Slowness of City Hall to move against Park Grill torpedoes its chances to undo'sweetheart' deal to counter bad press, judge says

By Jonathan Bilyk | Sep 24, 2015

In the latest scene in a years-long saga cutting across Chicago’s culture of politics and clout, a Cook County judge has said Chicago City Hall and Mayor Rahm Emanuel cannot undo a deal cut by the Chicago Park District under former Mayor Richard M. Daley to allow a group of Chicago investors – including some with ties to the former mayor – to operate the restaurant in Millennium Park, simply because city officials wished to now get on the right side of bad publicity surrounding the “sweetheart deal.”

Thursday, Sept. 24, Cook County Circuit Judge Moshe Jacobius found in favor of the owners of the Park Grill, the “white tablecloth” restaurant and concession at Millennium Park, denying a request from the city of Chicago to invalidate a concession agreement between the ownership group and the Park District.

The city had sued in 2011 following Emanuel’s inauguration as mayor, succeeding Daley. In its complaint, the city had asserted it held ownership rights to the land on which the Park Grill now sits, and it never formally consented to the 30-year agreement reached in 2002 between the Park District and the group, legally known as Millennium Park Joint Venture, led by caterer James Horan and restaurateur Matthew O’Malley. The investment group also included people connected to Daley, including friends, relatives and neighbors of the former mayor and officials in his administration, city contractors, and members of city boards and commissions.

The city has alleged the deal was improperly negotiated to guarantee the Park Grill group “unconscionable” terms, including annual fees based on net, rather than gross, revenues, exemption from property taxes, and free water, natural gas and garbage pickup, among other items. Because of these terms, the city contended Park Grill owed the city more than $8 million.

In arguing against the deal, the city particularly pointed to the relationship between O’Malley and Laura Foxgrover, a former Chicago Park District official who worked with the people responsible for negotiating the concession agreement. Foxgrover had come to the Chicago Park District from O’Malley’s former business, the Firehouse Restaurant, and bore a child with O’Malley. The couple later married.

City lawyers argued the relationship cast a pall over the agreement, alleging it may have played a role in helping O’Malley’s group negotiate the favorable terms.

The relationship between O’Malley and Foxgrover was made public in 2005, when the Chicago Sun-Times first reported it. At the time, the Park District said Foxgrover played no role in negotiating the deal.

However, when the relationship became public in 2005, 15 months after the Park Grill had opened and nearly three years after the concession agreement had been reached, city officials first expressed disapproval of the deal, as evidenced by a letter sent to the Park Grill group by city lawyer Mara Georges in which the city first publicly mentioned its discomfort with the restaurant’s operations on the city-owned land.

However, it was not until Emanuel became mayor in 2011 that the city took the matter to court, asking a judge to intervene.

At that time, legal representatives for the Park Grill group decried the city’s legal action, saying the city was simply attempting to undo a deal to which it had assented in an attempt to grab a greater share of the now-profitable restaurant’s proceeds and intervene before the Park Grill group could complete a $13 million sale of the Grill’s operational rights to Levy Restaurants.

In his decision, Jacobius said the city’s timing in bringing the lawsuit is key.

While the judge conceded the relationship between O’Malley and Foxgrover was improper and raises questions, he said the city’s arguments against the deal were undercut by its decision to wait so long to act against the deal, even though city officials had known from the beginning of the city’s ownership of the land on which the Park Grill sits and of the terms of the deal under which the Park Grill would operate.

From 2003 to 2005, when allegations concerning the relationship between O’Malley and Foxgrover first became widely known, and again until 2011, when the city brought its lawsuit, the city not only did not make any real moves to rewrite the Park Grill deal, but continued to behave as if the restaurant had every legal right to operate where it was, under the terms of the agreement. Among other items, the judge noted the city granted Park Grill building permits and a liquor license, performed building inspections and collected sales taxes and licensing revenues from the Grill, just as City Hall would with any legally operating restaurant.

Even though the Chicago City Council never formally signed off on the deal, as the city said should have been required, Jacobius said the city’s actions before and after the deal was signed demonstrated it had empowered the Park District to act as its agent in negotiating the agreement and signaled to the Park Grill group City Hall was on board.

“Even if the City did not authorize the Concession Agreement before it was signed, the City ratified the Concession Agreement and now may not challenge its validity,” the judge wrote.

The judge further chided city officials for their treatment of the Park Grill group in the matter, saying the city’s actions could not be chalked up to a simple oversight driven by “negligence or inattention.” Rather, the judge said the action against the Park Grill group and the lawsuit that followed was motivated by the desire of city officials to get out in front of “impending negative publicity.”

While Georges testified this was not the case, Jacobius said he did “not find her testimony in that regard to be credible.”

“The Park Grill Parties have spent substantial sums of money, induced in no small part by the affirmative acts of the City,” Jacobius wrote. “Furthermore, the construction of the Park Grill partly benefited the City, which had planned on a restaurant in Millennium Park all along.

“Finally, …. allowing the City to disavow the Concession Agreement would result in great injury to the Park Grill Parties. Therefore, the Court finds that the City granted the Park Grill a license to operate the restaurant and is, under the circumstances here, estopped from revoking such license.”

Millennium Park Joint Venture was represented in the action by the firm of Novack Macey, of Chicago.

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