smce ce miso) ie IERD cary op st. tours ) JUN 20 zo aerssouRs caRcurT court no {TwENTY-SECOND JUDICIAL CIRCUIT aa (City of St. Louis) ‘GRCUT CLERKS OFRCE: ADLER LOFTS MASTER LANDLORD ) ue, , ) Plaintise, } Cause No. 1622-cc00037 ) va. } Division No, 31 ) LOCUST CENTRAL BUSINESS ) prsmarcr, ) ) Defendant. 5 (ORDER AND JUDGMENT In its “Amended and Supplenental Verified Petition for Declaratory Judgnent, Permanent Injunction and an Accounting” Plaintif® Adler Lofts Master Landlord LLC (Adler) alleges that Defendant Tocust Central Business District (District) hes repeatedly violated Missouri state law and city of st. teuls Ordinances in its conduct of the District's business affairs and neetings. Adler seeks a declaratory judgnent declaring that certain expenditures by the District were and are unlawful, a permanent injunction prohibiting District from making any such prohibited expenditures in the future, an accounting, and an award of attorney feos This matter now is before the Court following a bench trial on February 27-28, 2017. The Court heard from several VENEER Ep JR 0 05 AMK wincluding Barry Adelstein (currently @ Board Commissioner and Treasurer for the District), Marlene Davis (the City’s Minth Ward Alderman), Will Zorn (attorney for the District for the last ten years}, Cathy Strobel (a District Board Commissioner), Jason Johnson (past Board Commissioner), John Hayden (Chairman of the District Board), and Robert Wood (Plaintiff Ader’s manager) « The parties have submitted proposed findings of fact, conclusions of lew, and judgments, from which the Court has berreved language without attribution. The Court has endeavored to denominate its findings as “Findings of Fact” or “Conclusions of Lew" where it is possible to do so. Any finding denominated a6 a finding of fact that should be considered a conclusion of law shall be considered a conclusion of law, and any finding denominated ¢ a conclusion of law thet should be considered 2 finding of fact shall be considered @ finding of fact. The Court now rules as follows. Findings of Fact 1. Plaintite Adler is @ Missouri Limited Liebi2ity real estate company with its principal place of business in the City of St. Louis, Missouri, Adler is a mixed-use building ofcondominiums and commercial spaces, and is a taxpayer in the District. Robert Wood Se a menber and the manager of Adler. 2. On Decenber 23, 1982, the City of st. Louis passed Ordinance $2728 (Ordinance). The Ordinance created Defendant District as a Special Business District (S80) pursuant to Missouri State enabling statutes authorizing and controlling the responsibilities and functions of an SBD. § 71.790 ASto. Defendant District ie an S8D and is a “body politic and a political subdivision of the {Sitate” of Missouri, Id., and is susceptible to being sued in its own nane Missouri, $35 F.3d 844, 850 (8% cir. 2008). 3. Pursuant to § 2 of the Ordinance, the District levies, and has levied at all pertinent tines, taxes on real estate property situated within the District and collects revenues pursuant to such levies. Section 5(13} of the Ordinance grants the District authority to make expenditures for the following purpose: For the promotion of business activity in the district by, but not limited to, advertising, decoration of any public place in the area, promotion of public events Which are to take place on or in public places, furnishing of music in any public place, end for the general promotion of trade activities in the district. 5. Purguant to $ 4 of the Ordinance, the District is adninistered by = Board of Commissioners (Board) -‘The District routinely spends money without Board approval. Its Rules, Policies and Procedures explicitly authorize expenditures by the Chaimman of the Board of up to $2,800 without Board authorization, 7. The Board frequently considers matters presented to it by Connissioners who have personal, financial interests in those matters. Such matters present conflicts of interest. Connissioners who aze so conflicted do not make written disclosures of the nature of those conflicts, nor do they always refrain fron participating in Board discussions of, and votes fon, such matters. @. Me. Wood on behalf of Adler began attending District nectings after to Adler tenants were robbed while roving in. Wood was concerned about what he believed was inadequate security in the District. Wood testified that after spending sone tine with District Treasurer Berry Adelstein discussing security issues, he looked into City public records and becane concerned that there were conflicts of interest related to Mr. Adeletein’s business interests and his vork for the District. ood aiso was concerned that the Soard had insufficient procedures and contzols to prevent conflicts of interest. wood pureued Board documents through Sunshine Law requests. Wood wasfurther concerned about a lack of transparency by the Board, about the lack of conpetitive bidding on contracts entered into by the Board, about several contributions the Board made to charitable organizations, about the Board’s use of a rental assistance program that has at tines benefited properties ovned by Soard Commissioners, and about a general lack of Board procedures and controls to protect taxpayer money. 9. Wood testified that he and other citizens attended Board meetings and complained about conflicts of interest within the Board, and the Board's budget and spending procedures. Wood testified that he tried to effect change at Board meetings, but finally decided that this lawsuit vas necessary to effect permanent change 10. ‘Though nunerous taxpayers in the District, including Adler, attended District Board mestings and implored the Commissioners to make the Board's proceedings more transparent and to address ongoing conflicts of interest that sone Commissioners had with respect to matters before the Board, the Board failed and refused to make any such changes, 11, Barry Adelstein, the District Treasurer, testified vhat the Soard has made nore than ten donations to non-profit groups An the District, but that it had stopped doing so sincethis lawsuit was filed. He testified that under Article 10 of the District Rules the District Chairman can authorize expenditures of up to $2,500 without Board approval if in the Chairman's opinion it is within a Budget category. 12, Adelstein’s testimony established that the District does not comply with all provisions of state statutes pertaining to budgets and related practices that apply to Missouri subdivisions. The evidence also established that at least one tenant in a building owned by Adelstein obtained rental assistance from the District, though Adelstein did not make the Board avare of his financial interest in the building. 13. The District purchased @ video surveillance systen for $15,256 without obtaining and considering competing bids. This expenditure vas made fron the 2016 Sudget. The minutes fron the December $, 2015 Board meeting at which the Board authorized the purchase did not reflect that the Board considered the essential teme of the proposel from the winning proposer, wae supplied with any information supplied by any other proposer, or authorized anyone on behalf of the District to pay the winning proposer or entered into a contract with it. 14, The evidence established that the District routinely makes donations of taxpayer monies to entities such as non=profits or charities that provide little or no services to the District and owe no contractual obligations to the District as consideration for these gifts. The District discontinued this practice vhen this lawsuit was filed, but the Board Chairman testified that he was not certain whether the gifts practice would resune after this lawsuit is finished. 15, The minutes of District Board meetings often fail to contain inportent infornation, as is reflected in the conpendiun of minutes comprising Exhibit 45. Fulton, 269 8.W. 24 até: Langlois v. Peniscott Memorial, 185 §.#.3d 711, 714-15 (Mo.App. 1.0, 2006). The Court notes that the minutes from the Decenber 8, 2015 esting fail to contain important information that the District testified was discussed at that meeting, including information concerning the approval of the video surveillance system purchase, Importantly, none of the meeting minutes reflect any discussion of conflicts of interest afflicting Board Commissioners, a topic the District’s attorney agreed would be important to describe in the minutes. Conclusions of Law 16. Adler is a taxpayer of the District and has stending to assert claims challenging the lawfulness of Districtpractices as alleged in Adler's Petition. Eastern Missouri v. St. Louis County, 781 5.W.2d 43, 45-47 (Ho.bane 1989) 17. Wothing in Missours Lew forbids municipal cozporations from spending public money without @ contract, but all expenditures must otherwise be lawful 18, Monbers of the District Board ove fiduciary duties co District taxpayers. Fulton v. City of Lockwood, 269 8.18.26 1, 7 8 (o. 1954). 19, District Budget. As 2 political subdivision the District is obligated to adopt an annual budget. § 67.010.1!, 20. The District's budget practices violate Missouri law. ‘The 2016 annual budget document submitted at trial, and which by all accounts is typical of the budgets adopted by the District, ¥ section 67.010.1 provides: T. Gach political subsiviston of this state, as defined in section 70.120, roast those required to prepare an annual budget by chapter 50 and aection 165-191, shsil prepare an annsel budget. The annus! mudet Shall present a conplets financial plan for the ensving budget yesr, Snd sell include at least the following informations TH) f'buager aassage describing the important features of the budget fd major changes con he tha tno years nest preceding, (3) Proposed expenditures fo! each do cisset fication for the budget year, together with a comparative int of actual oF astinated expenditures {or che two yours aext fading, itemized by year, funds activity, apd object? yaisad forthe payment of interest, amortization, and Eetenptson charges on the deSt af the political subdivision? TS) n’genecal budget summary, tor the bassetJacks 2 “budget message describing the important features of the budget and major changes from the preceding year," a comparative statenent of actual or estimated revenues for the two years next preceding, itemized by year, fund, and source(,]” and a general budget summary, all of which are required by law. 22, In 2026 the District made an expenditure of $75,256.00 An 2016 for a video surveillance systen. 22. Gonflicts of Interest. Sone Commissioners of the District have participated in Board meetings and perticipated in Giscussions and votes concerning transactions in which that Connissioner had @ financial interest. These Commissioners, including Barry Adelstein, did not submit to the Board written disclosure of those interests, Such actions violate the law.? The ‘evidence established that no Conmisslone: ever prepared such a F Section 105.462.1 provides in pertinent pare: ‘The governor, Lieutenant governor, any member of the general ascenbly, for shy menber of the governing body of a political subdivision who es Sisubseantial personal of private interect in any neacure, billy srser ‘br oreinence propesea oF pending before the general aesenbly or such sptesningibody, shalt before such official pessee of 0 interest with the chief clerk of the howss of representatives or the esoretaty of the senate or clerk of sven governing Doay snd auch cement shall he recorded in the appropriate journal oF ether record Of proceedings of the governing body. The governor shat? make the Governor's written report slong with the governor's approval. or ‘Gisapproval of any bill or act of the gonsral assembly dascribing tho ature of the Sntarest snd such report. ahall be recorded sn the Journal of the house of sepresentatives or of the senate. 5 108.461.2weitten disclosure of his or her private interest prior to a vote as required by § 105.461.1. See Bugg v. City of Boonville, 372 S.M.3d 76, 81, n.3 (Mo.App. W.D. 2012). None of the minutes of Board meetings indicate any oral or written disclosure of any Financial interest a Commissioner or Board nenber has had with any of the nunerous financial transactions the Board has entered into. 23. Donations to Charitable Organizations. ‘The evidence established that on several occasions the District has made outright gifts to charitable organizations and other private entities, with no strings attached. These donations lack any statutory authorization, and violate the Missouri Constitution, het. VI, $5 23, 25. St. Louis Children’s Hospital v. Convay, 582 8.41.24 687, 690° (Mo.bane 1975) (City violated Missouri Constitution, Art. VE, §§ 23, 25 and other constituesonat provisions when it gave land which it owned to a private hospital corporation to aid the hospital in building an addition); see also, Op. Att. Gen. No. 74, Seay (1989); Op. Ast. Gen, No. 9, Antonio (1979); Op. Att. Gen. Wo. 75, Riley (1952) Public entities such as the District are prohibited from giving public property to private persons or associations. This is trueeven if the donations provide some incidental benefit to the District. St. Louis Children’s Hosp., 582 S.W.2d at 690-91. 24, Relief Sought by Plaintif#. adler’s principal complaint is that the District's budget, ite handling of neetings and the minutes fron such meetings, and its procedures related to conflicts of interest are not sufficiently transparent. Generally speaking, this Court agrees with Adler. 25. Adler's Anended and Supplemental Verified Petition is for Declaratory Judgment, Permanent Tajunction and an Accounting. However, at trial Adler suggested that a Declaratory Judgment would Likely be sufficient to accomplish the goals of this Litigation 26. Plaintiff Adler has established thet @ declaration by this Court that the District's actions and budgetary processes violate state law Se warranted and necessary. Adler has suggested that in light of the District’s general agreenent thet Sts annual budget does not comply with state law, and given that the District has generally agreed to provide more detail in the minutes of its mestings, end to provide more transparency generally, that @ permanent injunction and accounting are not necessary at this tine. Instead, Adler seeks a formal declaration by this Court (1) that the District has violated astate law and/or the Missouri Constitution in the manner in which it presents its annual budget, (2) in the District's recording of Board meeting minutes, and in its handling of conflicts of interest by Board members, and (3) in the Distrlet’s procedures for approving expenditures. With respect to the latter request, Adler seeks a declaration by this Court that the District’s expenditure of $75,256 for video surveillance equipment was unlawful because the District did not obtain and consider three competing bids before approving the expenditure, 27, The declaratory judgnent act vests trial courts with the power "to declare rights, status, and other legal relations whether or not further relief is or could be clained,” Section 527.010, RSYo. "A court may grant a declaratory judgment if presented with: (1) a Justiciable controversy that presents real, substantial, presently existing controversy adnitting of specific relief, as distinguished from an advisory decree upon a purely hypothetical situation? (2) a plaintiff with a legally protecteble interest at stake, consisting of a pecuniary or personal interest directly at issue and subject to innediate or prospective consequential relief; (3) a controversy ripe for judicial determinations and (4) an inadequate remedy at law.”Mo. Soybean Ass'n v. Mo. Clean Mater Comm'n, 102 $.W.3d 10, 25 (Wo.bane 2003). The trial court is afforded wide discretion in administering the provisions of the declaratory judgnent act. City of St. Louis v. Crove, 376 $.H.2d 185, 189 (Ho. 1968). 28. The Court believes the declaration Adler seeks is warranted, with the exception of the third request. Adler has not directed the Court to any statute or ordinance requiring ‘such competing bids. or has Adler identified a statute or ordinance violated by the District's grant of authority to the Board Chairman to approve expenditures of up to $2,500 without Board approval. Having said that, the Court believes that in the interest of transparency in government it behooves the District to be fully transparent in its approval of such expenditures. 29. Attorneys’ Fees, “Missouri courts adhere to the ‘american Rule! which states that, ordinarily, litigants must bear the expense of their ovn attorney's fees." Lett v. City of St. Louis, 24 §..3d 157, 162 (Mo.App. £.0.2000). “Nevertheless, exceptions are permitted where: (1) the fees are authorized by statute or contracts (2) very unusual circumstances exist so it ay be said equity denands a balance of benefits; (3) the fees result from an individual being involved in collatera? Litigation? or (4) in special circumstances, a party's conductis frivolous, without substantial legal grounds, reckless, or Punitive.” Arcose ¥. Daniel Schmitt & Co., 504 $.W.3d 772, 787 (Mo.App. £.. 2016) 30. Having reviewed this matter carefully the Court finds that special circumstances exist such that Adler is entitled to payment of its attorneys’ fees. The District’s resistance to providing basic transparency with respect to its conduct is the sole reason this lavsuit was necessary. District Commissioners admitted that the District has agreed to change its conduct to align with state law in response to this lawsuit. Te refused to do so until then, and it is apparent to this Court that that change would not have occurred but for Plaintiff having filed this lawsuit. It is also clear that the district would continue to make donations and gifts to private parties in violation of the Missouri Constitution absent a declaration from this Court that such donations/gifts violate the Missouri Constitution. The sane is true with respect to sone Commissioners’ clear conflicts of interest that have simply been ignored by the District, and the existence of which has never bean placed in the public record, These are basic issues of ethical governance that should not have erisen in the first place, but once they became apparent to the taxpaying public, the District should have “recognized them and taken corrective action. Instead, the District refused to acknowledge that anything was wrong. The District's conduct that necessitated this lawsuit was without legal justification, and is easily a basis for requiring it to pay Plaintite’s attorney fees Order_and Judgment THEREFORE, it is Ordered and Decreed that Judgrent Se hereby entered in favor of Plaintiff Adler Lofts Master landlord, LLC and against Defendant Locust Central Business District on Plaintiff's claim for declaratory judgment, and it As further ordered and deczeed that: ‘The District’s budgetary and related practices do not comply with Missouri statutes, including § 67.010 RSHo., as outlined above; TT, Members of the District Board have engaged in non- disclosed conflict transactions that violated § 105.746, and the Board has failed to take legally necessary steps to ensure that tis minutes reflect disclosures as to these conflicts, as outlined above IIT, he District has @ practice of making unlawful donations of taxpayer monies that violate the Hissourl Constitution, Article VI, §§ 23, 257 andWw. ‘The evidence, and the overall record in this case denonstrate that Plaintiff Adler is entitled to an avard of reasonable attorneys’ fees incurred hefein due to the ‘special circunstances that exist herein; accordingly, Adler is directed to file, within ten (10) calendar days from the issuance of this Order and Judgnent, an appropriate motion for an avard of such attorneys’ fees: the Court will avard appropriate attorney fees after a hearing on the matter. 50 ORDERED: Toa. oriarty, Dated: 2020/7 cc: Attorneys of Record