Citibank sues over Burlington Telecom assets

8/4/2019 Citibank sues over Burlington Telecom assets

1/38

U.S.O;.lISTRIC

UNITED STATES DISTRICT COURT Inn Sf? -2 M'i 8: 4&DISTRICT OF VERMONT

CITIBANK, N.A., as assignee ofCITICAPITAL MUNICIPAL FINANCEPlaintiff J : I I - C V - d / ~

-v -

CITY OF BURLINGTON and MCNEIL, LEDDY &SHEAHAN, P.C.Defendants.

COMPLAINTPlaintiff Citibank, N.A., as assignee of CitiCapital Municipal Finance (hereinafter

"Citibank"), by and through its attorneys, Nixon Peabody LLP, as and for its complaint againstDefendants City of Burlington, Vermont ("Burlington") and McNeil, Leddy & Sheahan, P.e.,alleges as follows:

NATURE OF THE ACTIONThis is an action arising out of a municipal finance agreement (the "Agreement")

between Burlington and Citibank, which Agreement provided for Burlington's lease-to-purchaseof certain telecommunications equipment (the "Equipment") and for the construction and operationof a city-wide fiber optic network infrastructure used to deliver voice, data and cable televisionservices (such network infrastructure as now fully constructed and operating, hereinafter referredto as "Burlington Telecom" or "BT'). Having secured from Citibank monies totaling more than$33,500,000.00 for the construction and ongoing operation ofBT, Burlington now claims to lacksufficient funds to make the rental payments due under the Agreement, and therefore, purports to

13356756.1

Case 2:11-cv-00214-wks Document 1 Filed 09/02/11 Page 1 of 38
http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00


2/38

have elected not to appropriate funds necessary to support its payment obligations.As the result of its claimed failure to appropriate, Burlington claims to have terminated

the Agreement effective July 1,2010. Notwithstanding its purported termination, Burlingtonrefuses to de-install and return the leased Equipment, as expressly required by the Agreement.Moreover, Burlington continues to use the leased Equipment in furtherance of itstelecommunications operation, collecting and retaining all revenue derived therefrom. Citibankhas not received a payment directly from Burlington since a payment of $386,673.75.00on or

about November 17,2009. Burlington failed to make two successive payments due on February17,2010 and May 17,2010, respectively, each in the amount of$386,673.75.00, requiringCitibank to make demand on an escrow Reserve Fund (as that term is defined infra) set up inconjunction with the Agreement. Citibank drew down the balance of the escrow Reserve Fund of$226,745.76.00on or after June 28, 2010 and thereafter has received no payments whatsoeverfrom or on behalfof Burlington. As ofAugust 17, 2011, Burlington will have failed to pay$3,534,471.50 in payments due under the terms of the Agreement, and such obligations accrueunder the Agreement at the rate of $235,631.44 monthly.

Accordingly, Citibank seeks, inter alia, declaratory and injunctive relief, in the form of anOrder of this Court preliminarily enjoining Burlington from further using and depreciatingCitibank's property, directing Burlington to pay holdover rent for its continued retention and use ofthe leased Equipment, requiring it to de-install and deliver the leased Equipment to Citibank inaccordance with the Agreement, or, alternatively, ordering replevin. Citibank also seeks an awardin the amount of its resultant damages. Alternatively, Citibank seeks rescission ofthe Agreement,and other legal and equitable remedies.

13356756.1 2

http:///reader/full/386,673.75.00http:///reader/full/of$386,673.75.00http:///reader/full/226,745.76.00http:///reader/full/3,534,471.50http:///reader/full/235,631.44http:///reader/full/386,673.75.00http:///reader/full/of$386,673.75.00http:///reader/full/226,745.76.00http:///reader/full/3,534,471.50http:///reader/full/235,631.44


3/38

PARTIES I. Plaintiff Citibank, N.A., as assignee ofCitibank Municipal Finance ("Citibank"),

is a nationally chartered bank, with its principal place of business located at 701 East 60 th StreetNorth, Sioux Falls, South Dakota 57104.

2. Defendant City ofBurlington ("Burlington") is a public body corporate andpolitic, organized and existing under the laws of the State ofVermont and located in ChittendenCounty. It operates an enterprise d/b/a Burlington Telecom ("BT"), a state-of-the-art

telecommunications network for Burlington's residents and businesses. Burlington operates BT asa private corporation at 149 Church Street, Burlington, Vermont 05401.

3. Defendant McNeil, Leddy & Sheahan, P.C. ("McNeil, Leddy & Sheahan") is aprofessional corporation, organized and existing under the laws of the State ofVermont, with itsprincipal place ofbusiness located at 271 South Union Street, Burlington, Vermont 05401.McNeil, Leddy & Sheahan served as legal counsel to Burlington in its negotiation of theAgreement.

JURISDICTION AND VENUE4. This Court has subject matter jurisdiction pursuant to 28 U.S.C. 1332, because

diversity of citizenship exists between the parties, and the amount in controversy exceeds$75,000.00 exclusive of interest and costs.

5. Venue for this action is proper in this district pursuant to 28 U.S.C. 1391(a)(I),because the Defendants and the leased Equipment at issue are situated in Chittenden County,Vermont.

13356756, I 3

http:///reader/full/75,000.00http:///reader/full/75,000.00


4/38

FACTUAL BACKGROUND AND ALLEGATIONS

The Development ofBurlington Telecom 6. In 1997, Burlington's citizens voted to approve the construction of a city-wide

telecommunications network which would come to be known as Burlington Telecom ("BT").7. On March 7, 2000, Burlington's citizens approved a change to Burlington's

charter, which the Vermont legislature subsequently approved and enacted into law on May 29,2000.

8. The law provides that: "[T]he public service board, in considering any applicationfor a certificate ofpublic good, shall ensure that any and all losses from these businesses, and, inthe event these businesses are abandoned or curtailed, any and all costs associated withinvestment in cable television, fiber optic, and telecommunications network andtelecommunications business-related facilities, are borne by the investors in such business, and inno event are borne by Burlington's taxpayers, the state ofVermont, or are recovered in ratesfrom electric ratepayers." 24A V.S.A. 3-438(c)(l).

9. In 2003, Burlington registered the trade name Burlington Telecom.10. In the Spring of2005, BT petitioned the State's Public Service Board ("PSB") for

a certificate ofpublic good ("CPG") to operate a cable television ("CATV") system inBurlington.

11. In its decision granting BT the CPG, the PSB made the following findings basedon Burlington's and BT's representations.

12. "The City ofBurlington, through the City department known as BurlingtonTelecom . . . , seeks a CPG to operate a CATV system throughout the City ofBurlington." See

13356756.1 4



5/38

Exhibit A, Petition of City of Burlington d/b/a Burlington Telecom, Docket No. 7044, State ofVennont, Public Service Board, at 3 (Sept. 13, 2005).

13. "The City Charter was revised in 1996 to authorize the City to engage in regulatedcable or telecommunications lines of business, subject to the Board's granting certificates ofpublic good in accordance with law." Id at 6.

14. "The overall Burlington telecommunications project has been split into threemajor sections, or Phases . . . ." Id. at 11.

15. "Phase I . . . refers to a non-commercial network over which the City providestelecommunications and data services to its municipal offices and schools." Id at 11.

16. "Phase II . . . refers to [Burlington Telecom's] offer of commercialtelecommunications and data services over the Phase I system to commercial and institutionalcustomers located within reach of the facilities constructed to provide Phase I services."Id a t ~ 12.

17. "Phase III . . . refers to the new facilities that [Burlington Telecom] intends toconstruct in order to offer CATV services, as well as telecommunications and high-speedinternet services. In Phase III, [Burlington Telecom] will construct a fiber-to-the-premise openaccess network that will pass every residence, business, and institution located within the City bysummer 2006. The system will have the capability to allow [Burlington Telecom] to offertelephone service, high-speed internet access service, cable television service, and transportservices to other service providers on an open access basis." Id. at 13.

18. "[Burlington Telecom] intends to offer basic service, as well as advanced servicesincluding premium and pay-per-view." Id at 22.

13356756.1 5



6/38

19. "I t is reasonable to expect the Phase III project to be economically viable for[Burlington Telecom]. Although [Burlington Telecom's] system will compete directly with theexisting Adelphia system for cable and internet access customers, [Burlington Telecom] will alsooffer telecommunications services and wholesale open access transport." Id. at 33.

20. "Phase III will be financed through a capital lease with Koch Financial."Id. at 35.

21. "The interest and principal payments under the Koch Financial lease will

comprise the most significant fixed cost of the Phase III project. [Burlington Telecom] projectscash flow sufficient to make required lease rental payments for the duration of the requestedCATV franchise." Id. at 36.

22. "The City has carefully developed and reviewed the business plan for [BurlingtonTelecom], including review by two teams ofoutside experts, both ofwhich confirmed thesoundness of the plan." Id. at 37.

23. "The projections indicate the project will become cash positive by July 2006 andis expected to generate a total of $22 million ofpositive cash flow in the first ten years ofoperation." Id. at 38.

24. "[Burlington Telecom's] projections are appropriately characterized asconservative . . . ." Id. at 39.

25. "Even recognizing that such projections are inherently subject to uncertainty andchange over time, [Burlington Telecom's] business plan is sufficiently conservative and indicatesa financial cushion sufficient to allow [Burlington Telecom] to weather variances in actualresults from those presently projected." Id. at 12.

13356756.1 6



7/38

26. "During November 2004, the City entered into a Master Equipment LeaseAgreement in the amount of$12.6 million to support the construction of its proposed system inone half of the City ofBurlington . . . ." Id. at 60.

27. "In the event of the failure of the City to make rental payments when due underthe [Lease Agreement], Koch Financial may take control of all assets that secure the repaymentof the $12.6 million amount fmanced." Id. at 62.

28. "Among the assets which may be taken over by Koch Financial are thosecurrently used as a fiber backbone for service to municipal buildings and commercial buildingsadjacent to the fiber backbone (the Phase I and II facilities)." Id. at 63.

29. "On May 24,2004, the City Counsel passed a resolution endorsing evaluation ofPhase III services, and authorized the lease financing for this phase on October 12, 2004." Id. at~ 6 6 .

30. "The City has stated that it has the right under the Charter to fund the regulatedcable/telecommunications activities of its Telecommunications Project through non-property taxrevenue streams currently used to support general government services, including but not limitedto rooms and meals taxes, charges for services, and development impact fees." Id. at 77.

31. "In the event the City defaults, the lease contemplates and provides for thetransfer of control of the project's assets from [Burlington Telecom] to Koch Financial, andsubsequently to another party, while at the same time allowing the City to generally control whensuch events would occur." Id. at 84.

32. Based in part on the above representations and findings, the PSB issued BT aCPO.

13356756.1 7



8/38

_ .._

33. In early 2006, BT began offering internet, phone and television services tocustomers other than Burlington itself.

Investment by Koch Financial Corporation34. On or about May 1,2002, a private financing company, Koch Financial

Corporation ("Koch") entered into an agreement with Burlington to finance the construction ofthe initial phase of the BT network and to lease the Equipment back to Burlington (the "FirstKoch Lease"). Pursuant to the First Koch Lease, Koch advanced to Burlington funds totaling

approximately $2,608,000.00.35. On or about March 18,2005, Koch agreed to advance to Burlington an additional

$20,000,000.00 in order to fund Burlington's continued build-out ofBT and to lease theadditional Equipment back to Burlington (the "Second Koch Lease") (together with the FirstKoch Lease, the "Koch Leases").

Negotiation of the Investment by Citibank36. In early 2007, Burlington and Citibank entered into negotiations regarding

Citibank refinancing the Koch Leases, and in conjunction therewith, providing Burlington withan additional $11,500,000.00 in funds necessary to the realization ofBurlington's plans tocomplete BT Phase III.

37. As noted in paragraph 7 supra, pursuant to 24A V.S.A. 3-438(c)(1), taxpayerrevenues may not be used to cover BT operating losses. Consequently, Citibank specificallysought as a condition to the Agreement, and Burlington agreed to provide, express assurancesthat Burlington had sufficient revenues available from non-taxpayer sources to fund the requiredpayments to Citibank.

83356756.1

http:///reader/full/2,608,000.00http:///reader/full/20,000,000.00http:///reader/full/11,500,000.00http:///reader/full/2,608,000.00http:///reader/full/20,000,000.00http:///reader/full/11,500,000.00


9/38

38. More specifically, in a letter dated August 17,2007, McNeil, Leddy & Sheahan,legal counsel to Burlington, provided the following legal opinion to Burlington and Citibank (byand through its legal counsel) (the "Opinion Letter"):

There is no prohibition of utilizing general fund revenues of theCity for telecommunications activities. However, there is aspecification that losses from telecommunications are not to beborne by the City's taxpayers, the State ofVermont or recoveredin rates from electric ratepayers. The same restriction applies tocosts incurred in the event of any abandonment or curtailment ofthe telecommunications systems by the City. We are advised thatapproximately 40% of general fund revenues are derived from othersources than through taxation of the City 's taxpayers.A true and correct copy of the Opinion Letter is attached herewith as Exhibit B.

39. In the Opinion Letter and otherwise, Burlington expressly warranted to Citibankthat at least 40 percent ofBurlington's revenues were derived from sources other than taxpayerfunds and would be available to fund payments to Citibank, and further, that Burlington had thefinancial resources and ability to make all payments to Citibank for the full term of theAgreement.

The Citibank A2reement40. On or about August 9, 2007, Burlington entered into a Master State and

Municipal Lease/Purchase Agreement with Municipal Leasing Consultants (the Agreement").A true and correct copy of the Agreement is attached herewith as Exhibit C.

41. On or about August 15,2007, Municipal Leasing Consultants assigned theentirety of its duties, obligations, right, title and interest in, to and under the Agreement, theEquipment defined in the Agreement, and the payments due from Burlington under the

13356756,1 9



10/38

Agreement to Citibank:. A true and correct copy of the Notice of Assignment is attachedherewith as Exhibit D.

42. The Agreement includes two (2) schedules: Schedule No. 001 and Schedule No.002. Schedule No. 001 contemplates the financing of the new BT Phase III equipment(specificaUy, "City-Wide Fiber Optic Network providing voice, Data and cable TV to Burlingtonoffices, Businesses and residents of Burlington," located "[t]hroughout City of Burlington."), inthe amount of$11,531,514.03. Schedule No. 002 contemplates the pay-off of the Koch Leases,

in the amount of $21,968,485.97. Schedule No. 002 also provides for the lease of certainequipment, specifically "City-Wide Fiber Optic Network providing voice, Data and cable TV toBurlington offices, Businesses and residents of Burlington; All other related equipment and [t]hepurchasing of Vehicles" located "[t]hroughout City of Burlington."

43. The total financing commitment contemplated by the Agreement was$33,500,000.00.

44. The Agreement provides for twenty (20) successive one-year terms, coincidentwith Burlington'S fiscal year, which ends on June 30th. The maximum lease term was twenty(20) years.

45. Section 5 of the Agreement obligates Burlington to make rental payments toCitibank: as set forth on each Rental Payment Schedule. See Exhibit C at Master Lease, 4.

46. Section 6 of the Agreement states, in relevant part, that Burlington may only enterinto either Schedules No. 002 or 001 if Burlington (1) intends "to continue such Schedulethrough its Maximum Lease Term under such Schedule and all other Schedules then in effect;"

13356756.1 10

http:///reader/full/of$11,531,514.03http:///reader/full/21,968,485.97http:///reader/full/33,500,000.00http:///reader/full/of$11,531,514.03http:///reader/full/21,968,485.97http:///reader/full/33,500,000.00


11/38

and (2) reasonably believes "that funds will be obtainable in an amount sufficient to make allRental Payments during the Maximum Lease Term." See Exhibit C at Master Lease, 6.

47. Section 6 further obligates "the [City's] responsible financial officer . . . [to] doall things lawfully within his power to obtain funds from which the Rental Payments may bemade, including making provisions for such Rental Payments, to the extent necessary, in eachproposed budget submitted for approval in accordance with applicable procedures ofLessee andto exhaust all available reviews and appeals in the event such portion of the budget is not

approved."48. Pursuant to Section 7 of the Agreement, Burlington is obligated to make such

rental payments "as may lawfully be made from funds budgeted and appropriated for thatpurpose during the [City's] then current fiscal year." See Exhibit C at Master Lease, 7.

49. Section 7 further states that ifBurlington fails to appropriate the necessary fundsin its annual budget for payments to be made for the following fiscal year, the "Lease shall bedeemed terminated at the end of the then current Initial Term or Renewal Term."

50. If the Agreement is deemed terminated pursuant to Section 7, the "Lessee agrees,at Lessee's cost and expense, to peaceably deliver the Equipment then subject to that Lease toLessor at the location or Locations specified by Lessor." Id.; see also Exhibit C at Master Lease, 21(b) (stating that upon default, the "Lessor may . . . require Lessee at Lessee's expense topromptly return any or all of the Equipment to the possession of Lessor at such place within theUnited States as Lessor shall specify, . . . .").

51. Section 11 of the Agreement states that the "Lessee shall immediately surrenderpossession ofth[e] Equipment to Lessor, upon . . . (b) the occurrence of an Event ofDefault with

13356756.1 11



12/38

respect to that Lease. It is the intent of the parties hereto that any transfer of title to the Lessorpursuant to this Section shall occur automatically without the necessity of any bill of sale,certificate of title or instrument of conveyance." See Exhibit C at Master Lease, 11.

52. Section 19 of the Agreement requires Burlington to indemnifY, protect and defendand hold Citibank harmless from and against any and all liabilities, obligations, losses, claimsand damages whatsoever regardless of cause thereof, and all expenses in connection therewiththat, inter alia, arise out of entering into the Agreement, Citibank's ownership of any item ofEquipment, use or operation of the Equipment, and breach ofany covenant of the Agreement orany material misrepresentation contained therein. Section 19 of the Agreement also providesthat the indemnification shall "continue in full force and effect" notwithstanding the terminationof the Agreement for any reason. See Exhibit C at Master Lease, 19.

53. Section 20 of the Agreement lists six (6) possible events of default. In relevantpart, these events include: (1) failure by Burlington to observe and perform any covenant,condition or agreement on its part to be observed or performed under the Agreement for a periodof thirty (30) days after Citibank provides written notice specifying Burlington's failure andrequesting that its failure be remedied; and (2) any statement or promise by Burlington in orpursuant to the Agreement or its execution, delivery or performance that was false on the day itwas made. See Exhibit C at Master Lease, 20.

54. Section 21 of the Agreement sets forth remedies in the event ofdefault and states,in relevant part, that Citibank has the right to '''require Lessee at Lessee's expense to promptlyreturn any or all of the Equipment to the possession ofLessor at such place within the UnitedStates as Lessor shall specifY." See Exhibit C at Master Lease, 21.

[3356756.1 12



13/38

The Escrow Agreement55. On or about August 9,2007, in conjunction with the Agreement, Burlington

entered into an Escrow Trust Agreement with Citibank (the "Escrow Agreement"). A true andcorrect copy of the Escrow Agreement is attached herewith as Exhibit E.

56. The Escrow Agreement details two separate funds: (1) the City of BurlingtonAcquisition Fund, valued at $10,531,514.03 (the "Acquisition Fund"); and (2) the City ofBurlington Reserve Fund, valued at $1,000,000.00 (the "Reserve Fund").

57. Pursuant to the Escrow Agreement, the Acquisition Fund and the Reserve Fundwere funded by Citibank with monies advanced to Burlington under Schedule No. 001.

58. The Acquisition Fund was established to cover the costs of the BT Phase III buildout. Upon information and belief, the Acquisition Fund has since been depleted by costsassociated with the build out ofBT Phase III.

59. The Reserve Fund was established and intended as partial assurance againstdefault by Burlington in the payment of rental payments due under the Agreement.

Burlington's Breaches of the Agreement Payment Defaults

60. Pursuant to the Agreement, Burlington was required to make two (2) payments toCitibank on February 17,2010: (1) a payment of$133,102.50, pursuant to Schedule No. 001;and (2) a payment of$253,571.25, pursuant to Schedule No. 002. See Exhibit C, Attachment 1to Schedule No. 001 at p. 1, and Attachment 1 to Schedule No. 002 at p. 1.

61. Burlington failed to make the payments due on February 17,2010.

13356756.1 13

http:///reader/full/10,531,514.03http:///reader/full/1,000,000.00http:///reader/full/of$133,102.50http:///reader/full/of$253,571.25http:///reader/full/10,531,514.03http:///reader/full/1,000,000.00http:///reader/full/of$133,102.50http:///reader/full/of$253,571.25


14/38

62. On March 15, 2010, pursuant to Section 8(a) of the Escrow Agreement, Citibankasked the escrow agent, UMB Bank, to distribute $386,673.75 to Citibank from the ReserveFund to cure Burlington's payment default.

63. UMB Bank complied with the request and distributed the funds from the ReserveFund to Citibank.

64. Pursuant to the Agreement, Burlington was required to make two (2) payments toCitibank on May 17,2010: (1) a payment of $133,102.50, pursuant to Schedule No. 001; and (2)

a payment of$253,571.25, pursuant to Schedule No. 002. See id.65. Burlington failed to make the payments due on May 17,2010.66. On June 4, 2010, pursuant to Section 8(a) of the Escrow Agreement, Citibank

again asked UMB Bank to distribute $386,673.75 to Citibank from the Reserve Fund to cureBurlington's payment default.

67. UMB Bank complied with the request and distributed the funds from the ReserveFund to Citibank.

68. Despite Burlington's failure to make any rental payments to Citibank in 2010,Burlington's payment obligations under the Agreement were satisfied through May 17, 2010 byvirtue ofCitibank's draw on the Reserve Fund.

69. Since the aforementioned Reserve Fund payments, Citibank has not received anyother scheduled rental payments from Burlington due under the Agreement.

13356756.1 14

http:///reader/full/386,673.75http:///reader/full/133,102.50http:///reader/full/of$253,571.25http:///reader/full/386,673.75http:///reader/full/386,673.75http:///reader/full/133,102.50http:///reader/full/of$253,571.25http:///reader/full/386,673.75


15/38

Failure to Appropriate70. In the spring of 20 10, Burlington failed to appropriate funds in its annual budget

necessary to pay Citibank the Rental Payments scheduled for the fiscal year beginning July 1,2010.

71. Burlington subsequently informed Citibank of its alleged inability to make furtherrental payments under the Agreement because, inter alia, it claimed to have no legally availablefunds. Burlington claimed, for the first time, that all ofBurlington's funds, regardless of theirsource, were deemed to be "taxpayer revenues."

72. Burlington further indicated to Citibank that the only funds legally available forrental payments under the Agreement were BT revenues, which Burlington contended wereinsufficient. Burlington's contention is particularly curious, because Burlington itself has beenamong BT's most significant customers. Therefore, Burlington arguably had the ability and theobligation under the Agreement to charge itself sufficient rates to make the payments requiredunder the Agreement, but it failed to do so.

73. For these reasons and others, Burlington's responsible financial officer has failedto "do all things lawfully within his power" to obtain rental payments funds.

Burlington's Purported Termination of the Agreement74. By agreement dated June 28,2010, Citibank agreed to forbear from taking any

action against Burlington through September 30, 2010, subsequently extended through October29,2010 (the "Forbearance Period"), to allow Burlington additional time to perform under theAgreement and appropriate the requisite funds.

13356756,1 15



16/38

75. The parties further agreed that Burlington was not obligated to make rentalpayments during the Forbearance Period, except to the extent of the $226,745.76 balance in theReserve Funds, which Citibank was entitled to draw upon. Citibank requested and UMB Bankdistributed the remaining funds, thereby exhausting the Reserve Fund.

76. Upon expiration of the Forbearance Period, Burlington failed to appropriatefunds necessary to make payments pursuant to the Agreement.

77. By letter dated October 21,2010, Citibank demanded de-installation and thereturn of the Equipment, pursuant to Sections 7 and 11 of the Agreement. A true and correctcopy of this letter is attached herewith as Exhibit F.

78. Citibank informed Burlington that, in light of Burlington's purported terminationof the Agreement by non-appropriation as of June 30, 2010, if Burlington continued to use andpossess the Equipment, Burlington would be obligated to pay holdover rent to Citibank:.

79. Citibank further informed Burlington that Citibank: reserved its right to seekrecission of the Agreement.

80. Burlington has refused to comply with its holdover rent obligations, and it hasrefused to rescind the Agreement.

81. Burlington has also refused to return the Equipment, and in fact, it continues touse the Equipment today. Instead, of de-installing and returning the Equipment as required bythe Agreement, Burlington has suggested that it be allowed to retain the Equipment so it maykeep BT intact for its continuing use and benefit and tender substitute equipment to Citibank.Burlington admits substitute equipment is not permitted by the Agreement, would unjustly andunlawfully enrich Burlington at Citibank's expense, and would have a value that is a fraction of

13356756.1 16

http:///reader/full/226,745.76http:///reader/full/226,745.76


17/38

both the total amount owing to Citibank and Burlington's cost of complying with its obligationto de-install and return the Equipment to Citibank.

82. In a letter dated November 23,2011, McNeil, Leddy & Sheahan, acting as legalcounsel to Burlington, wrote to Susan M. Hudson, Clerk of the PSB Board, stating, in pertinentpart, as follows:

The City agrees with Citibank that the failure to appropriate fundsfor FY 2011 scheduled lease payments has resulted in termination ofthe Lease Agreement, and it is now the City'S obligation to return toCitibank the equipment financed there under [sic] as soon aspractical.A true and correct copy of this letter is attached herewith as Exhibit G.

83. Burlington's suggestion that it be allowed to tender substitute equipment wouldmaterially prejudice Citibank's legal and economic interests - and indeed those of the municipalfinance market generally - and is in direct contravention of the Agreement, as legal counsel toBurlington has expressly acknowledged.

COUNT I(City of Burlington) Declaratory Judgment - Deinstallation and Returnof Equipment

84. Plaintiff incorporates by reference and realleges the foregoing allegations as iffully set forth herein.

85. Burlington's failure to appropriate the necessary funds in its annual budget forpayments to be made for the following fiscal year was an Event ofDefault under Section 20 ofthe Agreement and operated to terminate the Agreement under Section 7 of the Agreement as ofJune 30, 2010. Additionally, Burlington's failure to perform its covenants under the Agreement,and Burlington's misrepresentations concerning the Agreement, constitute additional Events ofDefault, pursuant to Section 20 of the Agreement.

13356756.1 17



18/38

86. When Burlington defaulted, title to all of the Equipment under the Agreementautomatically transferred to Citibank. See Exhibit C at Master Lease, 11.

87. The Agreement defines Equipment as the "City-wide Fiber Optic Networkproviding voice, Data, and cable TV to Burlington offices, Businesses and residents ofBurlington, All other related equipment and The purchasing ofvehicles." See Exhibit C atMaster Lease, 1, Schedules 001 and 002.

88. If the Agreement is terminated pursuant to Section 7, Burlington is

unambiguously obligated to de-install and deliver the Equipment to a location specified byCitibank, anywhere in the United States, at Burlington's cost and expense.

89. Moreover, in the Event ofDefault, which includes failing to appropriate money tomake a lease payment, Citibank may (and indeed has) demanded that Burlington de-install theEquipment at its own cost and return it to Citibank. See Exhibit C at Master Lease, 21(b).

90. Counsel for Burlington admitted that Burlington has defaulted under theAgreement and is required to return the Equipment.

91. Nonetheless, Burlington has refused to return the Equipment.92. Burlington has also refused to return Citibank's vehicles in accordance with the

Vehicle Rider of the Agreement. See Exhibit C at Master Lease, Vehicle Rider.93. Instead, BT continues to use Citibank's Equipment and vehicles unlawfully and

without its permission and continues to depreciate the value ofCitibank's assets in order togenerate revenue for itself.

13356756.1 18



19/38

94. Burlington's actions have caused Citibank to sustain, and will continue to causeCitibank to sustain, damages, including further depreciation of the value of its assets and lostrental revenues.

95. Citibank is therefore entitled to specific performance of the Agreement.96. An actual controversy exists between the parties, and Citibank is entitled to a

declaratory judgment in the form of an Order of this Court directing Burlington to de-install anddeliver the Equipment to a location specified by Citibank, anywhere in the United States, at

Burlington's cost and expense.COUNT II(City of Burlington)

Declaratory Judgment - Replevin 97. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.98. Burlington defaulted under the Agreement on June 30, 2010.99. When this happened, title to the Equipment and vehicles subject to the agreement

automatically transferred to Citibank.100. Citibank now owns the Equipment and vehicles.101. Citibank has made demand for the return of its Equipment and vehicles.102. As stated earlier, Burlington's counsel admitted Burlington's obligation to de-

install and return the Equipment and vehicles.103. Nonetheless, Burlington has refused to de-install and return the Equipment and

vehicles.104. Burlington's actions have caused Citibank to sustain, and will continue to cause

Citibank to sustain, damages, including further depreciation of its assets and lost rental revenue.

13356756.1 19



20/38

105. These injuries are irreparable.106. Citibank has no adequate remedy at law.107. Citibank is therefore entitled to judgment determining its lawful right to

possession of the Equipment and vehicles and an Order of this Court requiring immediate deinstallation and delivery of the same.

COUNT III (City of Burlington) Breach of the Agreement


109. The Agreement constitutes a valid, binding contract.110. Citibank has fully performed all of its obligations under the Agreement, including

paying all of the costs to install the BT network.111. Burlington's lease payments were bargained for and intended by the parties, in

part, to cover these expenses.112. Following Burlington's default, Citibank demanded de-installation and return of

its Equipment and vehicles in accordance with the Agreement's terms.113. Burlington's counsel admitted that Burlington had this obligation under the

Agreement.114. Nonetheless, Burlington has refused to de-install and return Citibank's Equipment

and vehicles in breach of its unambiguous contractual obligation to do so.115. Burlington has also breached its covenants, representations and obligations under

the Agreement, including, without limitation, its covenant that it would not enter into the

13356756.1 20



21/38

Agreement unless it reasonably believed that "funds will be obtainable in an amount sufficient tomake all Rental Payments under the Maximum Lease Term" of twenty (20) years.

116. To the extent Burlington now claims limited availability ofnon-taxpayer revenuesto make the rental payments required under the Agreement, it would have necessarily had suchknowledge when it entered into the Agreement and therefore could not "reasonably believe" thatsuch funds would be obtainable.

117. Moreover, Burlington breached its representation that "[t]he responsible financialofficer ofLessee shall do all things lawfully within his power to obtain funds from which theRental Payments shall be made, including . . . to exhaust all available reviews and appeals in theevent such portion of the budget is not approved."

118. As a direct and proximate result of the above breaches, Citibank has sustainedand/or will continue to sustain damages in excess of $33,500,000.00, plus costs, interest, andattorney's fees.

119. Additionally, because Burlington's intentional breach of the Agreement amountsto a reckless or wanton disregard ofCitibank's clear contractual rights, Citibank is entitled to anaward of punitive damages. See Monahan v. GMAC Mort. Corp., 179 Vt. 167 (2005) ("Tosupport the award of punitive damages, plaintiffs needed to show that GMAC's breach ofcontract, or the covenant of good faith implied in the contract, demonstrated actual malice.").

COUNT IV (City of BurlinJrton) Breach of Implied Covenant of Good Faith and Fair Dealing 120. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.

13356756,1 21



22/38

121. Burlington d/b/a BT has refused, despite the plain grant of rights to Citibank bythe terms of the Agreement and its express covenants and the covenants implied therein by law,to return Citibank's Equipment and vehicles, and as a direct and proximate result thereof,Citibank has sustained and will continue to sustain damages in excess of $33,500,000.00, pluscosts, expenses, and attorney's fees.

122. Burlington d/b/a BT has therefore breached the covenant of good faith and fairdealing implied in the Agreement.

123. Moreover, because Burlington's intentional breach of the implied covenant ofgood faith and fair dealing amounts to a reckless or wanton disregard ofCitibank's clearcOI?-tractual rights, Citibank is entitled to an award ofpunitive damages. See Monahan, 179 Vt.167.

COUNT V(City of Burlington)Unjust Enrichment124. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.125. Citibank has conferred a benefit in excess of$33,500,000.00 on Burlington.126. This benefit includes the installation of, and materials used to build, a city-wide

fiber optic broadband network, other Equipment, and vehicles.127. It would be unconscionable for Burlington to retain such a benefit without

compensating Citibank.128. Based on the terms of the Agreement, Burlington knew or should have known that

Citibank did not intend to confer such a benefit on Burlington without receiving justcompensation in return.

13356756.1 22

http:///reader/full/33,500,000.00http:///reader/full/of$33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/of$33,500,000.00


23/38

129. Burlington's retention and use of the Burlington-wide fiber optic broadbandnetwork, other Equipment, and vehicles since June 30,2010 constitutes a substantial andcontinuing benefit to Burlington.

130. Burlington would be inequitably and unjustly enriched to Citibank's detriment ifallowed to retain the benefit Citibank has provided without due compensation.

131. Citibank is therefore entitled to an award of compensatory damages in an amountin excess of $33,500,000.00, in addition to all necessary costs, expenses, and attorney's fees.

COUNT VI(City ofBurlington)Conversion132. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.133. Upon Burlington's default, title to the Equipment and vehicles automatically

transferred to Citibank.134. Burlington has refused to return Citibank's Equipment and vehicles despite

Citibank's demand that it do so.135. Additionally, Burlington d/b/a BT continues to use Citibank's Equipment and

vehicles to generate revenues for itself.136. Burlington d/b/a BT's actions amount to a conversion ofPlaintifPs property. See

Economou v. Carpenter, 124 Vt. 451, 453-54 (1965) ("[A] conversion consists either in theappropriation of the property to the party's own use and beneficial enjoyment, or in itsdestruction, or in exercising dominion over it [to the] exclusion or defiance of the owner's right,or in withholding possession from the owner under a claim of title inconsistent with his title.").

13356756,1 23



24/38

137. As a direct and proximate result ofBurlington d/b/a BT's conversion ofCitibank's property, Citibank has sustained damages in excess of $33,500,000.00, plus costs,expenses, and attorney's fees.

138. Moreover, Burlington's willful and intentional refusal to return Citibank'sproperty entitles Citibank to an award of punitive damages. See Clymer v. Webster, 156 Vt. 614,631 (1991) ("As a general rule, punitive damages are recoverable in any action for damagesbased upon tortious acts, . . . , as long as the unlawful or wrongful acts evinced personal ill willor showed a reckless or wanton disregard of a another's rights.").

COUNT VII(City of Burlington) Declaratory Judgment - Indemnification for Holdover Payments 139. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.140. According to Burlington, its lease term under the Agreement expired on June 30,

2010.141. Burlington continues to use and possess the Equipment after termination of the

Agreement.142. Such continued use and possession of the Equipment by Burlington constitutes a

holdover.143. Section 19 of the Agreement requires Burlington to indemnifY Citibank for any

and all damages arising out of the use and operation of the Equipment, notwithstanding thetermination of the Agreement.

13356756.1 24



25/38

144. As a result of Burlington's holdover, Citibank has suffered and continues to sufferlosses in rental income through August 17,2011 in the amount of approximately $3,534,471.55,and such losses continue to accrue at the approximate rate of$235,631.44 per month.

145. Pursuant to the Agreement and pursuant to common law, Burlington is required toindemnify Citibank for these losses.

146. Citibank has demanded that Burlington make payments to Citibank for holdoverrent and as indemnification for losses suffered as a result of Burlington's continued use andoperation of the Equipment after termination of the Agreement.

147. Burlington has refused to pay Citibank the holdover rent due, or any sumwhatsoever.

148. Citibank is entitled to entry of an Order of this Court directing Burlington toindemnify Citibank for losses in rental income, specifically for holdover rent since July 1, 2010.

COUNT VIII (City of Burlington) Declaratory Judgment - Indemnification for Breach/Misrepresentation 149. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.150. Section 19 of the Agreement requires Burlington to indemnify Citibank for any

and all damages arising from a breach of any covenant in the Agreement or from damage causedby any material misrepresentation contained in the Agreement, notwithstanding the terminationofthe Agreement.

151. As a result of Burlington's misrepresentations and breach of the Agreement,Citibank has suffered and continues to suffer losses in an amount in excess of $33,500,000.00.

152. Burlington is required to indemnify Citibank for these losses.

13356756,1 25

http:///reader/full/3,534,471.55http:///reader/full/of$235,631.44http:///reader/full/33,500,000.00http:///reader/full/3,534,471.55http:///reader/full/of$235,631.44http:///reader/full/33,500,000.00


26/38

153. Citibank has demanded that Burlington make payments to Citibank asindemnification for losses suffered as a result of Burlington's misrepresentations and breach ofthe Agreement.

154. Burlington has refused to pay Citibank any such sums.155. Citibank is entitled to entry of an Order of this Court directing Burlington to

indemnify Citibank for losses suffered as a result ofBurlington's misrepresentations and breachof the Agreement.

COUNT IX (City of Burlington) Rescission - Unilateral or Mutual Mistake 156. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.157. Through mutual mistake of the parties, or, alternatively, through mistake on the

part of Citibank coupled with misrepresentations or other inequitable conduct on the part ofBurlington that induced such mistake by Citibank, the Agreement failed to fully and trulyexpress the intention and meaning of the parties as to the conditions, scope or degree of theparties' obligations and representations thereunder.

158. Specifically, the mutual mistake would have consisted of the parties' belief thatBurlington indeed had, as expressly represented, sufficient non-taxpayer funds legally availablefor rental payments under the Agreement.

159. Alternatively, the misrepresentations or other inequitable conduct on the part ofBurlington would have consisted of Burlington's knowing misrepresentations regardingBurlington's funds legally available for rental payments under the Agreement and/or itsknowledge of doubt or a dispute concerning such availability.

13356756.1 26



27/38

160. Burlington's ability to make rental payments under the Agreement was material tothe transaction, because Citibank would not have agreed to advance $33,500,000.00 toBurlington without Burlington's express representation that it would have the ability to repaythese monies in legally available funds.

161. But for such mutual mistake, or, alternatively, the mistake of Citibank induced bythe misrepresentations or other inequitable conduct of Burlington, Citibank would not haveentered into the Agreement.

162. If Burlington's present assertions as detailed supra concerning the availability ofnon-taxpayer funds were true at the time the Agreement was executed, there was no meeting ofthe minds between the parties relating to material and necessary terms of the Agreement.

163. The parties' mistake as herein alleged relating to material and necessary terms ofthe Agreement is a proper basis for rescission of the Agreement.

164. Citibank notified Burlington of its right to rescind the Agreement. However,Burlington has refused to rescind the Agreement and return Citibank's funds.

165. Citibank has offered and remains prepared to return any consideration alreadyreceived from Burlington, net ofdamages suffered by Citibank.

166. Lacking an adequate remedy at law, Citibank is entitled to rescission of theAgreement on the ground that it was the product of a unilateral or mutual mistake.

COUNT X(City of Burlington) Rescission - Fraudulent Inducement


13356756.1 27



28/38

168. Burlington falsely and fraudulently and with the intent to defraud Citibankrepresented to Citibank that at least 40 percent of Burlington's revenues were not taxpayer fundsand would be available to make rental payments to Citibank, and further, that Burlington wouldnot enter into the Agreement unless Burlington both believed and warranted that it could andwould obtain funds sufficient to make all payments due under the Agreement for its maximumterm.

169. Based on Burlington's present assertions, these representations were necessarilyfalse in fact and would have been known by Burlington to be false at the time they were made.

170. Burlington's ability to make payments under the Agreement was material to thetransaction, because Burlington knew that Citibank would not have agreed to advance$33,500,000.00 to Burlington if Burlington did not expressly represent and warrant that it wouldhave the ability to repay these funds.

171. Citibank had a right to rely on Burlington's statements, did in fact reasonably relyon them, and could not reasonably have discovered Burlington's fraud.

172. In reliance upon Burlington's representations, Citibank agreed to enter into theAgreement with Burlington.

173. Citibank has suffered and continues to suffer damages in an amount in excess of$33,500,000.00 caused by its justifiable reliance upon the false information provided byBurlington.

174. The Agreement should be rescinded, because Burlington's misrepresentationsinduced Citibank to enter into the Agreement.

13356756.1 28

http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00


29/38


176. Citibank has offered and remains prepared to return any consideration alreadyreceived from Burlington, net of damages suffered by Citibank.

177. Citibank is entitled to rescission of the Agreement on the ground that it wasinduced by fraud.

COUNT XI (City of Burlington) Rescission - Negligent Misrepresentation


179. At all times relevant hereto, Burlington had a legal duty to act with reasonablecare and in good faith in its business and contractual relationship with Citibank, and it wasobligated to take reasonable care to provide truthful and accurate information to Citibank.Specifically, Burlington was obligated to take reasonable care to accurately disclose its financialstatus and a truthful and reasonable assessment of its ability to make rental payments due underthe Agreement.

180. Burlington failed to take reasonable care to provide accurate information toCitibank concerning its financial status and ability to make rental payments due under theAgreement.

181. Burlington failed to exercise reasonable care by, inter alia, failing to ensure thatsufficient funds or ability to access funds existed to make the requisite payments under theAgreement.

13356756.1 29



30/38

182. Burlington's inaccurate representations concerning its financial status and abilityto make rental payments due under the Agreement were material to Citibank's willingness toenter into the Agreement, and such representations were made to induce, or with the foreseeableresult that they would induce, Citibank to enter into the Agreement.

183. Citibank has suffered and continues to suffer damages in an amount in excess of$33,500,000.00 caused by its justifiable reliance upon the false information provided byBurlington.

184. The Agreement should be rescinded, because Burlington's misrepresentationsinduced Citibank to enter into the Agreement.


186. Citibank has offered and remains prepared to return any consideration alreadyreceived from Burlington, net of damages suffered by Citibank.

187. Citibank is entitled to rescission of the Agreement on the ground that it wasprocured by negligent misrepresentation.

COUNT XII(City of Burlington) Declaratory Judgment - Impermissible Impairment of Obligations ofContract 188. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.189. Article I, Section 10 of the United States Constitution prohibits acts of state

legislation (including acts of a municipality) that impair the obligations of contracts.

13356756.1 30



31/38

190. To the extent that Burlington contends the meaning of available "taxpayerrevenues" has been limited or modified by government action since Burlington entered into theAgreement in August 2007, such that all of Burlington's funds, regardless of source, are nowdeemed "taxpayer revenues" and are thus unavailable for rental payments, such modification hasmade it impossible for Burlington to perform under the Agreement.

191. Citibank is entitled to a declaratory judgment that such a modification wouldsubstantially impair Citibank's expectations and rights under the Agreement in violation of

Article I, Section 10 of the United States Constitution and is, therefore, invalid andunenforceable as against Citibank.

COUNT XIII(City of Burlington) Default Under Uniform Commercial Code Article 2A


193. Article 2A of the Uniform Commercial Code, Vt. Stat. Ann. ("V.S.A.") Tit. 9A 2A-102 (2010), "applies to any transaction, regardless of form, that creates a lease."

194. The Agreement is a "lease," as defined by Article 2A, Section 103(j) of theUniform Commercial Code, 9A V.S.A. 2A-I03(j) (2010), insofar as it is "a transfer of the rightofpossession and use of goods for a term in return for consideration."

195. The Equipment constitute "goods," as defined by Article 2A, Section 103(h) ofthe Uniform Commercial Code, 9A V.S.A. 2A-103(h), insofar as they are "all things that aremovable at the time of identification to the lease contract."

13356756.1 31



32/38

196. Citibank is a "lessor," as defined by Article 2A, Section 103(p) of the UniformCommercial Code, 9A V.S.A. 2A-103(p), insofar as it is "a person who transfers the right topossession and use of goods under a lease."

197. Burlington is a "lessee," as defined by Article 2A, Section 103(n) of the UniformCommercial Code, 9A V.S.A. 2A-103(n), insofar as it is "a person who acquires the right topossession and use of goods under a lease."

198. Section 2A-523(l) of the Uniform Commercial Code sets forth the lessor'sremedies for lessee's default and states, in relevant part: "I f a lessee . . . fails to make a paymentwhen due or repudiates with respect to a part of the whole, then, with respect to any goodsinvolved, . . . the lessee is in default under the lease contract." 9A V.S.A. 2A-523(l).

199. Section 2A-523(3)(a) further provides that when a lessee defaults under a leasecontract, "ifthe default substantially impairs the value of the lease contract to the lessor," the

lessor may pursue remedies including recovery of rent. 9A V.S.A. 2A-523(3).200. Burlington's misrepresentations and breach of covenants concerning, inter alia,

availability of funds to make rental payments under the Agreement constitute an "event ofdefault" under the Agreement that substantially impairs the value of the Agreement to Citibank.In effect, Burlington's professed inability to make rental payments under the Agreements, if true,renders the Agreement worthless.

201. IfBurlington is determined to have defaulted under the Agreement, Citibank may,inter alia, recover rent. See 9A V.S.A. 2A-523(l)(e).

202. Section 2A-529 states, in relevant part:

13356756.1 32



33/38

After default by the lessee under the lease contract described in section2A-253(1) or 2A-523(3)(a), or if agreed, after other default by the lessee,. . . the lessor may recover from the lessee as damages: (a) for goodsaccepted by the lessee and not repossessed by or tendered to the lessor . . .(i) accrued and unpaid rent as of the date of entry in judgment in favor ofthe lessor; (ii) the present value as of the same date of the rent for the thenremaining lease term of the lease agreement; and (iii) an incidentaldamages allowed under section 2A-530, less expenses saved inconsequence of the lessee's default.9A V.S.A. 2A-529.

203. Because Burlington maintains use and possession of the Equipment, Citibank isentitled to recover from Burlington accrued and unpaid rent on the Equipment as provided in theAgreement and incidental damages in the amount of at least $3,534,471.55 through August 2011and accruing at the rate of at least $235,631.44 per month thereafter.

COUNT XIV (McNeil, Leddy & Sheahan) Negligent Misrepresentation 204. Plaintiff incorporates by reference and realleges the foregoing allegations as if

fully set forth herein.205. To secure an express promise that Burlington had the requisite financial and legal

power, authority and capability to perform its obligations under the Agreement, Citibankrequired that Burlington provide the Opinion Letter, which is attached herewith as Exhibit B.

206. Burlington solicited the Opinion Letter from its counsel, McNeil, Leddy &Sheahan to expressly assure and represent to Citibank that Burlington had the requisite financialand legal power, authority and capability to perform its payment obligations under theAgreement.

lJ356756J 33

http:///reader/full/3,534,471.55http:///reader/full/235,631.44http:///reader/full/3,534,471.55http:///reader/full/235,631.44


34/38

207. As legal counsel to Burlington with regard to the negotiation of the Agreement,and as the author of the Opinion Letter, McNeil, Leddy & Sheahan knew that Citibank intendedto use and rely upon its representations set forth in the Opinion Letter in determining whether toenter into the Agreement, and indeed, it intended and expressly instructed that Citibank rely onthe information in the Opinion Letter.

208. The Opinion Letter explicitly states that Citibank, "its successors and assigns andany counsel rendering an opinion on the tax-exempt status of the interest components of theRental Payments, are entitled to rely on this opinion."

209. McNeil, Leddy & Sheahan had a duty to use reasonable care to impart correct,reasonably considered, fair and non-deceptive information to Citibank.

210. McNeil, Leddy & Sheahan in fact induced Citibank to enter into the Agreementby representing in its Opinion Letter: "We are advised that approximately 40 percent of generalfund revenues are derived from other sources than through taxation of the City's taxpayers."

211. On information and belief based on Burlington's present statements, thisrepresentation by McNeil, Leddy & Sheahan was incorrect when made, and McNeil, Leddy &Sheahan knew or should have known of the incorrectness of the representation and that Citibankwould rely on the representation to its foreseeable detriment in agreeing to proceed with thetransaction.

212. Upon information and belief: McNeil, Leddy & Sheahan failed to use reasonablecare to confirm and accurately and unambiguously communicate to Citibank concerning theavailability of general fund revenues before attesting to their availability.

13356756.1 34



35/38

213. Citibank foreseeably and justifiably relied upon this erroneous opinion in agreeingto enter into the Agreement with Burlington and in, inter alia, advancing $33,500,000.00 toBurlington.

214. As a direct and proximate result of its reliance upon the incorrect representationmade by McNeil, Leddy & Sheahan, Citibank has suffered damages in an amount in excess of$33,500,000.00.

COUNT XV(McNeil, Leddy & Sheahan) Third Party Beneficiary Breach of Contract


216. McNeil, Leddy & Sheahan contracted with Burlington to provide legal servicesand counsel to Burlington in connection with the Agreement.

217. Burlington's contract with McNeil, Leddy & Sheahan for legal services wasintended to benefit Citibank, as Burlington sought to enter into the Agreement with Citibank andfurther sought McNeil, Leddy & Sheahan's services to expressly represent to Citibank in theform of its legal opinion that Burlington had the requisite power, authority and capability to enterinto the Agreement.

218. In its capacity as legal advisor, McNeil, Leddy & Sheahan prepared the OpinionLetter and intended that the Opinion Letter be relied upon by Citibank and induce Citibank toproceed with the transaction with Burlington and advance to Burlington the sum of$33,500,000.00.

13356756.1 35

http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00


36/38

219. Citibank was an intended and identified third party beneficiary ofBurlington'scontract with McNeil, Leddy & Sheahan.

220. McNeil, Leddy & Sheahan breached its contract to provide reasonable,professional and competent legal services to Burlington by its failures as aforesaid.

221. This breach proximately caused Citibank's damages in an amount in excess of$33,500,000.00.

222. McNeil, Leddy & Sheahan is liable to Citibank as a third party beneficiary of itscontract with Burlington.

PRAYER FOR RELIEFWHEREFORE, Plaintiff requests that this Court enter judgment against the Defendants

and in Plaintiffs favor on the counts of the Complaint, or as indicated enter judgment on suchcounts in the alternative, and award relief as follows:

1. Preliminarily and permanently enjoin the City ofBurlington d/b/aBurlington Telecom from further using and depreciating Citibank's assets,including its Equipment and vehicles, to generate revenue for itself;

2. Order the City ofBurlington to place all of the revenues BurlingtonTelecom has generated since June 30, 2010 and will continue to generatefrom the use ofCitibank 's property into a constructive trust or into anescrow account with this Court:

3. Order the City ofBurlington to pay Citibank holdover rent, and toindemnify Citibank for expenses, and any and all losses relating toBurlington's continued use and possession of Citibank's Equipment and

13356756.1 36



37/38

vehicles since June 30, 2010 and Burlington's breach and/ormisrepresentations;

4. Order the City of Burlington at its own cost to de-install and returnCitibank's Equipment and vehicles to Citibank at a location anywhere inthe United States in accordance with the parties' Agreement;

5. Order the City of Burlington to pay over to Citibank any revenues of theCity ofBurlington d/b/a Burlington Telecom held in constructive trust orescrow to which Citibank is entitled;

6. As necessary and on Citibank's Motion, appoint an interim receiver tointer alia: (a) monitor Burlington's compliance with this Court's orders;(b) manage the constructive trust or escrow account; (c) organize theaffairs ofBurlington Telecom; and (d) perform an accounting ofBurlington Telecom;.

7. Award Citibank damages in an amount to be proven at trial in excess of$33,500,000.00;

8. Award Citibank punitive damages for the City ofBurlington's intentionalbreach of its clearly-defined contractual obligations, intentional breach ofthe implied covenant ofgood faith and fair dealing, and intentionalconversion ofPlaintiffs property;

9. Alternatively, rescind the Agreement between the parties and order thereturn of all principal sums advanced in the amount of $33,500,000.00 toCitibank;

13356756,1 37

http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00http:///reader/full/33,500,000.00


38/38

IO. Award Citibank attorney's fees and costs incurred herein, including prejudgment and post-judgment interest; and

11. Grant any other relief to which Citibank is entitled and such other relief asis just and proper under these circumstances.

Respectfully submitted,Dated: September 1, 2011 CITIBANK, N.A.,. A ASSIGNEE OFITICAPITAL M CIPAL FINANCE(

900 Elm StreetManchester, N.H. 03101(603) [email protected]@[email protected]

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

Documents

Citibank sues over Burlington Telecom assets