relieving the City of its uncured and
continuing default for want of timely completing this task during the pendency of the Appeal as
required by the Second Amendment.
84.

The City nevertheless remained responsible for the provision of the Environmental

Insurance in order to release the Property from the Environmental Deed Restrictions.
85.

On February 22, 2016, in recognition of the fact that the City had still not issued a

building permit for the Project by the date which was thirty (30) days preceding the Amended
Closing Date, and in an effort to avoid Federated’s termination of the Third Amendment, Federated
and the City executed that certain Amended & Restated Third Amendment of Purchase and Sale
Agreement (the “Amended Third Amendment”), a copy of which is attached hereto as Exhibit J.
86.

In it, the parties extended the date of Closing yet again, this time to April 29, 2016

(the “Second Amended Closing Date”), but again conditioned such date on the prior receipt of a
construction permit for the entire Project.
87.

On April 26, 2016, in recognition of the fact that the City had still not issued a

building permit, Federated and the City executed a certain Second Amended & Restated Third
Amendment of Purchase and Sale Agreement (the “Second Amended Third Amendment”), a copy
of which is attached hereto as Exhibit K.
88.

In it, the parties further extended the date of Closing to May 31, 2016 (the “Third

Amended Closing Date”).
89.

On the Third Amended Closing Date, and again in recognition of the City’s failure

to issue a building permit for the Project, Federated and the City executed, after more than twenty
two (22) negotiation iterations and a standoff resulting in further concessions from Federated

 

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regarding recordation of the Amended Garage Agreement with the Property’s conveyance deed,
that certain Fourth Amendment of Purchase & Sale Agreement, Second Amendment of Parking
Garage Contribution and Funding Agreement, & Third Amendment to Corporate Guarantee
Agreement, effectively entering a fourth amendment of the PSA (with regard to the related part of
such agreement, the “Fourth Amendment”), second amendment of the Garage Agreement (with
regard to the related part of such agreement, the “Second Amended Garage Agreement”), and
second amendment of the Guarantee (with regard to the related part of such agreement, the
“Second Amended Guarantee” and, together with the Amended Guarantee, the “Amended
Guarantee”) (collectively, the “May 2016 Amendments”). Copies of the May 2016 Amendments
are attached hereto as Collective Exhibit L.
90.

In the Fourth Amendment, Federated and the City amended the Property’s legal

definition, as they had agreed to do under the Second Amended Guarantee following review and
approval of the Project by the planning board as part of the 2015 Approval.
91.

The parties further deleted the City’s repurchase remedy under the PSA.

92.

Finally, the date of Closing was extended once more, this time to June 16, 2016

(the “Fourth Amended Closing Date”).
93.

Unlike the dates established under the Third Amendment or its various amendments

and/or restatements, however, in the Fourth Amendment Federated agreed to not condition the
Fourth Amended Closing Date on receipt of a building permit for the Project, which decision was
made in reliance on its receipt from the City of written confirmation detailing the remaining
conditions precedent thereto—thus removing, or so Federated thought, any uncertainty with regard
to the Property’s buildability.

 

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94.

Under the Second Amended Garage Agreement, the City’s repurchase remedy was

narrowed to Lot 6 only.
95.

Among other things, the parties also detailed in that amendment the cost to be paid

in the event the City exercised its repurchase remedy, and agreed the Garage Agreement, as
amended, would run with the title to the Property—to the benefit of Federated’s successors in title
without related City consent.
96.

In the Second Amended Guarantee, the parties confirmed the narrowing of the

City’s repurchase remedy, and otherwise made minor adjustments to the Guarantee’s structure.
97.

In summary, the following agreements govern and are relevant to this dispute:
a. The PSA, its First Amendment, Second Amendment, Third Amendment,
Amended Third Amendment, Second Amended Third Amendment, and Fourth
Amendment (collectively, the “Amended PSA”) which governed the
conveyance of the Property from the City to Federated. The terms of the
Amended PSA expired at Closing except where specifically therein noted to the
contrary;
b. The Somerset Street Agreement, outlining the City’s agreement to fund twothirds (2/3) of the estimated $4 million TPC for raising and improving the public
thoroughfare adjacent to the Property;
c. The Garage Agreement, as amended by the First Amended Garage Agreement
and Second Amended Garage Agreement (collectively, the “Amended Garage
Agreement”), which details the City’s obligation to contribute $9,007,000.00 in
Grant Funds toward Federated’s construction of the Parking Garage, as well as
the various commitments made by Federated in consideration of such
contribution;
d. The Jobs Agreement mandating the creation of a specified number of permanent
fulltime new jobs in exchange for receipt of the Grant Funds, and thereby
transferring the City’s related obligations to HUD to Federated; and
e. The Amended Guarantee, specifying certain guarantees and obligating certain
corporate entities with regard to specific events of non-performance in an effort
to ensure sufficient tax revenue to service related City debt, but also expressly
conditioned on receipt by Federated of the full amount of Grant Funds for the
Project (the foregoing, collectively, the “Interlocking Partnership
Agreements”).

 

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98.

Through its execution of the Interlocking Partnership Agreements, and

continuously throughout various meetings with Federated and others, the City has held itself out
as, and in fact became, Federated’s partner in the carrying on of a variety of business affairs related
to the completion of the Project, from directly serving as the Project’s subdivision applicant, to
first assuming direct responsibility for and thereafter sharing the cost of the Project’s required
remediation, including responsibility for procuring and paying the premiums for the
Environmental Insurance, to jointly funding a large portion of the Project intended to serve the
public on a regular basis, to funding Federated’s major reconstruction of existing and new City
streets, and a variety of additional express and implied responsibilities.
99.

The parties routinely referred to these Interlocking Partnership Agreements as the

“partnership documents”, both in writing and otherwise.
100.

Federated’s claims relate principally to clarification of rights under, the City’s

breach of, and bad faith dealings under the Amended Garage Agreement and the Somerset Street
Agreement (such agreements, together, the “Relevant Agreements”).
Federated’s Full Compliance with the Relevant Agreements
101.

Federated has fully and timely complied with and met each and every contractual

obligation under the Relevant Agreements through the date of this Complaint.
102.

Over nearly a decade, Federated met countless times with neighborhood groups and

representatives as well as Property abutters in an effort to be a good neighbor and build consensus
about the Project.
103.

In addition, it timely proceeded with the permitting and entitlement of the Project

both upon entering the PSA and then again following the costly and burdensome Appeal filed

 

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against the City, which Federated oversaw and managed the defense of to the City’s benefit at its
own expense.
104.

Federated worked with the City on the amendment of zoning necessary to construct

its first iteration of the Project, drafting at its own cost and expense the City’s new Master
Development Plan section of its site plan ordinance, to the benefit of the City and the public at
large.
105.

Federated received conditional approval from the City’s planning board on not one,

not two, but three separate occasions, and thereafter worked diligently and tirelessly to clear an
unprecedented number of conditions imposed thereon, exceeding 100.
106.

Federated even went so far as to hire a former Portland planning board member

with a law degree and background in urban planning as well as town management for the specific
purpose of preparing the Project for construction and handling related matters.
107.

Federated executed contracts and paid millions of dollars in connection therewith

between itself and architects, landscape architects, civil engineers, geotechnical engineers,
mechanical, electrical and plumbing engineers, a national construction company and an
international structural engineer for the preparation of concept and feasibility, design-development
and construction documents, as well as to oversee the pre-construction activities of the Project
while a final construction budget and management contract were negotiated.
108.

Federated designed the Parking Garage and Project in accordance with the

Amended Garage Agreement and Amended Guarantee and took all steps within its control to
construct the Parking Garage.
109.

Federated designed and engineered improvement plans for Somerset Street, a City

thoroughfare, providing its own capital and resources to advance funds for the same, in accordance

 

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with the Somerset Street Agreement and the City planning board’s conditional Project approval,
and in seeking its still-unpaid reimbursement pursuant to said agreement followed all designated
procedures related thereto.
110.

Federated repeatedly requested, albeit in vain, to meet with City officials in order

to work collaboratively with the City to control costs, as required under the Somerset Street
Agreement.
111.

Federated worked with its consultants and the City for years, spanning the period

of time between December 2015 and March 2018, to refine its initial construction schedule in order
to address City concerns with staging and logistics, resulting in more than a dozen submitted
iterations of its construction management plan prior to its first conditional approval by the City,
which to this date has still not been finally approved, mere days before the 2015 Approval expired.
112.

Federated engaged the services of a reputable national leasing broker to procure

retail tenants for the Project’s ground floor commercial space, and said broker identified numerous
interested tenants with which Federated entered into leasing discussions and negotiations, over
many months, and likewise engaged numerous national and international hospitality franchises in
discussions about prospective hotels on the Property prior to interest abating in the face of the
City’s public statements about the Project.
113.

Federated prepared an updated American Land Title Association survey of the

Property.
114.

Federated closed upon its acquisition of the Property, paying millions of dollars to

the City in cash, without a building permit in hand, in reliance on the City’s representation that it
would continue to work in good faith with Federated to timely process a building permit
application for the Project in a prioritized manner.

 

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115.

Federated worked closely with, and paid thousands of dollars to, Central Maine

Power to ensure sufficient electrical capacity and an appropriate related design for the Project.
116.

Federated worked closely with the Portland Water District to determine utility

connection charges for the Project, and to plan for same.
117.

Federated worked closely with the City’s assessing department to determine

projected tax rates, and thus revenues, applicable to the Project, both during construction and upon
stabilization, for purposes of ensuring the City could repay its loan to HUD.
118.

Federated assumed responsibility for the remediation of the Property from the City,

relieving the City of liability for the same, and worked closely with the U.S. Environmental
Protection Agency to accomplish a valid transfer of related approved plans into its own name for
implementation.
119.

Federated obtained, at its own time and expense, a permit from the State of Maine

Fire Marshal’s office for the Parking Garage and paid its team of consultants to finalize application
materials for submission of a building permit for the Parking Garage.
120.

Federated renegotiated contracts, scopes of work, and related fees for services with

its architects, engineers and others in order to design the Revised Project Concept in accordance
with the City’s suggestion and confirmation that an amendment to the Project’s predecessor’s
Master Development Plan permit, as embodied in the 2014 Approval, was not only possible but in
fact recommended by the City.
121.

Upon learning the City had arbitrarily changed its mind with regard to the

continuing validity of the Master Development Plan permit, Federated shifted its priorities, at great
expense and to the detriment of its other business, in order to focus virtually exclusively on the

 

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Project in order to receive approval to start construction before the underlying 2015 Approval
expired.
122.

Nearly two years after first submitting its plans for a building permit pre-review,

which the City agreed to conduct as a means of inducing Federated to proceed to Closing without
the actual issuance of a building permit, and after Federated reluctantly agreed to end a stalemate
following the City’s improper invalidation of the PSA, Federated paid the City hundreds of
thousands of dollars in permitting and application fees in order to permit it to review said plans a
second time, after the City lost the initially submitted plans, and with the expectation that a building
permit for the Parking Garage would issue as a result thereof upon approval of related construction
plans.
123.

Given the passage of time from the Project’s inception and the City’s related

inability to timely process Federated’s related entitlements, as well as its failure to adhere to
express and implied contractual obligations, Federated’s ability to maintain the focus and attention
of its many third party vendors was strained, an outcome in which the City played a direct role.
124.

Nevertheless, Federated successfully retained the services of a pre-qualified third-

party reviewer to expedite review of the Project’s building permit application on behalf of the
City—effectively paying twice to receive the expedited review the City previously offered for free
in order to induce Federated to move forward with an expedited Closing timeline.
125.

Federated completely satisfied all building design-related elements necessary for

receipt of a building permit and negotiated with several reputable environmental and excavation
firms to commence site work related to mandatory site remediation upon the issuance thereof.
126.

Notwithstanding the fact that Federated never triggered a contractual need to do so,

at the City’s request Federated provided formal evidence of its financial and technical capacities,

 

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regarding Somerset Street and/or the Project generally, as applicable, on numerous occasions, over
the course of many years, through multiple financial institutions, and it worked with City staff
members to fine-tune its first requisitions under the Relevant Agreements as deemed necessary,
timely providing all required supporting documentation until the City was satisfied and made its
initial disbursements.
127.

On or about September 27, 2017, Federated filed a second requisition of funds

dedicated to the project’s Parking Garage (“Second Garage Requisition”), for the balance of funds
requested (and previously approved) under its first requisition, within the time specified by said
agreement.
128.

Thereafter, as a result of the City’s failure to pay the same, Federated timely and

formally notified the City in accordance with the Amended Garage Agreement of its delinquency
in satisfying same as well as related interest.
129.

In 2018, Federated committed to proceeding with the Project and undertook steps

to procure a manager for the Parking Garage upon its completion.
130.

Federated worked in good faith to find multiple acceptable alternatives to the City’s

surprising last-minute demand that Federated post a significant cash escrow or letter of credit for
the entire Project as a condition of the issuance of a building permit for the Parking Garage alone,
which conflicted with years of written correspondence and the City’s agreed upon role as the
Project’s subdivision applicant.
131.

Federated entertained settlement discussions with the City that would permit

alternatives to a zoning board appeal of the denial of its building permit application.
132.

Federated appealed the City’s denial of the Project’s building permit application.

 

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133.

Federated issued correspondence which would have immediately cured any and all

of its alleged defaults under the Relevant Agreements, while adamantly denying the existence of
the same, as articulated by the City following denial of its building permit.
134.

Federated attempted to further the remediation of the Property even after denial of

its building permit, but in a continued pattern of obstructionist conduct the City refused to sign the
necessary access agreement permitting Federated’s vendors from accessing public portions of the
Project site including a yet-to-be constructed City street, only to relent after Federated’s contractor
declined the work, and Federated missed out on available federal funding, as a direct result of the
City’s position.
135.

Federated has remained in constant contact with the City about the Project’s status

and worked in good faith to entertain pre-suit alternative dispute resolution prior to the filing of
this action, to no avail.
136.

In sum, Federated has spent more than eight years and almost ten million dollars

($10,000,000.00) related to the acquisition, development and preconstruction costs of the Project,
in reasonable reliance on the City’s numerous and repeated inducements and assurances that it
remains fully committed to the Project, and Federated continues to incur significant carrying costs
in the form of taxation, insurance, and responses to repeated City requests that it clean up the
Property from vagrants, paraphernalia, and rubble conveyed by the City itself, while the City
simultaneously declines to enforce posted signage on the Property or allow Federated to place a
fence around it.
137.

The City, which has received a significant net financial benefit from its sale of the

Property to Federated, has in return refused to honor multiple prior statements made with the
purpose and intent of inducing Federated to proceed, refused to work in good faith collaboration

 

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with Federated, refused to honor the Relevant Agreements, refused to pay Federated monies it
agreed were due and payable, intentionally or otherwise villainized Federated in local print and
television media, and notwithstanding the above has also continued to use the Property for its own
purposes.
The City’s Acknowledgment of Federated’s Full Compliance
138.

The City ratified and confirmed the absence of default under the PSA time and

again over the span of five separate years ranging between June 2011 and May 2016 when it
ratified the continuing full force and effect of same throughout at least six (6) separate
amendments.
139.

Had Federated been in default as of Closing, the City would not have been obligated

to convey the Property to it.
140.

In 2015, the City implicitly conceded the PSA had not expired when it voluntarily

amended it by virtue of the Third Amendment, and it further acknowledged Federated’s full
compliance with the terms of the PSA yet again when it later closed on its disposition of the
Property via transfer and conveyance to Federated 04 and Federated 05 as the valid successors of
DV001.
141.

In the spring of 2017, in the context of starting applicable Project timelines under

the Relevant Agreements, but without a required building permit in hand, Federated submitted an
informal draft of its first requisition of Grant Funds under the Amended Garage Agreement
demonstrating total costs expended to date but only requesting, post-retainage, the lesser amount
of Nine-Hundred Ninety-Nine Thousand, Nine-Hundred Ninety-Nine Dollars ($999,999.00) as an
arbitrarily determined sum unrelated to specific expenditures.

 

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142.

Following feedback from the City, Federated resubmitted this document with

adjustments made to the supporting backup material initially included therewith, without
adjustment to the requested amount (the “First Garage Requisition”).
143.

Pursuant to the Amended Garage Agreement, the City could not have disbursed any

funds requisitioned by Federated unless and until Federated fully satisfied the related requirements
as set forth therein; hence, the act of funding a requisition is tantamount to an acknowledgment of
Federated’s full compliance with related obligations.
144.

On or about June 27, 2017, the City funded Federated’s First Garage Requisition in

the full amount requested, thus confirming Federated’s full satisfaction of and compliance with
the Amended Garage Agreement.
145.

Following its initial comments on the draft requisition, which were fully addressed,

the City neither questioned nor disputed the balance shown in Federated’s First Garage Requisition
above and beyond what was formally requested as an arbitrary subcomponent thereof.
146.

Previously, on February 15, 2017, Federated submitted to the City its first

requisition under the Somerset Street Agreement in the amount of One-Hundred Forty-Seven
Thousand, Five-Hundred Twenty-Five Dollars ($147,525.00) (the “First Somerset Street
Requisition”).
147.

Pursuant to the Somerset Street Agreement, the City likewise could not have

disbursed any funds requisitioned by Federated thereunder unless and until Federated fully
satisfied the related requirements as set forth therein.
148.

The City initially objected to Federated’s First Somerset Street Requisition;

however, after much dialogue and demonstration to the City by Federated that it was in fact in full
compliance with the Somerset Street Agreement, and had been at the time the aforementioned

 

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requisition was submitted, the City also funded the First Somerset Street Requisition, again
demonstrating its acknowledgment that Federated had complied with related contractual
obligations.
149.

Following notices of default issued to Federated by the City’s outside counsel in

the spring of 2018, after the City’s denial of Federated’s building permit application, Federated
responded in great written detail outlining precisely why each alleged default was improperly
alleged, and it did so in a timely manner in line with the agreements to which such notices
pertained.
150.

Thereafter, the City did not re-allege default until nearly a year later when it alleged

virtually the same grounds it had previously alleged, in total disregard of Federated’s prior cure
letters and its own implicit acceptance of the same.
Campaign to Obstruct the Project
151.

Since as early as 2013, outside forces have waged a constant, repeated, and

vexatious series of attacks at an administrative level and in Superior Court in the form of the
Appeal to impede or obstruct the development of Maritime Landing as the Project’s predecessor
and the Project’s first, more dense, iteration.
152.

While it was the City’s planning board which entered the record of decision that

was attacked in the Appeal, and while it did so in reliance on pre-drafted motions and conditions
and other input directly from City staff, ultimately Federated took charge of the City’s defense,
defending the taxpayers of Portland from the City’s own mistakes as the City merely piggy-backed
on Federated’s efforts.
153.

For months, Federated funded the Appeal to defend against the forces of

obstruction.

 

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154.

In doing so, Federated incurred substantial costs, fees, delays and other incidental

damages, including financial loss from an ultimately scaled-back development with dramatically
fewer units and a much more aggressive construction schedule, increased expenses associated with
construction delays, rising construction costs, attorneys’ fees and, later, revised zoning directly
impacting the Project financials and an untimely City increase in building permit fees.
155.

The obstructive efforts were spurred by a vigilant ad hoc neighborhood group—

informally calling itself ‘Keep Portland Livable’—the co-founder of which acknowledged openly
in regard to the Appeal that “the power to delay is the power to destroy” with regard to the intent
of the Appeal.
156.

At each stage of the Appeal, the City burdened Federated by requesting and

accepting its efforts, and Federated continuously defended the Project and the City’s record of
decision until ultimately settling with opponents in the interest of advancing an expeditiously
delivered, albeit much smaller, housing project to the local community – which, at that time and
still today, was suffering from a rental rate crisis the likes of which have not been seen in recent
times.
157.

The City was well aware of and participated directly in crafting the terms of the

Appeal’s settlement, including the revised design and nature of the Project, all of which complied
with applicable regulations and, more importantly, the Interlocking Partnership Agreements.
158.

As a result of the Appeal, an amendment of the Interlocking Partnership

Agreements was necessitated, causing further Project delay, and the Project was further
stigmatized.

 

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159.

Federated and its predecessors spent tens of thousands of dollars defending the

Appeal so that the Project could move forward to the benefit of the City and its residents as
originally contemplated.
The City’s Malfeasance, Bad Faith and Repudiation of the Relevant Agreements
Initial Permitting Problems
160.

After the Appeal, Federated unofficially inquired, in the spring of 2015, whether it

could administratively amend a part of the 2015 Approval to include hospitality use, while still
providing hundreds of residential units.
161.

Hospitality is a use expressly permitted in the Property’s zoning district, but it is

also one which has become politically sensitive for the City in light of numerous recent hotel
developments and the City’s well-documented housing crisis.
162.

In response, the City took the position that the Grant Funds were being contributed

to the Project to catalyze new housing development, notwithstanding the fact that HUD precludes
the source of those funds from being used for housing and the parties initially contemplated a wide
range of uses of which housing was but one.
163.

However, rather than debating Federated on the merits of its position, the City

abruptly declared, on or about June 8, 2015 (the “June 8th Communication”), that the PSA was no
longer in force or effect, due to an alleged expiration.
164.

Federated promptly asked the City’s in-house attorneys for an explanation but was

ignored.
165.

The City’s economic development director thereafter advised Federated that before

the City would entertain further discussions, he and the City’s interim manager, its then-police
chief, needed to update the City Council for guidance.

 

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Following the City’s June 8th Communication, Federated repeatedly asked for

166.

clarification from the City Council and senior City officials, with no explanation of the City’s
position or any indication as to whether the guidance being sought from City Council members
was via a public or private forum.
167.

The City thereafter refused to explain its position for several weeks, until it

delivered formal correspondence late in the day on Friday June 19, 2015 (the “June 19th
Communication”), leading Federated to reasonably conclude it was a means of preventing further
discussion of non-housing project changes.
At virtually the same time as the City’s June 8th Communication and June 19th

168.

Communication, the City was in final employment negotiations with, but had not yet hired,
Mr. Jennings, a newcomer to city management and municipal work in general.
169.

Mr. Jennings eventually started as the City’s new chief administrative and

executive official on July 13, 2015.
170.

During Maine’s short construction season, halfway through the one year period

allotted to receive and commence construction under an already difficult-to-procure building
permit, Mr. Jennings ordered his staff to completely stop reviewing the Project altogether,
effectively ordering his staff to go “pencils down,” and forbade them from even interacting with
Federated or its many third-party vendors until further notice.
171.

Federated’s staff and entire development team was effectively put on hold for

months.
172.

While the clock kept ticking with regard to the dwindling window of time in which

Federated could obtain a building permit, Federated’s hands were completely and intentionally
tied by the very same party expecting it to perform.

 

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173.

It was not until several months later, after Federated’s hired outside counsel to

demand performance and Federated reluctantly agreed to forgo its interest in exploring the addition
of hotel uses in favor of an all-housing program, even though the same was not mandated by any
of the applicable agreements governing the parties, and even though such use was expressly
allowed under in-place zoning, that the City agreed to “amend” the allegedly expired PSA.
174.

Around the same time, the City stated in writing that it would not recommence its

permitting efforts until execution of such amendment, evidencing a willful and entirely improper
exploitation of its status as reviewing authority for the purpose of gaining leverage over Federated
in related but ultimately distinct contractual negotiations.
175.

The City effectively held Federated’s legitimate contractual and land use rights

hostage, for the purpose of serving political ends not shared by Federated, by resort to its role as
Seller of the Property—extorting a particular development scheme from Federated by use of
inappropriate means.
176.

Later in 2015, the City hired its own planning board chairman, an individual who

has been critical of the Appeal settlement, the Project, and Federated both on record and in a public
forum, as the director of its planning department—i.e., as the person chiefly tasked with overseeing
the administrative review of conditions he had previously imposed during an arduous quasijudicial decision-making process.
Federated’s Acquisition of the Property
177.

In 2016, the City approached Federated with a request to close upon its acquisition

of the Property well before Federated was obligated to do so under its PSA.

 

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178.

As a compromise with the City, and in good faith, Federated agreed to proceed to

Closing if the City would either (i) issue the Project a building permit, or (ii) itemize in no uncertain
terms the remaining conditions standing between it and a construction permit.
179.

The City chose option (ii), and did so, twice, in writing, first by letter dated June 1,

2016 confirming that the only remaining conditions of approval were (a) finalization of an
acceptable construction management plan, and (b) certain enumerated fees (the “First Remaining
Conditions Letter”), and by subsequent correspondence on formal City letterhead dated June 29,
2016, (the “Second Remaining Conditions Letter”) (together, the “Remaining Conditions Letter”),
copies of which are attached hereto as Collective Exhibit M.
180.

Nowhere did the City list a performance guarantee as a remaining condition of

approval within the Remaining Conditions Letter.
181.

Given the City’s prior waiver of that normal condition of all planning board

approvals, to benefit itself and allow the sale of the Property to Federated by reference to a legal
description citing its recorded subdivision plat, Federated rightly assumed said requirement had
been waived outright, as expressly permitted by the City’s Code of Ordinances.
182.

However, even if it had not been, the performance guarantee would have (a) been

a responsibility of the City to post, both as the seller of the Property and as the expressly agreed
upon subdivision applicant, and (b) would have conveyed to Federated at Closing under the terms
of the PSA and by running with the title to the land.
The Revised Project Concept
183.

In 2016, in recognition of the impossibility of having its construction management

plan approved—due to what the City deemed unacceptable logistics of closing an entire street for
the duration of a single-phase project, even though it was the same street the City required

 

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complete reconstruction of—and in light of the fact that the City had proposed no workable
alternatives, Federated informally approached the City about returning to a phased project similar
in density, but shorter in height, as was first contemplated by the 2014 Approval (the “Revised
Project Concept”).
184.

The City expressed written excitement about the prospect of such changes, and its

staff agreed they made sense for reasons including the circumstances surrounding the clearing of
conditions associated with the 2015 Approval.
185.

In fact, the City went so far as to recommend how the Revised Project Concept

should be pursued when it steered Federated away from amending the 2015 Approval in favor of
a recommendation that it be accomplished by amending the earlier Master Development Plan
permit embodied in the 2014 Approval.
186.

In conjunction therewith, the City expressly confirmed, in an email attached hereto

as Exhibit N, that the 2014 Approval remained valid for several more years and could even be
extended for a longer period of time administratively (the “MDP Confirmation Letter”).
187.

In the same email, the City expressly stated that it was “committed to making [the

Project] a reality and will do everything [it] can within [its] legal and administrative framework”
to reach that end.
188.

Just as it had relied on the City’s First Remaining Conditions when expending

millions to acquire the Property ahead of schedule, it was in reliance on the City’s MDP
Confirmation Letter that Federated approached the Appeal litigants, the neighborhood association,
and others to build community support for the Revised Project Concept, and thereafter performed
market studies, feasibility analyses, rent surveys and other due diligence while it completely
renegotiated its third-party vendor contracts to incorporate entirely new scopes of work.

 

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Funding Refusal & Permit Denial
189.

In October 2017, following the valid and timely submission of the Second Garage

Requisition and more than a year of discussions regarding the Revised Project Concept, the City
abruptly stopped disbursing funds under the Amended Garage Agreement without explanation.
190.

The City then advised Federated, months later, while advising it was facing internal

pressure to advance the Project given its outstanding debt service obligations to HUD, that
notwithstanding the MDP Confirmation Letter’s verification of the 2014 Approval’s continuing
validity, after a change of heart it was no longer willing to consider the Master Development Plan
permit active, effectively precluding the City’s own recommendation that such permit be used as
a means of implementing the Revised Project Concept which, by that time, Federated had been
working on for years and remodeled its entire investment around.
191.

Importantly, the planning board had not invalidated the 2014 Approval or therefore

the associated Master Development Plan permit in granting the 2015 Approval, and nothing in the
settlement of the Appeal changed this fact.
192.

Further, there is nothing inherently or otherwise contradictory about the 2014

Approval’s Master Development Plan permit and the 2015 Approval’s subdivision or site plan
approvals; in fact, the Master Development Plan section of the City’s site plan ordinance is
expressly intended to operate symbiotically with overlapping site plan approvals.
193.

To make matters worse, the City notified Federated of this purported expiration

only a matter of weeks before the 2015 Approval – and Federated’s ability to preserve its
entitlements by obtaining a building permit – expired.

 

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194.

Federated had previously been operating in reasonable reliance upon the City’s

confirmation that its entitlements were immune from near-term expiration given their preservation
under the Master Development Plan permit.
195.

The sudden and unexpected threat of expiration came with great cost implications

for Federated; any post-expiration re-permitting of what was already a financially complex and
historically controversial undertaking is subject to a plethora of new ordinance revisions enacted
by the City well after investment decisions were made by Federated during the many years for
which the Project was delayed—including a workforce housing or “inclusionary zoning” initiative
mandating the artificial capping of certain Project rents and, accordingly, deflating the Project’s
projected returns.
196.

As a result, Federated was forced to scramble in order to (a) apply for, (b) arrange

for, and (c) pay for construction commencement in a matter of weeks simply to preserve what the
City had determined in its questionable discretion to be the only remaining development rights for
the Project.
197.

In good faith, Federated negotiated with contractors to manage the construction of

the Midtown project, released final construction design services, paid hundreds of thousands of
dollars in application and review fees to the City, notwithstanding the City’s theretofore
unexplained failure to fund its own portions of the Project, worked painstakingly to refine its
construction management plan, and remained in constant contact with the City regarding the
Project through the end of the 2015 Approval’s permit life.
198.

Ultimately, however, notwithstanding this herculean effort and the fact that the

Parking Garage’s construction plans were fully approved from a design perspective, the City chose
to deny Federated’s building permit application.

 

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Refusal to Honor Waiver of Performance Guarantee Requirement
199.

The City’s primary and only real basis for the denial was that Federated failed to

post a performance guarantee for the entire Project, which the City claimed was a condition
precedent to the issuance of construction entitlements and which it would only accept in the
essential form of a full cash escrow covering all of the Project’s site work.
200.

In light of the City’s refusal to decouple the public street improvement project

Federated took on from its larger Project entitlements, this meant the amount of the guarantee was
increased by several millions of dollars, to potentially as much as $15 million or more worth of
site improvements, even though the permit applied for only related to the Parking Garage and
contemplated no public site improvements until later stages.
201.

The City’s denial letter cited other bases for denial as well, including expiration of

the 2015 Approval and Federated’s failure to pay certain fees, but they were pretextual in nature.
202.

The 2015 Approval would not have expired had the City not required a performance

guarantee—which would have allowed the timely issuance of a building permit—and Federated
expressly advised the City that all remaining fees would be paid upon resolution of that outstanding
issue.
203.

In fact, Federated even paid the fees in full prior to retrieving its uncashed checks

as a means of damage control after the City continued to insist on, and refuse to proportionally
share in the cost of, an unreasonable performance guarantee requirement.
204.

Federated advised the City in writing, on March 19, 2018, that the money for its

remaining fees, which was initially paid in full, was being held locally and would be delivered
promptly upon the City’s “clearing remaining permitting hurdles”—the very same hurdles it was
advised three calendar years earlier in the Remaining Conditions Letter were not at issue.

 

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205.

Requiring applicants to post a performance guarantee covering planned site

improvements is typically a standard condition of approval prior to issuance of a building permit
and also before a development’s subdivision plat is released by City staff for recording at the
Cumberland County Registry of Deeds.
206.

Under Section 14-499 of the City’s Code of Ordinances, this requirement not

surprisingly applies to subdivision applicants.
207.

For Federated’s Project, the City expressly and contractually agreed to serve as the

Project’s subdivision applicant, and thus took on the responsibility of posting a performance
guarantee, if it chose to require one.
208.

Despite Federated’s express written request, the City did not post a performance

guarantee as the Project’s subdivision applicant.
209.

Instead, the City called Federated in default for even suggesting it should do so.

210.

Further, Section 4 of the Somerset Street Agreement specifically states that the City

would accept a contractor’s bond, at the time of construction contract execution as opposed to prior
to issuance of a building permit, in full satisfaction of the performance guarantee otherwise
required by Section 14-501 of the City’s Code of Ordinances.
211.

Federated reminded the City of this in writing on March 1, 2018 but the City refused

to honor this express contractual agreement.
212.

The City’s Code of Ordinances further grants the City express authority to waive

the requirement of a performance guarantee and, as the City’s actions and express confirmations
illustrate, that is exactly what the City did for the Project.
213.

Since the City desired to convey the Property to Federated long before it was able

to grant Federated a building permit, and the legal description of the Property necessary for such

 

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conveyance was tied to an unrecorded subdivision plat, the City intentionally, deliberately and
permissibly waived the normally applicable rules, for its own benefit, so that it could reap millions
of dollars in monetary benefits from divesting itself of the contaminated Property and related
liabilities and save itself from paying the related sum prior to Closing upon its sale of the same to
Federated in accordance with the Amended PSA.
214.

In fact, in an email dated March 16, 2018, the City’s then-planning director

confirmed in writing that the City had done so for that purpose, and this aligns perfectly with the
Remaining Conditions Letter.
215.

The City’s waiver had the effect of saving it from what by its own admission would

have otherwise constituted the necessity of paying approximately $15 million in Project site work
expenses, in cash.
216.

The First Remaining Conditions Letter was issued in direct response to Federated’s

request for an itemization of outstanding conditions of approval standing between it and the
issuance of a building permit for the Project, and in the context of the parties’ negotiation of the
then-unexecuted Fourth Amendment.
217.

The parties’ contractual arrangement initially required Federated to close on its

acquisition of the Property only after issuance of a building permit, a provision specifically
bargained for by Federated in order to assure itself that the Property would be buildable before
millions of additional dollars were spent acquiring it in vain.
218.

In response to pressure from the City, however, and following the City’s refusal to

acknowledge Federated’s express right to receipt of a building permit before Closing, Federated
relented and agreed to proceed to Closing without a building permit in hand, notwithstanding the
saga of permitting delays it had endured over the years, but only on the basis of the First Remaining

 

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Conditions Letter, which in its exhaustive enumeration of remaining conditions precedent to the
issuance of a building permit did not list a performance guarantee.
219.

Federated was therefore shocked when the City advised that a performance

guarantee, which it admitted in writing to waiving for itself, was all of a sudden a pre-building
permit requirement—particularly where the parties expressly and contractually agreed the City
would serve as the Project’s subdivision applicant.
220.

In addition, Section 14-501(c) of the City’s Code of Ordinances requires the posting

of a performance guarantee in the amount of 100% of the cost of related improvements “as
determined by the public works authority and the planning authority”.
221.

On January 28, 2018, in an effort to work with the City toward the advancement of

the Project Federated requested the City determine and advise Federated of the amount of any
required performance guarantee in accordance with its Code of Ordinances.
222.

The City refused to determine or supply Federated with an amount for the

performance guarantee it later insisted be paid by Federated notwithstanding (a) the City’s
agreement to serve as the Project’s subdivision applicant and (b) its waiver of any guarantee
requirement.
223.

Further, when Federated suggested as a compromise that it be allowed to post a

bond instead of paying an all-cash escrow for the entirety of a development both parties
acknowledged was in the midst of being redesigned, the City refused to accept same,
notwithstanding an express reference to bonding costs in the Somerset Street Agreement.
Anticipatory Repudiation of Relevant Agreements
224.

In addition, just prior to the expiration of the 2015 Approval’s permit window, and

well after Federated had expended hundreds of thousands of dollars pursuing a construction permit

 

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on the assumption the City, even if reluctantly, would remain its partner in the Project, the City
advised it no longer intended to honor any of its contractual obligations under the Relevant
Agreements absent certain steps being taken by Federated (such correspondence, the “March 2018
Letter”), attached as Exhibit O.
225.

The demands of the City’s March 2018 Letter were particularly confusing to

Federated because (a) some of them failed to relate to any of the Interlocking Partnership
Agreements, and (b) nearly all of them mirrored certain positions previously taken by the City but
fully addressed by Federated in earlier correspondence leading up to payment of its First Somerset
Requisition and First Garage Requisition in June 2017—the same requisition that triggered the
time permitted for the Second Garage Requisition and, potentially, completion of the Project.
226.

After acting as the architect of the Project’s demise, the City then sent Federated a

letter dated April 12, 2018 (the “April 2018 Letter”), following the Project’s permit period
expiration and building permit denial, alleging defaults across the board under the Relevant
Agreements.
227.

Confusingly, the City alleged Federated was in default for failing to commence

construction of the Project within a “reasonable time,” notwithstanding the fact that the Amended
Garage Agreement specified a date for completion, rather than commencement, of the Parking
Garage, and even though the City had itself expressly denied Federated the right to do the very
same thing it was complaining was not done.
228.

The City’s April 2018 Letter also overlooked the fact that the Amended Garage

Agreement specifically called for an express timeline for completion—i.e., not one unilaterally
determined “reasonable” by the City.

 

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229.

The April 2018 Letter also alleged Federated was in default of the Amended Garage

Agreement for failing to demonstrate its financial resources, notwithstanding numerous prior
instances of same, and further notwithstanding the fact that, unlike the Somerset Street Agreement,
there was no express condition requiring Federated to do so under the Amended Garage
Agreement.
230.

Perhaps most confusing of all, however, is the fact that the City’s April 2018 Letter

alleged a default by Federated for failing to follow proper disbursement procedures under the
Amended Garage Agreement, even though the bases for its Second Garage Requisition, which
represented the balance of expenses previously included in the First Garage Requisition, were
previously and expressly approved by the City.
231.

The City, in effect, approved and then “un-approved” the Second Garage

Requisition, just as it had confirmed and then declined the Master Development Plan permit,
waived and reinstated the performance guarantee, and stated no building permit was necessary for
site work prior to conditioning commencement of site work on receipt of a building permit.
232.

When Federated, in a last ditch effort to satisfy the City, consented to posting a

performance guarantee in cash, as long as the City would contribute its own two-thirds (2/3) share
thereof with regard to Somerset Street, the City refused but notified Federated it was waiving the
guarantee for itself alone.
233.

In the end, the City’s refusal to honor its well documented waiver of the

performance guarantee—confirmed directly by the City in writing no less than three times—or to
timely honor the type of guarantee it otherwise expressly and contractually agreed to accept, and
finally its refusal to share in the cost thereof, even after Federated conceded and agreed to pay its

 

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own portion under protest, made receipt of a building permit—a goal supposedly shared by the
parties for more than seven (7) years—a virtual impossibility.
234.

In an effort to protect its interests, and in light of the lack of receipt of any

certificate(s) evidencing the City’s binding mandatory pre-construction Environmental Insurance
for the Property—without which the Project would not be permissible to construct—Federated
retrieved a portion of the financial fees it had previously issued checks for to the City in
conjunction with its building permit application, but without withdrawing said fees or the related
application, for safe keeping pending the City’s reconsideration of its position.
235.

The City never in fact reconsidered its position, and thereafter only refunded a small

fraction of fees paid to it by Federated, supporting Federated’s decision to safeguard additional
funds while the Project’s future remained in flux.
236.

As a result, the City (i) denied Federated’s building permit, (ii) based such denial

on Federated’s failure to comply with a waived-and-then-reinstated condition of approval as well
as Federated’s related safekeeping of funds specifically arising from that context, and moreover
(iii) bafflingly alleged Federated’s request for the City to share in the financing of such
circumstances by funding its agreed upon portion of the performance guarantee was somehow a
default under the Somerset Street Agreement.
237.

In attempt to understand the City’s position further, Federated requested, pursuant

to Maine’s Freedom of Access Act, various pertinent City records.
238.

Those central to the issue inquired of were never delivered and, accordingly, either

did not exist or were withheld without justification.

 

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Express Repudiation of Relevant Agreements
239.

Throughout the spring of 2018, in an attempt to resolve what was then the Project’s

latest impasse, Federated engaged the City’s outside counsel on numerous occasions through
countless email exchanges, telephone conversations, and exchanges of formal written
correspondence in an attempt to explain its position and the reasons for it, as well as to allay any
and all concerns held by the City.
240.

On April 25, 2018, the City’s outside counsel informed Federated that the City

could consider a consent decree and related order issued by a Superior Court justice utilizing
Federated’s pending building permit appeal as a means of reactivating the disputed Project permits,
as part of a negotiated settlement of what by that time had become an adversarial relationship.
241.

She also advised, however, that the City had serious concerns about Federated’s

financial capacity to construct the Project and would not move forward without Federated first
producing sensitive financial information well in excess of anything Federated was contractually
obligated to furnish – an act that would merely permit further discussion as opposed to resolving
the dispute with certainty.
242.

She further advised Federated that short of Federated implementing the Project,

which it could not do absent the City’s permission, the City intended to pursue the reacquisition
of Lot 6 under the Amended Garage Agreement so that another party could do so.
243.

In line with this threatened approach, Mr. Jennings communicated to Federated that

he had conversations with other developers interested in the Property about taking over the Project.
244.

In fact, Mr. Jennings was even quoted in the Portland Press Herald as stating

“hundreds of other developers” could have constructed the Project.

 

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245.

After conversations in the spring of 2018 failed to reach a mutually acceptable

result, correspondence from the City’s outside counsel was limited for several months as City
administration re-engaged Federated directly in a series of conversations intended to discuss the
future of the Project, including how it might be revived, and the Property more broadly.
246.

On October 24, 2018, Federated had a teleconference with the Mr. Jennings as the

City’s manager and Greg Mitchell as the City’s director of economic development wherein it
explored a number of ideas for moving forward constructively notwithstanding the expiration of
permits for the Project.
247.

The City representatives on the call agreed to check with their staff with regard to

the feasibility of certain approaches discussed and report back to Federated promptly so that further
conversations could unfold in accordance with the feedback they received.
248.

Despite repeated requests for a status update, the City did not respond to Federated

for three months.
249.

When it finally did so, on January 10, 2019, it was via formal correspondence again

delivered on a Friday afternoon—continuing a pattern of behavior reflecting the abrupt delivery
of controversial communications disparaging Federated without any meaningful opportunity for
immediate response, beginning first with its faulty invalidation of the PSA in 2015 and continuing
through its March 2018 Letter, among other examples.
This correspondence framed the October 24th call described above as one

250.

characterized by a series of developer demands which the City was unwilling to meet and
concluded by a refusal to further discuss the Project.

 

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251.

Ironically, the demands allegedly made by Federated, including a suggested

consent order to revive Project permits, were in fact suggestions first raised by the City’s own legal
team.
252.

At this point, the City again referred the Project to its outside legal counsel for the

“handling of all Midtown Project contractual requirements”.
253.

In response, Federated replied to the City manager suggesting the parties pursue

non-binding alternative dispute resolution.
254.

More than a month later, after the City’s internal legal counsel continued to pepper

Federated with threatened code enforcement actions in relation to matters including (a) the height
of the grass on the Property, (b) rubble the City itself abandoned on the Property, (c) graffiti on a
fence the City conveyed to Federated, and (d) syringes and other paraphernalia from transient drug
users traversing the vacant site in light of the City’s failure to enforce an express authorization to
prevent trespassers, and after Federated again spent thousands of dollars in response to those
threats, the City’s outside legal counsel again delivered Federated a formal notice (the “February
2019 Letter”), attached hereto as Exhibit P.
255.

The February 2019 Letter alleged Federated was in violation of the Relevant

Agreements, sought assurance of compliance with said agreements, and threatened to repudiate
same in the event such assurance was not received by March 15, 2019.
256.

Confusingly, said letter once again recycled and set forth virtually the same

arguments Federated had addressed without objection nearly a year prior, in addition to a year
prior to that.
257.

In effect, the City’s February 2019 Letter regurgitated arguments it had been using

for at least two years, as though Federated had never previously responded to the same.

 

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258.

While the City’s February 2019 Letter overlooked its own previous failure and

refusal to pay the Second Garage Requisition, which by that time had occurred nearly one and onehalf years earlier, it was quick to threaten Federated with a breach of contract action with the
express aim of re-taking title to the Property if Federated was unable to deliver the Parking Garage
by September 27, 2019 – a date tied to the filing of the Second Garage Requisition and
conveniently overlooking its failure to fund the same as a prerequisite for enforcement of any
available remedies.
259.

Specifically, the City indicated its intent to exercise its questionable rights under

paragraph 9 of the Amended Garage Agreement, which provides a remedy for breach of said
agreement in the event of a default which remains uncured for a period of ninety (90) days
(hereinafter, the “Garage Remedy”).
260.

The February 2019 Letter overlooked that Federated’s ability to deliver the Parking

Garage by September 2019 was made virtually impossible by the City’s continuing refusal to
permit the very same work it was demanding the completion of. And it was moreover premature
and contained a unilaterally truncated “cure” period, in direct conflict with the Relevant
Agreements.
261.

Federated responded, again in great detail, to the City’s February 2019 Letter, via

email dated March 4, 2019 and attached hereto as Exhibit Q, setting forth the reasons said letter
was again baseless.
262.

Subsequently, Federated’s in-house counsel attempted to contact the City’s outside

counsel on numerous occasions prior to the deadline set forth in her February 2019 Letter,
expressly advising that the window to resolve the matter was quickly closing, but was ultimately
unsuccessful as the City was entirely, but characteristically, unresponsive to Federated.

 

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263.

The City’s attorney stated she would not be in touch until she had direction from

her client, after which she stated, in multiple emails over several days during the period she was
ostensibly looking for assurance from Federated, that she had “not been able to connect with the
city”, was “having a terrible time connecting” with the Mr. Jennings as the City’s manager, and
coordinating with the City was “proving a challenge”—feelings Federated knows all too well.
264.

Not until a week after the City’s arbitrarily established deadline for repudiation of

the Relevant Agreements did Federated finally hear back from the City, and only to the effect that
the City would be willing to entertain alternative dispute resolution.
265.

No response was received in regard to Federated’s position regarding the substance

of the City’s February 2019 Letter.
266.

Whereas the date set forth in the City’s February 2019 Letter came and went with

the City unwilling to so much as even discuss the matter with Federated, the City has in accordance
with its own written confirmation expressly repudiated the Relevant Agreements.
Permit Denial Appeal
267.

Following the denial of its building permit application, Federated in good faith

timely undertook an appeal thereof to the City’s administrative appeal board.
268.

On June 21, 2018 said board heard Federated’s application at a public hearing, at

which the City’s outside legal counsel and its internal legal staff were present.
269.

At the hearing, in a last effort to save the Project, Federated’s principal argument

centered on the fact that, as written, Federated’s permit window ran from the date of “final
approval,” rather than the date of final action, which conditional approval with more than 100
conditions could not possibly constitute.

 

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270.

Ultimately, however, the City’s appeal board, as advised by counsel for the City,

denied the appeal.
Longstanding and Improper Delays by the City
271.

In addition to its anticipatory and later express repudiation of the Relevant

Agreements as well as its overt failure and unreasonable refusal to continue funding requisitions
under the Amended Garage Agreement and Somerset Street Agreement, the City has further
breached the Relevant Agreements on a number of fronts related to its refusal to act in good faith
as a Project partner, thus ensuring the impossibility of the very same outcome it seems at least
ostensibly to be upset with the nonoccurrence of.
272.

Moreover, where the City’s duties as a reviewing authority and contracting party

would ordinarily be separate, the City has conflated its two very distinct capacities throughout its
partnership with Federated, consistently to Federated’s disadvantage.
273.

In repeated breach of its duties as a Project partner, the City delayed the normal

permitting and approval process and improperly impeded the Project.
274.

Standard site plan approvals expire within one year of approval by the City’s

planning board unless administratively extended, which they may be for a maximum period of up
to an additional two years.
275.

It took Federated, which had numerous vendors and multiple full-time staff

members working exclusively on the Project, more than fifteen (15) months to receive City
approval for a majority of the more than 100 discretionary, redundant and overly vague conditions
associated with Midtown.

 

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276.

And it took years to have just one condition of approval in particular—its

construction management plan—partially, and still conditionally, approved, which again occurred
the same week Federated’s 2015 Approval expired.
277.

In fact, at one point the City failed to respond to Federated’s submission of a draft

of that plan for more than half a year, which failure occurred after the City had stopped working
on the Project altogether the year before for several months in order to exert leverage over
Federated in various contractual negotiations.
278.

As a result of the City’s inexplicable inability to timely approve Federated’s

construction management plan notwithstanding more than a dozen drafts thereof over three
calendar years, Federated was afforded very little if any time to coordinate construction logistics
in accordance with that document before expiration of its 2015 Approval.
279.

In short, the City unreasonably waited until the last minute to approve the one

document necessary to ensure construction could proceed in an orderly fashion, and even that
approval itself was conditional.
280.

Furthermore, notwithstanding the substantive nature and associated challenges of

the Project’s conditions, the sheer number of conditions itself—which is unprecedented—
demonstrates the City’s lack of support for the Project.
281.

Recent projects of comparable size and complexity as the Project, but proposed by

local developers as opposed to Florida-based developers, have had significantly fewer conditions
attached to their planning board approvals, including for example the 2012 approval for the socalled “Forefront at Thompson’s Point” project, an approximately $100 million development
proposed by a company managed by the City manager himself prior to Mr. Jennings’ municipal

 

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appointment, which covered a land area ten times the size of the Project and consisted of a mix of
uses similar to the Project’s, inclusive of hotel, office, restaurants and others.
282.

Despite its massive size and intensity, this comparable project, proposed by a team

of principals including Mr. Jennings, only had approximately twenty (20) conditions of approval—
or one-fifth of those associated with Midtown.
283.

By way of further example, the recently constructed “WEX” corporate

headquarters, a major downtown office complex occupying an entire block in a congested area of
the City, built for use by a large corporation previously located in the same municipality Mr.
Jennings was the economic development director for, and which Mr. Jennings as the City’s
manager has been a vocal supporter of, had only 13 conditions of approval associated with it,
compared to Midtown’s more than 100—a figure approximately twice as high as even the Project’s
predecessor, the 2014 Approval, which related to a vastly larger development.
284.

And for the March 29, 2018 approval of the State’s largest hospital’s major

expansion of its downtown campus including vertical expansion of a primary tower and a large
parking facility along one of the State’s busiest thoroughfares, only approximately twenty (20)
conditions of approval were attached by the City.
285.

As showcased by the foregoing, while the Project may have been one of if not the

largest in the State’s history, it was certainly not without peers.
286.

Whether in terms of size, cost or complexity, there have been numerous projects

comparable to the Project approved by the City in the last decade.
287.

Notwithstanding its similarities to other massive projects approved by the City in

recent years, however, the contingencies attached to the Project’s approval were an order of
magnitude greater.

 

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288.

Even though the City administratively extended the Project’s initial one-year

timeline for site plan approvals to the maximum three-year timeline permitted by its Code of
Ordinances, it did so not as a courtesy to Federated —which had been working diligently toward
full Project approval—but instead as a result of its own actions, and in a manner that aligned with
its own self-seeking ends.
289.

The City initially extended the timeline for final approval for a period of one

additional year, which allowed it to sell the Property to Federated, and for the second and last
period of one additional year after that which caused Federated to draw down funds under its First
Garage Requisition—starting a contractual timeline long desired by the City.
290.

In summary, the City’s planning board, acting in reliance on and in deference to

written suggestions from City staff, imposed an inordinate and simply unheard of number of
provisos and prerequisites on the Project’s “approval”, which conditions were drafted by the City
itself, and the City thereafter hired the very same person who led the challenging planning board
approval process, and who had been critical of the Project, as the person chiefly responsible for
clearing that oppressive list of conditions, making the 2015 Approval all but a sham and virtually
ensuring the Project would never be built.
291.

The City then proceeded to ignore and at points refused to even interact with,

Federated for months at a time, during Federated’s many and well documented attempts to satisfy
the outrageously excessive number of conditions associated with the Project.
292.

But after the City virtually assured the Project of which it was so critical was

impossible to fully permit and misled Federated to believe otherwise long enough to close upon
its acquisition of the Property and draw down Grant Funds, it promptly pulled the plug on its
partner.

 

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Damages
293.

As a direct result of the City’s express repudiation of the Relevant Agreements, it

has effectively brought the development of the Project to a halt.
294.

Due to the City’s failure to approve the Project’s predecessor application in a

manner defensible from attack, and as a result of its inability to timely permit the revised Project
after burdening it with an unheard of number of conditions and ignoring Federated’s attempts to
satisfy the same, construction costs have increased dramatically and market demand has lessened,
impacting Federated to the extent of tens of millions of dollars.
295.

As a proximate cause of the City’s breach of said agreements, Federated has

incurred compensatory damages of more than Ten Million Dollars ($10,000,000.00) in direct cash
investment in the Property, the Project, and related vendors and consultants, as well as marketing
materials, staff time, and similar expenditures.
296.

Loss of expected profits are significantly and exponentially higher.

297.

Neutral and conservative valuations of the Parking Garage alone indicate Federated

has lost millions upon millions of additional dollars in expected revenue, and exponentially more
in profit, due to the City’s undermining of the Project.
298.

Federated’s extensive internal underwriting and cash flow projections indicate City

obstruction of the Project further resulted in the loss of millions of dollars in expected revenue and
profit in relation to the remaining residential portions of the Project as well.
299.

An interested party which approached Federated about acquiring the Project site,

in an unsolicited manner, dropped its offering price for the unimproved Property by Six Million
Dollars ($6,000,000.00) as a result of the City’s publicly threatened legal actions against, and bad
faith with respect to its dealings with, Federated.

 

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300.

Another party which had also expressed, again in an unsolicited manner, either

acquiring the Property outright or partnering with Federated to construct the Project together,
dropped its offer price by Two Million Dollars ($2,000,000.00) and ultimately failed to move
forward in any respect with regard to the Project due to the City’s failure to honor its prior
statement in the MDP Confirmation Letter.
301.

The City’s refusal to honor the remainder of its obligations under the Amended

Garage Agreement deprived Federated of more than Eight Million Dollars ($8,000,000.00) in
partnership contributions on which Federated relied when purchasing the Property and designing
a project both parties expressly agreed was not otherwise commercially viable.
302.

While Federated has expended millions toward the initial construction efforts of the

Project, the City’s bad faith actions have clearly stifled additional equity and other financing
interests in the Project.
303.

As a result of the City’s many public statements about Federated and the Project,

by way of its highest executive and elected officials, Federated has also suffered damages to its
reputation and goodwill, with an impact on its unrelated business affairs as the owner of significant
national commercial real estate holdings as well.
304.

As the result of the significant passage of time arising from the City’s Obstruction,

as hereinafter defined, Federated lost the ability to construct the Project or its predecessor at
dramatically lower construction costs, and forfeited years of related cash flow.
305.

As a result of the City’s conduct surrounding the performance guarantee, Federated

has been damaged from the City’s failure to convey the full amount thereof, which should have
been paid prior to Closing by the City itself, at the time of conveyance of the Property, or by the
City’s requirement that Federated pay such amount on its behalf.

 

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CAUSES OF ACTION
COUNT I – BREACH OF CONTRACT
Amended Garage Agreement
306.

Federated restates and realleges paragraphs 1 through 305 as if restated herein.

307.

The Amended Garage Agreement is and at all times relevant hereto was a valid and

enforceable contract.
308.

Federated has fully complied with all of its duties and obligations under the

Amended Garage Agreement, including but not limited to fully designing the Parking Garage as a
compliant structure, entitling said Parking Garage through the City’s planning board, coordinating
with third-party utility providers, hiring staff to manage leasing and construction affairs, timely
applying for a building permit to construct the facility, negotiating various construction and
remediation contracts to implement related cleanup and construction work, receiving construction
design approval from the City’s approved third-party plan reviewer, paying hundreds of thousands
in related City review and permitting fees, filing its First Garage Requisition in a manner fully
approved by the City, filing its Second Garage Requisition in the time required, repeatedly assuring
the City in writing of its technical and financial capacity on multiple occasions, pursuing financing
for construction commencement, and in good faith making itself available at virtually any time
including on weekends and recognized holidays for cooperative discussions with the City
regarding the advancement of this element of the Project.
309.

Nevertheless, in breach of its express contractual obligations, and without

explanation, the City stopped disbursing funds under the Amended Garage Agreement in October
2017, following the Second Garage Requisition, and thereafter anticipatorily breached the
Amended Garage Agreement when it delivered Federated the March 2018 Letter, after which it

 

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finally repudiated the Amended Garage Agreement expressly as of March 15, 2019 by way of its
February 2019 Letter.
310.

Through its February 2019 Letter, the City is purporting to exercise its Garage

Remedy in an effort to retake possession of Lot 6 from Federated.
311.

Through its March 2018 Letter and February 2019 Letter, the City has clearly and

positively indicated that it will not comply with its express obligations under the Amended Garage
Agreement.
312.

The foregoing expressions confirm the City’s prior discontinuation of compliance

under the Amended Garage Agreement, and default thereunder, dating to October 2017, when it
failed to fund Federated’s Second Garage Requisition, and accordingly Federated fully anticipates
the City will continue to not comply with its obligations under the Amended Garage Agreement.
313.

Federated is entitled to treat the City’s failure to pay its Second Garage Requisition,

after previously approving the bases of same, as well as the City’s anticipatory breach as stated in
the March 2018 Letter, and finally its actual repudiation of the agreement in the February 2019
Letter, as immediate breaches of the Amended Garage Agreement.
314.

The City’s actual breach, anticipatory repudiation, and express repudiation of the

Amended Garage Agreement, as well as its threatening conduct in relation thereto, are and will be
to the direct detriment of Federated and have cost Federated to lose the millions of dollars it has
spent to date on the Project along with the Project’s value and Federated’s reasonably expected
profits.
315.

As a direct and proximate cause of the City’s breach by failure to fund the Second

Garage Requisition, its anticipatory breach in the March 2018 Letter, and now its express

 

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repudiation in the February 2019 Letter, Federated has suffered damages including those described
in paragraphs 259 through 268 above.
316.

In addition to money damages, to which Federated is entitled, Federated is also due

injunctive relief.
317.

The City’s actions and threatened actions have caused Federated to suffer

irreparable injury which so long as the Amended Garage Agreement continues to encumber the
Property, and the Amended Guarantee continues to be enforceable, cannot be remedied absent the
grant of injunctive relief.
318.

Federated has protectable interests deserving of immediate protection and has a

substantial likelihood of success on the merits.
319.

Since the City has already drawn down the Grant Funds from HUD, and is already

paying interest thereon irrespective of whether said funds are held or paid to Federated, the further
injury that will come to Federated in the absence of injunctive relief outweighs any harm that an
injunction would inflict upon the City—none.
320.

The granting of injunctive relief would reflect a favorable balancing of relevant

hardships.
321.

So long as the Amended Garage Agreement continues to encumber the Property,

the public interest will be furthered by enjoining the City from further breaching and attempting
to wrongfully terminate it together with Federated’s private property rights in Lot 6.
WHEREFORE, Plaintiff prays that judgment be entered against Defendant City of Portland
as follows:

 

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A.

Enter judgment against the City and in favor of Federated awarding Federated

damages, including but not limited to compensatory and lost profits, in an amount according to
proof, together with the costs and fees associated with this action;
B.

Enter a preliminary injunction enjoining and restraining the City, its agents,

servants, staff and attorneys, and all others in active concert or in participation with it from:
a. Altering Federated’s quiet enjoyment of the Property;
b. Prohibiting Federated from entering into leases related thereto; and
c. Enforcing any deadlines established within the Amended Garage Agreement for
completion of the Parking Garage, to the extent the same have or may have been
triggered under said agreement, while this matter is pending and for a period of
time running two years from the City’s actual disbursement of the Second Garage
Requisition, after a building permit is granted, unless and until the Amended
Garage Agreement is rescinded.
C.

Enter an Order suspending any deadlines for the completion of the Project or

Parking Garage component thereof as specified in the Amended Garage Agreement, Amended
Guarantee, or any of the other Interlocking Partnership Agreements discussed herein while this
matter remains pending and for a period thereafter equating to the date which is two years after
the City’s satisfaction of the Second Garage Requisition and issuance of the necessary building
permits, unless and until the applicable agreements are rescinded;
D.

Grant any necessary equitable relief in order to remedy the harm done, including

any necessary writs;
E.

Award reasonable attorneys’ fees and related court costs; and

F.

Grant such other and further relief as the Court may deem just and proper.

At the appropriate time, Federated may also seek leave to assert claims for punitive
damages.

 

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COUNT II – BREACH OF CONTRACT
Somerset Street Agreement
322.

Federated restates and realleges paragraphs 1 through 321 as if restated herein.

323.

The Somerset Street Agreement is a valid and enforceable contract.

324.

Federated has fully complied with all of its duties and obligations under said

agreement.
325.

Under Sections 2 and 4 of the Somerset Street Agreement, the City agreed to fund

two-thirds (2/3) of the cost of performance guarantee expenses, while under Section 3(d) it also
agreed to make all disbursements pursuant to compliant requisitions within fifteen (15) days of
receipt.
326.

Under Section 2 of the Somerset Street Agreement, demonstration of financial

capacity by Federated is only a condition to the issuance of a building permit, not disbursement of
funds.
327.

Importantly, the City confirmed in writing that it did not issue “building” permits

for site work improvements, like the Somerset Street improvement project. Nevertheless, it chose
to enforce the requirement of financial capacity demonstration at a time of its unilateral and
arbitrary choosing.
328.

Under Section 2(b) of the Somerset Street Agreement, the City agreed to meet with

Federated in order to manage construction costs, including permitting expenses, and to continue
to work “collaboratively” and “cooperatively” with Federated for such purposes.
329.

The City breached the foregoing obligations when it (i) attempted to unilaterally

amend the Interlocking Partnership Agreements by adjusting the cumulative guarantee obligations
thereof to its own benefit and to the detriment of Federated, notwithstanding its prior waiver
thereof, prior to issuance of a building permit for the Parking Garage, (ii) unreasonably declined
 

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to fund Federated’s Second Somerset Requisition within fifteen (15) days of its filing, (iii) refused,
by way of the March 2018 Letter, to continue funding any disbursements under the Somerset Street
Agreement until Federated provided assurances to the City which, pursuant to the express terms
of said agreement, were premature at such time, and (iv) not only failed to cooperatively
collaborate with Federated for the purpose of finding common ground on construction and
permitting expenses, but in fact, at the level of its highest administrative official, completely
ignored Federated’s many repeated and well-documented written and other requests to engage in
such dialogue.
330.

Pursuant to the March 2018 Letter and the February 2019 Letter, the City clearly

and unambiguously indicated that it will no longer fund Somerset Street Agreement requisitions.
331.

As a direct and proximate result of the City’s breach of the Somerset Street

Agreement, Federated suffered damages including but not limited to the denial of its building
permit and corresponding expiration of its site plan permit, which expiration has directly adversely
impacted expected Project profits in addition to costs associated with the delay of any re-permitting
of the Project, and costs associated with the City’s failure to permit the Project arising from the
lack of a performance guarantee the City should have partially funded if in fact it was required.
WHEREFORE, Plaintiff prays that judgment be entered against Defendant City of Portland
as follows:
A.

Enter judgment in favor of Federated and against the City;

B.

Award compensatory and lost profits damages to Federated, as well as pre-

judgment and post-judgment interest, in an amount according to proof, together with the costs and
fees of bringing this action;

 

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C.

Require that the City, unless and until the Relevant Agreements are rescinded,

specifically perform under the Somerset Street Agreement, by cooperatively collaborating with
Federated on Project costs and related matters as well as allowing a bond in lieu of cash escrow or
letter of credit to satisfy any performance guarantee now or hereafter applicable to the Project, if
any; and
D.

Award Federated any further relief that the Court deems equitable and just.

At the appropriate time, Federated may also seek leave to assert claims for punitive
damages.
COUNT III – DECLARATORY JUDGMENT
Amended Garage Agreement
332.

Federated restates and realleges paragraphs 1 through 331 as if restated herein.

333.

Section 4(a) of the Amended Garage Agreement provided Federated three months

from the date of its First Garage Requisition, i.e., until September 27, 2017, to draw down the first
One Million Dollars ($1,000,000.00) in Grant Funds for any Grant Uses.
334.

Section 4(b) of the Amended Garage Agreement also specifies that the two-year

timeline for Federated to reach the so-called “start-up” phase of construction of the Parking Garage
(“Substantial Completion”) is not triggered until Federated requisitions the first One Million
Dollars ($1,000,000.00) in Grant Funds, specifically for “Garage construction” as but one of
multiple permitted Grant Uses.
335.

Federated has not commenced construction of the Parking Garage and, accordingly,

none of its requisitions under the Amended Garage Agreement relate to construction costs, as
would be required to start the two-year timeline for Substantial Completion.
336.

The Amended Garage Agreement further clarifies that since the parties expressly

agreed construction of the Parking Garage was not commercially viable absent the City’s full
 

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contribution of the Grant Funds, the triggering of applicable timelines tied to requisition dates
assumes, naturally, a corresponding payment of Grant Funds associated therewith before
applicable timelines commence.
337.

Section 1 of the initial Garage Agreement expressly states that Substantial

Completion runs “from the date on which a total of $1,000,000.00 in City Grant Funds has been
requisitioned. . . .and disbursed. . . .” (emphasis added).
338.

The City also expressly agreed, in Section 2 of the initial Garage Agreement, which

section has not been modified in subsequent amendments, that the Grant Funds would represent
the first money spent on the Parking Garage.
339.

Notwithstanding this agreement, the City elected to, without apparent reason or

accompanying explanation, discontinue disbursing the Grant Funds while simultaneously
attempting to hold Federated to an obligation of reaching Substantial Completion tied to the date
of its Second Garage Requisition.
340.

Federated was under no obligation to file the First Garage Requisition on June 27,

2017, but after incurring costs for more than half a decade it agreed to do so voluntarily, in good
faith and without a financial need therefor, in response to pressure from the City which had
conditioned its compliance with other aspects of the Relevant Agreements on commencement of
relevant Project timelines.
341.

Thereafter, Federated fully complied with its obligation to timely file the Second

Garage Requisition thereafter which, again, merely sought the balance of funds initially requested
and approved for payment in the First Garage Requisition.
342.

After fully approving its construction plans, but denying a construction permit on

the basis of an arbitrarily waived-then-reinstated performance guarantee precondition, and thus

 

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making delivery of the Parking Garage by any point in time an impossibility absent a change in its
own conduct, the City took the position that the deadline for completion of the Parking Garage
continues to run from the date funds were requested even though, again, the City failed to fund the
related requisition and expressly and contractually acknowledged in writing that the Parking
Garage is not commercially viable absent the Grant Funds.
343.

Section 2 of the Garage Agreement states, in pertinent part, that the Grant Funds

are “being provided in part as an incentive to build the Garage which would otherwise not be
commercially viable” (emphasis added).
344.

At all times relevant to the Project and including with respect to attempts to start

construction of the Parking Garage, Federated used good faith efforts to proceed in a timely fashion
from the date of its First Garage Requisition and, thereafter, from the date of its Second Garage
Requisition.
345.

These efforts included multiple unanswered inquiries to the City, in writing, with

regard to the status of payment of the Second Garage Requisition, as well as its application for a
building permit and finalization of Parking Garage construction plans within weeks of the City
notifying it that it had arbitrarily changed its mind with regard to the continuing validity of the
longer-term Master Development Plan permit associated with the 2014 Approval.
346.

Although Federated was unsuccessful in obtaining the building permit necessary

for the Substantial Completion of the Parking Garage by the date which is two years following its
Second Garage Requisition, even if the Amended Garage Agreement required Federated to base
the timeline for delivery upon the date thereof as the date on which the first One Million Dollars
($1,000,000.00) in Grant Funds were drawn down for any of the Grant Uses, as opposed to
specifically for construction purposes, where the City failed to fund said requisition, or even

 

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explain why it had done so, while simultaneously acknowledging in writing that it was necessary
for the Parking Garage to be commercially viable—thus depriving Federated of several months in
which it could have cured or remedied any perceived deficiencies in its request—the City was
undeniably the first party to breach the Amended Garage Agreement.1
347.

Such circumstances do not and cannot constitute a default by Federated under the

Amended Garage Agreement.
348.

Federated has complied with all obligations incumbent upon it arising under the

Amended Garage Agreement and ancillary components of the Interlocking Partnership
Agreements.
349.

The City, through its February 2019 Letter and preceding communications,

including the March 2018 Letter and April 2018 Letter, issued Federated a series of default notices
and expressly repudiated the Relevant Agreements (collectively, the “Default Notices”).
350.

In its February 2019 Letter, the City, in addition to repudiating the Relevant

Agreements, expressly noted its intention to seek a repurchase of Lot 6 in accordance with the
Amended Garage Agreement.
351.

The Default Notices have given rise to a genuine, present and actual controversy

concerning Federated’s compliance with the Amended Garage Agreement.
352.

As a consequence, Federated is in doubt of its rights, status, obligations, powers

and privileges under the Relevant Agreements, and even under its deed to Lot 6.
353.

There is a bona fide, actual, present and practical need for the Court to issue a

declaration as to the interpretation and enforceability of the Amended Garage Agreement and the
rights of the parties thereunder.
                                                            
1

 Federated strongly disputes the allegation that it has also breached the Amended Garage Agreement, and for the
avoidance of doubt this averment should not be construed to the contrary. 

 

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354.

The rights, status, obligations, powers, and privileges of Federated under the

Relevant Agreements are dependent upon the Court’s adjudication of the present controversy.
355.

All parties with antagonistic or adverse interests are properly before the Court.

WHEREFORE, Plaintiff prays that judgment be entered against Defendant City of Portland
as follows:
A.

Declare that Federated has complied with all applicable provisions of the Relevant

Agreements with respect to its obligations, requirements and deadlines to (i) request funds for, and
(ii) start or commence construction of the Project arising thereunder;
B.

Declare that there has been no event of default or breach by Federated under the

Relevant Agreements with respect to Federated’s obligations, requirements and deadlines to start
or commence construction under the Relevant Agreements;
C.

Declare that the bases for default asserted in the Default Notices are invalid;

D.

Award Federated its attorneys’ fees and costs incurred in connection with this

cause; and
E.

Award Federated all other and further legal and equitable relief that the Court

deems just and proper.
COUNT IV – DECLARATORY JUDGMENT
Somerset Street Agreement
356.

Federated restates and realleges paragraphs 1 through 355 as if restated herein.

357.

While Federated appealed to the City during the Project’s permitting and

entitlement efforts to decouple the Somerset Street improvement project—a public infrastructure
undertaking for which no planning board approval or building permit was required—from the
larger Project permits, the City refused, alleging the Project and street improvement work were

 

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too closely interrelated and causing Federated to incur massive third-party costs related to the
negotiated design of said improvements with City staff and Project abutters.
358.

Federated accordingly required a building permit before it could have constructed

the work contemplated by the Somerset Street Agreement.
359.

While there is no timeline specified expressly for completion of the work required

under the Somerset Street Agreement, under Federated’s construction management plan approved
by the City in March 2018 the City expressly acknowledged and consented to such work
commencing no sooner than between six (6) and nine (9) months following commencement of the
Parking Garage.
360.

Less than one month after approving such a start date, however, the City then

declared Federated in breach of the Somerset Street Agreement, by way of its April 2018 Letter,
for failure to complete the same work it approved, literally weeks before in Federated’s
construction management plan which clearly outlined this work would not even commence until
several months later.
361.

The City’s April 2018 Letter alleged that Federated had defaulted under the

Somerset Street Agreement for failure to follow the disbursement procedures therein, as a result
of its second requisition thereunder (“Second Somerset Requisition”), for the purpose of funding
the City’s performance guarantee.
362.

However, Section 4 of the Somerset Street Agreement states, in pertinent part, that

Federated’s contractor was responsible for delivering to the City a “performance bond . . . for the
full amount of the Contract. . . .”
363.

Section 1 of the Somerset Street Agreement requires the parties to pay their

proportionate shares of the TPC.

 

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364.

The TPC, in turn, very clearly includes, to the extent it is determined to not have

been later waived, the cost of a performance guarantee.
365.

The City therefore alleged Federated was in default for asking the City to fund an

obligation the City expressly agreed to fund.
366.

Notwithstanding the indisputable prematurity of its claim, the City’s April 2018

Letter further alleges Federated defaulted under the Somerset Street Agreement for failure to
appropriately demonstrate its financial resources in accordance therewith to the extent of one-third
of the street improvement cost.
367.

Section 2 of the Somerset Street Agreement clearly and unambiguously provides

that demonstration of Federated’s financial capacity is a contractual obligation due at the time of
issuance of a building permit for the scope of work specifically associated with the contemplated
Somerset Street improvements, rather than a precondition to the issuance of such permit, or to the
disbursement of funds under the Somerset Street Agreement, and under no event would failure to
deliver it constitute an event of default.
368.

Notwithstanding the foregoing, on no less than three occasions, and outside the

context of its application for a building permit, the City protested Federated’s requisitions under
the Somerset Street Agreement on the basis that it had not sufficiently demonstrated its financial
capacity.
369.

The City further based its allegation of default for want of financial capacity

demonstration on the fact that Federated had not timely commenced the project, even though the
City itself had sole control over such timing.
370.

The City alleged that it was concerned about Federated’s financial standing given

the structural changes it baselessly alleged took place in Federated’s business affairs.

 

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371.

Federated voluntarily demonstrated through a number of financial institutions and

intermediaries, on multiple occasions spanning several years, that it had more than sufficient
financial capacity to construct the Project.
372.

In fact, its financial standing has dramatically improved since the Somerset Street

Agreement was executed.
373.

The City alleged that Federated had defaulted under the Somerset Street Agreement

for its failure to follow certain HUD “guidelines” articulated in the Code of Federal Regulations.
374.

However, notwithstanding any further requirements the City itself may be subject

to as a recipient of loan funds from HUD, the Somerset Street Agreement itself only obligates
Federated to comply with certain enumerated labor and employment regulations of HUD—and
none of them are triggered until on-site construction commences, which at the time of this
Complaint is an impossibility.
375.

Further, the “regulations” cited by the City in its April 2018 Letter are in fact merely

“guidelines” and, as such, are suggestive recommendations for direct grant recipients rather than
mandatory requirements for ultimate grant beneficiaries.
376.

Under no circumstances would failure to follow such suggestions constitute a

default under Federated’s entirely separate contract with the City.
377.

In its February 2019 Letter, the City again alleged that Federated was in default of

the Somerset Street Agreement, but this time added as a basis for such conclusion that it had not
provided a timeline for the related work.
378.

However, Federated not only provided a timeline in the form of its construction

management plan, but the City in fact acknowledged the provision of this timeline by virtue of its
approval of the same, which was delivered to Federated in writing.

 

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379.

The Default Notices, and specifically the March 2018 Letter, have given rise to a

genuine, present and actual controversy concerning Federated’s compliance with the Somerset
Street Agreement.
380.

Federated is in doubt of its rights, status, obligations, powers and privileges under

the Somerset Street Agreement.
381.

There is a bona fide, actual, present and practical need for the Court to issue a

declaration as to the interpretation and enforceability as to the Somerset Street Agreement and the
rights of the parties thereunder.
382.

The rights, status, obligations, powers, and privileges of Federated under the

Relevant Agreements are dependent upon the Court’s adjudication of the present controversy.
383.

All parties with antagonistic or adverse interests are properly before the Court.

WHEREFORE, Plaintiff prays that judgment be entered against Defendant City of Portland
as follows:
A.

Declare that Federated has complied with all applicable provisions of the Somerset

Street Agreement with respect to its obligations, requirements and deadlines to (i) demonstrate its
financial capacity, as applicable, and (ii) provide a timeline for commencement of construction;
B.

Declare that there has been no event of default or breach by Federated under the

Somerset Street Agreement with respect to Federated’s obligations, requirements and deadlines to
start or commence construction of the street improvement work required thereby, or with respect
to its Second Somerset Requisition or otherwise;
C.

Declare that the bases for default asserted in the Default Notices are invalid;

D.

Award Federated its attorneys’ fees and costs incurred in connection with this

cause; and

 

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E.

Award Federated all other and further legal and equitable relief that the Court

deems just and proper.
COUNT V – FRAUDULENT INDUCEMENT AND MISREPRESENTATION
384.

Federated restates and realleges paragraphs 1 through 383 as if restated herein.

385.

The City fraudulently induced Federated to proceed to Closing upon its acquisition

of the Property, well before it was obligated to do so, in reliance on its issuance of the First
Remaining Conditions Letter, which documented previous verbal representations prior to the
execution of the Fourth Amendment and contained false representations to the extent the
subsequently enforced obligation to post a cash performance guarantee in the total amount of the
Project’s site work was omitted therefrom.
386.

Given its later insistence on the existence of a performance guarantee as a condition

of approval, the City at all times knew or should have known that the representations contained in
the First Remaining Conditions Letter, as confirmed in the Second Remaining Conditions Letter,
both of which confirmed the absence of any such condition, were false and untrue.
387.

The City issued the First Remaining Conditions Letter for the sole purpose of

inducing Federated to close upon the Property before it was contractually obligated to, on the basis
of the representations and omissions contained therein.
388.

Federated, in justifiable reliance on the First Remaining Conditions Letter and the

truth of the material fact that it, like the Second Remaining Conditions Letter, confirmed the lack
of any further conditions precedent to obtaining a building permit beyond those specifically
enumerated therein, was damaged by the City’s actions to at least the extent that it gave up the
valuable right to condition a Closing on the Property and the associated expenditure of multiple
millions of dollars on its receipt of a building permit.

 

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389.

Further, the City’s MDP Confirmation Letter, wherein it confirmed the long-term

continuing validity of the 2014 Approval’s Master Development Plan permit in the context of
permitting a future amendment thereof without permit expiration, likewise turned out to be a false
representation of material fact.
390.

The City knew, on the basis of Federated’s express comments, that Federated was

reimagining parts of the Project in the form of the Revised Project Concept, as a way of making
approval of its construction management plan—which had theretofore been impossible to receive
City approval of—and thus implementation of related construction, a more seamless and efficient
process for all involved.
391.

In related discussions with Federated, the City expressly suggested that Federated

pursue amendment of its prior Master Development Plan permit as opposed to Federated’s thenpreferred approach of amending its then in-place site plan permit as embodied in the 2015
Approval, for the sole purpose of causing Federated to pursue that course of action and/or to refrain
from amending its site plan permit, which eventually lapsed as a result.
392.

In justifiable reliance on the MDP Confirmation Letter’s contents as true, valid and

enforceable, Federated acted thereupon and renegotiated all of its applicable vendor contracts, reconceptualized the Project, and reconfigured its entire approach to the Project timeline.
393.

However, as confirmed by the City’s retraction of the position it previously stated

in the MDP Confirmation Letter, when it advised Federated mere weeks before its site plan permit
expired, in January 2018, that it had inexplicably changed its mind, the City either knew that the
representations in its MDP Confirmation Letter were false or proceeded in issuing such
correspondence with reckless disregard for whether they were false or not.

 

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394.

As a result of the City’s misrepresentations in the MDP Confirmation Letter,

Federated spent significant time in vain restructuring its design team, exploring project concepts
and pursuing various market and other analyses which were later deemed not feasible without an
entirely new permitting process, which process would evaporate Federated’s exempt status from
harmful regulatory modifications enacted after the Project’s inception, and was hampered in its
ability to resolve issues that eventually precluded issuance of a building permit for the Project and
the related expiration of its 2015 Approval due to the City’s last minute decision to truncate its
construction permitting window.
395.

This cause of action is not subject to or therefore precluded by the Maine Tort

Claims Act, 14 M.R.S. Sec. 8101, et. seq., because it does not seek damages against the City.
WHEREFORE, Plaintiff prays that judgment be entered against Defendant City of Portland
as follows:
A.

Rescind the Relevant Agreements and other Interlocking Partnership Agreements,

to the extent same remain applicable, due to the City’s misrepresentations and unfair and deceptive
acts, which have rendered the Project an impossibility;
B.

Award Federated its attorneys’ fees and costs incurred in connection with this

cause; and
C.

Award Federated all other and further legal and equitable relief that the Court

deems just and proper.
COUNT VI – BREACH OF THE IMPLIED COVENANT
OF GOOD FAITH AND FAIR DEALING
396.

Federated restates and realleges paragraphs 1 through 395 as if restated herein.

397.

Since Midtown’s inception, Federated placed a great deal of trust and confidence

in the City to advance the Project in good faith and to act cooperatively and collaboratively with
 

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Federated as required by the Relevant Agreements as well as the Interlocking Partnership
Agreements more broadly.
398.

Time and again, the City also affirmed its commitment to and support of the Project

outside of a contractual context, through written and other statements from its chief administrative
official and senior staff members including, as but one example, the MDP Confirmation Letter
which stated “we are all committed to making this project a reality and will do everything we can”
to make it happen.
399.

Due to the City’s dual role as seller of the Property and contract partner, on the one

hand, and permitting and reviewing authority for the Project on the other, a great disparity existed
between Federated and the City as its partner.
400.

By virtue of the foregoing and the City’s status as a financial partner in the Project,

a fiduciary relationship existed between the City and Federated.
401.

Notwithstanding this fact and the City’s many disingenuous comments to the

contrary, following the settlement of the Appeal it became apparent the City was displeased with
the revised, smaller, less dense version of Midtown—and commenced an obvious campaign to
intentionally scuttle the Project, in bad faith, through continuous acts of obstruction repeatedly
erring on the side of Project delays and impediments rather than collaboration and support,
including but not limited to by:
a. the City’s fabricated expiration of the PSA, which correlated directly with the
timing of Federated’s attempt to discuss an entirely legal but politically sensitive
partial change of use for the Project, which it failed to explain the bases of for weeks
after notifying Federated of same late on a Friday afternoon in the middle of its
permitting efforts;
b. the City Manager’s confirmed directive to his staff to stop reviewing the Project’s
conditions of approval for several months in an admitted effort to exert leverage
over Federated in related contract negotiations by inappropriately utilizing the
City’s overlapping role as permitting authority to benefit its role as land seller and
contract partner;
 

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c. the City’s unreasonable inability to approve Federated’s proposed and continuously
revised construction management plan, a condition precedent to receipt of a
building permit, for more than two years, and its refusal at times to even respond
to Federated regarding said plan for more than half a year;
d. initially refusing to fund the First Somerset Requisition partially on the basis that
Federated had not demonstrated its financial capacity, even though evidence of
same had been delivered to City staff in writing on multiple prior occasions without
so much as an acknowledgment of receipt, and certainly without objection, and
even though such action by Federated was not a contractual precondition to
disbursement of funds;
e. the City planning director’s statements to Federated in the winter of 2018, as
Federated expended hundreds of thousands of dollars to procure a building permit
notwithstanding the fact that the City had discontinued its financial contributions
months earlier, that the City was “done with” the Project, that Midtown was
“heading to litigation”, and that “as usual [Federated’s principal] doesn’t know
what the [expletive] he is talking about”;
f. the City planning director’s staff being directed not to speak or correspond with
Federated unless it was channeled through said director;
g. the City Manager’s prohibition of the City’s planning director from communicating
with Federated except for in writing;
h. the City’s decision to characterize the MDP Confirmation Letter as nothing more
than a “preliminary conversation” even though it was aware Federated had
completely re-conceptualized the Project in reliance on it over a year prior;
i. the City Manager’s refusal to (a) explain why the Second Garage Requisition was
not funded, or (b) even engage Federated in conversations about the same despite
written requests on at least five separate occasions, all of which were ignored and
went without response of any kind;
j. the City’s refusal to honor its waiver of the performance guarantee requirement,
notwithstanding two written confirmations that it was no longer a condition of
approval, one written admission that the City had waived it for itself in order to
proceed to Closing, and express authority under its Code of Ordinances to issue
such a waiver coupled with an email from its planning staff stating they would do
“everything [they] can to make [the Project] happen”, and the City’s oversight of
the fact that in any event it, as the Project’s subdivision applicant, rather than
Federated, was responsible for posting the performance guarantee;
k. indicating in writing that no building permit was necessary for site work to be
undertaken, and then on a separate occasion indicating site work would preserve
Federated’s entitlements for the Project if commenced in a timely fashion, only to
later arbitrarily change course and take the position that a building permit was, in
fact, required for site work after all; and
 

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l. the City’s acceptance of Federated’s building permit application and hundreds of
thousands of dollars in related permit fees for the Parking Garage, a component of
the Project the City acknowledged was not commercially viable without the Grant
Funds, at a time when the City, unbeknownst to Federated, had not only neglected
to fund, but had in fact determined it would not be funding the Second Garage
Requisition (collectively the “City’s Obstruction”).
402.

The components of the City’s Obstruction outlined above represent the culmination

of a laundry list of less significant but still obstructionist behavior, arising from a clear bias against
the Project following its post-Appeal redesign, ranging from the City counsel’s failure to object to
its own planning board member admitting to conducting online research about the Project—to
which the rest of the board was not privy—during the Project’s entitlement stage, to City staff
refusing to consider specific Project materials which the Interlocking Partnership Agreements
specifically contemplated, to the City’s planning director, in his capacity as former planning board
chair, sarcastically congratulating a Federated employee on his new job “working for” Jonathan
“Peter” Monroe, one of the Appeal plaintiffs—in apparent disapproval of Federated’s decision to
settle the Appeal instead of further defending the Appeal.
403.

The Project’s apogee was limited to a brief period of time between execution of the

PSA and the 2014 Approval.
404.

Thereafter, upon settling the Appeal, Federated presented the revised Project for

reasons outside of its control, whereupon the City’s obvious displeasure, and corresponding
unwillingness to work cooperatively with Federated, began and has only grown since.
405.

The long pattern of the City’s Obstruction amounts to a direct breach of the

covenant of good faith and fair dealing implicit in this transaction by virtue of the City’s fiduciary
relationship to Federated as a partner in the Interlocking Partnership Agreements.
406.

This cause of action is not subject to or therefore precluded by the Maine Tort

Claims Act, 14 M.R.S. Sec. 8101, et. seq., because it does not seek damages from the City.
 

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WHEREFORE, Plaintiff prays that judgment be entered against Defendant City of Portland
as follows:
A.

Rescind the Relevant Agreements and other Interlocking Partnership Agreements,

to the extent same remain applicable, due to the City’s Obstruction constituting a nearly continuous
breach of the implied covenant of good faith and fair dealing applicable to Federated’s partnership
with the City;
B.

Award Federated its attorneys’ fees and costs incurred in connection with this

cause; and
C.

Award Federated all other and further legal and equitable relief that the Court

deems just and proper.
COUNT VIII
TORTIOUS INTERFERENCE WITH A CONTRACTUAL RELATIONSHIP
407.

Federated restates and realleges paragraphs 1 through 406 as if restated herein.

408.

Throughout the month of June 2015, the City was being managed by its police chief

(“Police Chief”) as an interim chief executive, following the departure of the City’s prior interim
chief executive.
409.

At the same time, the City was concluding negotiations with finalists for the

position of new incoming City manager, and eventually made an offer to Mr. Jennings.
410.

Prior to his commencement of employment as a City employee, Mr. Jennings took

a direct and active role in the Project’s trajectory.
411.

Although his tenure with the City did not commence until mid-July 2015, Mr.

Jennings held multiple discussions with Federated and City staff members, including the Police
Chief as interim City manager, throughout June 2015.

 

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412.

On June 26, 2015, weeks before starting as City manager, Mr. Jennings even met

with Federated in person to discuss the Project and his soon-to-be staff in depth.
413.

Prior to his commencement of employment, Mr. Jennings was actively directing

City staff members with regard to the Project.
414.

In a June 2015 meeting with Federated, the Police Chief acting as the City’s interim

manager advised Federated that Mr. Jennings contacted him to inform him that Federated reached
out to and met with Mr. Jennings to discuss the Project.
415.

The position held by the Police Chief is and was a direct report to the position Mr.

Jennings assumed in July 2015.
416.

The position held by the City’s economic development director, which individual

drafted the June 19th Communication, was also a direct report of the position Mr. Jennings assumed
in July 2015.
417.

Direct reports are subject to performance reviews by their superiors, in this case

Mr. Jennings.
418.

By means of intimidation arising from his incoming status as the direct supervisor

of both the Police Chief, acting as interim City manager, and the City’s economic development
director, as author of the June 19th Communication, Mr. Jennings acted in a personal non-City
employee capacity when he procured the breach of the PSA, a breach which but for his direct
involvement would not have occurred, and proximately damaged Federated thereby.
WHEREFORE, Plaintiff prays that judgment be entered against Defendant Jon P. Jennings
as follows:

 

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G.

Enter judgment against Mr. Jennings and in favor of Federated awarding Federated

damages, including but not limited to compensatory and lost profits, in an amount according to
proof, together with the costs and fees associated with this action;
H.

Grant any necessary equitable relief in order to remedy the harm done;

I.

Award reasonable attorneys’ fees and related court costs; and

J.

Grant such other and further relief as the Court may deem just and proper.

At the appropriate time, Federated may also seek leave to assert claims for punitive
damages.

Dated: August 16, 2019

Respectfully Submitted
/s/ Allison A. Economy
Allison A. Economy, Esq.
F. David Walker, IV, Esq.
RUDMAN WINCHELL
Attorney for Plaintiffs
84 Harlow Street,
Bangor, Maine 04401
(207) 992-2413
aeconomy@rudmanwinchell.com

 

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