Against the wishes of the theater operator, the city of South Lake Tahoe changed the locks and boarded up windows last week on Wallace Theaters' Stateline Cinema.
The city's action came as the order for possession on the property became effective as part of an eminent domain procedure that was necessary for the city to carry out its $350 million Park Avenue Redevelopment Project.
"I am astounded, " said Wallace Theaters' attorney, C. Nicole Murphy. "The agency went onto the Wallace property, they boarded up the windows and changed the door locks and replaced the letters on the marquee with a closed sign. All of this is illegal."
Wallace Theaters, which does not own the land under the theater, filed a motion to stay in the project area in March after the South Tahoe Redevelopment Agency denied the company's request to allow them to operate the six-screen theater in a new development. The theater company is also contesting the agency's decision to allow the developer of the cinema complex the right to award the theater operation to a company that hasn't been displaced by the project.
California redevelopment law mandates that reasonable preference be given to displaced tenants of the project when selecting businesses for the new development, Murphy said.
Wallace Theaters is considered a displaced tenant because it operated and had to close one screen within the project's boundary - a 34-acre block at the corner of U.S. Highway 50 and Park Avenue, near the state line. It also operates an eight-screen complex across the state line in the Horizon Casino Resort.
Demolition of the redevelopment block's 1960s development is nearly complete. The only structure left standing is the green building that housed Wallace's Stateline Cinema. The land under the theater is owned by the Van Sickle Trust, which has not objected to the city's taking of the property.
The building may not be standing much longer.
Judith Von Klug, South Lake Tahoe's redevelopment manager, said the city's order for possession on the property is valid. And the city will move ahead with its plans to clear the redevelopment parcel in order to transfer title to American Skiing Co., the main developer of the project, by July 1.
"We have a court order telling us we get possession. No court has agreed to put a stay on that possession," Von Klug said. "At any time we get a court order telling us to stop, we'll stop."
Von Klug said the Agency is planning to tear down the building as early as next week after asbestos removal is complete.
Murphy said the theater company is now pursuing a restraining order to stop the South Tahoe Redevelopment Agency from moving forward until a decision is made on the motion to stay.
Judge Suzanne Kingsbury heard the case last week in El Dorado Superior Court, despite three attempts by Wallace Theaters to disqualify her from the case for a personal friendship with South Lake Tahoe's City Attorney Catherine DiCamillo, who served on the judge's election campaign in 1996.
Judge Joseph Harvey ruled that Kingsbury could hear the case, and a court of appeals panel backed his decision.
"They have done everything they can to try to stop us from getting the order of possession," said Lee Rosenthal, an attorney hired by the city to take on its redevelopment cases. "They've tried putting this off and have been unsuccessful in every case."
Kingsbury hasn't released her decision on the matter.
The hearing for theater company's restraining order to stop activity on the Park Avenue Project is scheduled to go before Kingsbury on Tuesday, Murphy said.
"Now I am hoping that they have not already demolished our building," Murphy said. "I hope they would not risk that type of liability, but they continue to just bulldoze ahead."
Murphy contends that Redevelopment Agency needed to give notice before acting on the order of possession. Von Klug said the Agency did that in three separate letters before it went into the building. The order of possession was also filed in court records.
Wallace Theaters has also requested a change of venue, to a court outside of Kingsbury's jurisdiction. That motion is scheduled for decision on June 9.
The Park Avenue Redevelopment Project has been in the planning stages for more than eight years. It calls for a posh quarter-share hotel and a gondola to be built by American Skiing Co., parent company of Heavenly Ski Resort.
A commercial retail complex with shops, restaurants and a six-screen movie theater is scheduled to be built by Trans-Sierra Investments, a Nevada company. The new development will be built on the 13 parcels that the city has acquired and demolished this year through the power of eminent domain.