Jonathan Bilyk Oct. 9, 2015, 11:46am

While Chicago city officials sued the owners of the Park Grill restaurant to collect millions of dollars in taxes and fees that would otherwise have been paid into the city’s coffers, the years-long litigation which failed to persuade a judge the deal was too crooked has cost the city’s taxpayers millions in legal fees, as well.

In September, Cook County Judge Moshe Jacobius shot down the lawsuit brought by Chicago City Hall to undo a deal cut by the Chicago Park District with a group of investors to bring a “white tablecloth” restaurant to Millennium Park.

City officials, including Mayor Rahm Emanuel, said the lawsuit, filed in 2011, was necessary to protect city taxpayers from a “sweetheart deal.”

That deal, reached in 2002 under the administration of former Mayor Richard M. Daley, allowed the Millennium Park Joint Venture – a group of investors led by caterer James Horan and restaurateur Matthew O’Malley, and which included a number of the former mayor’s friends, relatives, neighbors and associates – to open the Park Grill as the park’s concessionaire and lone restaurant.

The city and other critics, however, have alleged the deal was improperly negotiated to guarantee the Park Grill group “unconscionable” terms, such as fees paid to the city based on annual net revenues, rather than gross; exemption from property taxes; and free water, natural gas and trash collection, among other items. Because of these terms, the city contended Park Grill owed the city more than $8 million.

The city contended the terms favorable to the restaurant group came about, in large part, because of an intimate personal relationship between O’Malley and Laura Foxgrover, a former Chicago Park District official who worked with those responsible for negotiating the concession agreement for Park Grill. Foxgrover had come to the Park District from O’Malley’s former business, the Firehouse Restaurant, and bore a child with O’Malley. The couple later married.

After years of arguments over the deal in court, however, Jacobius rejected the city’s case, saying the city had waited too long to bring the lawsuit to lend credence to its assertions it had somehow been misled by a Park District acting without the knowledge or consent of City Hall.

The judge further said the city appeared to act largely out of a desire to get on the right side of “negative publicity” after news outlets reported details of the favorable terms afforded the Park Grill under the operating agreement.

Following the ruling, Emanuel criticized Jacobius’ decision, saying he believed the judge “ruled against Chicago’s taxpayers, who we believe have been taken advantage of in a sweetheart deal that benefited a select few.”

“The 30-year ‘contract’ has already cost Chicago taxpayers millions in lost revenue and we stand by our commitment to fight on their behalf,” Emanuel said in the statement.

He said the city was reviewing “what further action” it might take.

However, the city’s action to fight the contract appears to have already cost city taxpayers millions more paid to local law firms who helped the city and Park District wage the court fight.

According to records obtained by the Cook County Record from the city of Chicago and the Chicago Park District under Freedom of Information Act requests, the city and Park District combined to pay their lawyers and others hired to handle and contribute to the litigation more than $6.6 million, combined.

According to the records supplied by the City of Chicago Department of Law, the city paid its lawyers, from the firm of Barnes & Thornburg, more than $3.3 million from January 2012, when it first hired the firm, to September 2015, shortly before Jacobius handed down his decision in the case.

The records indicate the city paid Barnes & Thornburg $3.064 million in invoiced attorney fees and an additional $279,332 in invoiced expenses.

Nearly two-thirds of the fees and expenses paid came in 2013 and 2014, when the city paid Barnes & Thornburg $817,371 and $1.35 million, respectively.

Likewise, the Park District has already paid its lawyers, from the firm of Reed Smith LLP, more than $3.13 million from December 2011 to April 2015. The Park District further reported it expects to pay an additional $154,963 in invoiced amounts not yet approved to the law firm yet this year.

The Park District reported legal fees of $450 per hour for attorneys and $285 per hour for paralegal work from December 2011 to December 2014, and fees of $295 per hour for attorneys and $125 for paralegals in 2015. Expenses paid to Reed Smith also included more than $293,121 paid to an expert witness for help regarding assets valuation, the Park District said.

Like the city, the bulk of the Park District’s expenses came in 2013 and 2014, when the Park District paid its lawyers $945,863 and $1.39 million, respectively.

In a release following the decision, the firm of Novack and Macey, of Chicago, which represented the Park Grill investment group, said Jacobius’ decision was “a victory for all hard-working Chicagoans who do business with the City.”

However, when contacted this week by The Cook County Record, the firm declined further comment on the case, its outcome or the cost of the litigation.

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Organizations in this Story

Reed Smith LLP
10 South Wacker Drive
Chicago, IL 60606

Novack and Macey LLP
100 North Riverside Plaza, Suite 1500
Chicago, IL 60606

Barnes & Thornburg LLP
1 North Upper Wacker Drive
Chicago, IL 60606

City of Chicago
121 N LaSalle St
Chicago, IL 60602

Chicago Park District
541 N Fairbanks Ct
Chicago, IL 60611

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