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The Thomas J. Klutznick company recently found out that a planned $100 million subsidy from the city of Phoenix for the highly touted CityNorth project had been nixed by a judge.
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Now the company stands to lose another $100 million — that’s the skyscraper-sized judgment being sought by local apartment developer Bruce Gray in a lawsuit filed this week.
Gray argues that his company lost about that much money because of Klutznick’s attempt to shut down a Gray Development plan to build luxury apartments at Tatum Boulevard and Deer Valley Drive. Gray has hired New York power attorney Barry Ostrager (pictured at right) to lead the case. According to one report, Ostrager commands $1,000 an hour.
Gray also hired local PR guru Jason Rose and company. Check out the bombastic news release Rose’s firm put out today:
FOR IMMEDIATE RELEASE
Gray Development Brings In Legal Heavyweight for $100 Million Lawsuit,
Trial Versus CityNorth Developer
Calls Klutznick Co. “Despicable Tyrants”
PHOENIX, AZ. JANUARY 9, 2009. The Chicago-based Thomas J. Klutznick
Company took $100 million from Phoenix taxpayers to build their struggling
CityNorth development. But now it is the Phoenix-based Gray Development
Group that’s seeking $100 million. From Klutznick. For a gross violation
of Gray’s property rights.
And they are bringing in Barry Ostrager, one of the most notable and
successful litigators in the country, to ready their case, which is likely
to go to trial later this year. Punitive damages in at least $100 million
dollars will also be sought at trial.
Ostrager was the lead trial counsel for Swiss Re in the highly
publicized insurance coverage dispute involving the World Trade Center
tragedy which resulted in a unanimous jury verdict in favor of Swiss Re.
Mr. Ostrager has also successfully argued before the U.S. Supreme
Court, and successfully represented clients in high-stakes cases such as
Andersen Consulting, J.P. Morgan Chase and Paramount Communications. In
2006, Mr. Ostrager was named the “Leading U.S. Litigation Business Trial
Lawyer” by Chambers & Partners, and has been named one of the “Ten Best
Trial Lawyers in the Country” for two years running by the Law 500.
And in just the past 12 months, Ostrager recovered a multi-billion dollar
trial verdict for Hanwha, successfully represented the current and two-time
America’s Cup holder, SNG, in appellate proceedings and successfully
petitioned the U.S. Supreme Court to hear a case for Travelers, which he is
arguing at the end of March.
“We’ve been around the block a few times. We know when a case is
clear and when it is compelling. Gray has been wronged by Klutznick, and
it’s time to make them pay for their conduct,” Ostrager said.
The renowned litigator said Gray would be seeking punitive damages
for Klutznick’s breach of its fiduciary duty as the “master
developer” of Desert Ridge.
“The deception and illegal behavior of Klutznick in their role as
master developer of Desert Ridge may be acceptable in their hometown of
Chicago, but it should not be in this community,” Ostrager said. “We
intend to wage a vigorous fight that will ultimately send a powerful
message to Klutznick and the Desert Ridge community,” he said.
Despite the economic downturn, Gray Development Group, a locally-based
multi-family developer, has been one strong ray of light in the Valley,
with seven projects under construction this past year alone. They include a
1,131 apartment home complex in Phoenix, 408 in Tempe and 731 in Peoria.
Three of these projects have since opened in Phoenix, with one already
leased and two others in lease-up. All told, that’s some $200 million in
Valley investment in 2008 and 2009.
“Unfortunately, we will not be adding to that investment and jobs
creation at Desert Ridge in north Phoenix, thanks to The Thomas J.
Klutznick Company. They have engaged in anti-competitive behavior to
thwart us from building a project on land we acquired four and a half years
ago from the Arizona State Land Department,” Gray Development Chairman
Bruce Gray said.
In 2007, the City of Phoenix permitted one project containing 441
apartment homes and approved another containing 224 homes on a portion of a
larger 41-acre parcel known as 4-H that Gray acquired under a Certificate
of Purchase from the Arizona State Land Department for approximately $32
million in May of 2004. Gray’s projects are across the street from
Klutznick’s CityNorth site, in the heart of Desert Ridge.
Klutznick became Desert Ridge’s sovereign by way of a generous 1993
agreement with the Arizona State Land Department (ASLD.)ASLD transferred
perpetual state approval rights and authority over thousands of acres of
taxpayer-owned lands in north Phoenix to a private party from Chicago.
Critics point out the foolishness of allowing an entity with such obvious
conflicts of interest to pocket hundreds of millions at the State of
Arizona’s expense.
“Klutznick’s violation of Gray’s property rights forced a decision
to give the land back to Commissioner Winkleman, and consequently sue
Klutznick for over $100 million,” Ostrager said. “They have been
despicable tyrants, hurting both Arizona taxpayers and additional
much-needed investment by Gray Development in the Valley. A jury will soon
hear that the actions of Klutznick Co. are reprehensible, as as they have
sought to unethically damage Gray Development Group for their own
enrichment,” he said.
“We have every confidence that this company will be exposed for what it
is, and the jury will be convinced at least a $100 million judgment is in
order,” Ostrager said.
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