Judge makes her decision in the first trial over ‘The Hole’

(Aerial view of The Hole, September 2009)
We’re in King County Superior Court Judge Susan Craighead‘s courtroom downtown, where she has just announced her findings in the first trial over the two-years-stalled West Seattle project known as “The Hole” (or “Hole Foods,” before Whole Foods Market announced in July it was no longer part of the project). Among Judge Craighead’s opening remarks this morning: “This case has been my window on the collapse of the financial system and the real estate market. … It seems that all the ‘suits’ were to varying degrees in complicity in a sort of a game that constituted construction financing during this period.” What she was deciding here is whose lien has priority – and she has decided it’s the general contractor, Ledcor Construction, and their subcontractor, Aero Construction (which dug The Hole).


(Photo published on WSB April 30, 2008, courtesy John Cashill)
Various parties argued that what had been done to the site before a certain key point in summer 2008 – including the April ’08 hole-digging to which the above photo is related – did not amount to “work” and therefore Ledcor and Aero were not first in line with their liens – but the judge disagreed with that. She said that former financier Seattle Capital, when trying to make the claim during a potential sale of the site that no work had been done, “should have known and did know (that contention) was false.”

One big loser in her ruling: 3922 SW Alaska LLC, the company related to Madison Development that agreed to buy the note for what remained of the project and its excavated site, then (to boil it way, way down) sought “judicial foreclosure” more than a year ago in hopes of moving on with the site without the burden of millions of dollars in liens to be fulfilled. We are now reading our copy of the 53-page ruling (while about 10 lawyers in the courtroom do the same thing – they have a short window here to ask the judge for clarification before she moves on to an unrelated criminal trial at 10 am) and are going through it – though we didn’t cover the entirety of the 2-plus weeks of testimony in the trial, they are summarized in the ruling, and it affords quite the view into never-before-publicized specifics of how the whole project fell apart. So, what does this all mean for the future of “The Hole”? Depends first on whether the decision is appealed, and what happens with other pending legal action. More to come.

ADDED 11:05 AM: We will transcribe some of this later – since the document itself is not likely to be available online immediately – but one note summarizing the last few pages of the ruling: The judge says that the site should be sold at foreclosure as soon as possible, because The Hole itself was never meant to be permanent, and could either fail or be ordered by the city to be filled in, in which case millions of dollars in work, representing part of the value of the property at sale, would be lost.

ADDED 3:24 PM: The exact language from the judge’s ruling regarding that section is the first transcription we’re adding – read on:

From page 51 of 53:

…10. The owner in this case, Fauntleroy Place LLC, is defunct, and without assets to pay what is owed to the lien claimants here. Their security for payment rests entirely on their rights in the property.

11. The lien claimants who have prevailed in this foreclosure action (Aero, Ledcor and Kleinfelder) will recover what they are owed to the extent the property can be sold at foreclosure at an amount sufficient to pay them, in the order of priority that the Court has determined. A substantial portion of the current value of the Property consists of the deep, shored excavation constructed by Aero and Ledcor (including subcontractor Malcolm), with professional services furnished by Kleinfelder. Their work substantially exceeded $5 million, some of which was paid by the Owner, and the rest of which was not. If the existing shored excavation needs to be decommissioned and filled in, the value in the Property represented by that work will be lost forever.

12. The ongoing viability of that excavation is in doubt. The shoring system that supports the excavation is by design a temporary system. It was neither designed nor intended to be in place for longterm suspension of the Project, and it has already been in place two years, well beyond its intended life span. The City of Seattle is the governing jurisdiction, and can at any time order that it be decommissioned and the excavation filled in, and if the owner fails to perform such an order, the City holds a $1 million cash deposit in pay for that work to be performed.

13. In the meantime, the shored excavation is subject to potential failure. Even a minor failure, where one of the shored walls shifted inward by just a matter of inches would result in substantial displacement and settlement of soils supporting adjacent streets, houses and other structures. Any such failure would likely result in the emergency decommissioning of the entire excavation, destroying the value in the Property represented by the work of Aero, Ledcor and Kleinfelder.

14. In addition, the value of the security represented by the Property is subject to market declines. The Court takes judicial notice of the general decline of real estate property values both locally and nationally from the height of the “real estate bubble” to the present. See ER 201 (b) The parties appear to agree that the general decline in real-estate values was a major reason for the failure of this Project. Additional, dramatic declines in real estate, impacting the value of the Property, are a risk that is currently resting on the financial shoulders of lien claimants Aero, Ledcor and Kleinfelder.

15. Those lien claimants currently have no security against the risk that the excavation and shoring system will need to be decommissioned, either by directive from the City or by a failure or other event that makes emergency decommissioning necessarily. Those lien claimants also currently have no security against any further market declines in the value of the Property. Prompt foreclosure, so that the current foreclosure value of the Property is reduced to cash and available to pay the lien claimants, removes those risks. Postponing entry of judgment until after trial resolving the bifurcated claims leaves the lien claimants vulnerable to those risks, which would be prejudicialto their rights and unfair to them. In the event of an appeal from judgment on these lien foreclosure claims, entry of that judgment now will require commencement of that appeal approximately 9 months earlier than would occur if entry of judgment were delayed until after trial of the bifurcated claims. In the event of appeal from immediate entry of judgment, this Court could determine whether to stay foreclosure against the Property pending the outcome of that appeal, and what security to require for the protection of lien claimants Aero, Ledcor and Kleinfelder to protect their judgment pending the outcome of any such appeal. The Court’s decision could be reviewed immediately by the Court of Appeals. Delay in entry of judgment on the Court’s determination of foreclosure would deprive those lien claimants of that security, to which they are entitled.

42 Replies to "Judge makes her decision in the first trial over 'The Hole'"

  • rudy November 15, 2010 (9:50 am)

    I’m amazed how you can keep all the stuff/parties in this story straight. I think my head will explode every time I try to follow all the drama and who was/is involved…….

    Once again well covered and reported you guys.

    • WSB November 15, 2010 (9:54 am)

      Thanks, I don’t know that we have sorted it out perfectly and completely but it just seemed like too important a case to let that keep us away … will be adding more from the 53-page ruling later, as well as taking a closer look at what’s in the court files that’s still pending (at least two cases last time we looked) – TR

  • Beth November 15, 2010 (10:20 am)

    I agree with Rudy! You guys rock. How you are able to keep West Seattle updated is amazing!!

  • Christy November 15, 2010 (11:10 am)

    Thanks for covering this. Few blogs would even try.

    • WSB November 15, 2010 (11:16 am)

      We’re actually a news organization publishing in blog format, 30 years of journalism and all that, and many sites are not run by professional journalists (though some that are not do a GREAT job, I should say). But for a data point, no newspapers have been covering the case either (much less any other form of news media). We have suggested to our partners at the Seattle Times that they link this, which is part of our relationship (we let them know when we are covering stories of interest, and generally vice versa). – TR

  • eileen November 15, 2010 (12:34 pm)

    It’s very interesting to hear that the judge is ordering a foreclosure sale since the excavation was not intended to be permanent. This might mean something will happen more quickly which would be great news.

  • cathyw November 15, 2010 (1:12 pm)

    Interesting that the hole itself is considered an “asset.”

  • dave peterson November 15, 2010 (1:41 pm)

    that was one of the most confusing, un-enlightening “story’s” ive read. certainly providing fodder for the existence of blogs vs getting a competent news story from real news people.

    • WSB November 15, 2010 (1:46 pm)

      thanks for your comment, Dave, sorry you didn’t find it enlightening. FWIW, I’m about as real a news person as it gets. 30 years in journalism – newspapers, television, radio, national Web – and just won a national journalism award. But certainly that doesn’t matter if you’re reading our work and not feeling informed. We’ve been covering this story for more than 2 years and perhaps there are parts that wouldn’t make sense if you hadn’t been following along. If there are specific parts of this particular story you find confusing, please let me know and I will work on that part when adding to the story from the court documents in a bit. You are welcome to e-mail us at any time (editor@westseattleblog.com) if you don’t want to elaborate here. Thanks! – Tracy

  • Dale S November 15, 2010 (1:56 pm)

    I hope the contractors get their liens satisfied including interest, and fees.

    • WSB November 15, 2010 (2:23 pm)

      Dale – the paperwork includes some specifics on that. One more story that’s in queue and then I’ll be adding to this one …

  • Carson November 15, 2010 (2:02 pm)

    Dave, I am not sure what you are reading. Part of the problem, for you anyways, is this has been an ongoing saga for a few years, so this single story does not tell the complete story, but was an update of many, with many more to follow I am sure.

  • old timer November 15, 2010 (2:42 pm)

    Thanks WSB, for all your diligent work.
    To those of us who have been paying attention to this story as presented here over the past several years, this all is making as much sense as is possible.
    It’s kind of neat to have such a close-up inspection of the workings of the ‘system’.
    I am grateful for your dedication to our community.

  • poc November 15, 2010 (2:50 pm)

    I guess that Dave should stick to reading mainstream news online. He might enjoy the article on one of the ‘big 3’ a few days ago that reported how a man was trying to recover his “stolen wife’s jewelry”. Now that’s a story he might find interesting! I’ll stick to the WSB, thank you.

  • enviromaven November 15, 2010 (2:50 pm)

    Wow, Dave…that was a cheap shot that got a much more gracious reply than it deserved. The situation in question is a messy, confusing tangle of legal maneuvers. The WSB’s update made it clear that there’s more to come in terms of sorting all that out. You might want to get a little more 411 before trashing them. They are one of the best resources for community news in the country.

  • dd November 15, 2010 (3:10 pm)

    Following up on eileen’s post, your story reports that the judge said “the site should be sold at foreclosure as soon as possible.” Is that an official ruling or just a suggestion?

  • EyeLiveInWS November 15, 2010 (3:11 pm)

    It’s interesting that you mention the city could order the hole filled. Did you find out what is going on with the hole on Stone Way? Why is that one any different than this hole? It’s been a hole for over 6 years!

    • WSB November 17, 2010 (8:08 pm)

      P.S. For anybody checking back here. Have researched a bucket of info on the issue of ordering (or not) The Hole filled. Story in the works, hoping for Thursday publication. – TR

  • KBear November 15, 2010 (3:13 pm)

    ‘that was one of the most confusing, un-enlightening “story’s” ive read.’

    Dave, apostrophes belong in contractions, such as “I’ve”, but not in plurals, like “stories”. Talk about unenlightened.

  • Dill November 15, 2010 (3:13 pm)

    I’m with dave on this one… not a very informative story. But whatever, the WSB can do wrong it seems based on the freakout that simple criticism appears to elicit.

    • WSB November 15, 2010 (3:27 pm)

      Have just added most of the last three pages of the ruling, which explain the judge’s perception of urgency. She did not “order” foreclosure but she was explaining why she thinks it should happen posthaste. The section about the city’s ability to order decommissioning – aka, filling in – of The Hole at any time is interesting, and we will be contacting DPD to explore exactly how they are monitoring whether that would ever be necessary – TR

  • dd November 15, 2010 (3:38 pm)

    Thanks WSB, adding that last part helps explain it but still, I am not holding my breath for anything to happen soon. Seems to me like 3922 has some decisions to make, or rather, betting. Either they appeal and try to drag it out for months (?), years (?) to wait for the economy to get better or they get notice from the city saying they have to fill it in. I like how the judge says (I imagine from some parties testimony) that the shoring was only temporary but all we’ve been hearing for the past two years is how that shoring would stand up for years and years.

  • dsa November 15, 2010 (4:52 pm)

    Without WSB we would know nothing, thank you for the excellent coverage.

  • dsa November 15, 2010 (5:10 pm)

    I doubt there was testimony as to the adequacy of the shoring or any risk assessment from a geotech expert. I think the judge was expressing a personal opinion requesting a quick sale.

  • Baba November 15, 2010 (5:21 pm)

    At first I was going to make a suggestion about troll feeding, but then I’ve read the last sentence of @Dill’s comment…

  • moxilot November 15, 2010 (5:25 pm)

    Hey Dave and Dill…. YOU read through 53 pages of a court finding in a short amount of time, summarize the past three years of jostling, and report it to us in a concise manner. Ready….go! Be ready to read the posts about how poor your efforts were. Then, go back to watching sitcoms where things are packaged nice and tidy in 30 minutes.

    Thank you, WSB, for keeping on it.

  • miws November 15, 2010 (6:03 pm)

    Yeah, boy howdy dave! I agree. That’s one confusing read!


    But, it has nothing to do how WSB reported the story. It has everything to do with all of the legalese in the Judge’s ruling. It made my head spin!


    Dill, yeah, those of us that have been reading WSB for a long time, many of us that have “been here” before WSB became a bona-fide news organization, tend to “freak out” when non-constructive, sarcastic, comments show up on these news stories.


    It’s simply a reflection of how much we value all the hard work the entire WSB Team does, and what a valuable asset WSB is to the entire West Seattle Community.


    moxilot FTW.



  • Baba November 15, 2010 (6:34 pm)

    Mike, I wanted to ask this question for a long time. Maybe you, as one of WSB’s elders (and I don’t mean age) can answer it.
    At times, that’s exactly how WSB seems to me….
    “many of us that have “been here” before WSB became a bona-fide news organization” – versus the rest of us…poor saps that were not.
    What do i need to do to GET IN?

  • EmmyJane November 15, 2010 (7:25 pm)

    It’s one thing to provide constructive criticism, or ask for more information (which would sound something like “WSB, I am having a hard time understanding this article, can you please clarify”) and it’s a completely different thing to be rude, which is what Dave was being. I would like to make excuses like “maybe Dave didn’t realize there were actual humans behind that little screen that might be offended by such a rude comment” or “maybe Dave is having a bad day” but honestly, after encountering enough “Daves” in this world, I think this person is just likely an unhappy a$$ who gets enjoyment out of being openly rude to others. There is no reasoning with those people.

    And I’m not standing up for the WSB because they can do no wrong or I’m part of some insiders club, I’m standing up for them because that comment was professionally insulting and RUDE. I wish we could ban rude people to some island so the rest of us wouldn’t have to deal with their crap.

  • EmmyJane November 15, 2010 (7:26 pm)

    Wow, in case anyone was wondering, I feel much better. :-) What a rant!

  • beth November 15, 2010 (7:29 pm)

    I haven’t seen this much common sense from a public official…well – ever. Judge Craighead deserves a round of applause. It would seem to me that she has the best interest of the community in mind, both the community of organizations that performed work on the ‘hole thus far and the West Seattle community in general.

  • hammer November 15, 2010 (7:52 pm)

    Got to say this to dave, dill, and the other trolls: If you don’t like the report, then find another place to read about this issue.

    Oh yeah, there isn’t one.

    I actually can’t believe the WSB is dredging through the legal docs. As a one or two person operation, I know it is is a lot of work to make sense of the legalese. Good for for the WSB, you guys deserve any awards you have won.

    I don’t think its a case of “the WSB can do no wrong”…its more an example of some critics who have no idea what an asset the WSB is the the community, nor the work it takes to report at the level they are demanding. This story would not be reported otherwise, even though there are a lot of interested parties.

  • miws November 15, 2010 (9:05 pm)

    beth, thanks for your comment about Judge Craighead. It reminded me of what I actually intended to post after initially reading the article, before getting distracted by the negative comments.


    I appreciate Judge Craighead’s concern about erosion. With the La Nina weather system predicted for this winter, even if we don’t get a bunch of snow, we’re likely to get a good amount of rain. Hopefully the City will do the right thing, and make the owner(s) fill the thing.



  • Baba November 15, 2010 (9:21 pm)

    Are you taking…
    Why waste your time casting pearls among swine?

  • EyeLiveInWS November 15, 2010 (11:59 pm)

    You are right, Dave… we can’t find this so-called “news story” anywhere else.
    Do you know why? Because it isn’t “news.”
    This is a neighborhood blog. It’s a blog. It gets revenue from advertising… because it’s a blog. There is no subscription cost to read it, because it’s a blog.
    Try to keep some perspective. A blog is an open venue to post opinion as well as claim to share the “news.” Gosh, I sure hope I am not being rude or showing any disrespect.

    • WSB November 16, 2010 (1:10 am)

      EyeLive, yes, it’s news. The first trial in a tangle of lawsuits over a multimillion-dollar project that stalled and left Seattle’s biggest neighborhood with a huge hole in the ground is a huge story, and that’s why we have continued to, and will continue to, cover it – until the day the hole’s either built over or filled in – and probably beyond!
      Dill – Nobody said it’s Pulitzer fodder. It’s a story that matters, to the neighborhood we cover. I don’t delude myself into thinking everybody cares. No story covered by us or any other news organization is of interest to ALL readers/viewers/listeners/etc. But there are some stories that conscientious journalists choose to cover just because they matter, even if they’re not sexy, even if they won’t ever turn up on the cover of People magazine or the lead story of 60 Minutes or the subject of a TV docudrama. The beauty of our format is that if something’s not of interest, you can just scroll on by. And if the day comes when you and thousands of others do more scrolling than reading, because nothing we publish is of interest, then we’ll be out of business. For now, traffic keeps growing. So maybe we’re making more good coverage decisions than lousy ones, just maybe.
      (added) And that is all I will have to say about the subject, after subsequently deleting a taunting comment from someone who acknowledged breaking our rules by trolling. Further discussion of the story itself is of course welcome – TR

  • Dill November 16, 2010 (1:05 am)

    And the hornets swirl.

    Hook, line, and sinker.

    And, I’m by no means a “troll.” I actually read this blog quite often. I don’t respond much, fearing the vitriol and anger that is always vomited upon anyone who mentions anything remotely negative towards this blog.

    Sorry folks, but this isn’t Pulitzer-winning fodder… it’s a sad hole in the ground. Stop wetting yourselves…

  • Ron Swanson November 16, 2010 (8:12 am)

    So is the Parks dept going to fight the Library dept for the hole?

  • austin November 16, 2010 (9:11 am)

    Only if they can get past me first. Later this week in the afternoon sometime I’m going to go down in the hole, pitch a tent and declare myself king of the hole. Anyone who claims they have more of a right to the hole than me will have to come down and fight me for it. If they win the fight they can have the hole, and if they lose the fight they have to be my servant for one week.

  • RPH November 16, 2010 (4:56 pm)

    Hail King Austin! King of the Hole! Hilarious.

  • batgurrl November 16, 2010 (8:48 pm)

    Why don’t we ask Tent City to move into the hole?

    Come on folks get a grip!

    Thanx WSB for all you do, we have the best blog in the world.

  • Patty Chastain November 19, 2010 (4:18 pm)

    And I was soo looking forward to a Whole Foods Market! Do you if they’re looking anywhere else in WS?

Sorry, comment time is over.