Four years and $1.6 million later, the city of Fairhope reached a settlement agreement Nov. 7 with the Alabama Municipal Insurance Corporation (AMIC) over the reimbursement of attorneys fees charged to litigate a lawsuit over a rejected retail development. Mayor Tim Kant said the tentative settlement will leave the city on the hook for $500,000, while AMIC will be required to pick up the $1.1 million balance.

The agreement was reached the week before a jury trial was scheduled to begin in Baldwin County Circuit Court, where the case had been remanded following a U.S. District Court judge’s rejection of it in 2010. Since then, both sides had agreed to delays while the city finalized a purchase agreement for the property at the center of the litigation – the former “Dyas Triangle” at the city’s northwestern gateway.

The dispute began when the Dyas family sued the city in 2008, after the Fairhope Planning Commission rejected its plans for a 54,000-square-foot shopping center on the property. Allegedly, the city removed an attorney AMIC had initially assigned to the case and replaced him with a team from the law firm of Hand Arendall, which submitted charges for reimbursement AMIC hadn’t anticipated or approved. At the time, the charges totaled just $225,000.

Before the parties could reach a handshake agreement, AMIC filed suit and shortly thereafter, the city countersued. But charges mounted as the Dyas family’s lawsuit continued and the core case remained unsettled until the city purchased the property from the family late last year, for a total of $8.75 million, more than $5 million of which was a bank loan.

Kant said today he has always believed the city was within its contractual rights to assign a different legal team to the case.

“If it’s covered under our insurance, the insurance people pick the attorney to use,” he said. “If it’s something outside of the normal realm – and we were told there was the possibility of a $16 million judgment against the city (in the Dyas case) – we made a decision to retain Hand Arendall to defend it. As it goes through the process, the insurance company should pick it up and they would pay part and we would pay the other part … We thought all along we were correct. We wouldn’t have carried on with spending money to prove we deserve to have the attorney fees paid, otherwise we may not have gone any further.”

Kant said the city reviews its insurance coverage annually and even though the relationship with AMIC was terminated, it has since found similar or better coverage from The Travelers Companies.

Kant also acknowledged that he has been the recipient of campaign contributions from Hand Arendall’s partners and a related Political Action Committee, but said the firm’s relationship with the city predates his tenure as mayor and added, “they’ve never lost a case.”

“In fact, they’ve returned at least $1 million back to the city coffers,” he said.

Fairhope does not employ a legal staff but has long kept local attorney Marion “Tut” Wynne on retainer in an arrangement worth a $24,000 base fee plus an additional $62,000 in additional fees last year, Kant said. Outside attorneys are frequently hired for additional work, he said.

Circuit Court Judge Jody Bishop presided over the case and denied several of AMIC’s motions in the days before the settlement was reached. Bishop was at one time Fairhope’s municipal judge.

Attorneys representing AMIC declined to comment on the settlement.