Big Fight Over a Mall in San Bernardino

SAN BERNARDINO (CN) – Through “truly Machiavellian actions,” San Bernardino violated its contract and let the downtown Carousel Mall fall into disrepair, so the city can seize it on the cheap and build a government center there, the mall’s owner claims in Federal Court.




     Placo San Bernardino claims the city and its Economic Development Agency allowed mold and asbestos to spread through the mall by failing to maintain their “obligation to maintain key parts of the mall.”
     Placo claims the defendants “have severely and intentionally impaired plaintiff’s ability to attract and keep tenants by refusing to honor their contractual obligation to maintain key parts of the mall, engaging in a high-profile media campaign to make the public and prospective tenants aware that the city intends to develop a government center at the site of the mall, and harassing existing and prospective tenants through a pattern of unusually long delays and arbitrary rejections of a broad range of permit applications.”
     Place calls it “a blatant misuse of municipal powers,” and says the city plans to seize the “multimillion-dollar Carousel Mall … property for their own use without paying just compensation.”
     The mall was built in the 1970s, next to city-owned property. Since Day One, Placo says, the city and its economic development agency have been required to maintain “key portions of the mall.”
     Placo says it bought “a substantial portion” of the mall for $23.5 million in January 2008, intending to spend millions more to “renovate and revitalize” it.
     Placo claims that since it bought the mall, “the city and the EDA have essentially abandoned and ignored their obligations under the REA [restriction and easement agreement] regarding maintenance of key portions of the mall and providing security for the mall. The city and the EDA have utterly failed to perform their obligations, allowing the pavement and masonry to substantially deteriorate, failing to repaint or repair deteriorated surfaces for years after they suffered damages, refusing to care for interior landscaping, and failing even to replace burned out light bulbs in the mall and parking areas. The failures have left the mall ugly and unsafe.”
     Placo claims the city’s Machiavellian refusal to maintain the property has allowed water to enter though big holes in the ceiling. The water and ceiling holes have exposed “structural members which are coated with asbestos containing materials in the common areas of the mall, which are owned by the city … [and] asbestos-containing material has spilled onto the walkways and corridors of the mall and has likely been circulated throughout the mall,” according to the complaint.
     The disrepair is so egregious that some stores have to close on “rainy days to prevent harm to patrons resulting from wet floors and walls.”
     Placo claims the city has “repeatedly violated OSHA and environmental laws and regulations by having their janitorial employees, without adequate training or safety equipment, clean up asbestos containing material which frequently drops through the missing ceilings of the common areas onto the walkways below, and then disposing of the hazardous material as ordinary trash without proper containment and without sending the material to an appropriately controlled hazardous waste disposal facility.”
     Because of the city’s contract violations, and the resultant loss of tenants, Placo says it has been left with “insufficient income to pay its mortgage.” It says the city, with help from co-defendant Chicago Title Co., in “an apparent quid pro quo deal, illegally purchased the mortgage from plaintiff’s lender with the intent to foreclose and become owner of the mall without having to pay plaintiff the fair value while giving their political patrons the chance to earn millions of dollars redeveloping the mall property.”
     This left Placo unable to use “its only material assert to generate sufficient income and by clouding title and thereby preventing plaintiff from refinancing,” it claims.
     Placo San Bernardino wants foreclosure stopped and damages for violation of its rights to equal protection and due process, breach of contract, conspiracy, interference, and an accounting.
     It is represented by Bryan K. Sheldon with Lim, Ruger & Kim of Los Angeles.

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