The city of Sarasota is on the brink of needing to pay $50 million in damages to a plaintiff in a breach of contract lawsuit. The plaintiff, Buck-Leiter Development, a private real estate developer, filed suit against the city years ago because Sarasota allegedly broke its contractual arrangement regarding a parking garage for Palm Avenue. Palm Avenue is a retail and hotel space that developers built on city property.
Ten years ago – in 2008 – city commissioners were negotiating their final agreement with the developer when the commissioners decided to cancel the deal because of finance and design disagreements. The developer filed suit, saying that the city had breached a prior agreement by backing out of a previous contract. The city, on the other hand, claimed that the developer breached the contract.
The developer won. A jury verdict issued against the city will order the city to pay out nearly $50 million in damages to the developer, but city officials say Sarasota – which has only a little more than $17 million in its emergency reserves – won't be able to afford the bill. Because it was a breach of contract lawsuit, the verdict will not be covered by the city's insurance. Furthermore, the city worries that it will empty its cash reserves, have its credit rating downgraded and be subject to enormous interest rates when it borrows money to satisfy this huge payment. Even worse, the city will probably have to raise taxes.
This lawsuit is an example of how – even if a plaintiff wins an award in court – it could be difficult to collect the award money. Due to the risk of something like this happening, it's important for plaintiffs to research all possible defendants in a case to help ensure that at least some of the defendants will have sufficient capital reserves available to pay a verdict that results in compensation for the plaintiff.
Source: Herald-Tribune, "Jury decision in development lawsuit could hit Sarasota taxpayers hard," Michael Moore Jr. and Nicole Rodriguez, May 25, 2018