The Washington Post

National Labor College sells its campus, but legal dispute lingers

The National Labor College in White Oak has been sold, but a legal disagreement with scorned buyer Monument Realty continues. (Jeffrey MacMillan/Capital Business)

Monument Realty president Michael Darby thought he had a deal.

Officials at the National Labor College signed a letter-of-intent in December to sell him the school’s 46-acre property just off the Capital Beltway in Silver Spring  for $29 million plus future payments of as much as $3.5 million, according to court filings.

For 18 years, the college provided AFL-CIO-sponsored training for working adults. But after the deal with Monument was signed, Paula E. Peinovich, the college’s president, announced that the college would shut down in coming months. Monument Realty planned a mixed-use project of more than 1.5 million square feet.

“We’re all very, very sad,” Peinovich said.

But the deal was still not done. Over the next three months administrators of the college and Darby, Monument’s canny, Australian-American founder, went back and forth in negotiations and together sought input from county officials, according to court records. On March 13 the two sides “met for hours” to finalize the deal, according to an affidavit from Darby.

Days later, the administrators changed direction and announced that they had a new deal that would keep the property in the labor family, a sale to the Amalgamated Transit Union, which represents bus, subway and boat operators, for $31.4 million.

A subsidiary of Monument sued the college, alleging in a complaint in Montgomery County Circuit Court that administrators had used “fraudulent concealment” to negotiate the ATU deal. Monument and its attorneys alleged that the sale violated “an agreement that specifically and unequivocally required defendant to negotiate” exclusively with Monument.

The college and its attorneys denied the allegations. But they acknowledged in detail in court something that union representatives had alluded to previously: that the school was heavily in debt.

Although training programs like the ones it offered had already begun moving online, in 2004 the college made the ill-timed decision to borrow $30 million from Bank of America to finance major campus upgrades. When the improvements failed to bring in enough new revenue, the college began to default on debt payments.

“The bank has the right to foreclose on the property as a result of this continuing default,” the college’s lawyers explained.

The college held its last commencement in April but it had still been spending $80,000 a month to maintain the property with no new tuition coming in, according to documents.

The college’s attorneys argued in court that Monument tried to bleed the college dry by delaying the sale. “Monument calculated that it could drag out contract negotiations to better its financial position,” they wrote.

Monument asked a judge to halt the sale and force college administrators to return to the negotiating table but last month Judge Terrence J. McGann allowed ATU’s purchase to proceed.

The deal closed July 30, and a day later the ATU announced that it planned to use the campus to “continue and expand on its great legacy as a school for labor, community and social justice leaders.”

Monument has since asked the court for unspecified damages in the case and requested a jury trial. A company spokeswoman declined to comment.

Peter R. Kolker, at attorney representing the college, said in an interview that Monument was trying to extract money from the college on the basis of a non-binding letter of intent.

“The letter of intent says what it says. We followed the letter of the letter if you will,” he said.

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz

Jonathan O'Connell has covered land use and development in the Washington area for more than five years.



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Jonathan O'Connell · August 14, 2014

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