Skip to comments.Duck Tours case begins ~ Key West Monopoly Trial
Posted on 05/06/2005 5:23:44 AM PDT by Elle Bee
BY TIMOTHY O'HARA
KEY WEST A jury is being asked whether the city of Key West ran Duck Tours Seafari out of business in 1995 or the business ran out of money and failed.
Opening arguments started Thursday in the case Duck Tours v. the City of Key West and the city's largest lease holder, Historic Tours of America, operators of the Old Town Trolleys and Conch Tour Trains. Duck Tours attorneys claim the company's owner, John Murphy, was an entrepreneur who received the proper business licenses, but was run out of business because he competed with the city's most profitable leaseholder. Legal battles about Duck Tours have been ongoing for more than 10 years.
The franchise agreement between the city and HTA violates the Commerce Clause of the U.S Constitution, Duck Tours attorney Scott Perwin said. Judge Howard Harrison would not allow Perwin to use the term monopoly in front of the jury. A state appeals court also referenced the word monopoly in its opinion last year, which sent the case back to court.
"They singled out one favorite local company [Historic Tours of America] and excluded everyone else," Perwin said. "They [Duck Tours] were run out of business by the city protecting that one local company."
Attorneys for Historic Tours of America and the city contend that Duck Tours did not follow the proper steps to become licensed or franchised by the city and city officials only enforced its laws about regulating traffic. Murphy knowingly spent $700,000 of his own money and put the vehicles out on the streets without proper licenses, the attorneys argued. Duck Tours captains conducted tours on land until they were caught and told not to, HTA attorney Hugh Morgan said.
"They never properly or in a timely matter applied for a sight-seeing tour franchise," Morgan said. "They decided to challenge the situation and put vehicles out on the streets without licenses.
"The business ran out of money and the business failed."
Where and how Duck Tours operated the tours is one of the main arguments in the case. Duck Tours ran a tour of the Key West harbor using about a half-dozen vintage World War II amphibious vehicles. Duck Tours obtained an occupational license to run a sea tour, but did not have a license or franchise agreement to run a vehicle tour on land.
The two sides referenced a potential settlement offer during Wednesday's proceedings, but neither camp divulged any details about it. The judge has placed a gag order during the trial and ordered attorneys and witnesses not to talk to the media about the case.
Lawyers constantly interrupted each other Wednesday, objecting to each other's lines of questioning. Perwin asked that Morgan be removed as lead counsel, alleging Morgan was simultaneously using himself as a witness and acting as an attorney.
Morgan was seen on videotape lobbying the City Commission for a franchise agreement for Historic Tours of America and threatened not to pay the city its franchise fees if it allowed Duck Tours to operate its business within 1000 feet of Conch Train or Trolley stop. The city receives 5 percent of both Conch Train and Trolley ticket sales. Harrison denied Perwin's request.
The city has long backed its agreement with Historic Tours of America.
"[The city] is ready to charge ahead and grind [Duck Tours] into the dirt," former City Attorney Diane Covan said in a private session with city commissioners in 1995, according to city records introduced into evidence Thursday. According to the document, the mayor at the time, Dennis Wardlow, replied "grind on."
" The judge has placed a gag order during the trial and ordered attorneys and witnesses not to talk to the media about the case."
That seems like and extreme measure over a simple litigation. Perhaps the Judge is trying to spare the city the embarrasment of being found at fault?
A gag order on a government corruption trial. Does the judge think this is Canada?
BY TIMOTHY O'HARA
KEY WEST Two former Key West police officers said Friday they investigated Duck Tours amphibious tour operators and found that they did not violate any city sight seeing laws, in testimony that wrapped up the first week of a civil suit against the city and Historic Tours of America.
The owner of Duck Tours Seafari Inc., which ran amphibious harbor tours in the mid-1990s, is suing the city and Historic Tours of America (HTA), alleging they ran his company out of business and harassed him in order to protect the Conch Tour Train and the Old Town Trolley, run by HTA. HTA has a a long-term franchise with the city, in which the city receives 5 percent of the profits from the company's tours.
Former Key West police officers Steve Yakel and Emilio Yannacone testified that they investigated Duck Tours Seafari after city officials claimed the company was running its tours on land. The former officers told jurors that they could not come up with any violations.
The city received pressure from Historic Tours of America to remove the Ducks, vintage World War II landing craft, from the streets and competing with the Conch Tour Trains and Old Town Trolleys, records show. HTA attorney Hugh Morgan sent the city a letter saying if Duck Tours were allowed on the streets, HTA would consider not paying its franchise fees. Permitting them on the streets would violate the non-compete clause in HTA's lease with the city, Morgan asserted.
Where and when the Duck Tours started giving a sight-seeing tour is the heart of the case. The group could drive on the streets, but could not give an actual tour until the vehicles hit the water. Duck Tours' owner, John Murphy, claims the tour operators did not give tours until the vehicles were in the harbor. After the letter from Morgan, the city began investigating Duck Tours to see if the operators were giving tours on the streets.
The trial will resume at 9 a.m. Monday and is slated to last nearly three weeks. Duck Tours is requesting $14 million from the city and HTA in damages.
BY TIMOTHY O'HARA
KEY WEST A long forgotten political scandal reared its head in court Thursday, as the man who bribed a city commissioner while cooperating with authorities in the mid-1990s testified in an anti-trust case involving the city, Historic Tours of America and Duck Tours Seafari Inc.
Attorneys for Duck Tours sought to tie the bribery and federal plea deal of the late city Commissioner Emory Major to an organized attempt by the city to keep certain businesses from conducting sightseeing tours or limiting the ability of some companies to do tours.
An attorney for the city tried to exclude the testimony, calling it "highly explosive" and "highly inflammatory." When that move failed, attorney David Audlin moved for a mistrial. Visiting Circuit Judge Howard Harrison denied the request.
Attorneys for Duck Tours used the testimony to lay out a case that showed there was corruption on the Key West City Commission when Duck Tours was trying to obtain the proper licenses to conduct tours of Key West Harbor using amphibious military vehicles. Duck Tours is suing the city and HTA, its largest lease holder and operators of the Old Town Trolley and Conch Tour Train. Duck Tours owner John Murphy claims he was unjustly run out of business and is asking for $14 million.
Jim Beaver, who attempted to start a company offering tours of Old Town in two pink Cadillacs, testified that he was solicited for a bribe in order to gain a franchise license for a sightseeing tour. Beaver was attempting to obtain an occupational license about the same time Duck Tours was trying to get a license.
In 1994, Beaver went to the city to request a franchise license to run a business that would charge between $200 and $300 for a convertible pink Cadillac tour of Old Town. Beaver testified that city officials told him that "HTA had all the licenses" and that the city was "not interested in issuing any new licenses."
Following the meeting, Beaver said, Major had a friend approach Beaver to talk to him abut working out an arrangement. Major met with Beaver at a local funeral home and told him if he paid Major, the commissioner would arrange for Beaver to obtain a license. Major told Beaver that he had to "learn how to dance," a slang term for bribery, Beaver said. Beaver immediately went to state and federal authorities with the information.
Beaver wore a wire for investigators and paid Major "thousands of dollars" in bribes, he said. Beaver told jurors that he was in the room when Major talked on the telephone with other city commissioners about pay-offs. Major told Beaver that he would have to have a "partner," Beaver said.
FDLE agents recorded discussions between Beaver and Major, tapes that eventually led to Major's indictment on federal bribery charges and removal from the City Commission. Major pleaded guilty to a charge of conspiracy to commit bribery.
Before the scandal broke, Major sponsored an ordinance that would set up a franchise agreement with Beaver's company and the city, similar to the agreement the city has with the Conch Tour Train and Old Town Trolley. The city receives 5 percent of ticket sales from the two businesses.
According to his testimony Thursday, Beaver made a presentation and the City Commission took public comment during the 1995 meeting. The commission then took a break at the meeting and then-Commissioner Joe Pais took Beaver to the back of the commission chamber and introduced him to HTA owner Ed Swift and HTA attorney Hugh Morgan, who is currently litigating the case on behalf of HTA.
The two men offered to allow Beaver to "partner" with HTA and run the Cadillac tours under HTA's franchise agreement with the city, Beaver said. Beaver declined, he said. The commission reconvened and Major called for a vote. He did not receive a second on his motion and the ordinance failed.
Pais said Thursday that he could not recall the conversation.
"I don't remember Mr. Beaver. I might have spoken to him. I may have introduced them, but I don't remember working out a deal," Pais said.
Beaver left town for several months and never again attempted to start the business. Major died in 2002.
The Duck Tours trial continues today at the federal courthouse on Simonton Street. Duck Tours is accusing the city of creating a monopoly for HTA and running the rival tour company out of business. City officials claimed the company was running its tours on land, which was not allowed under the company's license. The city received added pressure from HTA to remove the Ducks from the streets, records show.
BY TIMOTHY O'HARA
KEY WEST Duck Tours attorneys presented testimony Friday intending to show that the company lost hundreds of thousands in revenues in the mid-1990s because the city and a competing tour company made it impossible for the rival tour company to survive.
Friday was the seventh day of testimony in the civil suit brought by Duck Tours Seafari against the city of Key West and its largest leaseholder, Historic Tours of America, owner and operator of the Conch Train and Old Town Trolley.
Economist Thor Bruce testified in court Friday that the owner of the Duck Tours, which went out of business in 1996, could have seen his profits grow by 30 percent a year. The company is asking for $14 million in lost revenues and attorneys fees, dating back to 1996. Company tax returns showed a $185,000 loss in 1995 and $10,300 loss in 1996. Bruce forecasted that the tour company could have started to show profits by 1997 and could have earned close to $180,000 in gross revenues that year.
Bruce called his profit estimates "conservative." He said that a similar tour in Boston has had substantial growth and now has 544,000 riders a year.
The company had $700,00 in capital and assets and less than $15,000 in the bank in September 1996, records presented in court showed. The company was still paying down $161,000 in loans, city trial attorney David Audlin said. Audlin has argued that the business was not run out of business by the city, but couldn't make it. The company also did not have the proper licenses, Audlin said.
A jury will eventually decide whether the city unjustly ran Duck Tours out of business or the business just failed and its owners violated city laws.
Audlin played up the company's lack of cash in the bank and outstanding debt. Bruce contended that many large companies don't have a lot of cash in the bank. Most of the funds are either tied up in capital or used to pay off debts, Bruce said.
"It's not uncommon to keep little cash in the bank, and instead, pay off creditors," Bruce said.
In his cross-examination, Audlin crafted a case showing that Duck Tours owner John Murphy had a lack of business smarts. Audlin asked Bruce if it was smart to start a company and put vehicles on the streets when an operator does not have the proper licenses. Murphy's attorney Scott Perwin countered with objections and said the company was issued the proper occupational license.
Bruce called Murphy a "pretty sharp" business man who researched other amphibious tour companies before starting his business. Bruce said he doubted that Murphy would put vehicles on the street without the proper licenses.
Bruce also compared the salaries and business expenses of Duck Tours to an amphibious tour company in Boston and to the Conch Tour Train, which is owned by the city's biggest lease holder, Historic Tours of America, also a defendant in the case. Boston Ducks paid higher taxes and similar salaries to Duck Tours' captains. Records presented in court showed that Duck Tours captains were paid $1,000 every two weeks, but also made tips.
Bruce did add some depreciation because the vintage World War II vehicles were used in saltwater and they were made to mostly be used in freshwater. The vehicles may have had to be replaced or repaired. The vehicles in Boston are used in freshwater.
BY TIMOTHY O'HARA
KEY WEST Mayor Jimmy Weekley testified in court Monday that the city did have the right to deny Duck Tours Seafari Inc. a license to conduct tours, because the city has the right to regulate the amount of traffic on its streets.
"If we couldn't regulate traffic on our streets, there would be even more congestion than there already is," Weekley said, adding that he receives a lot of complaints about vehicle traffic and congestion in Old Town.
Duck Tours owner John Murphy is suing the city and Historic Tours of America, operators of the Old Town Trolleys and Conch Tour Trains, for forcing Duck Tours out of business.
Weekley admitted that Conch trains and trolleys do add to downtown congestion, and there are more electric cars, buses, Bone Island Shuttles and other vehicles on the streets now than when the Ducks were in business in 1995.
HTA has an exclusive contract under which the city receives 5 percent of ticket sales in exchange for not allowing any other motorized tour operator within 1,000 feet of HTA depots and stops. The city contends the 1,000 feet only applies to city property. However, the Duck Tours were cited by code enforcement for operating a Duck Tour depot on private property within 1,000 feet of a train and trolley depot. Murphy's attorneys, Michael Barnes and Scott Perwin, say the agreement violates the interstate commerce clause of the U.S. Constitution and federal antitrust laws.
Weekley admitted that the city's agreement with HTA "does not support" competition. HTA has the only seven motorized sightseeing tour licenses in the city and an exclusive franchise agreement with the city to run the Conch Tour Trains and Old Town Trolleys.
City attorney David Audlin argues that Murphy started his business without obtaining the proper licenses. Murphy had a license to run a harbor tour, but nothing on land. He says he obtained the proper occupational license and the Ducks could drive on the roads and give a narrative, but not a sightseeing tour.
City licensing director Carolyn Walker testified about the licensing process and her dealings with Murphy. She said she had no idea the vehicles were amphibious when she issued them an occupational license to do harbor tours.
Also on Monday, Judge Howard Harrison denied the city's and HTA's request to limit the amount of monetary damages, because the Ducks had not been in business since early 1997. He also denied a motion that would have limited some of the evidence regarding the disruption of interstate commerce.
The trial will continue today with City Planner Ty Symroski testifying. The trial is slated to wrap up by Friday, the judge said. Duck Tours is asking for $14 million.
"HTA has an exclusive contract under which the city receives 5 percent of ticket sales in exchange for not allowing any other motorized tour operator within 1,000 feet of HTA depots and stops"
Leaglized "protection", aka mafia tactics.
"We live in America. The city lives in the Conch Republic." Duck Tours attorney Mick Barnes
"I don't know what to say. I just don't know where the hell we get the money." City Commissioner Harry Bethel
BY SCOTT FUSARO
KEY WEST The city of Key West should pay Duck Tours Seafari $13.5 million because it drove the company out of business nine years ago, a jury found Monday.
"I think the jury sent a very clear message. They gave us every penny that we justified and every penny that we asked for," Mick Barnes, the attorney for Duck Tours, said after the jury had returned the verdict.
A city spokesman said Monday evening the city has not yet determined whether it will appeal the ruling or revisit its agreement with Historic Tours of America, which has the only franchise to provide sightseeing tours in the city.
"The city's waiting to talk to its attorneys [today] to see what options are available to us," said spokesman Michael Haskins.
However, Mayor Jimmy Weekley and Commissioner Harry Bethel both said Monday that an appeal will be forthcoming.
"Anything of this magnitude, you're going to appeal," Weekley said.
While the jury deliberated Monday, attorneys for both sides argued before Judge Howard Harrison a second phase of the case in which Duck Tours seeks to invalidate the city's franchise agreement with HTA, which operates the Conch Tour Train and Old Town Trolleys.
Even without a ruling from Harrison on the franchise agreement, Duck Tours founder and principal owner John Murphy said he plans on resuming tours.
"If the city believes after this ruling they can still enforce the franchise as they have, we'll deal with that when it comes up," Barnes said.
Larry Silverman, an attorney for HTA, said he believes the company's agreement with the city will remain intact.
"Our perspective is that any judgment against a municipality is automatically stayed on appeal. Nothing's going to happen for a good period of time, and we believe the city's going to prevail upon appeal," he said.
However, Mark Bauer, a professor of antitrust law at Stetson University law school in Gulfport, said it is hard to imagine a scenario in which the city's exclusive franchise agreement with Historic Tours would be valid.
Under the state action immunity doctrine, states may pass laws granting monopolies to companies due to matters of urgent public health. However, he said of Historic Tours' agreement with the city, "Unless the state of Florida were to pass special legislation allowing Key West to act, I can't see any way the franchise agreement can be validated."
Murphy said the verdict was a victory for businesses, sending the message that they must be able to operate unfettered by Key West politics.
"You can't get away with breaking the law, being so arrogant and thinking it doesn't make a difference, and expect to skate," he said.
David Audlin, who represented the city in the case, attempted to persuade the jury in closing arguments that city action against Duck Tours came only because the company never obtained the proper permits. The company's business plan was to operate without the required permits, pick a fight with the city, watch the business fail and file a lawsuit, he argued.
"If he collects his evidence and bides his time, he gets a great lawsuit, a really, really great lawsuit. This business was never intended to succeed," Audlin told the jury.
Moments later, Barnes rebutted the argument, asking, "How convoluted an argument can you make?" and questioning how Murphy could have attracted investors to a business that might well have been called "Going into Lawsuits."
"We live in America. The city lives in the Conch Republic," Barnes said.
The jury verdict came after only four hours of deliberation following nearly three weeks of trial testimony that included the recounting of a city commissioner shaking down another man who wanted to start a tour company in the 1990s. The mayor, assistant city manager and city planner all testified in the case. The city argued that the franchise agreement was intended to help regulate traffic.
The trial came a decade after Duck Tours filed its lawsuit against the city after going out of business. A summary judgment in the city's favor was overturned last year by the Third District Court of Appeal.
In its ruling, the appeals court found that the city's ordinances "grant monopoly rights to the Train and Trolley."
City Commissioner Carmen Turner said Monday evening she was "very, very disappointed" to learn of the award.
"I wonder how much of that Historic Tours of America is planning on kicking in," she said.
When informed of the verdict, Bethel pondered whether the city's choice to defend against the lawsuit was the proper decision.
"We should have maybe talked about some kind of settlement up front, at the onset of this thing," Bethel said. "I don't know what to say. I just don't know where the hell we get the money."
Nice! Lets hope Ducks gets to collect the money. Sorry, Elle Bee, you are going to be paying for a part of it though.
They'll just appeal and lose and continue to run this monopoly
Where are the feds now with their RICO laws?
this is a transportation issue and someone should take down the bubbas who perpetuate this abuse
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