BROOKSVILLE — Three years ago, the city of Brooksville embarked on a civil lawsuit that has only gotten tougher as time has progressed.
With two losses, one in a Tampa federal court and the other in a federal appeals court in Atlanta, the city is now perched to bring the matter to the nation's highest court.
Brooksville City Council members last month gave city attorneys the green light to appeal a federal appeals court ruling in its default case against Westchester Fire Insurance Co. with the hope of collecting $5.3 million for unbuilt infrastructure at the Cascades at Southern Hills subdivision.
City attorney Tom Hogan Jr. of the Hogan Law Firm said the case, which he hopes to get on the U.S. Supreme Court's fall docket, has landmark implications because it could ultimately affect how municipalities write surety contracts with future developers.
"We feel that a contract is a contract," Hogan said Wednesday. "There are implied conditions, and if the parties accept them, they must be met."
The lawsuit revolves around a 2003 contract between the city and the surety company that underwrote the construction of water and sewer services, streets and sidewalks for Levitt & Sons, developers of the 411-acre subdivision.
Although the company managed to complete most of the infrastructure on Phase 1 before it sought bankruptcy protection in 2007, the second phase remained largely unfinished when it was sold in 2010 to Tampa-based CaSHP Homes for $2.2 million.
According to Hogan, when Levitt & Sons failed to complete the improvements, the city foreclosed on the bonds. When Westchester refused to pay, the city sued.
After losing the initial case in 2010, the city appealed. But the city also lost that round earlier this year, when the judge agreed with Westchester that the city had suffered no damages because the developers had sold no lots, built no homes and had constructed no "pertinent improvements" that needed completion.
The court further ruled that the bonds only guaranteed the city would not to be left with the expense of half-finished improvements if the work had been started.
Hogan disagrees, saying that the one-page contract with Westchester is specific, and that Levitt proceeded with earthwork and constructed a concrete culvert with the intention to develop and complete the project.
Furthermore, Hogan believes that both courts erred by failing to apply a landmark 1938 Supreme Court ruling known as the "Erie Doctrine," which mandates that federal courts must decide civil cases based on state laws where they are being decided.
"It's a fundamental part of federalism," Hogan said. "A lot of other legal experts think it's a valid argument."
Presenting a case before the Supreme Court however is at best a long shot. Of the approximately 10,000 petitions submitted every year, the court grants and hears oral argument in only about 75 to 80 cases.
The effort is likely to be costly as well. So far, the city has spent more than $44,000 in legal fees, hiring the Atlanta law firm of Barnes & Thornburg for the appeal. In addition, between 2008 and 2011, the city paid the Hogan Law Firm $86,278 on this case, but that money was returned last year when the firm entered into a contingency agreement with the city.
Hogan estimates that additional legal fees could be $20,000 to $30,000 before the case is settled.
For now, Hogan and associates at the firm are working on preparing initial briefs on the case that must be presented to the court by July 16 unless a requested 90-day extension is granted.
Logan Neill can be reached at (352) 848-1435 or [email protected].com.