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Court rules against minority firms in land use, profit sharing dispute

Columbia Plaza Associates says Northeastern deprived it of millions, Court finds proof lacking that NU violated agreement; CPA appeals

Jule Pattison-Gordon

A group of minority businesses and nonprofits received a major setback in its legal battle alleging that Northeastern University wrongfully deprived its members of hundreds of millions of dollars. The plaintiffs, Columbia Plaza Associates, say the university violated an agreement with them over the development of a valuable Roxbury parcel, and reaped the exclusive profits.

In a ruling issued on Dec. 15, 2016, the Suffolk Superior Court sided with Northeastern. The court said that plaintiffs did not provide sufficient proof that NU achieved its profit and development projects through unfair or deceptive practices, and that CPA had filed its lawsuit too late.

Not backing down, plaintiffs filed an appeal early this month.

The case revolves around construction on Parcel 18, for which CPA owned the development rights and NU owned most of the land. The two entities entered into an agreement in 1999 to develop a 925-car garage on the site. NU since has built a 22-story, 1,100-bed dorm on another part of the property and intends to construct a hotel.

The parcel was assembled from city-, state-and MBTA-owned land and the rights were granted to CPA as part of the 1980s Linkage Program. Officials intended the minority group to use its development rights to guide usage of the Roxbury parcel in ways that would stimulate the local economy and job market. Plaintiffs say NU’s actions soundly defeated that hope.

In their filings, CPA brought two charges: First, that NU did not sufficiently compensate CPA, while reaping large profits for itself; and second, that NU misrepresented that it had CPA buy-in on a development project in order to secure Boston Planning and Redevelopment Agency approval.

The court stated that plaintiffs did not provided sufficient proof that NU had violated the letter of the agreement, and said CPA had failed to bring objections in a sufficiently timely manner for their case to be viable.

Millions due… to no one

The 1999 agreement between CPA and NU created a joint entity to develop the garage and envisioned the creation of a second joint venture entity, through which significant amounts of CPA’s compensation would be channeled. However, that entity was never formed — an eventuality not provided for in the agreement and which threw the status of the compensation into limbo.

Plaintiffs say that the compensation still is due and that NU resisted creating the joint venture to avoid paying. The court, however, ruled against that claim.

The proposed second joint venture was to be used to develop another parcel subsection, called 18-3A. As part of CPA’s compensation in the garage deal, it was to receive $100,000 from NU, paid not as cash, but rather in the form of CPA’s original capital contribution into this future joint venture.

While the agreement required NU to work in good faith to create the second joint venture, it never explicitly demanded the enterprise be realized. The entity was never created. As such, CPA did not receive the $100,000 in this or any form.

The 1999 deal also stated that should parcel subsection 18-3A not be developed for a commercial purpose — such as a hotel — it would be used for NU institutional purposes and the university would pay the fair rental value of the building to the joint venture.

But again, that joint venture did not exist and so the payment was not made. Plaintiff Kevin Cohee, chair and CEO of OneUnited Bank and a member of CPA, previously told the Banner he estimates CPA would be due at least $100 million from the dorm’s development.

The court ruled that because no joint venture was established, “Northeastern had no contractual obligation to pay CPA anything.” Only the creation of the entity would have triggered the millions of dollars in compensation to CPA.

Cohee alleged that NU had not worked in good faith to pursue creating a joint venture and had avoided CPA requests to meet or provide a draft joint venture agreement. During the final day of court, Vincent Lembo, senior counsel and vice president for Northeastern and secretary to the board of trustees, said that the university had not attempted to form the joint venture during the six-month time frame set forth in the agreement.

Misrepresentation?

Plaintiffs asserted that NU proceeded without CPA approval when it built a dorm on Parcel 18-3A instead of a commercial development, and when it represented to the BPDA that the groups had agreed to develop together a hotel on Parcel 18-1A.

In a rebuff to plaintiffs’ claims, the court ruled that NU adequately kept CPA informed about its plans, via regular communication with several CPA members. While plaintiffs had argued that NU was wrong to presume a few members of the organization could speak for the whole, the court disagreed, noting these individuals had represented CPA on certain legal documents.

The court opinion further stated that CPA representatives had failed to exercise their rights on Parcel 18-3A by failing to respond to an invitation to work on hotel plans for that subsection, to actively object when plans changed to instead locate a dorm there, or to propose an alternate plan for the property. As such, the court ruled, the plaintiffs essentially gave up their rights.

“CPA claims that it was wrongfully deprived of certain bargained for benefits in connection with Parcel 18-3A …[but] CPA’s complete failure to do anything to exercise those rights or to respond to Northeastern’s invitation to work with it in connection to the construction of a hotel meant that they lost whatever rights they had.”

For years, NU has been pushing to complete the planned hotel on 18-1A. By the time representatives met in court last October, the project hit a snag due to CPA not having granted the university the development rights.

Too late to sue

The court also critiqued CPA for waiting too long before suing. An unfair business practice lawsuit must be filed within four years of plaintiff realization of being harmed — in this case, the point at which CPA realized NU was developing a dorm without their involvement, the court opined. At the latest, that realization would be in 2009 — the point at which CPA sent an official letter of complaint to NU, according to the court opinion.

Between issuing the demand letter in April 2009 and selecting a lawsuit as their vehicle for redress in July 2013, CPA waited four years plus nearly three months.

On Jan. 3, 2017, CPA plaintiffs filed to appeal the court ruling.