Gray Development Sues CityNorth Developer for $100 Million; Hires Grand-an-Hour Attorney

Categories: News

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The Thomas J. Klutznick company recently found out that a planned $100 million subsidy from the city of Phoenix for the highly touted CityNorth project had been nixed by a judge.

Now the company stands to lose another $100 million -- that's the skyscraper-sized judgment being sought by local apartment developer Bruce Gray in a lawsuit filed this week. 

 

ostrager barry.jpgGray argues that his company lost about that much money because of Klutznick's attempt to shut down a Gray Development plan to build luxury apartments at Tatum Boulevard and Deer Valley Drive. Gray has hired New York power attorney Barry Ostrager (pictured at right) to lead the case. According to one report, Ostrager commands $1,000 an hour.

Gray also hired local PR guru Jason Rose and company. Check out the bombastic news release Rose's firm put out today:

 

FOR IMMEDIATE RELEASE

Gray Development Brings In Legal Heavyweight for $100 Million Lawsuit,

Trial Versus CityNorth Developer

Calls Klutznick Co. "Despicable Tyrants"

PHOENIX, AZ. JANUARY 9, 2009. The Chicago-based Thomas J. Klutznick

Company took $100 million from Phoenix taxpayers to build their struggling

CityNorth development. But now it is the Phoenix-based Gray Development

Group that's seeking $100 million. From Klutznick. For a gross violation

of Gray's property rights.

And they are bringing in Barry Ostrager, one of the most notable and

successful litigators in the country, to ready their case, which is likely

to go to trial later this year. Punitive damages in at least $100 million

dollars will also be sought at trial.

Ostrager was the lead trial counsel for Swiss Re in the highly

publicized insurance coverage dispute involving the World Trade Center

tragedy which resulted in a unanimous jury verdict in favor of Swiss Re.

Mr. Ostrager has also successfully argued before the U.S. Supreme

Court, and successfully represented clients in high-stakes cases such as

Andersen Consulting, J.P. Morgan Chase and Paramount Communications. In

2006, Mr. Ostrager was named the "Leading U.S. Litigation Business Trial

Lawyer" by Chambers & Partners, and has been named one of the "Ten Best

Trial Lawyers in the Country" for two years running by the Law 500.

And in just the past 12 months, Ostrager recovered a multi-billion dollar

trial verdict for Hanwha, successfully represented the current and two-time

America's Cup holder, SNG, in appellate proceedings and successfully

petitioned the U.S. Supreme Court to hear a case for Travelers, which he is

arguing at the end of March.

"We've been around the block a few times. We know when a case is

clear and when it is compelling. Gray has been wronged by Klutznick, and

it's time to make them pay for their conduct," Ostrager said.

The renowned litigator said Gray would be seeking punitive damages

for Klutznick's breach of its fiduciary duty as the "master

developer" of Desert Ridge.

"The deception and illegal behavior of Klutznick in their role as

master developer of Desert Ridge may be acceptable in their hometown of

Chicago, but it should not be in this community," Ostrager said. "We

intend to wage a vigorous fight that will ultimately send a powerful

message to Klutznick and the Desert Ridge community," he said.

Despite the economic downturn, Gray Development Group, a locally-based

multi-family developer, has been one strong ray of light in the Valley,

with seven projects under construction this past year alone. They include a

1,131 apartment home complex in Phoenix, 408 in Tempe and 731 in Peoria.

Three of these projects have since opened in Phoenix, with one already

leased and two others in lease-up. All told, that's some $200 million in

Valley investment in 2008 and 2009.

"Unfortunately, we will not be adding to that investment and jobs

creation at Desert Ridge in north Phoenix, thanks to The Thomas J.

Klutznick Company. They have engaged in anti-competitive behavior to

thwart us from building a project on land we acquired four and a half years

ago from the Arizona State Land Department," Gray Development Chairman

Bruce Gray said.

In 2007, the City of Phoenix permitted one project containing 441

apartment homes and approved another containing 224 homes on a portion of a

larger 41-acre parcel known as 4-H that Gray acquired under a Certificate

of Purchase from the Arizona State Land Department for approximately $32

million in May of 2004. Gray's projects are across the street from

Klutznick's CityNorth site, in the heart of Desert Ridge.

Klutznick became Desert Ridge's sovereign by way of a generous 1993

agreement with the Arizona State Land Department (ASLD.)ASLD transferred

perpetual state approval rights and authority over thousands of acres of

taxpayer-owned lands in north Phoenix to a private party from Chicago.

Critics point out the foolishness of allowing an entity with such obvious

conflicts of interest to pocket hundreds of millions at the State of

Arizona's expense.

"Klutznick's violation of Gray's property rights forced a decision

to give the land back to Commissioner Winkleman, and consequently sue

Klutznick for over $100 million," Ostrager said. "They have been

despicable tyrants, hurting both Arizona taxpayers and additional

much-needed investment by Gray Development in the Valley. A jury will soon

hear that the actions of Klutznick Co. are reprehensible, as as they have

sought to unethically damage Gray Development Group for their own

enrichment," he said.

"We have every confidence that this company will be exposed for what it

is, and the jury will be convinced at least a $100 million judgment is in

order," Ostrager said.

-30-

 

 


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1 comments
Priscilla Wolfe
Priscilla Wolfe

I am writing you with concern and frustration. I speak on behalf of many individuals with interests in the Desert Ridge development.

As a native of Arizona, property owner, and with regret, silent investor in a vacation rental unit at Toscana of Desert Ridge, I am asking that the Klutznick Co. concede defeat and exit the State of Arizona and not return under any circumstance. Clearly, Maricopa County Superior Court Judge Robert Miles’ 2008 ruling an err, as the so called "contemplated benefits” to the state, particularly the substantial tax revenues," were not advantageous to the public and would likely be realized on that site in another way. Phoenix Democratic Mayor, Phil Gordon should be ashamed of his involvement and contribution to tyranny, corruption and unethical, unconstitutional behaviors and allowing this type of mismanagement to occur with taxpayer dollars. It has been said, that the Mayor’s actions are that of a fool, allowing an entity with such obvious conflicts of interest to pocket hundreds of millions, at Arizona's taxpayer’s expense.

In July of 2010, a jury in Maricopa County Superior Court awarded Gray Development and its principal, Bruce Gray, $110.65 million in damages from Northeast Phoenix Partners, the master developer of Desert Ridge, composed of Klutznick Co. officials. I agree with the recent court judgment against The Kluztnick Company in favor of Gray Development. Furthermore, I agree with the comment regarding the Klutznick Companies, “The actions are that of "Despicable Tyrants", with interest only in personal enrichment.”

I believe Klutznick has turned a beautiful project into a miserable, failed attempt at development. The project has been thwarted under Klutznick management since inception. Currently, owners are losing their properties at an alarming rate thus increasing bank losses therefore furthering damages to American economy. Major retail contenders have backed out due to a poorly planned and funded operations, and property values have been declining as a result. The Thomas J. Klutznick Companies skills as master developer are less than desirable and the business acumen exhibited, highly indicative of incompetence, dishonesty, power mongering and certainly unethical in every aspect.

Gray Development hopes to take control of the lease held by Klutznick to satisfy at least part of the court judgment, and the recent transfer of that asset to a Delaware Corporation by Klutznick is clearly an attempt to shield it from Gray’s claims; just another indication of, and a lack of concern for, taxpayers in the State of Arizona, residential, as well as, business owners and/or investors at Desert Ridge and surrounding areas. I urge you to forgo your holdings to Gray Development allowing a proven, competent developer to proceed. The area is in urgent need of progress, and that can and will be realized in another way, the sooner the better, under the control of Gray Development.

Again, I ask that you settle your claims and relinquish to Gray Development, any assets you attempt to shield. I ask that you concede defeat, both as master developer and as a board member of the Desert Ridge Master Association immediately. Behaviors such as those exhibited by The Thomas J. Klutznick Co., breach of fiduciary duty as master developer, gross violations to personal property rights and anti-competitive behaviors may occur in your hometown of Illinois but, not in my hometown, nor in the State of Arizona. Klutznick, “you’re fired” go home.

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