Cases & Deals

Los Angeles County MTA and Alameda Produce Market shareholders settle after seven years of litigation

Clients Los Angeles County Metropolitan Transportation Authority

Jones Day successfully represented the Los Angeles Metropolitan Transportation Authority (the "MTA") in resolving a seven-year battle over the MTA’s use of eminent domain powers. In March 2004, the MTA governing board adopted a resolution of necessity that authorized the MTA’s taking of property in downtown Los Angeles (the “Property”) owned by Alameda Produce Market, Inc. ("APMI"). On April 1, 2004, the MTA commenced a proceeding seeking to acquire the property by eminent domain. During that proceeding, the MTA utilized California’s "quick take" eminent domain procedure, whereby a public entity filing a condemnation action may seek immediate possession of the condemned property upon depositing with the court the probable compensation for the property. A dispute arose surrounding the validity of the MTA's resolution of necessity, which jeopardized the MTA's ability to retain the Property (which it had, during the course of the eminent domain action, developed into a bus terminal). The eminent domain dispute was ultimately appealed to the California Supreme Court.

While the appeal was pending, APMI and its affiliates filed for bankruptcy in the Central District of California. The MTA filed a contingent proof of claim in the case, on the theory that if the MTA lost on appeal it would be entitled to reimbursement of its probable compensation deposit (most of which had, during the trial proceedings, been used to repay APMI's secured lenders). APMI, however, failed to provide for the MTA's claim in its proposed plan of reorganization. The MTA objected to the plan, seeking a modification that provided for payment of its claim. Behind the scenes, the MTA also approached APMI to gauge its interest in settling the overall eminent domain issues. APMI's management was unwilling to consider settlement, even though the bankruptcy court expressed its opinion during proceedings regarding the plan and estimation of the MTA's claim that the MTA was likely to win the action in the Supreme Court. And it dragged its feet in agreeing to any modification of its plan that would provide for payment of the MTA's contingent claim.

Also involved in the case were a group of dissident shareholders seeking to oust control from APMI’s management as part of a competing plan of reorganization (the "Shareholders"). At the same time that the MTA was trying to negotiate with APMI's management, the MTA approached the Shareholders to see whether they would be willing to modify their proposed plan to provide for a full settlement of the eminent domain lawsuit. Jones Day persuaded the Shareholders that their willingness to settle what the bankruptcy court viewed as a worthless appeal — in exchange for the appraised value of the Property (less the deposit already withdrawn) — would turn the momentum in their favor. Ultimately, the Shareholders’ agreed to settle on Jones Day’s proposed terms. And on June 24, 2011, the Bankruptcy Court confirmed the Shareholders competing plan, effectively ousting APMI’s sitting management. In its ruling, the bankruptcy court recognized that the settlement between the MTA and the Shareholders, which provided APMI with much needed liquidity in exchange for the dismissal of what the bankruptcy court viewed as a worthless appeal, was an important factor in its decision to rule in the Shareholders’ favor. The bankruptcy court’s ruling ended seven years of litigation between APMI and the MTA.

Los Angeles County MTA v. VCC Alameda (California Superior Court)

We use cookies to deliver our online services. Details of the cookies and other tracking technologies we use and instructions on how to disable them are set out in our Cookies Policy. By using this website you consent to our use of cookies.