City of Minot wins $2.44 million in parking ramp dispute with Cypress Development
A jury awarded the City of Minot $2.44 million today in a contract dispute with the developer of two downtown parking ramps.
The jury entered deliberations this afternoon and returned a verdict within hours.
“We’re glad to have this issue behind us after investing so much time, money, and emotion into these structures,” said Minot Mayor Shaun Sipma in a prepared statement. “Now we can focus on moving forward for the benefit of the city.”
The city had alleged Cypress Development breached its contract when it failed to make required lease payments on two downtown parking ramps. In terminating the lease and taking over ramp management, the city states it incurred expenses beyond its contractual obligation. It also states it is owed money on the construction, for a total in damages of about $3.2 million.
Cypress, which counter-sued, had alleged it was the city that breached the contract.
Cypress issued a statement following the verdict, saying, “We are disappointed in the outcome, but we have always had a high regard for the city, and we wish them the best.”
The city’s relationship with Cypress began in 2011. The city and Cypress entered a series of contracts in which Cypress agreed to develop, design, and construct two mixed-use developments, including parking, retail space and apartments on city-owned land downtown.
The city agreed to contribute just over $4.9 million per structure from a combination of MAGIC Fund dollars and federal funds toward construction. The Renaissance and Central parking structures opened in 2016, with construction of retail space and apartments remaining.
The city terminated its contracts with Cypress and filed suit for breach of contract in March 2018.
The jury awarded the city $2,442,479.94 to cover unpaid rent and excess costs the city incurred in constructing the parking structures. The amount also includes costs incurred by the city to install the exterior walls and roofs on the two structures after terminating its arrangement with Cypress, which had been obligated for that work in the contract.
Sipma said efforts will begin to find a partner to construct apartments on top of the two structures and complete the development of the existing commercial space.
Cypress’ countersuit, which was denied by the jury, sought more than $50 million in damages related to excess construction costs and lost profits.
In closing arguments today, the city had asked the jury to prioritize the written agreements in its deliberations. Cypress had argued that both the contract and the city’s behavior should be considered, insisting the city’s actions to infuse more money into the project beyond the contract were significant.
Jocelyn Knoll, the city’s lead attorney with Dorsey & Whitney, Minneapolis, described a scenario in which Cypress allegedly worked behind the scenes to misrepresent the project and persuade the city to pursue it.
“Every single time that the city wanted to be a good contracting partner, Cypress wanted more money,” Knoll said. “Cypress wasn’t doing what it was supposed to be doing in the contract.”
Darien Loiselle, Cypress’s Portland, Oregon, attorney, said Cypress had shared a vision for the project with former Mayor Curt Zimbelman but leadership changes hurt the project.
“There was a significant change at the city, and there was a change in attitude. There was a change in focus and there was definitely a change in leadership,” Loiselle said. “The leadership abandoned this project.”
He said the city manufactured an excuse to remove Cypress when it terminated the contract in March 2018 over $255,000 in rent obligations, despite Cypress offering to put the money in escrow, he said.
“Cypress was trying to move the ball forward. The city was trying to end the relationship,” he said.
In addition to losing its opportunities to create retail space and housing at the ramps, Cypress states it essentially will be gifting the city its $16.2 million investment in the ramps’ construction.