Wallace Theaters lose ruling

Wallace Theaters' request to stay in the Park Avenue Redevelopment Project has been denied.

Judge Suzanne Kingsbury ruled Wednesday that the theater company had no rights to the property as a monthly tenant in the project area. She also decided that Wallace Theaters did not meet its burden of proof for hardship if the project moved forward without it.

The theater company filed a cross-complaint to the South Tahoe Redevelopment Agency's eminent domain action to acquire the one-screen theater building for part of its $350 million Park Avenue Redevelopment Project.

The Park Avenue Project, which has been planned for more than eight years, calls for the city of South Lake Tahoe's possession of 34 acres of land in the area of Lake Tahoe Boulevard and Park Avenue, near the Nevada state line. The city has acquired all of the property, demolished the buildings on the land and is preparing to turn the bare parcel over to developers by July 1 for a $2 million fee.

The project's lead developer, American Skiing Company, parent company to Heavenly Ski Resort, plans to build a four-star hotel and a gondola leading up to Heavenly's slopes on the property. Trans-Sierra Investments, a Nevada company, is slated to build a retail complex in the area that includes restaurants, shops and a six-screen movie theater in 2001.

Legal complaints were stirred by Wallace Theaters in March when it was denied the contract to operate the new theater planned for the Park Avenue Project.

Lewis Feldman, attorney for the developers, said Resort Theaters of America was selected to operate the new theaters on the merit of its superior business proposal. The Redevelopment Agency upheld the developer's decision in a March public hearing.

C. Nicole Murphy, attorney for Wallace Theaters, contends that the Redevelopment Agency is obligated under California law to provide a preference to Wallace Theaters because it operates one screen on Park Avenue and is considered a displaced tenant of the project. It also operates an eight-screen theater inside the Horizon Casino Resort, a block away.

The theater company is suing the city over the decision to allow another theater company to operate in the Park Avenue Project.

Wallace Theaters sought the motion to stay in the project area until the preference complaint went to trial in November. It also sought a temporary restraining order to stop activity on the project until the motion to stay was decided.

Kingsbury ruled against both actions.

"Wallace's argument is that it has an absolute right to be included in the project, which is not what the Health and Safety Code says," Kingsbury said in a written ruling. "Whether (Wallace) was given a reasonable preference is a matter yet to be adjudicated; it is not a reason for granting the stay."

The ruling backs the city's order of possession, which became effective May 25, on the Park Avenue theater building. The Van Sickle Trust, which owns the theater building and surrounding plots, has no objection to the city's taking of the property.

The theater building is the only building left standing in the project area. Judith Von Klug, the city's redevelopment manager, said demolition could start as soon as next week, after asbestos abatement is resolved.

Murphy said an appeal to Kingsbury's decision will not be sought.

"It wouldn't be productive, that decision was not unexpected," she said. "It is extremely difficult for a private entity to show a comparable hardship, (the Agency's) claim of hardship is almost always going to be overwhelming in comparison."

The Agency will meet hardship in the way of financial penalties if it does not turn the 34-acre property over to the developers by July 1, which the city is on track to meet, according to Von Klug.

Wallace Theaters is also awaiting a June 9 hearing on its request for a change of venue to a court outside Kingsbury's jurisdiction. Wallace tried three times to disqualify Kingsbury from hearing its motion to stay case on the grounds that her personal friendship with City Attorney Catherine DiCamillo might affect her impartiality. That request was also denied by Judge Joseph Harvey.