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Nightclub Settlement Just Start of Legal Fight

By Olin Ericksen

December 6 -- In what may signal the beginning of a protracted court battle, the City last month agreed to pay nearly a quarter million dollars to a local businessman who sued after his plans for a large nightclub on the pier fell through.

The check was cut to businessman and developer, Russell Barnard nearly three years after he filed a $23 million suit against the City when it became apparent that the 699-seat nightclub and restaurant -- which was first approved 16 years ago -- would not become a reality.

Barnard -- who owns Rusty's Surf Ranch, a live music venue on the pier -- charges the city "materially breached" a 1993 lease, costing him more than $1 million in damages and $22 million in lost profits.

The City counters that Barnard never fully secured financing for the project, which is why it was never developed.

Lawyers for both sides do agree on two points: The $246,000 settlement paid by the City for "mitigation fees with interest" -- which covers such things as sewage installations which were never built -- was the least contentious of the claims filed. Both sides also agree that they still appear headed for a collision in court.

"It's the biggest crock of sh-- to hold onto that money as long as they had for installations on a building that wasn't even built," said Alexandre Cornelius, the attorney handling Barnard's suit. "If the City hadn't returned this money, I would have stopped practicing law."

Cornelius called it a "strategic" move and "damage control" on the part of the City to offer a settlement on the mitigation fees only days before the suit was to go to trial, so as to "not look bad in front of a jury." He added he believes the City is posturing for a longer legal battle.

A similar settlement offer was on the table last July, according to lawyers for both sides, but Barnard's attorney said they did not take it because it did not include interest. Cornelius said the City withdrew the offer a day after the judge reset a new trial date.

However, attorneys who represent the City tell a different story.

"The day after he filed his complaint Mr. Barnard could have walked down to a counter at the planning department and they would have cut him a check on the spot," said Gary Goodstein, outside council hired by the City.

"He never requested a refund of these fees, he just didn't pursue it," Goodstein said. "Instead, he wrapped them up in the rest of his $23 million suit against the city."

The City decided to settle on the issue "after (Barnard) finally enunciated his alleged damages," Goodstein said.

Barnard's attorney called it an "outright lie" that his client failed to describe the mitigation fees, saying they filed a "government claim act" with an itemized description of the expenses.

"The City could have granted it in part, but instead they denied it in total," said Cornelius. "After that, he's supposed to just walk down to the City and ask for a refund after they denied his request?"

The dispute over what the settlement means only touches the surface of the larger legal issue at hand: Had Barnard failed to secure enough funding for the proposed site, or was his project the victim of the City's development process?

Studies in recent years by the University of Southern California and an outside audit have found developing in Santa Monica to be a highly bureaucratic, lengthy and expensive process. (see related story)

Despite the hurdles, the City argues that other projects have been built on the pier successfully and that Barnard "had an advantage" when compared to other developers.

"He served on the personnel commission for ten years and knew people in the building and safety division, and the ins and outs on how to get things developed," said Goodstein. "Not to mention he had developed on the pier once before himself."

To Goodstein, the answer to why it was never built is very simple.

"He never had the money to get this done," Goodstein said.

Barnard's attorney disagreed.

"The most outrageous point they are trying to make is that Russ couldn't finance it," said Cornelius, noting that he had investors lined up for years while the project waited to work its way though the City's system.

"The City wouldn't give him the right site,” he said. “From the get go, planners screwed up the site. To develop in Santa Monica can be done, but it's a tortured process."

As for Russ Barnard, he says he "has full confidence in the courts" and that he will prevail.

City officials also believe they are in the right.

"We're ready to go to trial at the drop of a hat and win," Goodstein said.

Though a new trial date has not yet been set, Barnard's attorney believes the case may be transferred to a long-cause calendar, reserved for cases that extend sometimes for years.

Related Stories

PART I -- Club Route 66 Reaches End of the Road (Feb. 19, 2002)

PART II -- Lost in a Maze (Feb 20, 2002)

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