Nicholas Malfitano Mar. 10, 2016, 3:02pm


PHILADELPHIA – A city councilman has won summary judgment in a lawsuit alleging he violated a real estate company’s constitutional right to equal protection by improperly influencing the sale of City-owned land, and depriving the plaintiff of the opportunity to participate in a competitive bidding process.

U.S. District Court for the Eastern District of Pennsylvania Judge Wendy Beetlestone ruled March 3 that Philadelphia City Councilman Kenyatta Johnson was not liable for the conduct alleged by plaintiff Bag of Holdings, LLC (BOH).

BOH is a real estate development and holding company established in 2011 by Ori Feibush and Michael Pollack, with Pollack now serving as its sole owner and employee – while Johnson is a sitting Philadelphia City Councilman serving the residents of the City’s Second District.

In its complaint, BOH alleges the City requires a competitive sales process to dispose of City-owned properties, and claims Johnson violated City policy and circumvented the competitive process when he finalized the sale of City properties to “political insiders” for less than market value.

Per the Philadelphia City Code, all City-owned real property must be advertised to the public for competitive bidding before sale, and “no sale shall become final without specific approval by City Council.”

“In 2012, a City policy was issued for the sale of real property owned by the Philadelphia Redevelopment Authority (RDA), the Philadelphia Housing Development Corporation (PHDC), and the City of Philadelphia’s Department of Public Property (PDPP),” Beetlestone said.

“The policy was never codified into law, but directed these agencies to utilize an ‘open market’ approach whenever a prospective purchaser offered less than the asking price or multiple entities expressed an interest in purchasing a property,” Beetlestone added.

Between 2012 and 2014, BOH said it expressed formal interest in 20 vacant, City-owned lots located throughout Philadelphia.

BOH added although each of the properties received “multiple” expressions of interest, they were communicated outside of a competitive sales process, in alleged violation of City policy, and BOH was unable to purchase any of them.

Further, BOH claimed several of the properties were sold directly and for below market value to political campaign contributors and friends of Johnson’s: Hayman Construction (owned by Felton Hayman), Wilson Drake Development (care of Anthony Drake) and Distinguished Properties (care of Sanjiv Jain, where Jain is allegedly close with one of Johnson’s childhood friends).

Per information contained in Beetlestone’s decision, Stephen Cobb, Johnson’s Director of Legislation and who assists in overseeing real estate development, communicated with RDA Executive Director Brian Abernathy every couple of weeks regarding City land sales in Johnson’s district.

On at least three occasions, a representative from Johnson’s office requested the RDA approve the direct sale of a property over multiple expressions of interest. Some of the direct sale properties were sold below market value, without the completion of an appraisal or a review by a Real Estate Review Committee, in apparent violation of the City land sale policies. Abernathy told Cobb and Johnson of his concern regarding the direct sales of the properties.

In their case, BOH claimed they were treated differently than the similarly-situated developers who actually acquired the properties, thereby violating BOH’s right to equal protection under the law.

In response, Johnson claimed both legislative and qualified immunity in his role as a councilman, and sought summary judgment to be granted in his favor.

In her published opinion, Beetlestone pointed to BOH not citing precedent or evidence of Johnson being aware of this supposed illegal conduct.

“BOH implicitly acknowledges the dearth of applicable law in its brief where, beyond the relevant legal standards, it failed to cite a single case on point. In addition to the lack of relevant precedent, BOH has not elicited any evidence that Johnson was advised that his conduct was unlawful,” Beetlestone said.

Beetlestone explained while Johnson’s alleged conduct may have raised “ethical concerns” with Abernathy about a City policy, the lack of guidance on this subject from any appellate court cannot provide “every reasonable official would have understood” Johnson’s communications with the RDA and the services extended to the councilman’s constituents violated BOH’s constitutional rights.

“Johnson could not be reasonably expected to know the law forbade the subject conduct; therefore, the qualified immunity defense must be sustained. Accordingly, summary judgment will be granted in Johnson’s favor,” Beetlestone said.

The plaintiff is represented by Walter Stephen Zimolong of Zimolong Law, in Philadelphia.

The defendant is represented by John Joseph Coyle and Michael R. Miller of the City of Philadelphia’s Law Department, also based in the city.

U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-06774

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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