A settlement has been reached in the case in which a Hamilton County Circuit Court jury awarded over $32 million to Chattanooga developer Duane Horton in connection with a resort project on Lookout Mountain that never got off the ground.
Circuit Court Judge J.B. Bennett said the two sides had informed him that it was agreed during a mediation session he ordered that there would be no further appeals in the case.
The plaintiff apparently agreed to take a lesser amount than the total awarded by the jury in compensatory and punitive damages to avoid a long appeals process that might have resulted in throwing out parts of the award.
Robin Derryberry, spokesperson for Mr. Horton, said he was not yet ready to make a statement, but may later.
An attorney in the case said some portions of the settlement were still under discussion.
The jury in late May awarded $20,599,000 in compensatory damages to the developer. who had planned a resort at Canyon Ridge. It was against a financial firm that allegedly secretly started working on a rival project.
A few days later, the jury added $11.5 million in punitive damages to the whopping compensatory damage verdict. However, the defense claimed the punitive damages should be thrown out due to "attorney misconduct." The defense said Dallas attorney Robert Manley asked a witness a question he had been instructed by the court not to ask. Attorney Manley asked Sterne, Agee & Leach CEO Eric Needleman how much money he is paid by the firm. Defense attorneys said it was "part of a continuing pattern of attorney misconduct."
Judge Bennett at the time said attorney Manley had been told not to ask the question "and you asked it."
The jury awards were against Sterne Agee & Leach and one of Sterne, Agee & Leach's former agents, Edmund J. Wall of Atlanta. Another defendant, Grove Street Partners LLC, settled out of court earlier. The firm is based in Atlanta.
Attorneys said it was believed to be the largest verdict award in Hamilton County history.
The lawsuit said some agents involved in a hotel and conference center project at Canyon Ridge on Lookout Mountain began working for a rival project, and neither major project ended up going forward.
The lawsuit initially asked $35 million in damages.
Developer Horton, owner of the Scenic Land Company, was initially involved with Randy Baker at Canyon Ridge on a project to build a $100 million Starwood Golf Resort at the location south of the Trenton-LaFayette Highway.
Mr. Horton and other investors in Singing Sisters Falls LLC bought over 400 acres adjacent to the resort site as an investment.
The suit says, "Despite serving as Canyon Ridge's investment banker, its bond underwriter and as one of Canyon Ridge's managers at different times, Wall and Sterne worked at odds with Canyon Ridge and in support of a competing project for their own benefit.
"Grove Street conspired with and, on information and belief, employed Wall and Sterne and joined in their work at odds with Canyon Ridge."
It says a group led by Mr. Baker decided to build a less expensive project featuring a Sonesta Hotel.
Mr. Baker was not a defendant. He was called as a witness by the defense.
The suit says by January of 2010 "everything had fallen into place for Canyon Ridge's project. Canyon Ridge had acquired the land and signed an exclusive Luxury Collection Franchise License with Starwood Resorts. Starwood's outside consultant, Paul Wischermann, performed a financial analysis indicating that the project would be highly profitable, a projection verified by two independent feasibility studies conducted by leading industry experts.
"The Canyon Ridge team was rounded out by the additional support of Ryan Companies, ESG, River Street Architecture and Hart Howerton, a world-class development team.
"Through Singing Sisters, the Canyon Ridge team had also acquired land surrounding the hotel to develop or sell after the hotel opened. Finally, Walker County, Ga., was behind the project, lending its financial support and credit rating to the project's bonds."
The suit says Mr. Baker "fell onto hard financial times and, desperate for funds that the Canyon Ridge project would not provide him, recruited Wall to develop a project more lucrative to himself, Sterne and Wall, to compete with Canyon Ridge's project.
"On information and belief, Wall contacted Grove Street, a commercial real estate development company Wall and Sterne had previously worked with, and enlisted them to assist in creating and promoting a competing project that would be more lucrative for both Baker and Sterne.
"Grove Street, with Wall's, Sterne's and Baker's guidance, planned to build a Sonesta hotel on the same site where Canyon Ridge's Starwood hotel would have stood."
The suit says Walker County eventually backed away from the initial Starwood proposal due to the competing project.
It says Sterne and Wall resigned as Canyon Ridge's bond underwriter on Sept. 15, 2010, but nine days later joined Canyon Ridge's board of managers at Mr. Baker's request "assuming fiduciary duties to CRR despite their clear conflict of interest."
The suit says Mr. Wall's "first act as a Canyon Ridge manager was an unsuccessful attempt to oust Horton as president of Canyon Ridge."
The complaint says, "Next, Wall - while simultaneously serving as a Canyon Ridge manager and working for the competing Grove Street project - reduced the amounts of recovery zone bonds that Canyon Ridge had received from the state of Georgia as part of the hotel development plan. Wall had helped Canyon Ridge execute the request for the RZBs, but did not inform Canyon Ridge of the reduction in the bonds' size because he intended to use the bonds for his competing Grove Street project, which was smaller in size and required a smaller RZB allocation."
The suit says Wall and Sterne "began simultaneously working as Walker County's 'financial advisor'. Accordingly, by late October, Wall and Sterne were serving in, or had served in, conflicting roles as 1) a Canyon Ridge financial advisor and bond underwriter, or a Canyon Ridge manager; 2) Walker County's financial advisor, and 3) on information and belief, working for Grove Street supporting and promoting the competing project. Wall and Sterne repeatedly used their influence in all three positions to thwart Canyon Ridge's efforts."
The case did not involve the Canyon Ridge development and golf course on Lookout Mountain. After Randy Baker left that development, it was taken over by Darryl Mims of Shelby, N.C., whose father had been involved in it earlier.
The trial started after the jury was picked on April 21.