Mold woes cost Portland $1.2 M

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Mold woes cost Portland $1.2 M

Central Maine Morning Sentinel - Augusta,ME

By TESS NACELEWICZ

Blethen Maine Newspapers

http://morningsentinel.mainetoday.com/news/local/4303853.html

Portland must pay Scotia Prince Cruises Ltd. more than $1.2 million

to settle a legal dispute over mold at the city's International

Marine Terminal, according to an arbitration panel's ruling released

Friday.

The ferry operator, which discontinued service during its battle

with the city, had demanded as much as $164.5 million in

compensation.

City Manager Joe Gray described the city as " pleased " with the

decision by the International Centre for Dispute Resolution.

Representatives of the cruise line did not respond to calls seeking

comment.

Although the city will also have to pay its own legal fees and

arbitration costs, Gray said the city is " very relieved " that Scotia

Prince Cruises failed to prevail on its major claims. He also said

that the decision " vindicates the city's position all along that

this was not about mold. Mold was an excuse for a business that was

failing. "

Len Langer, an attorney representing Scotia Prince who is with the

Portland firm of Tompkins, Clough, Hirshon & Langer, referred

questions to Mark Hudson, chairman of the company. Hudson could not

be reached Friday afternoon.

The company still maintains a Web site, but the site says the

business was " destroyed " by the presence of toxic mold at the

terminal. The ship named " Scotia Prince " was sold in April.

The ferry had provided service from Portland to Yarmouth, Nova

Scotia, for more than 30 years, but passenger totals dropped in the

early 2000s after the Hudson family took over the business.

Scotia Prince blamed the mold, water leaks and ventilation problems

at the old waterfront building for the termination of its Portland

service. The company said the problems led it to evacuate the

building late in its 2004 season and then cancel its 2005 sailing

schedule to Nova Scotia. The $164.5 million it sought included more

than $88 million for lost profits and compensation for losing its

route from Portland.

The city contended it had remedied the problems in the terminal

after Scotia Prince left and that it was ready to be occupied in

2005. The ferry line disagreed.

Scotia Prince abruptly canceled its sailing schedule in April of

that year, and Portland terminated the company's docking lease. The

city wanted Scotia Prince to pay $2.5 million for lost lease revenue

and terminal repairs, but the arbitrators denied Portland's claims.

The decision went to arbitration because that remedy was specified

in the ferry line's contract. During more than a year of hearings

and discovery, Scotia Prince eventually reduced its claim to $90

million, according to the city.

In the end, the arbitrators ordered the city to pay Scotia Prince

just over $1.17 million. Most of that was for some of the excess

rent the cruise line said it paid for the old terminal. The city

also has to pay $166.74 in daily interest that started accruing last

Jan. 1, bringing the total payment owed to Scotia Prince to just

over $1.2 million.

Total costs to the city will exceed that amount, however, because

the city and the cruise line were each ordered to pay their own

attorney's fees and the costs of arbitration. The bill for the

arbitration amounted to about $400,000, and City Manager Joe Gray

said Portland's share is a little more than $200,000.

TOTAL LEGAL EXPENSES UNCLEAR

It was not clear on Friday what the city's total legal expenses are

in the case, but as of the summer 2006, the city had already spent

nearly $300,000 in outside legal fees. At the time, it was

anticipating it could spend $250,000 more.

Both the city and cruise line agreed that the arbitrators did not

have to spell out the reasons for their decision, so it was unclear

how they arrived at it.

Typically, said Kayatta, an attorney at the Portland firm of

Pierce Atwood who represented the city, the reasons for arbitration

decisions are not detailed because that can be more expensive and

the decisions are rarely overturned by courts.

He calculates that Scotia Prince spent more fighting the case than

the sum the company will recover from the city.

Gray likened the award to Scotia Prince as " essentially a rent

rebate for the condition of the facility from 2000-2005. "

He said the decision " puts to rest any claim that the city's repairs

to the facility in 2005 were inadequate. "

The new occupant of the International Marine Terminal is Bay Ferries

Ltd., which owns and operates the high-speed ferry called The Cat.

Gray said the fact that the company is now in its second season at

the 98-year-old terminal shows there are no problems there.

Mark Mac, president of the company, could not be reached for

comment on Friday but said last year he was confident the city had

addressed the mold problem.

Gray said the decision won't cause a deficit in the city budget,

even though it comes at a time when the Portland schools are

grappling with a $1.7 million to $2.5 million school budget

shortfall. This summer the city closed out its 2006-2007 municipal

budget in the black because revenue exceeded spending.

Gray said he believes the costs of the Scotia Prince decision can be

covered with savings and the city's $20 million reserve account.

Scharf, president of the Portland Taxpayers' Association,

said his reaction to the decision is that " it could have been worse. "

He believes Scotia Prince did not have a legitimate claim and said

the city needed to defend itself or it could have faced millions

more. However, Scharf called for a full accounting by the city of

its legal costs in the matter.