BROOKSVILLE — The City Council approved a proposal Monday that will allow its attorney to proceed with litigation against two bonding companies on a contingency basis.
By a 3-2 vote, the council granted authority to the Hogan Law Firm to go after about $20 million in performance bonds for infrastructure that were issued to the now-bankrupt developers of Southern Hills Plantation. The city says it is owed the money because the developers didn't complete work on the infrastructure.
Under the proposal, the law firm will act as an independent contractor in the court cases against Travelers Casualty and Surety Company of America and Chubb Group Insurance Cos. and will receive anywhere from 5 percent to 25 percent of money recovered, depending on the amount.
Although initially opposed to the deal, newly elected council member Emory Pierce ended up supporting it because he said it presents the least amount of financial risk to the city.
"Although I think the chances (of success) are very slim, there really aren't a lot of other options at this point," Pierce said. "There's a lot at stake here, and if it succeeds, the city will benefit greatly from it."
The case stems from the 2008 bankruptcy filing by original Southern Hills developer LandMar Development, which left unfinished some infrastructure in the second and third phase of the subdivision. With a new developer ready to take over the subdivision, the council had hoped to collect the money from the surety companies to complete the infrastructure.
Although the two cases have yet to go to court, another case where the city hoped to recover $5.3 million against Westchester Fire Insurance Co. is being appealed after a judge ruled against the city in August.
City attorneys Tom Hogan and Jennifer Rey met with council members in a closed executive session Monday to inform them of their strategy in the open cases.
Council member Joe Johnston III, who along with council member Joe Bernardini voted against the proposal, said he wasn't convinced that the city would ultimately benefit from the action. In addition, he worried that the legal battle would run up thousands of dollars in additional fees in order to successfully prosecute the case.
"You're talking $10,000 to $15,000 at least in depositions, filing fees and expert witnesses," Johnston said. "I hope I'm proven wrong, but I just didn't think the potential outcome outweighs the risks here."
The Hogan Law Firm's contract with the city calls for a minimum of 75 hours per month, at $175 an hour, for a minimum of $13,125, and $185 an hour for additional work. But under the agreement, which is for three years, the firm could collect 25 percent of any recovery from the cases up to $10 million, which is allowable under Florida law.
Logan Neill can be reached at (352) 848-1435 or email@example.com.