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Collaboration Through Litigation: Springs’ USOC Deal ‘Saved’ By Suit

By Matt Masich
DENVER — The big deal was falling through.
The $53 million public/private partnership aimed at keeping the U.S. Olympic Committee, or USOC, headquarters in Colorado Springs had broken down. City funding for the new headquarters hadn’t come in, developer LandCo Equity Partners was running out of money to build it, and the USOC seemed ready to skip town.
When LandCo filed a lawsuit against the city and USOC, a lot of people thought the deal had been killed. In fact, just the opposite was true.
“Litigation is usually destructive. Litigation usually takes years,” said Steve Long, who with fellow Polsinelli Shughart partner Reid Page represented LandCo in the suit. Polsinelli is a Colorado 50 law firm.
“Who would have thought you could save a deal by suing people, and do so in about 90 to 120 days? But that’s what ended up happening.”
The resuscitated deal reached a conclusion this month when LandCo completed its portion of the construction. But it was tortuous getting there.
In the original deal, signed in March 2008, LandCo was to build a new six-story headquarters building on property it owned in downtown Colorado Springs. The city agreed to buy the top five floors of the building with money raised by selling certificates of participation, or COPs. The city planned to lease this space to the USOC for the nominal fee of $1 a year. LandCo was also to make $16 million in upgrades to the Olympic training facility.
LandCo took out a construction loan and began building the headquarters, counting on funds from Colorado Springs’ sale of COPs to pay back the loan. But the economy tanked a month before the COPs were to be sold in November 2008. This set off a chain reaction.
The city decided not to sell COPs until rates improved and until the USOC signed a lease. USOC wouldn’t sign a lease until LandCo could prove it had enough money to improve the training facility. LandCo had a hard time raising money because the COP sale hadn’t gone through. As 2009 began, the parties were at an impasse. That’s when Long and Page came in.
“When we were approached about this case it was a true mess,” Long said.
LandCo brought in the Polsinelli attorneys to figure out a way to persuade Colorado Springs and USOC to follow through on their commitments. After a few months of talking failed to get results, the attorneys urged their client to file a lawsuit compelling the city and USOC to honor their agreement.
“Lawsuits should be a last resort, but there are times when it may be the only resort. That’s what we felt in this situation,” Long said.
LandCo was hesitant to file a suit. The company was getting a lot of negative press in Colorado Springs: Contractors that weren’t paid filed liens against the headquarters building, construction hadn’t begun on the training facility, and the El Paso County district attorney’s office was investigating the company’s executive, Ray Marshall, on other matters.
But with negotiations stalled and rumors flying about USOC heading for greener pastures in Chicago or Atlanta, LandCo agreed with its attorneys that a specific performance lawsuit was the best way to get the deal completed. The city and USOC were named as defendants. USOC officials were upset about being named in the suit, but Long said it was a necessary part of his team’s strategy.
“Reid [Page] and I were aware that there were rumors that they [USOC] were leaving town,” Long said. “If we had a case against the city and USOC just up and left, we might have had no recourse. But to have them as a defendant did create an option that, had those rumors proved true and they moved in that direction, we might make the argument that the defendant was acting in such a way as to make specific performance impossible.”

Campaign pays off
In a worst-case scenario, Long said, the decision to sue USOC could have left the organization so alienated that it would decide to break off all talks and leave town. Such a move would have a devastating impact on Colorado Springs, where the Olympic headquarters is not only an immense source of pride, but a source of thousands of jobs and hundreds of millions of dollars to the local economy. The attorneys said they “bent over backward” to assure USOC that LandCo wanted to reach an agreement rather than pursue damages.
“I think a lot of what happened to get them calmed down was just persistence and regular communications with them,” Page said. “Over the course of time they realized there was an opportunity there – that we weren’t trying to blow things up, that we were trying to put the deal together.”
The goodwill campaign paid off. In May, LandCo reached a confidential settlement with the USOC, but not with the city. Reaching a separate peace with the Olympians wasn’t an easy decision, Long said. While LandCo planned to use the settlement with USOC as leverage to get Colorado Springs to settle as well, it would have weakened LandCo’s position if the city didn’t settle and the case went to trial without USOC as a defendant.
“We needed to convince the city that they either close the deal or they lose the U.S. Olympic Committee,” Long said. Compared with the talks with the USOC, he said, “it was much more holding the threat of litigation over their head.”
The pressure worked. In August, the Colorado Springs city council approved a settlement that would put a new deal in place. And this time, all parties lived up to their ends of the bargain. LandCo agreed to finish building the headquarters, but turned over work on the training facility to the city. The city agreed to sell the long-delayed COPs and purchase five floors of the headquarters building for $18.8 million. What looked like a broken deal in March became a successfully completed deal in October.
“This is a shining example of a lawsuit doing good for society,” Long said.