Updated with comment from City Attorney Eileen Blackwood
Negotiations aimed at settling CitiCapital’s $33.5 million lawsuit against Burlington Telecom have collapsed, Mayor Miro Weinberger said on Saturday.
The two sides proved unable to reach an out-of-court agreement in talks that got underway in January. BT and Citi met for only a single two-day negotiating session. They did not hold a second round of talks in March, as had earlier been scheduled, the mayor disclosed in an interview in Battery Park during Kids' Day celebrations.
“It didn’t make sense to continue those talks,” Weinberger said, declining to specify the reasons for the breakdown. Because the dispute remains in litigation, the mayor said it would be improper for him to comment in detail.
The battle for control of the telecom network equipment leased to BT by CitiCapital thus returns to federal court in Burlington for adjudication of the lawsuit filed 20 months ago, after BT ceased making payments on its lease agreement.
The Weinberger administration had hoped to negotiate a deal with Citi that would clear the way for BT to be sold to private interests or to a co-op that some Burlington residents are forming. No buyer is likely to take the financially troubled utility off local taxpayers’ hands until the fight with CitiCapital is resolved. The New York-based creditor wants to be paid $33.5 million it says it is owed for the fiber-optic system or have the court order return of BT's infrastructure.
BT has been making small monthly payments to Citi, but at the current pace, it would take decades to cover the full amount.
It could also take more than a year for the court battle to be decided.
“We will continue to do everything we can to defend the taxpayers against further BT liability,” Weinberger said.
Update: Sunday, May 12
City Attorney Eileen Blackwood, who took part in the negotiations with CitiCapital, says it's "disappointing" that the talks did not produce a settlement. "I was hopeful we'd be able to find common ground and resolve this expeditiously," Blackwood commented in a telephone interview on Saturday.
Blackwood says the city is basing its defense mainly on the argument that the outcome of the dispute with CitiCapital must be "commercially reasonable." Noting that CitiCapital specializes in municipal financing arrangements, Blackwood says the lease-purchase agreement with the city-owned utility should be seen as having enabled Burlington to provide a municipal service to its residents and businesses. Under those circumstances, payment to Citi of $33.5 million would not be a "commercially reasonable" outcome for Burlington taxpayers, Blackwood says.
Discovery in the case could wrap up in "late fall," Blackwood says. It's "very possible" the actual case would not begin to be heard by federal court Judge William K. Sessions III until early next year, Blackwood suggests.