A potentially explosive Old Town lawsuit alleging city wrongdoing may be coming to a conclusion.

On the line is the fate of a planned, towering hotel and apartment buildings near Western Spirit Museum in the heart of Scottsdale’s busiest neighborhood. 

The first legal shot was fired last summer, with a lawsuit against the city and the Museum Square developer by existing Gateway at Main Street condo owners. 

The suit claims a “fraudulent inducement” by city officials cleared the path for the 150-foot tall hotel pegged as the Museum Square anchor.

Maricopa County Superior Court Judge Christopher Court, after dismissing multiple attempts to have the suit tossed, scheduled lawyers from all three parties to make oral arguments Wednesday, April 1. 

That’s if the disagreement is not resolved out-of-court.

According to sources, a Gateway at Main settlement offer was presented at a Feb. 24 Scottsdale City Council executive session. The condo owners say they will drop their lawsuit if the waiver of 60-foot height restrictions for its neighbors that was approved by the HOA board is re-presented to the entire membership.

Meanwhile, ARC Scottsdale Holdings – an affiliate of Macdonald Development, the Museum Square developer – is pitching its own settlement before the court decision.

Documents provided to the Progress show this is not necessarily a Gateway vs. city and Museum Square straight-line fight.

In November, though “Regrettably, and with great consternation,” ARC/Museum Square filed a notice of claim against the city.

The Scottsdale-based law firm representing Museum Square cited the Gateway at Main lawsuit in telling the city, “Because of the significant damages to which developer has been exposed, (ARC/Macdonald) hereby offers to settle all claims against the city and release the city from all further liability in connection with this matter for the total amount of $9 million.”

The heart of Gateway’s lawsuit is a claim then-Assistant City Manager Brent Stockwell deliberately misled the board of the condo association, tricking an elderly HOA president into waiving long-standing height restrictions on neighboring developments.

The Museum Square developer appears to be hedging its bets with the notice of claim hand-delivered to Scottsdale City Clerk Ben Lane.

ARC/Macdonald “reserves all rights to assert all available claims for any and all damages that it has suffered or will suffer from the city’s conduct and that may be proved at trial, including, but not limited to, claims for breach of contract, breach of the covenant of good faith and fair dealing, negligence, or other causes of action,” warned Jeffrey Gross, an attorney with ARC representatives Berry Riddell. 

Dueling settlements?

According to the agenda for the non-public Feb. 24 meeting, City Council was to “discuss and consult with the city’s designated attorneys to consider its position and to instruct its attorneys regarding ongoing litigation in the matter of Gateway at Main St. Plaza Scottsdale Condominium Association v. City of

Scottsdale, et al.”

The meeting closely followed Gateway at Main Street’s Feb. 6 answer to motions by the city and Museum Square developer to dismiss the lawsuit.

Though legal advice and discussions at executive sessions are closely-guarded secrets, City Council likely was presented Gateway’s settlement offer of “a very easy solution to this dispute: the parties can simply agree to send this issue back to the Gateway HOA for a proper vote. 

“If the HOA votes to terminate their covenants, Macdonald can proceed without further expense or delay. If the HOA declines to terminate their covenants, the 60-foot height limit would remain in effect. Macdonald can still build up to 60 feet, but would probably have to settle for slightly less profit on the project.”

Spokesman Jason Rose said Museum Square is confident the Gateway lawsuit “likely will get dismissed. However, can there be some creative problem solving that creates a win-win for everyone? Sure.”

Regarding the developer’s notice of claim to the city, Rose said, “Museum Square after unanimous City Council approval paid the city $27 million for the property. With that agreement there were certain rights the council voted in. The claim is to preserve the rights – any business would do that.”