Don’t Even Think About Fighting Phoenix City Hall Unless You’re a Good Old Boy

Miriam Hayenga isn't your typical developer.

For the most part, the Valley's earth-movers and shakers tend to be conservative white guys. Hayenga's not just female — she's a lesbian.

And that's not all.

They drive giant SUVs; Hayenga favors a sporty VW Bug convertible. They're politically connected; Hayenga is out of the loop. They're into McMansions; she and her partner have lived in the same modest north central Phoenix home for nearly two decades.

But Hayenga, 47, has long been accustomed to playing with the boys. As a girl, she got good enough at tennis to turn pro by taking on her brother — anything he could do, she learned to do better. It never occurred to her that land deals would be any different.

Hayenga thought that she had a simple project, one that required no special favors from the city. Instead, she found herself in a nine-year nightmare. "I was so naive," she says.

Development, as it turns out, is nothing like tennis. In tennis, there are rules, and referees to enforce them. A point doesn't suddenly become a fault. It's about how good you are — not about the people you know.

In the city of Phoenix, development is infinitely more arbitrary. Forget fair play: You're now dealing with double-speaking businessmen, angry neighbors, and lawyers. (Always, inevitably, lawyers.) Rather than referee, the officials down at City Hall seem intent on muddling the process.

Yesterday, they told you that you could build 120 condo units? Ha! You didn't ask the right question. Today, you get only 10. Are you upset? File a lawsuit. Want resolution? Sorry, we can't talk if you're in litigation.

For Hayenga, one simple development plan turned her life haywire. City Hall bungled her case badly enough that former Councilwoman Peggy Bilsten now accuses officials of a "cover-up." Meanwhile, Hayenga says that her lawyer, Paul Gilbert — arguably the Valley's top zoning attorney — talked her into suing a lifelong friend, then left her holding the bag when the trial went south.

Ultimately, Hayenga lost a mentor, a jury verdict, hundreds of thousands of dollars, and the deal itself — only to realize in the end that her city had screwed her over, and her own lawyer let them get away with it.

It's been the most excruciating civics lesson imaginable.

It was tennis, indirectly, that led Miriam Hayenga to development.

Hayenga is that rare Phoenix resident: a true native, and one who never really left town. Why should she? She loved — okay, make that loves, in spite of everything — Phoenix.

She grew up in a blue-collar family, the third of four children born to a linesman and a (for the most part) stay-at-home mom. After Squaw Peak Elementary and Camelback High School, Hayenga stuck around for Arizona State University. She was a standout on the women's tennis team there, and for a while after, played the pro circuit.

Hayenga ended up settling right back where she started, in Phoenix, where she and her brother started an event-planning business. In her mid-20s, the young entrepreneur met Mary Slaughter, who ran a small non-profit agency devoted to helping disabled children. The two fell in love, dealt successfully with the familial disapproval, and settled into a quiet, happy life together.

Then came a real business opportunity.

As a teenager, Hayenga had taught tennis lessons at the Pointe at Squaw Peak, later renamed the Pointe Hilton. While there, she got to know Bob Gosnell, the master builder who'd developed that site as well as its sister projects: the Pointe communities at South Mountain and Tapatio Cliffs.

Gosnell was a Phoenix visionary. Not only were his Pointe resorts among the very first high-end resorts built in this desert, he also built developments that were ahead of their time. Instead of the usual strict separation between commerce and residences, Gosnell got city approval for "planned community developments," or PCDs, that featured a mix of hotels and condominiums, tennis clubs and dining facilities. The Pointe projects also benefited from prime location: both Tapatio Cliffs and his development near South Mountain are nestled into some of the city's loveliest mountain ranges.

Thanks to his success as a builder, Gosnell became a larger-than-life presence in the Valley. (As Gosnell recently reminded New Times, this newspaper once depicted him on its cover, in bed with then-Phoenix Mayor Terry Goddard.)

Gosnell, as Hayenga is quick to volunteer, was a mentor. In 1996, when Gosnell decided to sell off both the club and the adjacent casual eatery, the Waterin' Hole, he gave her the chance to purchase them.

Ric Williams, current president of Gosnell Builders, tells New Times that Gosnell was willing to sell the property on the cheap because he thought he was helping Hayenga to fulfill her dream: She wanted to own the restaurant, and create a tennis ranch.

"There was no discussion of a condominium project that would result in the demolition of the adobe building which was a historic part of Sunnyslope," he explains.

Hayenga tells it differently. By the '90s, she says, it was clear that tennis' popularity was waning. The Waterin' Hole was a landmark — as Williams notes, it was a lovely old building, rumored to have once been a bordello. But it had real liabilities.

The biggest was location. The Tapatio area is gorgeous, but it's not exactly accessible. Drivers take Seventh Street north until it runs into the Phoenix Mountain Preserve, just east of Sunnyslope; Gosnell literally blasted his way through several mountains to build the hotel and residences.

And the Waterin' Hole was far off the development's main drag. Hayenga was forced to market the saloon/eatery primarily to neighbors and guests at the Pointe's Hilton Hotel. Even they got careful instructions to "follow the blue line" painted on the street.

Hayenga says that from the beginning, she wanted an exit strategy. Rumors had begun to surface at the Waterin' Hole Racquet Club, where Hayenga was a member, that Gosnell intended to tear down the building and put in 120 apartments. She thought she could do better — she'd invest money into improving the place and try to save it. But she'd only go so far.

"I thought I could buy it, try to revive it, and if I can't revive it, I'll make sure I have a backup plan," she says.

Her plan: redevelop the site, perhaps as condominiums, perhaps as an addition to the Hilton Hotel.

Gosnell knew this, Hayenga says. The former president of Gosnell Builders, Rick Kafka, explained to her that the business had a "parachute clause," she says — if things got bad, she could always tear it down and build something else.

"You have a gun to the neighborhood's head," she claims Kafka told her, according to court documents. "If they don't support your business, you just build 120 apartment units on the property, and there is nothing they can do to stop you. It's already zoned for it."

Records show that Hayenga went three times to City Hall to discuss the zoning — once with Kafka.

During those visits, it all seemed very simple. The Waterin' Hole's acreage was zoned for up to 20 residential units per acre, meaning a total of 120 units, city planners told her. Condos or hotel rooms were both fine.

In March 1997, she closed on the property.

Not surprisingly, her ownership made little difference. Despite Hayenga's hands-on management and nearly $500,000 investment, the restaurant continued to lose money. And fewer and fewer people were playing tennis.

Something had to give.

Hayenga began talking to developers, one of whom accompanied her to City Hall. Again, she was given assurance that the property was zoned for up to 120 units.

She found herself in negotiations with Hilton. The company wanted to expand the hotel, and 120 "Hilton Garden Suites" would be a perfect substitute for the Waterin' Hole.

Ultimately, Hilton agreed to pay Hayenga $4.35 million in cash, due on the day of closing. It would be a huge profit — she'd paid just under $1 million for the acreage — and a straightforward deal. There was no zoning change needed, and, no matter how unhappy they were, there was no way the neighbors could stop the project.

What could possibly go wrong?

In February 2000, three years after the city had assured Miriam Hayenga her zoning was set, staffers suddenly announced they'd uncovered a serious problem.

Hayenga had been meeting regularly with Hilton brass, working through the details of the land sale. But then, in a meeting at City Hall with both Hayenga and Hilton, assistant city planner Steven Muenker explained that there was a big problem with their plan.

There weren't enough units left for development.

It took months to unravel what Muenker was talking about. But, as he finally explained, in 1979, The Pointe Tapatio had been allotted 2,147 residential units. As of early 2000, he explained, those units had almost entirely been used up.

Never mind the zoning on Hayenga's property. The entire Tapatio development had only 12 units left. Hayenga and Hilton could develop no more than 12 condos, or 12 hotel suites, without a major zoning change.

Hayenga was stunned. Not surprisingly, so was Hilton. All along, Hayenga had said she had the zoning to build a 120-unit hotel.

Hayenga had an option: She could ask the City Council to rezone the property and increase the cap. But the Tapatio residents were already annoyed at the prospect of losing their neighborhood eatery and tennis club. A zoning change would mean meetings at City Hall, bad publicity — and no guarantee of a happy ending.

Hilton walked away from the deal.

Miriam Hayenga's $4.35 million vanished into thin air.

Eventually, Hayenga did get a zoning change. It took nearly two years of hustling, about $30,000 in fees, and a pitched battle with her business' neighbors — and she still got much less than what they'd originally promised her. But finally, she was allotted 78 units.

During the battle, Hayenga's main source of income, the Waterin' Hole, was hit hard. No one wanted to book a party at a place that might be closed in a year. And to say that the neighbors didn't like the new plans is an understatement.

"I had someone try to run me over in the parking lot," Hayenga says. "People were pissed."

Hayenga kept her cool. Her partner, Mary Slaughter, marvels that even when the neighbors lined up with pitchforks to oppose the plan, Hayenga arranged for shuttles to get them to City Hall for meetings.

The end was bittersweet, at best. Hilton was long gone. By 2002, no one was offering cash for the property.

So Hayenga went into business as a developer. The best deal she could find required her to work with a builder to market condominiums, sell them, and finally get her money when the project sold.

The last unit sold in 2005 — five years after the Hilton deal collapsed.

And that might well have been the end, Hayenga says, if not for Paul Gilbert.

Gilbert is a partner at Scottsdale-based Beus Gilbert. Widely recognized as the dean of Valley zoning attorneys, he's also a political player, with access that most lawyers can only dream of. A graduate of Brigham Young University who counts the Mormon Church as a client, Gilbert co-chaired Mitt Romney's presidential bid in Arizona.

The fundraisers he held for Romney were hardly an oddity for his palatial Paradise Valley home. Politicians in nearly every municipality in the county know they can count on Gilbert and his connections for campaign support.

Gilbert isn't a guy who intimidates; people give him what they want not because they're afraid, but because they like him. He's not a litigator — indeed, people who've worked with him say they can't imagine him writing a brief, much less arguing it in court. But he excels at the inside game.

Hayenga first consulted with Gilbert in 2000, when she realized that she would need a major zoning amendment to build anything. It didn't occur to her at the time that she might have a lawsuit over the units' disappearance.

But Gilbert, she says, was convinced of it.

Gilbert and his firm believed that Bob Gosnell had screwed her. "They kept saying, 'We'll try to help you,'" Hayenga recalls. "'That guy who sold you the property, he did you wrong. Go after him.'"

(Gilbert was out of town and couldn't be reached for comment. L. Richard Williams, a lawyer at his firm, says the story seems unlikely, pointing out that Gilbert is not a litigator.)

And while Hayenga had thought that maybe she should be reimbursed for her expenses rezoning the property, Gilbert explained that her claim was much bigger.

She'd lost out on the Hilton deal because of his misrepresentation, right? $4.35 million, down the drain! Then, add the time and money she spent trying to develop the property, and the fact that she still ended up with 40-some units less than Gosnell had promised . . . She'd suffered some real damages. He thought she could get $1.5 million in damages, easily.

Despite what his firm asserts today, it's clear Gilbert wasn't just blustering. That's because he agreed to take the case on contingency — meaning his firm wouldn't charge Hayenga attorney fees, in exchange for a share of any payday at the end. Hayenga would have to cover only the costs of litigation: expert witnesses, court fees, and the like. (That bill ended up totaling more than $50,000.)

No one could blame Hayenga for agreeing. "When you tell the top zoning attorneys in the city that you have a problem, and they say they'll handle it for you, you trust them," Hayenga says.

Surely, she had nothing to lose.

In retrospect, trusting Paul Gilbert may have been Miriam Hayenga's biggest mistake. She says she wondered, from the beginning, whether Gosnell was really to blame — after all, the city had also assured her that there were 120 units left for development, only to change its tune later.

David Leonard, an attorney based in both Tucson and Los Angeles, is representing Hayenga in a possible case against Gilbert's firm. (It's no coincidence that Leonard is in Tucson. Hayenga says none of the lawyers she consulted in town was willing to take on the powerful Beus Gilbert.)

Leonard blames Gilbert for his handling of the case. Even if he was convinced that Gosnell was at fault, Leonard says, he should have still included the city of Phoenix in the suit.

Lawyers call it the "empty chair" theory.

"You don't leave an empty chair for the defendants to point to and say, 'That guy did it,'" Leonard explains. It's the same principle in play if someone rear-ends you. You don't just sue the driver who hit you; you also sue the one who sideswiped them seconds before. Facts can grow more complicated as a case drags on, and a good lawyer will cover every possible base on the front end. Otherwise, a defendant can wiggle off the hook by blaming someone who's not a party to the claim.

But despite the city's culpability, Leonard says, Gilbert wasn't interested in suing it.

Leonard believes Gilbert had good reason not to go there — and it had nothing to do with the merits of the case. "He had a conflict of interest," Leonard says. "Do you think he's going to bite the hand that feeds him? No way can he sue the city. That would mess up the rest of his practice." (Williams, the lawyer at Gilbert's firm, disputes this, saying they've sued Phoenix on multiple occasions.)

Gilbert surely had good intentions; he must have seen an easy payday from Gosnell. But the truth of what happened proved to be infinitely more complicated than Gilbert's original view.

One problem may have been that the case was never given the attention it deserved. As Leonard notes, no fewer than 14 lawyers worked on the case at one time or another during its four years of litigation.

At trial, it became clear: The large number of lawyers on the case wasn't a show of manpower so much as benign neglect.

Suddenly, at trial, assistant city planner Steven Muenker was testifying to things that somehow he'd never previously explained. His boss, city planner David Richert, was equally expansive.

Through their testimony, it became clear that Gosnell hadn't misled Hayenga. That's because the city didn't even determine that the units were gone until 2000 — three years after Gosnell had sold her the property.

As it turns out, in 1995, another developer with a piece of the Pointe Tapatio project, Evans-Withycombe, had asked city planners to allow them to build 120 apartments on a piece of the property zoned commercial.

Suffice it to say, Evans-Withycombe is also a well-connected player in development circles. The city granted the request.

It wasn't until Hayenga showed up five years later that the city realized they'd messed up the Evans-Withycombe deal. City planners found no evidence in their files that they'd notified the neighbors, as required by law, that the Tapatio area was getting an increase in density.

How to get around that?

Instead of counting the Evans-Withycombe apartments as an increase of the cap, the planners decided to take the units allotted to other parts of the development (read: the acreage Gosnell had sold to Hayenga) and give them to the apartments instead.

That's why there'd been no units left for Hayenga. After the fact, city planners arbitrarily had decided how to count the Evans-Withycombe units.

Not normal procedure. But certainly enough to convince the jury that Gosnell was an innocent bystander.

The real kicker came when Gosnell himself testified.

The developer explained that, after Hayenga sued him, he'd gone down to look at city files and see what had happened.

It became clear to Gosnell in just 45 minutes that his units were transferred to Evans-Withycombe.

The question was implicit: Why didn't Hayenga give similar due diligence and research the city's files? More to the point, why wouldn't her lawyers do it before dragging everyone through years of litigation?

In any trial, no matter how badly things are going, it's easy to trick yourself into thinking you're winning. You know your story so well, and you truly believe it. It tends to make sense to you, even if the jury is lost.

Halfway through the trial, though, Miriam Hayenga knew she was in trouble. This was no quiet tinge of worry. This was a sense of utter disaster.

Hayenga recalls her attorney, Williams, turning to her and whispering, "Has anybody ever said anything like this to you?" Stunned, she replied that the testimony was news to her, too.

"At that point," Hayenga recalls, "he just put his head in his hands." (Williams says that never happened.)

The end came quickly — too quickly. As any good lawyer will tell you, a jury that's done deliberating in minutes is a jury that's going to rule for the defense. Even if the plaintiffs do an excellent job showing guilt, juries rarely like to convict without taking hours to go over the evidence and make sure their condemnation is correct.

Acquittal can happen in minutes.

And so it was for Bob Gosnell. Hayenga's partner, Mary Slaughter, recalls that after the jury had been sent to deliberate, Hayenga and Slaughter hopped in their car to make the 15-minute drive home to north central Phoenix, thinking they'd sit around for hours, or even days, waiting for a verdict.

They were still on the road home when Hayenga's phone rang. The jury was back.

Back in court that very hour, the two women sat in shock as the jury unanimously found in favor of Gosnell.

If the verdict stung, what came next was even worse.

Because she'd brought the suit, the judge socked her with Gosnell's attorney fees.

Instead of getting a payday, Miriam Hayenga owed Gosnell's attorney $600,000, plus $15,000 in court costs.

Hayenga made good on her debt. Her lawyers negotiated to get the bill down to $313,000 — still awful, but something she could pay.

She paid.

By this point, though, there's no way she is giving up the fight. "She's tenacious," Slaughter says. "She is just such a fighter."

She's hired two lawyers: One, Jeff Finley, to sue the city, and the other, David Leonard, to look into suing Beus Gilbert for malpractice.

Because the statute of limitations passed years ago, any claim against the city will be a difficult one. In order to win, Hayenga and her attorney must show "fraudulent concealment" on the part of the city — that staffers not only didn't play fair but actively covered up their wrongdoing before finally admitting the truth in trial.

But that begs an important question: Did the city actively withhold information? Or did Hayenga's attorneys (including the best zoning attorney in town) let her down by failing to ask the right questions?

Gosnell's people clearly believe the latter.

Ric Williams, president of Gosnell Builders, says it should have been clear from the beginning that Hayenga wasn't entitled to residential units.

"Ms. Hayenga was clearly wrong and failed to adequately research the entitlements and/or received very bad advice from her attorneys and land use people," Williams said in a written statement. "Justice was served with her misstep and the actions of her team of contingency lawyers; hopefully, she will confront reality and drop her misguided legal attack on our city."

But Beus Gilbert disputes that. And at least one city official sees things much differently.

Peggy Bilsten was the councilwoman representing the Tapatio area through the 1990s. In fact, Bilsten happened to be present at the meeting in 2000 when city planners suddenly revealed that Hayenga didn't have 120 units after all.

Hayenga had hoped to call Bilsten in for a deposition. But the city's lawyers at Gust Rosenfeld claimed that the former councilwoman wasn't amenable to being called.

As it turns out, the city was playing hardball — dishonest hardball at that. Bilsten would have none of it.

Without even consulting a lawyer, Bilsten wrote up a notarized statement last November and gave it to Hayenga's lawyers.

"I am more than happy to give my deposition," Bilsten wrote. In fact, Bilsten explained, she was writing her statement because she was terribly concerned that she'd have to leave for an international trip before she'd have a chance to be deposed.

As Bilsten explained, she'd been told during meetings in 2000 that Hayenga didn't have units at her disposal. After reading the testimony of city planners Richert and Muenker, Bilsten became convinced that they'd concealed the truth.

"At no time during the meeting held in 2000 was I ever informed that the 120 dwelling units were illegally allocated by the city in October of 1995," she wrote. "Furthermore, I was never told that the city could have taken action to give property rights back to Ms. Hayenga, or I would have insisted that we do that.

"We have a responsibility as trusted public servants to do what is right and honorable."

And that wasn't all. Bilsten wrote that she had concerns about how the city had allocated those units back in 1995, the ones that ended up being taken from Hayenga. If the neighbors had really been properly notified that more density was being added, they surely would have been angry. (Just look what happened when Hayenga asked for a rezoning.) Why was no one even aware that a rezoning had taken place?

Bilsten was concerned that the city failed to post the change properly, and that the neighbors weren't notified, as required by law.

She called it a "cover-up."

"My heart is heavy as I am writing this statement, because I believe the role of public servants is to serve with integrity and honesty," she wrote. "According to the sworn statements enclosed, this was clearly not the case."

Indeed, maybe a good lawyer should have discovered why there were no units left, as Gosnell avers. But Hayenga was a Phoenix resident seeking information, in multiple meetings with the city, about property: Should it have really taken a lawyer to get to the bottom line?

Why, when Hayenga went to City Hall three times before buying the property, did the city fail to explain that there was a zoning cap that could affect her development rights?

And why, once city planners realized that there were no units left, didn't they simply explain where the units had gone? They could have told Hayenga that they'd allowed someone else to build a bunch of apartments and that subsequently, to keep the cap intact, no one else could build.

That would certainly have been preferable to making her hire lawyers and wade through years of litigation.

"I suspect the lawyers at Beus Gilbert didn't know enough about the case to ask the right questions," says Leonard, Hayenga's new attorney. "But the city certainly wasn't volunteering anything."

The city declined comment, citing the pending litigation.

To anyone's who been following the case, the question is whether the city is conspiring against Miriam Hayenga or it's merely incompetent.

Last year, something curious happened, something that suggests the latter — that city staffers really have no idea what's going on at the Pointe Tapatio.

Just to recap. First, the city told Hayenga there were 120 units available. Three years later, it turned out that there were only 12 — it'd given the others to another developer. Ultimately, Hayenga was forced to get a zoning change just to get enough units added to build condos.

Guess what the city is saying now?

You won't believe this: There are still units left.

Last year, a developer named Joe Meza wrote to the city, inquiring about how many units were available on a hilly piece of the Tapatio Cliffs development that he'd just purchased.

The city told Meza that there were 12 units.

Hayenga and her lawyer were stunned. If there were still units available, why had she been forced to go through a rezoning?

To get answers, they summoned the Phoenix planner who'd written the letter on behalf of the city, Elizabeth DeMichael. Under oath, DeMichael explained that, yes, the Meza parcel still had units.

Hayenga's lawyer, Finley, asked how that was possible.

Those units had been assigned to Meza's parcel, DeMichael said. Even if the overall cap had been exceeded, he shouldn't lose his units. That answer was precisely the opposite of what Miriam Hayenga had been told in 2000.

Then, in response to Finley's follow-up questions, DeMichael laid down the real shocker. Hotel rooms, the planner said, don't count toward the unit cap. As long as a room doesn't have a stove, it does not count as a "residential unit" in the same way as an apartment.

Under that interpretation, there should have been plenty of units left at the Pointe Tapatio back in 2000.

As Hayenga's attorney, Jeff Finley, wrote in court documents earlier this spring, "Not until depositions were taken in this matter was it discovered that the City does not count hotel rooms against the dwelling cap .  . .  Despite having begged the City to allow the 120 units on her property, the City denied the request without ever advising that units were available because hotel rooms do not count."

As Finley concluded, "Instead of full disclosure, the City slowly gave out bits and pieces of information."

Nine years after the city soured her zoning deal, Miriam Hayenga is still on the case. And bits and pieces of information are still coming out.

The rules seem to change outright, depending on who's asking. The city seems more interested in stonewalling than explaining the truth in a logical way.

And, still, Miriam Hayenga fights on.

In the past, Hayenga's life has turned on a dime. After majoring in Biblical counseling at ASU, she headed to the conservative Fuller Theological Seminary in California before realizing she didn't quite agree with its teachings. "I had to figure things out for myself," she says. Tennis proved not to be an option, so she switched gears to start a business and, ultimately, get into developing the Waterin' Hole site.

Today, Hayenga manages the small rental properties that she and her partner have purchased as investments over the years; she's also managing an oil-and-gas venture in Missouri.

Her next move is unclear. But her partner suspects that the lessons Hayenga's learned through this debacle may lead to the next phase of her life.

"I wouldn't be surprised," Slaughter says, "if she got more involved in civic activities after all this is over."

Indeed, if you can't fight City Hall — even when the facts are on your side — maybe it's time to change it.

"I think she's been — I don't want to say disillusioned, although that may be the right word — but disheartened by the fact that her city, the city she grew up in, is basically working against her," Slaughter says.

"You don't realize that can happen."

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Sarah Fenske
Contact: Sarah Fenske