Charles Green admonished for letter

By Thomas Wilson
STAR STAFF
twilson@starhq.com
JOHNSON CITY -- A multimillion-dollar judgment against North American Fibers to the city of Elizabethton will go to mediation following a hearing held here in Chancery Court on Monday.
Chancellor Richard Johnson upheld the substance of his ruling against North American Fibers, Inc., but reduced the $2.3 million financial interest awarded in the judgment to the city. He also rebuked the company's president and chief executive Charles K. Green for an ex parte letter sent to the chancellor in July shortly after his initial ruling was issued.
"The court admonishes him", Johnson told attorneys for both sides prior to hearing arguments. "Ex parte contact with the court is just absolutely prohibited."
In a ruling issued June 24, Johnson ordered NAF to pay the city more than $3.4 million for effectively blocking the city's access to a main sewer line. The judgment awarded the city $1.2 million in construction costs of the sewer line plus the $2,312,311 amount in interest the city would pay over a 29-year period on the loan used to fund construction of the sewer line.
"Were pleased with the judge's request," said Charlton DeVault, lead attorney representing the city in the case. "This was a good solution."
NAF attorney Stephen G. Anderson adamantly argued Monday that the judgment requires NAF to pay the city principle plus interest for the next 29 years while alleging the city is not required to make payments on those bonds until June 2013.
"They haven't paid any of it out yet, and they don't pay any of it out for 10 years," Anderson told the court.
The city financed the Sycamore Shoals pump station and bypass sewer line through approximately $1.102 million in capital appreciation bonds (CAB). The CAB does not require the issuer to make payments until June 1, 2013. The $3.4 million award had been the sum of all payments made by the city between 2013 and 2031 if the bonds were not recalled or refinanced. Johnson directed both parties to resolve the $1.1 million total judgment amount based on present-day financing with a mediator and bring an agreed total back to him for a judgment.
In a motion asking Johnson to amend his ruling, Anderson wrote that the court is ordering NAF to pay $160,820 now when the city would not be required to make that bond payment until 2031. He stated the judgment requires that NAF make payments on principle plus interest for the next 29 years.
DeVault told the court the city did not object to amending the debt service portion of the damage award. However, DeVault added that the city wants assurances that the judgment would be paid.
"The city's main concern is the taxpayers don't have to pick up that portion of the debt service tab," DeVault told the court.
Green said Monday night he was pleased to see the total judgment vacated and hoped mediation would move forward quickly so the judgment could be appealed. He said a full appeal required NAF to post a bond equal to the amount of the judgment. "We are ready to get on with it," he said.
Johnson's ruling included findings that went to the management of North American companies involving the company's $5 million liability reserve established in 1997; the North American board of directors; and property purchased by North American and two other investors from Green's wife Patricia Green.
Prior to hearing arguments, Johnson produced an unopened envelope containing the letter addressed to him from Green. He opened the letter in court and read from its contents prior to hearing arguments. In the letter dated July 11, 2003 Green asks Johnson to effectively change statements made in his decision.
Johnson said he first became notified the letter had been sent after receiving a telephone call from this reporter asking about his opinion of the letter's contents. The chancellor said he found the envelope containing the letter several days later while it was lying on a file cabinet in the Washington County Clerk and Master's office at the downtown center in Johnson City.
After admitting the letter into court evidence, Johnson stated his first duty was to find if Green's letter constituted a pleading or if Green was now representing himself in the case. He asked Anderson if he had been fired by Green, to which Anderson replied, "He has not, your honor". Johnson said the letter asked him to consider the facts of the case.
"I cannot consider these facts; they are ex parte facts; the other party was not privy to this letter," Johnson said. He also took exception to Green's inference in his letter that "North American's counsel should have done a better job of explaining (the) issues."
"If there has ever been the white heat of advocacy in a case, this is it," said Johnson, who pointed to the voluminous documents compiled by attorneys for both sides.
Green said the city's arguments regarding the management of North American companies had angered him during the trial. He characterized the assertions as "untrue" and were not relevant to the sewer line issue. "I was advised by my attorney not to send the letter," he said.
When the case went to trial in Dec. 2002, Green, NAF and North American Rayon Corp. (NARC) were defendants. Johnson ruled that the city did not establish Green as an alter-ego of the North American companies, and did not attach liability to Green or NARC.
Anderson said Green felt he was not able to properly argue the facts laid forth by the city regarding the alter-ego issue. Anderson also said that, immediately after learning the letter had been sent, he contacted DeVault and attempted to contact Johnson to notify them of the document.
"If, at the end of the day, the court's conclusion is, 'it doesn't matter whether or not Mr. Green is the alter-ego of the corporations and the city loses anyway because there is no connection', then those findings that he was an alter-ego is unnecessary to the ultimate conclusion," Anderson argued.
Johnson said the findings addressed the issues specifically argued by the city.
Anderson also said the city built the west end interceptor not as a gravity flow line, but a pressurized line that did not require a pump station. "They don't need that pump at the sewer treatment plant to lift it up," he said.
The defense had argued that the city could have spent $40,000 to create a gravity flow line that would have effectively solved the problem without the $1.1 million expense. Johnson denied the defense's motion to strike the findings and also upheld his concurrence with the city's engineering expert regarding the need for the interceptor line to be built.
The city filed the lawsuit against Green, individually, and several companies, in August 2000, alleging the fly-ash landfill located on NAF property blocked one of the city's main sewer lines. Several companies except NAF, North American Rayon Corp., and Green, individually, were removed from the action.
According to testimony in court, the city had a sewer line easement allowing them to place the line on the property in 1957. During the 1980's, NAF later developed the site above the sewer line as a landfill for fly ash, which is formed from the non-combustible minerals found in coal. The case went to trial in December with three days of testimony and argument heard by Johnson.
After the hearing, DeVault said mediation hearings regarding the financial framework of the judgment could begin in one or two months. If a mediator brings the two parties together on a financial number, Anderson indicated the case would be taken to the Tennessee Court of Appeals.
"After that's done, the judge will sign off and we will have a judgment," said Anderson after the case, "and we'll be off to the Court of Appeals."