2020 fire complicates Kozy case as judge weighs next steps

More than a year after the Minnesota Court of Appeals saved downtown Duluth's Pastoret Terrace from the wrecking ball, there remains significant uncertainty over the future of the historic, but long-troubled building.

The case is essentially back where it began — with a judge needing to decide what evidence to consider in making a determination on whether the heavily fire-damaged building should be allowed to come down.

Judge Eric Hylden was expected to begin that process last fall, following the higher court's August 2020 ruling that an earlier demolition order was erroneously based on economic factors, rather than the feasibility of restoring the 1887 Oliver Traphagen building that originally featured luxury townhouses.

But a major fire in November 2020 proved to be a considerable setback in what has already been a nearly four-year legal battle, causing additional damage that now includes a largely nonexistent roof, a severely burnt interior and a crumbling brick facade at the structure most recently known for housing the Kozy Bar and Apartments.

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The Duluth Economic Development Authority, which acquired the tax-forfeited property and is seeking to have it torn down after a series of fires dating back to 2010, argues that latest blaze should be a key consideration for the court as it conducts a new analysis of the potential for historic preservation.

Assistant City Attorney Elizabeth Sellers Tabor this month filed a motion to reopen the record and, effectively, create a mini-trial process to supplement the three days of testimony heard in April 2019.

She asked the judge for permission to introduce expert opinions regarding the building's current historic significance, structural condition and the "consequences for and risks to health, safety and welfare presented by the property's challenged condition."

"This task for the district court on remand is to carry out the direction of the appellate court to further consider (the city's) affirmative defense," Sellers Tabor argued at a hearing Monday. "That affirmative defense involves questions of whether there is a feasible alternative to demolishing the property that's at the heart of this case. And the facts have changed significantly since the original trial back in the spring of 2019."

The city hired an engineering firm, LHB Inc., to assess the building's condition after the latest blaze. The report found that at least two of the six original townhouse units were heavily damaged, including the iconic rotunda at the corner of First Street and Second Avenue East — with officials noting that engineers were limited in their ability to gain access to compromised interior sections.

Hylden in January denied a bid to lift the injunction against demolition in wake of the fire, also ordering DEDA to undertake the first step in a proposed series of measures to shore up the building against further deterioration, as mandated by the Court of Appeals.

But that first step — erecting an exterior bracing system to prevent an outward collapse — still has not been completed 11 months later, as the lawsuit's plaintiffs, led by the building's former owner, Eric Ringsred, have been unable to come up with a $140,000 bond ordered by Hylden in October after a second appeal.

William Paul, the attorney of record for Ringsred, likened the $140,000 bond to an "end run" around the Court of Appeals mandate and said the city is attempting to do the same by reopening the record to include information that didn't exist at the time of the higher court's ruling.

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Paul contended Hylden must first decide the case based solely on noneconomic evidence introduced at the original trial, after which he said the city could bring a motion for relief on the basis of the subsequent fire.

Miles Ringsred, son of the plaintiff and an attorney representing the group of preservationists known as Respect Starts Here, also argued Monday that the city is looking for "a second bite out of their affirmative defense apple."

He acknowledged some facts have changed but said there was no basis for the court to conduct a new trial, even on a limited basis.

"(The city has) had over a year to try to get experts to either do an affidavit or at least bolster their arguments to the point that they're not just listing off a wish list of items that they hope to prove," Miles Ringsred told the court. "What they need to do, and what they have failed to do, is prove that this new evidence is likely to produce a different result."

But Sellers Tabor told the court it "doesn't make sense" for the city and DEDA to hire experts and prepare detailed reports at taxpayer cost without knowing whether they could be introduced in court.

"We're not proposing to open the floodgates," she added. "We're not proposing wholesale discovery. It's a very narrow issue. What are the facts that have changed since the first trial and why do they matter?"

Hylden did not give any indication of how he intends to proceed with the case, nor did he issue a timeline. The judge took the matter under advisement and will issue a written ruling.