Legal Struggle Over; Kootenai Estates for Sale

By Beacon Staff

After three years of legal wrangling, the lawsuit over the Kootenai Lodge Estates, a development at the northern tip of Swan Lake, appears to have been settled.

The Swan Lakers, a community group opposing the 42-acre subdivision, and the defendants, Florida-based developer, the Milhous Group and Lake County, confirmed last week that a general settlement had been reached. The three parties declined to give specifics until the agreement is finalized, likely sometime in the next week.

“In terms of substance and principal, we’ve reached an amicable resolution of all issues between the parties and we are looking forward to, quite frankly, the time when the Kootenai project will literally be one of the jewels of the Swan Valley and be perceived that way by all of the area’s residents,” Jerry Peisach, one of the development’s three principals, said.

It’s the latest twist in the back-and-forth over the subdivision, which has included conflicting rulings and, most recently, was tied up in the Montana Supreme Court.

In mid-December, the state’s highest court prevented the Lake County Commissioners from granting final approval to the Kootenai Lodge Estates subdivision and revoked previous approval, granted by the county in October. The order prohibited the Milhous Group from selling any property in the subdivision, which is located about eight miles from Bigfork at the mouth of Swan Lake.

The decision essentially refuted an August Missoula District Court ruling that the Swan Lakers didn’t have standing to take legal action against Lake County and allowed the community group to proceed with their lawsuit.

At the time of the Supreme Court ruling, the Milhous Group argued that because of the injunction, a bond should be filed on its behalf to compensate for the money lost while the property cannot be sold. Milhous said it had invested more than $44 million on restoration and development of the project, and would incur damages of $20,000 a day under the injunction.

The Supreme Court denied the bond request and instead said it would expedite subsequent rulings to lessen costs to the development. But in June the court still hadn’t issued a ruling, so Milhous again requested a bond. This time the Supreme Court agreed, saying the case was taking longer than expected and sent the parties back to Missoula District Court in early July to decide the amount.

“The Missoula judge did something interesting: He scheduled the bond hearing in the afternoon, but also said he wanted all three parties to meet in the morning to see if we couldn’t work things out,” Alan McCormick, an attorney for Lake County said. “No one was quite sure even what he wanted us to talk about – the amount of the bond or the entire dispute. But as we sat and talked back and forth it did seem there was some interest by all three parties to see if we couldn’t resolve the entire lawsuit.”

The groups agreed to postpone the bond hearing until July 18 in hopes of finalizing negotiations. If a settlement wasn’t reached by that date, then the bond decision and overall case would continue. Also, as part of the postponement, the Swan Lakers agreed to allow five of the subdivision’s homes to be sold – a compromise the Supreme Court approved last week, but now appears a moot point.

“Subject to the final documentation and the formal stuff that gets done, what we anticipate when the I’s are dotted and T’s crossed is that the entire project is free and clear and unencumbered by anything – not just those five homes,” Peisach said.

Five homes are already completed, Peisach said, along with infrastructure like roads, curbs and landscaping. At build-out, the development will include 42 homes, the historic Kootenai Lodge, a pool and pool house, beach area, a nature center with an on-staff naturalist and a barn that, pending approval, will be renovated to house a fitness center.

The homes cost between $3 and $7 million, depending on location and style. Peisach said one home was sold before the injunction, and that the group is hoping to close with that buyer and possibly some other interested parties following the settlement.

The lawsuit dates back to June 2005, when the Swan Lakers, a group consisting of about 250 people living in the community surrounding the development, objected to numerous aspects of it, including the historic significance of Kootenai Lodge itself. The lodge was built by copper barons in the early 19th century and numerous nearby outbuildings are part of a National Historic District.

The Swan Lakers’ Supreme Court appeal argued that the group, as well as individual member Bradley Wirth, are directly harmed by the Kootenai Lodge development. It also questioned whether Montana’s subdivision regulations are unconstitutional and prevent citizens from protesting the approval of developments by county commissioners.

After last week’s settlement talks, though, it appeared the group was ready to put aside the fight.

“We believe the settlement is in the best interest of all the parties and serves the interest of all the parties,” said Peter Leander, Bigfork attorney and president of the Swan Lakers.