23 Apartments Lawsuit Settles

By Gordon HopkinsA lawsuit against the City of Fairbury over $272,000 sitting in escrow has been settled after mediation.The complaint was filed in U.S. District Court on October 4, 2024. The plaintiffs are Allied Development LLC and Fairbury ‘23 LP, who were responsible for turning a school building into apartments 20 years ago. According to the complaint, “When Allied Development sold the Fairbury ’23 apartments on or around May 30, 2023, Fairbury refused to forgive its loans as it had agreed to, forcing the title company to hold approximately $272,000.00 in sales proceeds. Those proceeds – which are still pending in escrow today – rightfully belong to Plaintiffs.”In 2004, Steve Foutch, until recently the owner of Fairbury 23 Apartments, received $202,000 from the City of Fairbury to convert a former school building into low-income housing. The city then asked for repayment of that loan, despite Foutch’s claim that he believed the loan would be forgiven and despite the fact that the money did not originally come from Fairbury. In 2003, the city was given two grants; $130,000 was money from the Cranston-Gonzalez National Affordable Housing Act of 1990 (HOME program) and $72,000 was CDBG (Community Development Block Grant Programs) money. Both of these were grants given to the city for the express purpose of creating affordable housing. Fairbury Mayor Kelly Davis and City Attorney Kurth Brashear participated in mediation and a deal was negotiated where both sides would receive a portion of the funds held in escrow. The mayor gave the City Council an update at a meeting on Tuesday, August 5, where he set the scene, “Kurth and I attended a mediation July 17 in Lincoln with Mr. Fouch and his attorney. It’s not very big room. And I was in there with three attorneys and one on Zoom, and I heard a lot of legal jargon, and it’s six hours. They didn’t even let us out for lunch.” Davis provided the council with details of offers and counteroffers, with a final offer of $178,400 by the plaintiffs. He explained his reasoning for accepting the offer. “ I understood that if we went to court, we could lose the whole thing, lose everything. It would be just a judge making a decision. It wouldn’t be a trial, per se, with a jury, and we could possibly have to pay all of Mr. Fouch’s legal fees, which could be quite a bunch, because he’s either on his third or fourth legal team.”The mayor also noted that the city’s insurance carrier, EMC Insurance Company, agreed to cover a portion of the payment. Davis explained, “The insurance attorney offered to cover 20,000 of Fouch’s requested settlement.”“I should clarify they are not under a obligation to do so under your insurance policy,” said Brashear. “They are calculating it will cost them more to defend.”According to the lawsuit, “The paper trail unquestionably shows that Fairbury agreed it was administering and providing grant funds, and that – consequently – Fairbury has simply refused to abide by its agreement.”However, City Councilperson Phil Rogge said, “The paperwork all says it’s a loan. There’s nothing in the paperwork that says it’s grant.”“The city might have got the money granted to them, but there’s a lot of programs like that, where you get the grant and then you lend it out,” said Rogge. “To me, a loan’s a loan.”“I reached out to Julie Katz a week ago,” said the mayor. “She’s only one around that we can find that did work on it.”Mayor Davis said, “She feels that Mr. Fouch is entitled to that money. She said there was not a developer out there that would come into a project like this without being guaranteed something like that.”Brashear pointed out that the city would still be receiving back more than the $72,000 in CDBG that the city originally paid into the project, “This would certainly recover payment of that, plus all interest that would be owed through 2034 plus some additional.”Brashear also emphasized the risk should the city decide to take the matter to court, “This is a classic bird in the hand, two in the bush situation.” The City council voted to approve the agreement at the meeting. While several of the council members voiced objections, the only council member to vote against the resolution was Phil Rogge.

Weekend Storms Leave Thousands Without Power

Craig James Shumard

Related Articles

High Winds Fuel Multiple Wild Fires in SE Nebraska

Sen. Ricketts Makes the Case for War

City Offices Closed During Move

A Broken Wire Over Railroad Tracks Leaves City in the Dark