Lawsuit goes forward in Coralville Von Maur deal

The city of Coralville and the Von Maur department store chain may have to decide whether to go forward with a development deal while a lawsuit is hanging over it.

District Judge Marsha Bergan on Friday denied the city's motion to dismiss the suit over plans to bring Von Maur to its Iowa River Landing retail development. She said legal precedent required her to view the lawsuit in the light most favorable to the plaintiffs, a group of 18 businesses and business owners in Coralville.

The lawsuit challenges agreements that would transfer a 7.2-acre site from the city to private developer Oliver McMillan for $1.5 million, with the stipulation that Oliver McMillan then transfer the property to Von Maur for $10 and take other actions to develop the site. The agreements also would provide Von Maur with a $9.47 million grant to offset construction costs for the new store.

The suit also claims the deals constitute an unlawful gift of property by a municipality and violate state laws against using economic development grants to relocate a business from one community to a neighboring community. It further says Coralville's selection of Oliver McMillan as developer does not meet a state requirement that urban renewal commissioners reside within the municipality.

Von Maur plans to close its store in Sycamore Mall in Iowa City after it opens the new Coralville store. Coralville officials say the Davenport-based chain was already looking for a better location before their city recruited it.

Coralville City Attorney Kevin Olson said Monday that while he would have preferred to get the case dismissed, he did not have any qualms with the judge's latest order.

“We accept her ruling, and I appreciate the fact that she ruled on all these motions as fast as she did,” Olson said.

On March 26, Bergan denied a preliminary injunction sought by the plaintiffs that would have blocked the transfer of city land for the deal. Olson declined to say whether the city would proceed with that transfer, which at one point was expected to occur this week.

The plaintiffs filed an amended and expanded lawsuit Wednesday against the city and Oliver McMillan. Among the changes are claims that the city circumvented state competitive bidding procedures on the development of urban renewal property.

The city argued in previous court hearings that granting the injunction to block the land transfer to Von Maur would cause irreparable harm and impede the project at a critical point.

City officials have said the incentives used to draw Von Maur are warranted because the anchor store will be a strong draw to shoppers and help attract other businesses to Iowa River Landing.

More than two dozen businesses and individuals filed the lawsuit, which was prepared by Cedar Rapids attorney Matt Adam.