Visiting Judge Linton D. Lewis heard oral arguments on Nov. 30, from all parties in the lawsuit filed by Countryside Investors, LLC and Donald and Robin Warner against the Carroll County Board of Commissioners, Radius Hospitality Management, LLC and Muskingum Watershed Conservancy District on the plaintiffs' motion for an injunction to suspend operations at Atwood Lake Resort.
Lewis, retired from the Perry County Common Pleas Court, was appointed after Carroll County Common Pleas Court Judge Dominick Olivito recused himself to avoid the appearance of a conflict of interest.
Arguing for the injunction, the plaintiffs' attorney, Kristen Moore, of Day Ketterer, Ltd. of Canton, contended that by entering into the management agreement with Radius Hospitality, the commissioners exceeded the authority permitted to the county under Ohio law. Moore cited sections of the Ohio Revised Code and the Ohio Constitution in making the argument that while the county is permitted to own and operate courthouses, jails, office buildings, libraries and "other necessary buildings," its authority is limited to facilities similar to those specifically listed in state statutes.
Moore noted there are exceptions allowing certain government entities to operate lodging facilities. However, she said previous interpretations have concluded there is no "self-executing provision" in the law and argued the Atwood arrangement does not fit established criteria.
Moore said the county relied heavily on a 2009 court opinion that considered accessibility to the public as one deciding factor. Although Atwood is available for public use, Moore said that opinion is superseded by sections of the Ohio Constitution which prohibit public investment in private enterprise.
Judge Lewis interrupted to question the logic of some of Moore's arguments, specifically definitions of "necessary buildings" in public areas.
Moore conceded that concession stands and golf shops would be permitted within park settings, but drew the line at hotels.
Judge Lewis asked, "So size matters?" and mentioned Burr Oak.
Moore replied that Burr Oak falls within statutory guidelines governing operations of state parks by the Ohio Department of Natural Resources.
Moore then said the court also must look at whether the plaintiffs would suffer "irreparable injury" by competing with Radius Hospitality, which she said is operating a "government-subsidized facility" that falls "in a separate class."
Judge Lewis asked Moore to explain why competition arising from the Atwood operation differs from competition between the county-operated county home and privately-owned nursing homes.
Moore replied that giving money to one private entity causes irreparable harm to taxpayers.
"If funds weren't being used to support a facility ... with a 'history of losing millions of dollars a year,'" the money "could be used - should be used" for public benefits that are constitutionally authorized.
She noted the contract is slanted in Radius' favor, by allowing them to pull out with 90 days notice if profits do not reach a certain level, and said that "illegal activity" cannot be upheld simply because of the jobs that would be lost.
"The time to preserve public funds is before they are all used," she said.
Moore continued, saying her clients did not bring suit "only for their private interest," but also because use of the money at Atwood "affects the public interest."
Moore said, "The essence of the case is every one the defendants is stretching" to find the "statutory authority and justification for what they are doing." When there is doubt, "court action must fall in favor of the plaintiffs."
Radius Management's attorney, Ronald W. Dougherty of Canton, addressed the issue of "unfair competition" by noting that Countryside Investors "built their hotel, knowing that Atwood existed" and was in operation. "The only people to be served by an injunction would be the plaintiffs," he said.
Dougherty said the county has spent more than $1.1 million, while Radius has spent more than $100,000, to refurbish the Atwood property. But, he said, "no taxpayer money ... no Carroll County funds" have been used. He noted the money was part of the $2,232,000 the county received as a mineral-rights signing bonus and that additional money will come from future royalties.
"If by some stretch of the imagination, these are found to be taxpayer funds? What happens to the funds?" he asked rhetorically, noting that the money would revert back to MWCD, and not stay with the county, if the injunction is granted.
Dougherty gave a timeline of events, noting the motion for the injunction was not filed either at the time the lawsuit was filed in September or prior to Atwood's opening on Oct. 1. Not filing until Oct. 26, "nearly 11 months after the gift from MWCD" and a month after the opening, Dougherty said, "suggests a lack of urgency for relief of irreparable harm."
Dougherty concluded by citing constitutional sections governing gifts to public entities and the construction of facilities for public benefit.
Moore rebutted, saying Dougherty used "obviously different situations," and that the "county's windfall" created unfair competition. She said the delay in filing for the injunction was part of a timeline negotiated by all parties.
Attorney J. Kevin Lundholm of Kyler, Pringle, Lundholm & Durmann, L.P.A., of New Philadelphia, represented MWCD.
In addition to citing constitutional provisions in favor of the Atwood agreement, Lundholm argued that"nothing in the record" indicates there are any differences in lease arrangements between MWCD and prior management companies to uphold plaintiffs' claim that Radius has an unfair advantage. "Is this truly a taxpayer action or a private business in court complaining" about unfair competition? he asked.
Referring to a conference center in Ashtabula County that was created under similar circumstances, Lundholm also noted that "it's important we don't ignore something we know exists."
"To some extent, that serves as a model for what we have here."
Moore's rebuttal centered on the lack of specific authority in the Ohio Constitution and stated that contractual safeguards beneficial to Radius make damages to the plaintiffs "difficult to measure."
As the county's representative, Prosecutor Donald Burns countered Moore's contentions regarding the county's authority by noting that political subdivisions have been granted additional authority to allow "room to maneuver" for purposes of public welfare, including job creation and economic development.
Burns said the plaintiffs' case rests solely on the absence of the word "hotel" in a particular statute cited throughout the proceedings. He also noted the lease money is earmarked for specific purposes relating to Atwood and would have no other taxpayer benefit.
"It seems to me," Burns said, "the plaintiffs are the ones who are stretching to make their case."
Moore rebutted that the plaintiffs' case "is not a stretching argument, but a straightforward application" of the attorney general's opinion," to which Burns replied that it was "a person with a private interest trying to piggyback on the taxpayer statute."
Judge Lewis will accept post-hearing briefs for 10 days before setting a date for the next hearing.