[StBernard] Company looks to high court after its port facility was taken by St. Bernard, handed to competitor

[Westley Annis]

Company looks to high court after its port facility was taken by St.
Bernard, handed to competitor

BY RAMON ANTONIO VARGAS AND GORDON RUSSELL | 
rvargas at theadvocate.com 
grussell at theadvocate.com 
MAR 18, 2017 - 6:15 PM  (0)

For years, at its mile-long facility fronting the Mississippi River in St.
Bernard Parish, the Violet Dock Port company moored and serviced U.S. Navy
ships at three of its five deepwater berths, work that was generating
healthy profits.

But it all came undone in 2010, just as the company had paid for expensive
renovations to accommodate bulk cargo operations. That was when authorities
in charge of St. Bernard Parish's port used Louisiana's eminent-domain laws
and $16 million in state funds to seize the facility for a fraction of what
the company claimed it was worth.

Adding insult to injury: Control of the Violet facility - as well as the
lucrative work done there - was turned over to a rival outfit that Violet
Dock Port's owners complain had an inside track with St. Bernard Parish
officials. That firm, Associated Terminals, also runs publicly owned port
facilities in Chalmette.

The port's legal team defends the expropriation by saying that state law
allows port authorities to seize property as long as the purpose is to boost
the commercial transportation of goods or people on water. That standard has
been met, lead attorney Jim Garner contends: Violet Dock Port never handled
cargo before its facility was taken, while the parish processed 255,000 tons
of cargo at that facility last year alone.

Additionally, Garner said, one Violet Dock Port official previously
indicated, in writing, that the company would have gladly sold the facility
for less than the price of expropriation.

A St. Bernard state court judge has since signed off on the sequence of
events that gave Violet Dock Port's former facility to the parish port,
which in turn leases it to Associated Terminals. A divided panel of
appellate court justices upheld that decision.

However, Violet Dock Port recently asked the state Supreme Court to review
the case, hoping to persuade the high court that the seizure of its land was
unconstitutional - or, failing that, that the price was far too low.

The stakes are high, Violet Dock Port's legal team says, in arguments that
have drawn support from national groups such as the libertarian Institute
for Justice and the pro-property-rights Pacific Legal Foundation - as well
as the state's most powerful business lobby, the Louisiana Association of
Business and Industry.

"Both the United States and Louisiana constitutions prohibit the taking of a
privately owned, ongoing business for government operation, or for operation
by another favored private entity," Violet Dock Port attorney Randy Smith
wrote to the Louisiana Supreme Court in a March 9 filing. "This case tests
the limits of government takings powers."

Violet Dock Port co-owner Paul Simmons said his grandfather and a group of
commercial partners began building up their marine industrial facility in
1978, having pieced together multiple plots of land with easy access to the
river, a railroad and a highway.

The company eventually built five heavy-duty docks and accompanying
infrastructure. Everything - from parking to security measures - was
designed so that Violet Dock Port would be qualified to service Navy ships
measuring 1,000 feet long and 100 feet wide.

Three of the berths received Navy approval, and Violet Dock Port
successfully bid for numerous contracts to service Navy ships, the company
recounts in court documents. On the other docks, the company conducted cargo
operations and performed topside repairs on other ships.

Lots of demand
Eventually, there was an overwhelming demand for facilities that could
handle dry bulk cargo, from grain to coal. So Violet Dock Port spent $2
million to renovate one of its berths to handle such cargo, and it planned
to lease that space to a firm named Vulcan Materials once everything was
built out.

This placed Violet Dock Port in competition with a facility just six river
miles away that handled much more cargo: the Chalmette Slip, owned by the
St. Bernard port and run by Associated Terminals.

Violet Dock's owners thought they'd get plenty of business: Their facility
could dock a wide variety of ships, had highway and railroad access, and
faced a portion of the river that was straight and deep. But they never got
the chance to duke it out with the Chalmette Slip and Associated Terminals.

Armed with a grant from the state Department of Transportation and
Development, St. Bernard port officials began the process to expropriate
Violet Dock Port's property in late 2010. They said that expanding the
parish port authority's cargo operations would boost the local economy and
create jobs, and they promised to improve the facility that Violet Dock Port
would be leaving behind. 

Port officials triumphed in the ensuing litigation, winning a ruling from
34th Judicial District Court Judge Jacques Sanborn that granted them
ownership of the land for $16 million.

Fourth Circuit Court of Appeal Judges Roland Belsome and Terri Love upheld
Sanborn's decision late last year. But the third member of the appellate
panel, Judge Joy Cossich Lobrano, dissented, writing that granting "public
ports unfettered rights to expropriate private property exceeds the
authority that has been bestowed by the Legislature and citizenry of this
state."

In asking for a state Supreme Court review, Violet Dock's lawyers cite that
opinion and list several wrongs they believe were committed against them.

Regarding the price, the company says one expert estimated it would cost $37
million for Violet Dock to replace its docks and infrastructure, while
another put the price tag at closer to $60 million.

Additionally, Violet Dock took exception to the fact that the operator hired
to run the facility - Associated Terminals - later assumed the former
owner's Navy service contracts.

"The contracts are substantially similar," Smith wrote to the Supreme Court.
"The only change (is that) St. Bernard now receives the revenue that (Violet
Dock Port) formerly received."

Out of business
For its part, Violet Dock "is out of business today," according to its court
filings, lacking its Navy revenues or a replacement property it considers
suitable.

Other aspects of the case not mentioned in the Supreme Court filing have
raised eyebrows among Violet Dock Port's owners.

They believe Sanborn should have disclosed that a marine towing company
owned by his brother rents office space at the St. Bernard port's brand-new
administrative complex.

They also note that Sanborn received a $1,000 campaign donation from the law
firm of the parish port authority's lead attorney, Garner, during a trial
that was held over a nearly two-year period - though Garner said all but
$100 of that contribution was returned when the judge didn't draw any
opposition in his re-election bid. Moreover, there is no law barring judges
from receiving donations from litigants.

Meanwhile, before turning over the management of the Violet Dock Port
property to Associated Terminals, St. Bernard officials weighed a proposal
from another interested firm: Louisiana Port Development LLC, an outfit
involving Walk-On's Bistreaux and Bar co-founder Rick Farrell. Farrell is
also the founder of Tricon Energy, a Houston-based trading firm.

But Farrell claims that at one point he was warned that if Louisiana Port
Development landed the management gig, it would be undermined by Associated
Terminals, according to a letter Louisiana Port Development attorney Ira
Middleberg presented to St. Bernard Parish officials in September 2015.

Middleberg's letter also claims that longtime St. Bernard port director
Robert Scafidel told Farrell repeatedly that regardless of what happened,
"you know you have to take care of David," a reference to Associated
Terminals owner David Fennelly.

Finally, the letter asserts that the port failed to collect as much in $4
million in rent, Navy fees and other revenues that port officials had
predicted when they sought the state grant for the expropriation.

The port's legal team says the two proposals were carefully reviewed and
vetted by the port's board before the decision was made to go with the
proven Associated Terminals, whose competitor, Louisiana Port Development,
was only formed in 2014.

Violet Dock's owners also wonder what role Sal Cusimano - a disbarred lawyer
whose hiring by the port in 2013 stirred controversy - played in the review
process.

Cusimano was hired by the port as an "agreement analyst" in 2013, shortly
after he was released from federal prison for bribing St. Bernard Parish
Judge Wayne Cresap. Port officials told WDSU-TV last year that Cusimano's
job duties included "having knowledge of all agreements and reviewing bids
that come into the port."

But Garner, the port's attorney, said that Cusimano had no role in reviewing
or comparing the proposals submitted by Associated Terminals and Louisiana
Port Development.

Neither Sanborn nor Scafidel responded to requests for comment.

AG's Office involved
Through a spokesman, Fennelly said that "Associated Terminals is proud of
the work that it has done in St. Bernard Parish for the last 16 years." He
added: "We believe that our outstanding record was a major factor in the
award of this contract." 

Louisiana Attorney General Jeff Landry's office asked state transportation
officials about two months ago for various files associated with the program
that funded the expropriation, as well as an explanation of the program, a
DOTD spokesman confirmed recently. A spokesman for Landry, citing office
policy, said he could not confirm or deny an investigation.

Garner confirmed that the port also had been contacted by the Attorney
General's Office. But speaking on the port's behalf, Garner vehemently
disputed the notion that anything underhanded occurred during the years-long
legal saga.

Perhaps most powerfully, Garner noted that Violet Dock Port's owners once
were willing to part with their property for $2 million less than the port
eventually paid them. In a 2007 letter to Scafidel, despite lacking a formal
assessment and feeling pressured by the parish to part with his facility,
Violet Dock Port President Donald Dieudonne said his board and stockholders
would sell their property to St. Bernard for $14 million.

And other evidence suggests that Violet Dock Port's owners thought the
property was worth far less than that. The year before expropriation
proceedings began, Simmons - the Violet Dock Port co-owner - paid only about
$1.4 million to acquire about a one-third interest in the company from his
grandfather, according to testimony. That would put the entire company's
value at less than $5 million.

Garner also said nothing barred Violet Dock Port from moving to another
riverfront industrial site to retain its Navy work, which generated revenue
for the company until 2013. Associated Terminals assumed the Navy contracts
only when they were essentially "left on (the company's) doorstep," Garner
said.

He dismissed allegations questioning Sanborn's and Scafidel's impartiality
as nonsense.

The judge's reasoning was well rooted in provisions of Louisiana's
eminent-domain laws that apply to ports but not other types of government
projects, Garner said. And despite an unsuccessful effort by Violet Dock
Port to move the dispute to federal court, citing the involvement of Navy
contracts, neither the company nor its advocates ever expressed doubts in
the case record about whether Sanborn had a conflict of interest.

Garner added that the uncertainty of the Violet Dock Port litigation has
kept St. Bernard officials from collecting the revenue they had projected
prior to the expropriation, but he expressed confidence that would change
once the case is finally settled.

It is not yet clear when that might be, as the state Supreme Court has not
indicated whether it will take up an appeal.

But given the high stakes and the heavy hitters involved, the chances of
such a review seem high.

"Unchecked, the decision (to uphold Sanborn's ruling) will incentivize
politically powerful corporate interests to lobby public authorities to
condemn properties owned and operated by smaller firms - solely for the
purpose of eliminating competition," according to an amicus brief from a
coalition of groups including LABI, the state's potent business lobby.

"But we need not hypothesize about what this opinion means for small
business," the brief added. "In this very case an independent enterprise has
been displaced from the market for a purpose that can only be viewed as
anticompetitive."