Traverse City commissioners voted 5-2 Monday to go into closed session to discuss a confidential memo from City Attorney Lauren Trible-Laucht about a federal lawsuit filed by 326 Land Company.  That company, which is in active construction on the Peninsula Place project on State Street next to the Park Place Hotel, is challenging the city requirement that any new building over 60 feet tall must go to voters for approval. After the closed session discussion Monday, commissioners came back into open session for public action, which consisted of Mayor Amy Shamroe directing city legal counsel on behalf of commissioners not to enter into any settlement discussion or mediation in the case.

Commissioners previously failed to obtain the five votes needed to go into closed session at their October 21 meeting to discuss the 326 Land Company lawsuit after extensively debating whether to review the case privately or publicly. The two commissioners who opposed going into closed session at the October meeting - Commissioners Heather Shaw and Jackie Anderson - again opposed the motion Monday. However, they first attempted to amend the motion to add a requirement that if commissioners did go into closed session, they would come out afterward and deliberate waiving their privilege and publicly releasing the attorney-client memo. That motion amendment was rejected by the larger commission along 4-3 lines (with Anderson, Shaw, and Commissioner Tim Werner in support). 

With enough commissioners supporting the motion to go into closed session Monday, the board then had a private discussion about the case. Afterward, commissioners came back into public session. Mayor Amy Shamroe read the following statement: "The city received a settlement demand (from 326 Land Company), and the city commission at this time is asking its attorneys to not enter into settlement discussion or mediation. We direct our attorneys to critically evaluate all of the plaintiff's claims, including the damage claims, and continue to defend the legality of Proposition 3, which is the charter provison that requires an affirmative vote of the city's electorate for all building heights over 60 feet in height."

The city reached a settlement agreement with 326 Land Company in 2022 that would’ve allowed the Peninsula Place project to move forward as originally proposed, but U.S. District Judge Paul Maloney rejected that agreement, saying he was concerned about possible “collusion” between the city and developer and was not persuaded the settlement was “fair, reasonable, adequate, and in the best interest of the public.” The case has remained in litigation since then. A stop-work order was issued against the project and also legally challenged, but 326 Land Company later submitted revised plans to the city and received a new permit. The company is now in active construction on Peninsula Place and selling units with a targeted 2026 completion date.