Hogan administration files lawsuit against State Center developer

Gov. Larry Hogan's administration has filed a lawsuit against the developer for State Center.

In a pre-emptive legal maneuver, the administration of Gov. Larry Hogan has sued the spurned developer of the $1.5 billion State Center project in midtown Baltimore.

The state is trying to force State Center LLC to terminate its right to redevelop the site after pulling the plug on the project as envisioned by voiding lease agreements with the company.

Before a meeting of the Board of Public Works on Wednesday, a lawyer for the developer threatened to sue the state come January if it terminated the leases. The board voted to do so anyway, and hours later state officials filed the lawsuit.

Shareese DeLeaver Churchill, a spokeswoman for Hogan, said Thursday that the state's legal action is a proactive step "that clearly signifies just how serious the governor and administration are about moving forward and finally redeveloping this site."

Michael J. Edney, a lawyer representing the developer, charged that the lawsuit is "directly aimed at gutting long-term middle-class jobs."

"We will not be bullied by the state, and we will continue to fight for the jobs we know the State Center project can create today, and the communities the project would transform," he said.

The State Center project, first proposed more than a decade ago under the administration of Republican Gov. Robert L. Ehrlich Jr., is seen as the centerpiece of the redevelopment of midtown Baltimore.

It would replace the state government office complex — with its crumbling buildings dating to the 1950s and 1960s — with a mix of retail, office and residential development. Under the plan, state government agencies would continue to be the anchor tenants.

The project has been stalled by court challenges and concerns about how much debt it would require the state to take on.

The timing of the 16-page lawsuit — which includes more than 200 pages of exhibits — indicates that the state had been preparing its legal strategy well in advance of the board's action. Edney said months-long mediation talks failed about two weeks ago.

The lawsuit asks the Baltimore Circuit Court to uphold the board's right to cancel the leases it awarded after entering into a Master Development Agreement with State Center LLC in 2009.

"Nothing in the applicable agreements or Maryland law compels the state to move forward with the project," the suit says.

The developer charged in April that the state had defaulted on its agreements by failing to move forward on the redevelopment of the 28-acre site.

The project had the support of the previous Democratic administration under Gov. Martin O'Malley but was put on hold when Hogan, a Republican, took over in January 2015.

The suit asks the court to rule that the state is not in default and that it owes the developer no monetary damages for failing to move forward.

Edney told the Board of Public Works on Wednesday his client had spent $26 million to fulfill its obligations under the contract. He urged the board in a written statement not to "walk the state into a legal morass from which there will be no quick or inexpensive escape."

The state's lawsuit contends that State Center LLC has no recourse over the terminated leases other than to declare the master agreement null and void. That would end the developer's exclusive right to build the project and allow the Hogan administration to award a new development contract to a company of its choosing.

The project had been stalled for several years after downtown office building owners filed a lawsuit objecting to the O'Malley administration's process for choosing a developer. The Court of Appeals ruled against the downtown plaintiffs in 2014, but the state couldn't get the project off the ground before Hogan took over.

The state argues in its suit that by the time that litigation was resolved, vast changes in the local real estate market had made the project "prohibitively more expensive." According to the suit, the board could not move forward with the leases without the General Assembly's consent because the leases would push the state over its debt limits.

Hogan has expressed commitment to move forward with the project in some form. He asked the Maryland Stadium Authority on Wednesday to study new options for the site, including Comptroller Peter Franchot's suggestion of a new sports arena.

Critics of the board's action contend that it ensures the project's construction will be delayed for many years. Edney has said the legal dispute could tie up redevelopment for a decade.

Edney said the developer would bring its own claims "documenting the governor's broken promises to the people of Baltimore and the Maryland small business that is its contracting partner."

He expressed confidence that his client will win in the courts.

Hogan communications director Doug Mayer vowed that the project would move forward.

"No one is going to stop the governor, the administration and the Baltimore city leadership from redeveloping the site — especially a group of lawyers whose only motivation seems to be lining their own pockets with taxpayers' money," he said.

Baltimore Sun reporter Luke Broadwater contributed to this article.

mdresser@baltsun.com

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