The City of Windsor expropriated the site of the “Cheetahs” adult entertainment club in order to facilitate redevelopment in downtown Windsor. The City paid the owners more than $1 million to cover the costs of relocation and renovations at the owners’ new facility, but the City denied the owners’ claim for $4 million in business losses.
The owners’ revenues at the new location were steady at first, but then fell off sharply and remained weak in the years following the expropriation. The owners argued that the losses were caused by the expropriation, and that the new site was inferior to the original site in numerous ways, including that it attracted a younger and less affluent crowd.
BLG represented the City and argued that the losses could be explained by a variety of factors other than the expropriation. Most importantly, BLG demonstrated that patrons from Detroit were a major source of the club’s revenues and that the terrorist attacks of September 11, 2001 had resulted in a significant decline in cross-border business. BLG also pointed to the effects of increased competition from a new adult club in Windsor, and new casinos in Detroit. BLG called the owners of nearby adult entertainment businesses to testify that revenues at their establishments were also down, and BLG answered every one of the owners’ arguments that the new Cheetahs site was inferior to the original site.
The Board concluded that the expropriation was not the major cause of the owners’ business losses. The Board instead agreed with BLG that the owners’ accountants had ignored other potential causes of those losses, and also concluded that the new Cheetahs site was “largely equivalent” to the original site. The Board thus awarded no business losses to the claimants. The owners appealed, but the Divisional Court affirmed the Board’s decision.
Stephen Waqué, Frank Sperduti and Sean Gosnell are partners at Borden Ladner Gervais LLP and members of BLG’s EMER Group (Environmental, Municipal, Expropriation, and Regulatory Law). For more information on any of these professionals, please visit: www.blg.com.