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Port of Astoria slapped with $4 million breach of contract verdict

Portland hotelier had deal on Riverwalk Inn
By Edward Stratton

The Daily Astorian

Published on October 13, 2017 9:57AM

Last changed on October 13, 2017 10:12AM

A Portland hotelier sued the Port of Astoria after losing out on a lease for the Astoria Riverwalk Inn.

Edward Stratton/The Daily Astorian

A Portland hotelier sued the Port of Astoria after losing out on a lease for the Astoria Riverwalk Inn.

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A jury has awarded $4 million in damages to Param Hotel Corp. in a breach of contract lawsuit against the Port of Astoria over the lease at the Astoria Riverwalk Inn.

“The jury’s verdict affirms the fundamental concept that a deal is a deal,” said Colin Hunter, Param’s attorney. “We sincerely thank the jury for their diligent service on this hard-fought case.”

The jury found that the Port had breached a contract by failing to assign the remaining seven years of heavily indebted former operator Brad Smithart’s lease to Param after the Port Commission voted to do so in 2015, with damages of $202,430. The jury also found that the Port made false representations to Param, with damages of nearly $3.8 million. An individual fraud claim against Port Executive Director Jim Knight was dismissed.

The Port’s attorney, Luke Reese, said the claims of fraud are subject to caps under the Oregon Tort Claims Act. The cap at the time of Param’s failed deal with the Port was more than $660,000.

Clatsop County Circuit Court Judge Dawn McIntosh will decide next week on Param’s claim of specific performance of a contract, which could retroactively grant Param the lease it had sought from Smithart. The Port will need to look at everything, including the court’s decision on specific performance, before deciding whether to appeal, Reese said.

Param sued the Port in November 2015 for breach of contract after being rebuffed in attempts to acquire the remaining seven years on Smithart’s lease. The Portland company claimed the Port breached an agreement reached by a unanimous vote of the Port Commission in June 2015 and showed favoritism when it later installed a locally connected company as the new operator.

Competing estimates

Opening his defense Thursday, Reese called Kevan Ridgway, a tourism consultant who lives in Cannon Beach, as an expert witness to estimate Param’s potential losses through 2022. A forensic accountant previously called by Hunter had estimated the company’s loss in net profits at $4 million. But Ridgway estimated only $190,000 over the seven years, assuming fewer rooms in operation, more investment needed to rehab the hotel and the purchase price of the lease from Smithart.

Reese then called Chester Trabucco, a partner in Astoria Hospitality Ventures with owner William Orr, a brother-in-law of former Port Commissioner Stephen Fulton. After the Port terminated Smithart’s lease and heard presentations from multiple suitors including Sonpatki, Hospitality Ventures was awarded a short-term lease on the Riverwalk Inn.

Orr and Trabucco were included as co-defendants in Param’s original lawsuit for intentional interference with economic relations. The two were later removed after Judge Philip Nelson ruled their lobbying of a public body is protected activity.

Trabucco learned about Sonpatki’s deal from a friend after the Port Commission vote in June 2015. Trabucco then started searching for financial partners and lobbying to get the lease. Nobody on the Port encouraged him to pursue Smithart’s lease, Trabucco testified, and he received no inside knowledge from Knight.

In his cross-examination, Hunter sought to show that Trabucco’s lobbying of the Port was aided and abetted through communication with Fulton and Port Commissioner Bill Hunsinger.

“I’m allowed to,” Trabucco said of his efforts.

Reese next called Knight, who reiterated his previous testimony that his termination of Smithart’s lease in July 2015 was necessary because of Smithart’s debt, the default on his lease, the deteriorating condition of the hotel and the deal with Sonpatki falling apart as Smithart entertained other suitors behind Sonpatki’s back. Knight denied having ever misled Sonpatki.

Hunter has argued that Knight provided incorrect documents to consent to the deal between Sonpatki and Smithart and never corrected them. Knight admitted to mistakes, but said the Port had trouble getting corrected documents from its attorney. Sonpatki later took the stand and testified about his failed attempts to fix the documents, get Smithart’s lease reinstated and offer the Port a cashier’s check for Smithart’s debts.

Reese called to the stand former Port Commissioner John Raichl, who said he had no concerns about how the Port Commission conducted itself in meetings, and that Fulton recused himself during discussions of the Riverwalk Inn. Hunter pointed out to Raichl notes from previous meetings showing that Fulton had been present for discussions of the Riverwalk Inn.

Closing arguments

“This is about whether the Port played by the rules,” Hunter said in his closing statements.

The questions are whether the Port and Param had a deal, whether that deal was broken and whether Sonpatki was misled, Hunter said. The Port wants to make the matter complicated with dates and figures, he said, but the issue is about playing by the rules and honoring a deal.

“This is a case about Mr. Knight’s truthfulness,” Reese said in his closing statements. “At the core, that’s what it is.”

Reese asked the jury to remember that Sonpatki is a successful businessman who took a risk trying to strike a deal with Smithart, who was the reason his deal went bad.

“If anyone is lying here, it’s Smithart,” Reese said.


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