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Judge hands Tampa Port Authority some wins, a loss in Channelside case

TAMPA — The bankruptcy judge overseeing Channelside Bay Plaza handed the Tampa Port Authority some wins but one notable loss in the ongoing court battle on Wednesday.

The judge dismissed the claims for damages made against the port by Liberty Channelside LLC, which is waging a tenacious legal campaign against the port for control of Channelside.

But the port also failed to get U.S. Bankruptcy Judge Christopher Sontchi to give up jurisdiction over Channelside, and the judge indicated during the hearing that he may continue to chip away at the port's rights over the complex.

Three entities are fighting over Channelside: the Tampa Port Authority, which owns the land and wants to buy the building; the Irish Bank Resolution Corp., which foreclosed on the building; and Liberty, which is competing with the port to buy the building.

Channelside landed in Sontchi's courtroom in Delaware last year because the IBRC sought bankruptcy protection for its U.S. assets. Wednesday's rulings were based on arguments made by all three sides earlier this month in court.

The port and the IBRC argued that the Channelside lease is not under the bank's control, thus it's not an asset under jurisdiction of the bankruptcy court. The bank said it gave control of the lease to the receiver currently running Channelside on its behalf.

But the port's attempt to remove Channelside from the court's purview failed: the judge decided that he will continue to oversee Channnelside and ruled that the bank effectively controls the lease.

"Even though the receiver was appointed guardian of the ground lease," the judge said. "I continue to find and believe that the debtor has de facto control over the ground lease."

By ruling that the bank controls the lease, the judge may have increased the bank's power over the property at the expense of the port. It was the second straight hearing where the judge signaled that he may curb the port's authority over Channelside.

The schism between Channelside's two owners, the port and the bank, has long vexed the nearly empty outdoor mall. Neither side could agree on picking a developer to revive the complex.

Liberty wanted to be that developer. So in May 2013 it tried to buy Channelside from the Irish bank. But the Tampa Port Authority governing board — which believes its land ownership gives it veto power over any sale, a power that the judge appears to be curtailing — voted to kill Liberty's deal.

Then in September, the port board decided that the only way to end the impasse with the bank was to buy Channelside itself and choose its own developer. But the IBRC had already sought bankruptcy protection, so the port's deal needed court approval.

Liberty then joined the bankruptcy case and filed suit to end the port's deal, saying the port unfairly ended Liberty's attempt to buy the complex.

In February the judge squashed the port's attempt to buy Channelside, ruling that the port had "no legitimate business reason" to scuttle Liberty's earlier 2013 bid to buy the complex.

Liberty also sued for damages, but all four of those claims were dismissed on Wednesday.

"Port Tampa Bay believes the Court's ruling (Wednesday) is the first step in returning Channelside as a jewel of downtown Tampa," read a statement issued by the port after the ruling.

"The port looks forward to moving forward in our efforts to bring about the full potential of Channelside for the benefit and enjoyment of all the people of Tampa Bay," port CEO Paul Anderson said in that same statement.

The judge told Liberty's investors they had 28 days to re-file one of those claims for damages, for tortious interference. The court said they need to be more specific about how they believe the port wronged them.

"There needs to be more meat on the bones," the judge said. "This is pertinent because it comes down to how much of the decision was based on malice or racism or some other business justification, and in order to support that we're going to have to have more specific allegations."

But the judge also said that he's already heard enough evidence to believe the port may have been "acting in bad faith."

Judge hands Tampa Port Authority some wins, a loss in Channelside case 04/09/14 [Last modified: Wednesday, April 9, 2014 11:19pm]

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