Possible New Precedent Against Mayor and City Manager in Development Deal
The City of Brookhaven, its Mayor and City Manager have been ordered to pay more than $6.6M for reportedly stalling a development project by The Ardent Companies in Brookhaven. The verdict and associated fines may have officials throughout the state thinking twice about development deals.
The city of Brookhaven is located inside “the perimeter” - a loop created by 2-85 that encircles the city of Atlanta. Brookhaven is immediately north of the neighborhood of Buckhead at the northern end of Atlanta.
At Issue
The Ardent Companies began working on a development deal in 2017 in which more than twenty homeowners sold their single-family homes to Ardent. The properties created an assemblage of about seventeen acres on which Ardent planned to build a townhome project of 226 units.
According to the developer, Brookhaven tried to acquire approximately three acres of the assemblage for its own project - a public safety hub its alleged to have offered to the DeKalb County School Board so the Board would keep Cross Keys High School in Brookhaven.
Ardent needed to purchase Bramblewood Drive NE (the road) from Brookhaven to include in its assemblage of properties. Ardent reported that it had an appraisal of $250K yet Brookhaven asked for $3M and wouldn’t negotiate on the price.
Brookhaven is reported to have recently used the same tactic of overpricing roads in the Children’s Healthcare of Atlanta construction of a $1.3B hospital. Brookhaven sold Tullie Road and Tullie Circle, roads around the project site, for $1.6M per acre.
An attorney for Ardent called Brookhaven’s tactic for Bramblewood extortion. The suggestion appears to be Brookhaven need not negotiate on the price of the road that’s a key part of Ardent’s development plan if Ardent isn’t willing to give up the property Brookhaven wants for an unrelated project - the public safety hub.
Bramblewood Drive NE is in the center of the map above. It intersects Buford Highway just south of N Cliff Valley Way NE.
Action Taken
Brookhaven denied a zoning request by Ardent in 2018. The denial voided the developer’s deals with homeowners. As a result, The Ardent Companies and two homeowners sued Brookhaven and its leaders in the DeKalb County courts.
Ardent and the homeowners recently prevailed. This month, the jury awarded what is believed to be one of the largest rulings of its type in the history of Georgia. Rusi Patel, general counsel with the Georgia Municipal Association reportedly described the ruling as “rare” and “pretty uncommon”.
Burke Brennan, a Brookhaven city spokesperson, has stated the city disagrees with the verdict and may appeal. The city has thirty days to appeal.
The Fines
Brookhaven has been ordered to pay more than $6M in fines. The jury ordered $200,000 in fines from Mayor John Ernst and City Manager Christian Sigman. Simon Bloom, an attorney for Ardent, asked the jury to send a message by ordering both Mayor Ernst and City Manager Sigman to pay $4M in punitive damages.
Punitive damages are rare in real estate development disputes that find their way into court. Though the jury awarded fines in this case, it did not add $12M for the estimated profit for the finished project.
So, the fines could have been more significant for both the city and its leaders. It appears the jury found some middle ground. This may be because it’s still possible to develop the land - nothing has been done since the 2018 zoning request was denied.
Lessons Learned?
Brookhaven is a relatively new city - incorporated in December of 2012. Zachary Hanson’s coverage of this issue in the Atlanta Journal-Constitution includes a quote from J. Max Davis, the first mayor of Brookhaven, on the fines levied by the jury in this case:
“I think it is kind of a warning to elected officials to get back to the root of public service, which is you’re a servant to the public, and the public includes people who come to you for proposed developments, whether you want to build a pool or want to build a condo tower.”
Hanson’s coverage includes statement by the current mayor John Ernst during his testimony:
“I’m very concerned about how I and other elected officials across the state can function, how we can have conversations with anyone in the future. I think it could be a chilling effect.”
Bloom’s request for $4M in fines for both the mayor and city manager threatened the personal property of both men. They may have had to liquidate their assets in an effort to pay the fines.
Though the fines given by the jury were significantly less, they may set a new precedent for city leaders. We expect statewide associations like the Georgia Municipal Association to make other city leaders aware of this case and its result.
It’s common for a city or county to ask for conditions when agreeing to a rezoning or development plan. Ardent felt Brookhaven’s refusal to negotiate on the price of a road when the city had no appraisal and the city’s request for property to execute a completely unrelated project were too much.
While the DeKalb County jury agreed, it will be interesting to see what happens if the City decides to appeal the case. Regardless of that outcome, we hope city and county leaders will work to keep development deals as simple and transparent as possible. As is said in politics, daylight is the best disinfectant.
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