Town Toyota Center in Wenatchee, Wash. (Photo by Town Toyota Center/ Wenatchee Public Facilities District)
Global Entertainment has reached a settlement with former client the City of Wenatchee, Wash., totaling $1 million. In the lawsuit, the city claimed that Global Entertainment gave inflated financial projections for Town Toyota Center, the nearly $42-million facility the company developed.
Two entities and their lawyers took part in a marathon, 11-hour-long meeting to reach a settlement even though there was already a summary judgment motion pending, which was a motion by Global Entertainment to dismiss the case.
“We felt pretty confident that the judge was going to dismiss either all or most of the charges, said attorney Dale Foreman, who represented Global Entertainment. “We did not think that there was negligence by our client, but the claims were substantial and clients [including Global Entertainment President Rick Kozuback] wanted to end the litigation and put it behind them, so they agreed to a settlement.”
He added that the settlement was the preferred alternative to continuing to pay large lawyer fees and endure a long and complicated trial.
Even the settlement process took longer than expected.
“It was a very long and difficult day where we met for coffee at 7 a.m. with our clients, went in a little before 9 a.m. to begin the mediation, and the meeting didn’t end until 8 p.m.,” said Foreman. “It was a very long and difficult day, but I’m glad we were able to get it resolved for Rick.”
Lawyer fees are a significant cost. Of the $1 million received by the City of Wenatchee, $400,000 will be paid to the city’s attorneys. The city has also paid $3.5 million to cover debt payments and an additional $3 million in legal fees, part of which went to fund an investigation into the financing and projections for the 4,300-seat arena.
The city’s lawsuit claimed that Global Entertainment provided misleading projections of attendance and revenue figures in order to secure financing for the facility.
“Our defense was that we gave what we believed were accurate projections, but then there was a huge financial collapse in the country that nobody could have foreseen or predicted,” said Foreman. “That changed people’s willingness to spend money to go to shows across the country — it wasn’t just Wenatchee that suffered.”
The settlement ends a situation that began far earlier than March 2013, when the lawsuit was first filed. Global Entertainment had been involved with the project since before the facility broke ground in September 2006. Parent company International Coliseums Company lists its responsibilities as project management and design concept, with Global Entertainment responsible for the feasibility plan, business plan, and due diligence. ICC was also to run ticketing through its GetTix.net, and to operate the facility as management company.
The city fired Global Entertainment as managers of the complex in 2009, just months after Town Toyota Center officially opened in October 2008.
“We did not think that was fair, and feel if we had been allowed to maintain the management, we would have been able to do better, even given the bad economy, than the people that took over because of our experience,” said Foreman. “We were deprived of the opportunity to make the best of a bad situation.”
The city installed the Wenatchee Public Facilities District (PFD) to operate the venue. The arena went into default in December 2011, later receiving a state bailout loan that the city is paying back through a tax increase and settlements.
“The building itself, without the sales tax that was raised to pay bondholders, operates at a small loss each year of about $100,000,” said Wenatchee Mayor Frank Kuntz.
He added that all the advisors for the creation of the facility have paid something toward either the refinancing of bonds or directly to the city or Wenatchee PFD, which owns the building. The city has already settled with the bond attorneys and bond underwriter.
One thing that hasn’t seemed to be affected by the lawsuits is the venue itself.
“The PFD was not a party to the lawsuit between the City of Wenatchee and Global, and there were no impacts to the operations at the Town Toyota Center arising from the lawsuit,” said facility GM Mark Miller.
The venue remains active, with plans to host Boston on Sept. 6, Trace Adkins on Sept. 18 and Ice Dance Oct. 3, in addition to its resident NAHL team.
“It is nice to have an entertainment facility in Wenatchee,” said Mayor Kuntz. “The Wenatchee Wild hockey team is very popular and is one of the top franchises in the North American Hockey League.”
Interviewed for this story: Dale Foreman, (509) 662-9602; Frank Kuntz, (509) 888-6204; Mark Miller, (509) 667-7847