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Boardwalk lawsuit against East Grand Forks claims defamation, civil conspiracy

The city of East Grand Forks released a copy of the 11-count complaint leveled against it over a long-unpaid economic development loan. The complaint lists Boardwalk Enterprises and Boardwalk Bar and Grill as plaintiffs, while the city of East Gr...

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The Boardwalk building. Herald Staff Photo.

The city of East Grand Forks released a copy of the 11-count complaint leveled against it over a long-unpaid economic development loan.

The complaint lists Boardwalk Enterprises and Boardwalk Bar and Grill as plaintiffs, while the city of East Grand Forks and its Economic Development and Housing Authority are the defendants. It comes roughly two years after city officials first said a $510,000 city loan to Boardwalk Enterprises, approved in 1999, had gone unpaid.

The complaint, provided Wednesday to the Herald by City Administrator David Murphy, alleges the city "engaged in a concerted course of action to defame and damage the reputation and business interests of plaintiffs." It added the city's "conduct was oppressive and motivated by malice."

Property and court records list Boardwalk Enterprises partners as Dan and Scott Stauss, longtime East Grand Forks Mayor Lynn Stauss' brother and son, respectively. The mayor has said he was unaware of any outstanding debt before it became public in 2014.

The mayor's cell phone voice mailbox was full late Wednesday afternoon and couldn't accept new messages.

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The complaint argues the debt the city has claimed is owed by Boardwalk Enterprises "is not a valid or enforceable obligation and should be determined to be a nullity." But if it is a valid obligation, "the claims of Boardwalk Enterprises against defendants based on the city's failure to comply with tax abatement agreements, etc., equals or exceeds any obligation of Boardwalk Enterprises to defendants."

The lawsuit was served to the city last week. The document Murphy provided Wednesday does not show a case number or an assigned judge.

City Attorney Ron Galstad said Tuesday the lawsuit was provided to the League of Minnesota Cities, and he expected the organization to assign an attorney.

Other counts against the city include slander of title, intentional interference with contract, defamation, bad faith breach of contract and civil conspiracy. The latter count argues the city "conspired to damage the business operations of plaintiffs to force Boardwalk Enterprises to pay a non-existent debt claimed by" the city.

The complaint also said Boardwalk's damages have exceeded $50,000, and it seeks injunctive relief "precluding the city from asserting that the debt it alleges is owed by Boardwalk Enterprises is a basis for imposing restrictions or limitations with respect to the liquor licenses issued for the property."

The East Grand Forks City Council voted last June to renew a liquor license for the Boardwalk Bar and Grill located in Boardwalk Enterprises' building on the condition that the loan dispute be resolved within a year. The council on Tuesday night tabled a decision on a liquor license for the business.

Boardwalk Enterprises owns the commercial building at 415 Second St. N.W. The loan was used to help construct that building after the 1997 Red River flood, but the city failed to file the mortgage documents with the county at the time it was first approved, according to an audit report.

The attorney who signed the complaint on behalf of Boardwalk, Jon Brakke, didn't return a message seeking comment Wednesday.

Related Topics: DAVID MURPHY
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