Top court urged to overturn State Center ruling

ANNAPOLIS — An attorney for Maryland urged the state’s top court Thursday to overturn a city judge’s ruling that essentially derailed the proposed $1.5 billion development of State Center in Baltimore.

Assistant state attorney general Julia Doyle Bernhardt told the Court of Appeals that Judge Althea M. Handy was wrong when she ruled in January that state law required the revitalization project to be subject to competitive bid, which it was not.

Handy, a Baltimore City Circuit Court judge, also erred in her earlier ruling that nearby business and property owners had standing as city taxpayers to mount a legal challenge, Bernhardt said. The state procurement law’s provision requiring competitive bidding does not apply to the State Center project because it involves the disposition of state-owned property.

Maryland has the authority to “dispose of its own land,” she said in explaining the state’s selection of developer Ekistics LLP for the project.

Bernhardt said the nearby store and property owners lack standing because their claim is rooted not in a legal dispute, but on their disagreement with the decision of state officials to bring competitive businesses to their neighborhood.

“This is simply a disagreement on a state policy decision for a development project,” Bernhardt said.

Michael J. Edney, an attorney for Ekistics, told the high court that Handy’s ruling, if upheld, “will raise the cost and uncertainty of doing business with the state.” Edney is with Gibson, Dunn & Crutcher LLP in Washington.

Michael D. Berman, an attorney for the nearby business and property owners, countered that the dispute goes beyond a policy disagreement. The owners can reasonably expect their taxes to rise and business to fall due to the “unlawful” project, which lacked competitive bidding.

“Who speaks for the taxpayer if the taxpayer cannot file suit?” said Berman, of Rifkin, Weiner, Livingston, Levitan & Silver LLC in Bethesda.

Judge Lynne A. Battaglia voiced concern that policy decisions could be stymied by permitting taxpayers to sue whenever they disagreed with a state action that raised their taxes.

“You would be opening the courthouse doors to everything the taxpayer didn’t like,” Battaglia said.

Berman responded that the owners are not like other taxpayers with regard to the State Center project. These businesses and properties are “in the economic shadow” of the proposed development, with many just a half-mile away.

Conceived in 2005 as a transit-oriented, mixed-use development, State Center is an attempt to revamp eight blocks on the city’s West Side near Martin Luther King Jr. Boulevard.

But the master developer selected by the state, Struever Bros. Eccles & Rouse, became insolvent and withdrew from the project in 2008 along with partner Ronald H. Lipscomb, whose romantic involvement with former Mayor Sheila Dixon became entwined with a corruption case against the mayor that led to her resignation from office in February 2010.

Rather than bid the project at that point, state officials moved to replace the original development team with Ekistics, headed by Caroline G. Moore, the former chief operating officer for public-private partnerships under Struever.

In 2010, a group of downtown businesses and property owners led by Lexington Charles L.P. and funded in part by attorney Peter G. Angelos filed the suit challenging the switch without competitive bidding.

After Handy’s ruling in favor of the owners, the state successfully sought direct review by the Court of Appeals without the case being heard first by the intermediate Court of Special Appeals.

In addition to Lexington Charles, plaintiffs in the case include Park Charles Apartments Associates LLC, Park Charles Office Associates LLC, 501 St. Paul St. LLC, St. Paul & Franklin LLC, RoboPark LLC, Charles Plaza LLC, 39 W. Lexington LLC, Fayette Garage LLC, Charles Towers LLC, Redwood Square Apartments L.P., Sabatino’s Inc., Chiapparelli’s Inc., Vaccaro’s Italian Pastry Shop Inc., Bonnie’s Peanut Shoppe Inc. and Flowers By Gina D.

The Court of Appeals is expected to render its decision in the case, State Center LLC et al. v. Lexington Charles L.P. et al., No. 12 Sept. Term 2013, by Aug. 31, 2014.