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Alaska Superior Court judge declares Anchorage LIO lease invalid

By KTVA CBS 11 News 2:12 PM March 24, 2016
JUNEAU –

Last Updated: Thurs., Mar. 24 at 6:00 p.m.

The lease signed between the Alaska Legislative Affairs Agency and 716 West Fourth Ave., LLC was thrown out by Superior Court judge Patrick McKay Thursday.

McKay sided with attorney Jim Gottstein of Alaska Building Inc., who’s been leading the charge on a long-running lawsuit on the legality of the contract. McKay ruled that the agreement was not an extension and was therefore invalid.

“This court finds that this contract is not an agreement to extend a lease but rather a wholly new lease instrument altogether and should have been competitively bid. Summary judgment is GRANTED in favor of plaintiff ABI that the lease is not an extension.

The court further enters, as the final appealable order, a declaratory judgment that the lease is invalid based on the lease’s non-compliance with AS 38.30.083(a).”

Thursday’s ruling frees the Legislature from the previous agreement, allowing them to relocate to another, possibly less expensive, location without fear of being sued by the building’s owner for breaking the contract.

Amy Slinker, a spokeswoman for 716 W. Fourth Avenue, LLC, said the company is still reviewing and analyzing the decision, and what it means.

Gottstein said the decision was a “a victory for the people in the State of Alaska,” but not necessarily for him. He added he thought the the lease was “blatantly illegal from the beginning.”

“One of the important things is that it blows the landlord’s threat to sue — if the legislature moves — out of the water because they can’t sue over them violating an illegal lease,” Gottstien said.

Aaska Gov. Bill Walker said the Legislature has been preparing space at the Atwood Building in Downtown Anchorage in case a decision like this came down.

Rep. Mike Hawker, R-Anchorage, was the chair of the Alaska Legislative Council when the original agreement was signed with developer Mark Pfeffer. Hawker issued the following statement in reaction to Thursday’s ruling:

“Legislative Council acted in good faith, working with our legal counsel to assure that the process and lease were valid. Clearly, a lower court judge has found otherwise. I do not have further comment; the Legislative Council will be reviewing the ruling and determining a course of action forward.”

The original 10-year lease on the building was valued at $40,320,000. In December, lawmakers voted to end the contract on the LIO building unless the developer could offer a “more competitive” price.

In an interview Thursday, Minority Leader Sen. Berta Gardner called the decision great news. She said it now gives the Legislature cover to leave the building without fear of litigation.

“In fact, we couldn’t stay without litigation,” said Gardner.

Although most Alaska lawmakers accepted the judge’s decision as positive news Sen. Gary Stevens, chair of the Legislative Council, said the state could still face another lawsuit.

“We could still be sued because we did, we signed a contract, even if the contract is void, the building was built according to our specifications, Stevens said. “So, I mean I don’t want to give people a heads up on how they can sue us, but lawsuits are always a possibility. We really cannot say that we’re not going to be sued, we cannot say that.”

Stevens said he is tentatively planning for a Legislative Council meeting Tuesday to hear from attorneys and the council about where to go next.

 

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