Unprecedented Award of Attorneys’ Fees to Henson & Efron Sends Message to Government Entities

FOR IMMEDIATE RELEASE

December 22, 2003, Minneapolis, MN – October's final judgment in Crablex, Inc. vs the Minneapolis Community Development Agency (MCDA) and Riverside Plaza ended an eight-year court battle in favor of Crablex. But what makes this case unique is the Minnesota District Court of Appeals’ unprecedented award of nearly $500 thousand in attorneys’ fees to Henson & Efron under Minnesota Rule of Civil Procedure 11—the largest of its kind in Minnesota.

Q: How and when did this lawsuit begin?

A: Crablex owns, and for years has wanted to develop, a two-acre commercial property in the Cedar-Riverside area of Minneapolis that borders the Riverside Plaza housing complex. Crablex had planned to build 102 units of rental housing on the property, which sits just west of Riverside Plaza, near the University and across the street from a light rail station. For years, and without Crablex's permission or consent, the MCDA had been using two driveways located on the Crablex property as a primary means of access to Riverside Plaza. On a daily basis, hundreds of Riverside Plaza tenants crossed Crablex's property to get to the parking ramp, and delivery trucks came and went from the Riverside Plaza loading dock. Unsuccessful in its attempts to get the MCDA to stop, Crablex hired Henson & Efron in 1995 to assist in clearing title and paving the way for development. Henson & Efron filed suit seeking to establish that the MCDA had no legal right to use the Crablex property, and to recover damages for the years of continuing unlawful trespass. Though the property and driveways were owned by Crablex and its predecessor, the MCDA had promised in writing to Riverside Plaza, that the driveways would be kept open.

In 1988 the MCDA bought Cedar Square West from HUD for $15 million and simultaneously sold only the buildings to Riverside Plaza for $17 million. The MCDA kept the land underneath the buildings. Before the transactions were closed, the attorneys for both the MCDA and Riverside Plaza authored title opinions which concluded that their clients had no legal claim or right to use driveways owned by Crablex.

When the title insurance company refused to issue a policy to Riverside Plaza, because there was no evidence the claimed driveway easements necessary for access from the west existed, the MCDA indemnified Riverside Plaza and the title company against “title defects” and promised to use its government power of eminent domain to “take” Crablex’s land if necessary. Incredibly, Riverside Plaza was indemnified by the MCDA, and the MCDA, in turn, obtained indemnification from HUD.

The result was that, although Crablex owned the two acres of real estate and was paying taxes and other holding costs, the MCDA's claimed easements and continuing trespass cast a cloud on the title, and Crablex was unable to build on, borrow against or sell its own property. Crablex had no other option but to sue.

Q: What was the outcome of that first suit?

A: In 1997, the District Court ruled, without a trial, and “as a matter of law,” that the MCDA and Riverside Plaza had no easement or other rights, but instead had intentionally and continually trespassed on the Crablex property since at least 1988.

Q: That's good, right?

A: Yes. But at the last possible moment the MCDA and Riverside Plaza appealed the decision and also began eminent domain (also known as condemnation) proceedings to “take” the Crablex property. The MCDA offered to pay $2 as “just compensation” for the land, and offered another $2 to "condemn" prior agreements that prohibited the MCDA from condemning the land—basically they wanted to “condemn” the agreements. Before the condemnation proceedings were scheduled to take place, however, the Appeals Court sent the case back to the trial judge for more testimony. When that happened, the MCDA withdrew its petition to condemn the property.

Prior to the scheduled trial, in 1999 the trial judge ruled that the MCDA had still failed to produce any evidence that could support its claims, and for the second time entered judgment for Crablex "as a matter of law." Again, faced with the adverse decision, the MCDA started eminent domain proceedings. But, when the trial court issued an order which allowed the trespass to continue pending a trial on the issue of damages—from which the MCDA could later appeal—the condemnation proceedings were withdrawn.

The 2000 trial was limited to the issue of how much compensation should be awarded for the MCDA's trespass. After hearing testimony over a period of several days, Crablex was awarded compensation equal to the rental value of the driveways, plus reimbursement for property taxes that had been paid by Crablex (including late penalties and interest), and pre-verdict interest on the amount of rental compensation owed to Crablex by the MCDA and Riverside Plaza. The total sum was about $288 thousand.

Following the damages trial, and because the court had twice ruled that the MCDA knew before it even bought the Riverside Plaza in 1988 that it had no right to use the Crablex driveways for access, Crablex asked the trial court to award its costs, expenses and attorneys' fees under a Rule which allows the court to do so when it determines a party has used the court system in bad faith, or solely for the purpose of harassment or delay. In 2001, the trial court awarded Crablex all of the fees requested, which after six years of litigation were nearly one-half million dollars. Over the next two years, the MCDA successively asked the trial court and Court of Appeals to reverse or reduce the judgment, including one last attempt, a petition to the Minnesota Supreme Court this past summer.

Q: What has been the outcome?

A: In the fall of 2003 the MCDA ultimately paid Crablex the full damages award, plus interest, and also paid all of Crablex's attorneys' fees, altogether totaling over $800 thousand. More significant, however, is the attorneys' fee award under Rule of Civil Procedure 11, for the MCDA's "bad faith" and delaying tactics. The award reflects the reality that Crablex's vindication of its property rights against the unjustified claims made by the MCDA would have been a hollow victory indeed if Crablex had to pay all of the litigation expenses.

Q: What is the impact from this decision?

A: Never before has a Minnesota court awarded attorneys’ fees in such a large amount under Rule of Civil Procedure 11, which provides: “Upon motion of a party, or upon the court’s own motion, the court in its discretion may award to that party costs, disbursements, reasonable attorney fees and witness fees if the party or attorney … acted in bad faith; asserted a claim or defense that is frivolous and that is costly to the other party; asserted an unfounded position solely to delay the ordinary course of the proceedings or to harass …”

This case was an obvious war of attrition by the MCDA and Riverside Plaza—one in which Crablex's right to the use and enjoyment of its own property was tied up for years while the MCDA made one unsupportable claim after another with the intention of forcing Crablex to just give up. The impact from the trial court’s award of attorneys’ fees, which was affirmed by the appellate courts, is to send a clear message that abuse of the court system by those who can afford access will not be tolerated -- even when the litigant found to have been acting in bad faith is the government.

Q: Who was the lead attorney for Henson & Efron representing Crablex?

A: Henson & Efron attorney David Bradley Olsen, an experienced civil litigator in both state and federal courts, represents clients in business, commercial, intellectual property, products liability, mass tort and other civil litigation. He has received Martindale-Hubbell’s highest “AV” rating, and has been recognized as a both a Rising Star and Super Lawyer® by the Minnesota Law & Politics magazine. During the Ventura administration, Olsen was also a statewide member of the Judicial Selection Commission.

Henson & Efron, P.A., a mid-sized law firm with more than 30 attorneys, is located in Minneapolis. The firm is known for its excellence in delivering a full range of legal services to individuals and businesses of all sizes. Henson & Efron is a member of Legal Netlink Alliance, an international consortium of law firms providing integrated, cost-effective, high-quality legal services to clients around the world. More information can be found at: www.hensonefron.com.

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