TAMPA — Channelside Bay Plaza is dying. Board members of the Tampa Port Authority believe only they can save it.
But they lost a crucial round in their fight last month when a federal bankruptcy judge dismissed their $5.75 million deal to buy the deteriorating development.
Dismayed port officials say they were not allowed to fully present their arguments and witnesses at that hearing, the legal equivalent of having to fight with one hand tied behind their backs.
Now they want to renew the fight, and this time they want the judge to let them come out swinging.
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Channelside is in desperate need of a new developer, and the port wants to guide the process of picking one.
But the port faces competing buyers and a rising price tag. Last week, a Largo investor said he would pay $7.5 million for the development.
Liberty Channelside LLC is another potential buyer. It was Liberty's lawsuit that scuttled the port's competing deal for Channelside.
Liberty tried to buy Channelside before the port did in 2013. But negotiations soured and the port vetoed the deal. Liberty sued and won last month. The judge ruled on Feb. 18 that the port had "no legitimate business reason" to deny Liberty's bid.
When the judge dismissed the port's offer, he told the Irish bank that is trying to sell Channelside that it could get more money than the $5.75 million offered by the port. As proof, the judge cited Liberty's $7 million offer.
Liberty's investors still want to buy Channelside, and to help their cause they also want the court to curb the port's rights to the property.
The port has long asserted that it has the final say over who can buy the property. It owns the land. But the Irish Bank Resolution Corp. owns the mortgage on the building.
The two owners could never agree on a new buyer, and as a result the complex has lost customers and tenants over the years.
Liberty, however, has argued in court that the Port Authority does not have absolute power to veto any deal. Those and other arguments may be swaying the judge.
While the judge said he wasn't ready yet to rule on the port's veto, he did declare on Feb. 18 that the IBRC has more power to help decide Channelside's fate than the bank has so far asserted.
"They basically acquiesced to the port's veto power," U.S. Bankruptcy Judge Christopher Sontchi said of the IBRC.
In fact, the judge declared the Irish bank had "de facto" control of the lease. If that's the case, then the IBRC has more control over who can buy Channelside — and the port has less.
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The port's lawyers are fighting back on several fronts.
"We want to be a full participant in the bankruptcy hearing," said Charles Klug, the port's chief legal officer. "If the judge leases an asset of the state, we're entitled to be heard."
By that, he means that the bankruptcy court must address the public agency's rights as the land owner before deciding who will ultimately own Channelside.
The port also filed a motion this month asking the judge to clarify his statements about the port's rights to Channelside.
The port argues that the IBRC surrendered the lease in 2012 to the court-appointed receiver that runs Channelside.
That led to this question for the judge: If the lease is no longer property of the IBRC, does the bankruptcy court have power over it?
The port also said that its deal to buy Channelside was part of the resolution of an earlier legal fight. Four years ago, the port sued to evict the IBRC for failing to maintain Channelside. A legal settlement ended that dispute. A key part of the settlement was the Irish bank agreeing to sell Channelside to the port for $5.75 million.
The port also asserts that Liberty has no standing to be included in the bankruptcy case in the first place, that its dispute is with the port and should be addressed in state court.
That argument is the next legal tussle in the Channelside case, set for April 1. But there will be more. The port needs the judge to clear up a lot of things, Klug said.
"Basically, this affects our ability to impact the case and what our rights are in this case," he said.
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All three sides went to Delaware for the Feb. 14 hearing.
But only two sides came ready to fight.
Liberty's main investors showed up for the hearing and testified in front of the judge. Top IBRC officials flew in from Ireland. One of them testified for the bank.
The port did not bring witnesses to court. None of its top officials went to the hearing. The port's lead attorney in the Channelside case didn't even go.
Klug said that's because the port was not allowed to put on a case Feb. 14.
"We were not full participants," he said.
Yet the port had a lawyer in the courtroom who cross-examined a witness and called another — a hostile witness from Liberty — to the stand.
Still, Klug insisted that the port could not call its own witnesses to testify.
But if the port's deal was at stake, then why couldn't the port defend that deal in the courtroom?
"It was the bank that was presenting this case," Klug said. "It was their action."
That assertion mystified Liberty's lead attorney, John Anthony.
"It is truly shocking, both as a factual proposition and based upon legal procedure, that the port might contend that it was not a party to the contested matter," he wrote in an email to the Tampa Bay Times.
Theresa Pulley Radwan, a professor at Stetson University College of Law and an expert in bankruptcy, was also surprised by the port's claim that it was a bystander in that key Feb. 14 hearing.
She said bankruptcy court rules make it easy for any interested parties to take part in hearings.
Regardless of the reason why, Radwan said the port missed a valuable opportunity to explain its side.
"You may have lost your ability to help the court to understand the facts," she said.
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Port board member Patrick Allman thinks the port needs to become more assertive in court and not rely on the bank's lawyers anymore.
The port has a story, he said, that it hasn't told yet.
"They just didn't present the case well enough to the bankruptcy judge to give him a warm, fuzzy feeling that this was the best business deal for Channelside," Allman said. "We need to go back and present that case."
In the meantime, Liberty has filed more motions challenging the port's recent filings about who has control of the Channelside lease and other issues. The legal skirmish is far from over.
Tampa Mayor Bob Buckhorn, who also sits on the port's governing board, is sick of it.
"I think we need to move beyond this frivolous lawsuit," he said. "I think it's just gumming up the works."
Jamal Thalji can be reached at (813) 226-3404, [email protected] or @jthalji on Twitter.