For years, at its mile-long facility fronting the Mississippi River in St. Bernard Parish, the Violet Dock Port company moored and serviced U.S. Navy ships at three of its five deepwater berths, work that was generating healthy profits.
But it all came undone in 2010, just as the company had paid for expensive renovations to accommodate bulk cargo operations. That was when authorities in charge of St. Bernard Parish's port used Louisiana's eminent-domain laws and $16 million in state funds to seize the facility for a fraction of what the company claimed it was worth.
Adding insult to injury: Control of the Violet facility was turned over to a rival outfit that Violet Dock Port’s owners complain had an inside track with St. Bernard Parish officials, who assumed the lucrative Navy work for themselves. That firm, Associated Terminals, also runs publicly owned port facilities in Chalmette.
The port’s legal team defends the expropriation by saying that state law allows port authorities to seize property as long as the purpose is to boost the commercial transportation of goods or people on water. That standard has been met, lead attorney Jim Garner contends: Violet Dock Port never handled cargo before its facility was taken, while the parish processed 255,000 tons of cargo at that facility last year alone.
Additionally, Garner said, one Violet Dock Port official previously indicated, in writing, that the company would have gladly sold the facility for less than the price of expropriation.
A St. Bernard state court judge has since signed off on the sequence of events that gave Violet Dock Port's former facility to the parish port, which in turn leases it to Associated Terminals. A divided panel of appellate court justices upheld that decision.
However, Violet Dock Port recently asked the state Supreme Court to review the case, hoping to persuade the high court that the seizure of its land was unconstitutional — or, failing that, that the price was far too low.
The stakes are high, Violet Dock Port's legal team says, in arguments that have drawn support from national groups such as the libertarian Institute for Justice and the pro-property-rights Pacific Legal Foundation — as well as the state’s most powerful business lobby, the Louisiana Association of Business and Industry.
"Both the United States and Louisiana constitutions prohibit the taking of a privately owned, ongoing business for government operation, or for operation by another favored private entity," Violet Dock Port attorney Randy Smith wrote to the Louisiana Supreme Court in a March 9 filing. "This case tests the limits of government takings powers."
Violet Dock Port co-owner Paul Simmons said his grandfather and a group of commercial partners began building up their marine industrial facility in 1978, having pieced together multiple plots of land with easy access to the river, a railroad and a highway.
The company eventually built five heavy-duty docks and accompanying infrastructure. Everything — from parking to security measures — was designed so that Violet Dock Port would be qualified to service Navy ships measuring 1,000 feet long and 100 feet wide.
Three of the berths received Navy approval, and Violet Dock Port successfully bid for numerous contracts to service Navy ships, the company recounts in court documents. On the other docks, the company conducted cargo operations and performed topside repairs on other ships.
Lots of demand
Eventually, there was an overwhelming demand for facilities that could handle dry bulk cargo, from grain to coal. So Violet Dock Port spent $2 million to renovate one of its berths to handle such cargo, and it planned to lease that space to a firm named Vulcan Materials once everything was built out.
This placed Violet Dock Port in competition with a facility just six river miles away that handled much more cargo: the Chalmette Slip, owned by the St. Bernard port and run by Associated Terminals.
Violet Dock’s owners thought they’d get plenty of business: Their facility could dock a wide variety of ships, had highway and railroad access, and faced a portion of the river that was straight and deep. But they never got the chance to duke it out with the Chalmette Slip and Associated Terminals.
Armed with a grant from the state Department of Transportation and Development, St. Bernard port officials began the process to expropriate Violet Dock Port's property in late 2010. They said that expanding the parish port authority's cargo operations would boost the local economy and create jobs, and they promised to improve the facility that Violet Dock Port would be leaving behind.
Port officials triumphed in the ensuing litigation, winning a ruling from 34th Judicial District Court Judge Jacques Sanborn that granted them ownership of the land for $16 million.
Fourth Circuit Court of Appeal Judges Roland Belsome and Terri Love upheld Sanborn's decision late last year. But the third member of the appellate panel, Judge Joy Cossich Lobrano, dissented, writing that granting "public ports unfettered rights to expropriate private property exceeds the authority that has been bestowed by the Legislature and citizenry of this state."
In asking for a state Supreme Court review, Violet Dock’s lawyers cite that opinion and list several wrongs they believe were committed against them.
Regarding the price, the company says one expert estimated it would cost $37 million for Violet Dock to replace its docks and infrastructure, while another put the price tag at closer to $60 million.
Additionally, Violet Dock took exception to the fact that the parish later ended up with the Navy service contracts.
"The contracts are substantially similar," Smith wrote to the Supreme Court. "The only change (is that) St. Bernard now receives the revenue that (Violet Dock Port) formerly received."
Out of business
For its part, Violet Dock "is out of business today," according to its court filings, lacking its Navy revenues or a replacement property it considers suitable.
Other aspects of the case not mentioned in the Supreme Court filing have raised eyebrows among Violet Dock Port’s owners.
They believe Sanborn should have disclosed that a marine towing company owned by his brother rents office space at the St. Bernard port's brand-new administrative complex.
They also note that Sanborn received a $1,000 campaign donation from the law firm of the parish port authority's lead attorney, Garner, during a trial that was held over a nearly two-year period — though Garner said all but $100 of that contribution was returned when the judge didn't draw any opposition in his re-election bid. Moreover, there is no law barring judges from receiving donations from litigants.
Meanwhile, before turning over the management of the Violet Dock Port property to Associated Terminals, St. Bernard officials weighed a proposal from another interested firm: Louisiana Port Development LLC, an outfit involving Walk-On's Bistreaux and Bar co-founder Rick Farrell. Farrell is also the founder of Tricon Energy, a Houston-based trading firm.
But Farrell claims that at one point he was warned that if Louisiana Port Development landed the management gig, it would be undermined by Associated Terminals, according to a letter Louisiana Port Development attorney Ira Middleberg presented to St. Bernard Parish officials in September 2015.
Middleberg’s letter also claims that longtime St. Bernard port director Robert Scafidel told Farrell repeatedly that regardless of what happened, "you know you have to take care of David," a reference to Associated Terminals owner David Fennelly.
Finally, the letter asserts that the port failed to collect as much in $4 million in rent, Navy fees and other revenues that port officials had predicted when they sought the state grant for the expropriation.
The port’s legal team says the two proposals were carefully reviewed and vetted by the port's board before the decision was made to go with the proven Associated Terminals, whose competitor, Louisiana Port Development, was only formed in 2014.
Violet Dock’s owners also wonder what role Sal Cusimano — a disbarred lawyer whose hiring by the port in 2013 stirred controversy — played in the review process.
Cusimano was hired by the port as an “agreement analyst” in 2013, shortly after he was released from federal prison for bribing St. Bernard Parish Judge Wayne Cresap. Port officials told WDSU-TV last year that Cusimano’s job duties included “having knowledge of all agreements and reviewing bids that come into the port.”
But Garner, the port’s attorney, said that Cusimano had no role in reviewing or comparing the proposals submitted by Associated Terminals and Louisiana Port Development.
Neither Sanborn nor Scafidel responded to requests for comment.
AG's Office involved
Through a spokesman, Fennelly said that "Associated Terminals is proud of the work that it has done in St. Bernard Parish for the last 16 years." He added: "We believe that our outstanding record was a major factor in the award of this contract."
Louisiana Attorney General Jeff Landry's office asked state transportation officials about two months ago for various files associated with the program that funded the expropriation, as well as an explanation of the program, a DOTD spokesman confirmed recently. A spokesman for Landry, citing office policy, said he could not confirm or deny an investigation.
Garner confirmed that the port also had been contacted by the Attorney General’s Office. But speaking on the port’s behalf, Garner vehemently disputed the notion that anything underhanded occurred during the years-long legal saga.
Perhaps most powerfully, Garner noted that Violet Dock Port’s owners once were willing to part with their property for $2 million less than the port eventually paid them. In a 2007 letter to Scafidel, despite lacking a formal assessment and feeling pressured by the parish to part with his facility, Violet Dock Port President Donald Dieudonne said his board and stockholders would sell their property to St. Bernard for $14 million.
And other evidence suggests that Violet Dock Port’s owners thought the property was worth far less than that. The year before expropriation proceedings began, Simmons — the Violet Dock Port co-owner — paid only about $1.4 million to acquire about a one-third interest in the company from his grandfather, according to testimony. That would put the entire company’s value at less than $5 million.
Garner also said nothing barred Violet Dock Port from moving to another riverfront industrial site to retain its Navy work, which generated revenue for the company until 2013. The parish took over the Navy contracts only when they were essentially "left on our doorstep," Garner said.
He dismissed allegations questioning Sanborn's and Scafidel's impartiality as nonsense.
The judge's reasoning was well rooted in provisions of Louisiana's eminent-domain laws that apply to ports but not other types of government projects, Garner said. And despite an unsuccessful effort by Violet Dock Port to move the dispute to federal court, citing the involvement of Navy contracts, neither the company nor its advocates ever expressed doubts in the case record about whether Sanborn had a conflict of interest.
Garner added that the uncertainty of the Violet Dock Port litigation has kept St. Bernard officials from collecting the revenue they had projected prior to the expropriation, but he expressed confidence that would change once the case is finally settled.
It is not yet clear when that might be, as the state Supreme Court has not indicated whether it will take up an appeal.
But given the high stakes and the heavy hitters involved, the chances of such a review seem high.
"Unchecked, the decision (to uphold Sanborn's ruling) will incentivize politically powerful corporate interests to lobby public authorities to condemn properties owned and operated by smaller firms — solely for the purpose of eliminating competition," according to an amicus brief from a coalition of groups including LABI, the state’s potent business lobby.
"But we need not hypothesize about what this opinion means for small business," the brief added. "In this very case an independent enterprise has been displaced from the market for a purpose that can only be viewed as anticompetitive."
Editor's note: This article was updated March 19 to clarify that the Navy service contracts at the Violet Dock Port property were taken over by the St. Bernard Parish port leadership rather than Associated Terminals.