City agrees to pay former Arena management firm $65,000 to settle lawsuit

The legal battle between the City of Corbin and the Philadelphia-based firm that formerly managed the city’s 5,000-seat arena has finally reached a conclusion after city officials agreed to a $65,000 settlement with the company Monday.

Officials refused to comment about the settlement following Monday nightÕs regular monthly meeting of the Corbin Board of Commissioners. It was approved following a closed session where commissioners met in private.

The agreement brings to an end years of dispute between the city and SMG regarding money the company claims was owed to it after it was ousted from The Arena in 2011.

According to the agreement, the city will pay SMG $65,000. In turn, the city will get $7,771. All of the money will come from an escrow account that has been sitting in stasis at Hometown Bank since the disagreement arose. SMG had argued in court filings that all of the $72,771 held in the account rightfully belonged to the company.

SMG filed a lawsuit against the city on Aug. 29, 2012 just days before Corbin City leaders were set to authorize their own lawsuit against the company for money they said SMG owed the city. SMG initially claimed the city owed roughly, $128,000 in expenses related to the Arena that SMG was forced to pay just before its contract was terminated in 2011.

City leaders approved a one-year renewable operating contract with SMG in May 2008, allowing SMG to provide construction advice for the facility prior to its completion. The contract required six months notice if either side planned on terminating the contract.

Corbin’s five-member Board of Commissioners voted in 2010 to terminate the agreement with SMG following bitter disputes over perceived cost overruns and the efficacy of the company’s management practices.

Prior to construction of The Arena, the city had a feasibility study conducted by Economics Research Associates (ERA) to determine the economic viability of the project. The study determined The Arena could expect an operating deficit of $295,000 to $336,000 per year for the first five years of its existence.

SMG noted the study in the lawsuit, saying "the Arena performed at least as well as it was projected to perform in its first years of operation."

The city’s agreement with SMG was generous in that it provided bonuses to the company even if The Arena lost hundreds of thousands of dollars under the company’s management.

SMG’s attorneys accused the city, in the original complaint, of not adhering to the agreement between the two sides and for engaging in behavior that was "to SMG’s detriment and in direct conflict with SMG’s exclusive right and responsibilities to manage the Arena."

The company also accuses city officials of interfering "with the details of Arena expenditures in attempts to cut or control costs," "interfering with the contractual relationships between SMG and certain of its employees, and by surreptitiously collecting information about SMG’s operation of the Arena."

Corbin Mayor Willard McBurney denied all of those allegations previously, but could not comment on the settlement reached Monday.

The agreement includes promises that neither side will pursue any more litigation and also contains a "non-disparagement" clause whereby both sides are forbidden from saying anything negative about the other.

In previous interviews, McBurney said auditors for the city found some "discrepancies" regarding financial management of The Arena under SMG’s watch. Last year, before negotiations between the city and SMG broke down, he said the two sides were arguing over roughly $70,000.