In the continuing saga of lawsuits filed between the city of Lakeway and developer Cherry Knoll, LLC, score one more for Cherry Knoll.
An Aug. 14 ruling by the Third District Texas Court of Appeals granted Cherry Knoll’s request to halt the proceedings brought by the city in the matter, allowing Cherry Knoll’s federal lawsuit. stemming from the same set of facts, to continue.
Understanding the facts
The following facts are summarized according to an April 22 opinion of the U.S. Court of Appeals for the Fifth Circuit in the case of Cherry Knoll, LLC v. Steven Jones, HDR Engineering, Inc. and the city of Lakeway.
In November 2006, Cherry Knoll bought a 27.7 acre tract in Lakeway, intending to develop it into a residential area with a small portion dedicated to commercial business. The next year, Lakeway approved a plat for the property. But the plat wasn’t recorded, so it didn’t become official. Later, Cherry Knoll changed its plans in favor of two separate plats for the property, with one being residential and one commercial. A year later, in the spring of 2008, Cherry Knoll told the city the project was on hold for financial reasons. It delivered the now-two plats to a city official to hold onto in the event the project was resurrected when the developer’s status changed; however, Cherry Knoll never approved filing, or recording, the plats.
Over the years, Cherry Knoll decided not to pursue the previous plans, preferring to develop office space on the tract since medical buildings had popped up in the area.
In 2013, Lakeway moved forward with a project to expand Flint Rock Road, adjacent to the Cherry Knoll tract, and the following year sought to buy a portion of the Cherry Knoll tract—1.74 acres—to complete its project. At $381,000, the appraised value of the tract was too high, and the city’s consultant told Lakeway officials, including then-City Manager Jones, that the city would be better to find an alternate design for the road.
Following a meeting between the city’s consultants and Jones, Lakeway’s Building and Development Services manager at the time told Cherry Knoll his department found the two unfiled plats from years prior and intended to record them, obligating Cherry Knoll to follow the plans over its own objections. The plats included a dedication for a right of way to the city that would be the basis for the new alignment of Flint Rock Road.
Lakeway officials then ordered a new appraisal to be conducted, resulting in a recommendation that Cherry Knoll be compensated $262,956 for the property, but Cherry Knoll never received either appraisal. The two plats were recorded with Travis County on Aug. 18, 2014, without city officials meeting with Cherry Knoll’s representatives.
The city subsequently offered Cherry Knoll only $130,000 for the rest of the land Lakeway needed for the roadway, which was rejected, and the city sued Cherry Knoll to condemn the property for the road project.
Before it received the second offer, Cherry Knoll sold the property to a developer who, with an intended change in zoning, planned to create a mixed-use project on the tract. However, this zoning change wouldn’t be allowed because it contradicted the filed plats.
In 2015, the city and Cherry Knoll settled the matter, with Cherry Knoll selling the parcel in question to Lakeway for $240,659. In exchange, the city agreed to do away with the filed plats and end its lawsuit against Cherry Knoll.
On Aug. 17, 2016, Cherry Knoll filed a lawsuit in federal court against the City of Lakeway and others, including Jones, former Mayor Dave DeOme, former Zoning and Planning Commissioner Ron Massa, former building and development services director Troy Anderson and HDR engineering, its consultant. The lawsuit alleged the 2015 agreement was invalid and constituted a taking of property by the city, a violation of due process rights and equal protection, and a violation of the Texas Open Meetings Act.
In 2017, Lakeway filed a lawsuit in state court against Cherry Knoll, alleging Cherry Knoll violated the 2015 settlement agreement.
Countersuits were filed in both lawsuits.
The city tried to dismiss Cherry Knoll’s claims in the state lawsuit but lost, and Lakeway appealed the decision in state court to the Third Court of Appeals in Austin.
Meanwhile, in the federal lawsuit brought by Cherry Knoll, the lower court dismissed the lawsuit in favor of the city, and Cherry Knoll appealed that decision to the federal appellate court, the Fifth Circuit Court of Appeals in New Orleans.
That meant two appeals were continuing at the same time—one in federal court and one in state court—with the same set of circumstances.
This spring, the Fifth Circuit Court of Appeals reversed the dismissal of the federal case, so the federal lawsuit brought by Cherry Knoll was back on. The court held that Cherry Knoll had the right to sue the city and others in federal court.
With the federal case reinstated, Cherry Knoll then asked the state appellate court to freeze the city’s lawsuit against it. Cherry Knoll reasoned the federal lawsuit was filed first and everything happening in the state lawsuit was redundant to what was occurring in the federal lawsuit which had been resurrected.
On Aug. 14, the Third Court of Appeals—the state appellate court—agreed with Cherry Knoll and halted the state court litigation brought by Lakeway against Cherry Knoll.
“The Aug. 14 decision puts a hold on the city’s state court lawsuit and allows the federal court lawsuit to proceed,” said Jim Schober, principal in the Schober and Schober law firm representing Cherry Knoll in both lawsuits.
The federal case brought by Cherry Knoll is set for trial in May, he said.
Jones resigned as Lakeway’s city manager on Aug. 19, and City Attorney Cobby Caputo said the lawsuits proceed just as they have been with other city staff named in the litigation who were employed with Lakeway at the time the action occurred.
“(Jones) is being sued for actions that took place when he was acting as city manager and, from the city’s perspective, that’s what’s important,” Caputo said, adding Jones’ insurance and attorney’s fees in the matter are still covered by the city.
A discussion of both lawsuits, federal and state, was on the Lakeway City Council’s executive session agenda Monday, but no action was taken.