Subway Project Leaves Trail of Anger, Lawsuits


Henry Lee survived the riots. He survived the earthquake. But he did not survive the MTA.

Lee, whose key shop has had a red “Unsafe to Enter” sign posted on its door since last summer--when tunneling caused parts of Hollywood Boulevard to sink--is among the merchants and residents who have tried to cope with life in the Subway Construction Zone.

The tunneling is about to end in Hollywood and move on to other Los Angeles neighborhoods, but the region’s biggest public works project is leaving behind bitter feelings and millions of dollars in claims and lawsuits.

“We never expected the construction to be more damaging than the earthquake,” lamented Tim Shumaker, the blind owner of a talent agency who says tunneling problems in August forced him from his apartment and office to live in a one-bedroom hotel room with his wife, their 5-month-old baby and his guide dog. “They’re tearing people’s lives apart.”


Lee and Shumaker account for but two of the 2,725 claims and lawsuits against the Metropolitan Transportation Authority brought by individuals and businesses along the subway route, ranging from big corporations to mom-and-pop stores. More than 100 property owners have filed for property tax relief, putting the subway project in the same category of “misfortune or calamity” as the earthquake and riots.

Since the project began, the transit agency and its insurance company have paid more than $15 million in settlements and judgments to businesses and residents, according to documents obtained through the California Public Records Act. The agency also has paid about $50 million for insurance to cover construction impacts.

Some have speculated that the claims and lawsuits will exceed $1 billion.

“This happens in the name of progress,” MTA spokeswoman Andrea Greene said.


Transit officials say they have spent millions of dollars to lessen the impact of the project, on everything from hiring carolers and trucking in four tons of snow to promote Christmas shopping in Hollywood to funding the planting of more than 3,500 trees in the Wilshire corridor.

“How can there be any doubt that Hollywood is going to be better when we are done?” MTA Chief Executive Officer Franklin E. White asked, noting that communities have fought hard to get rail lines. He said businesses Downtown and on Wilshire Boulevard should start seeing more of the economic benefits next year with the opening of a two-mile extension of the subway to Wilshire and Western Avenue.

Chris Martin, an architect who owns a Downtown office building, called subway construction a “rip in the fabric of the city that takes time to heal.”

He recalled a conversation he had with a tenant whose desk shook whenever beams were pounded into the ground during construction: “I said, ‘Do you want to be in the heart of the metropolis, where the world economy is right outside your door? Or do you want to be in Cucamonga listening to the birds chirp?”

Jack Kyser, chief economist of the Los Angeles County Economic Development Corp., cited the experience of the Bay Area Rapid Transit system as reason for optimism. “If you went to the Bay Area, you had a lot of very unhappy campers when they were doing construction,” he said. “But now, if you go to Market and Powell (in San Francisco), which used to be ground zero, it’s a happening place.”

“I think the neighborhood will be much better in the long run,” said Craig Klapman, a bookstore owner on Lankershim Boulevard in North Hollywood. “I’m not making much money, but I’m surviving.”

Don Clinton, whose Clifton’s cafeterias in the Downtown area endured 2 1/2 years of construction, was not so understanding. “I haven’t found another business person who feels it was worth all the inconvenience,” he said.

“We’re all willing to put up with some discomfort,” said Jerry Schneiderman, a developer who chairs Hollywood Damage Control & Recovery, a group of more than 500 property owners who have joined together to file claims against the MTA. “We’re all willing to be good citizens and give our best for the community.


“But the level to which the MTA and its contractors have gone with their carelessness and destructiveness is beyond what anybody should endure,” he said.

Property owners along Wilshire, Vermont Avenue, Hollywood Boulevard and now on Lankershim complain that blocked storefront views and traffic detours have driven customers away. One Wilshire merchant filed a claim alleging respiratory problems “and diminution of life expectancy” due to hydrogen sulfide gas leaks from the project.

The bulk of complaints have come from Hollywood, where tunneling was suspended for several months last year after the ground sank 10 inches. Businesses there complain about cracked walls, sunken floors, broken pipes and interrupted water service. In one case, transit workers had to carry buckets of water into a Hollywood business after the water was cut off.

Feelings are so bitter that one neighborhood group printed red condemnation signs reading, “This otherwise healthy business has been deemed expendable by MTA (the Metropolitan Terrorist Authority).”

The transit agency has a $100-million insurance policy to cover damage caused by construction, but the MTA is responsible for a $500,000 deductible per incident.

Settlements and judgments do not come before the MTA board for public discussion or approval. Instead, the agency’s insurance firm, Argonaut Insurance Co., has the right to “investigate, negotiate and settle any claims as it deems expedient,” said Abdoul Sesay, the MTA’s director of risk management-construction.

“The insurance company is on the hook for $99.5 million,” Sesay said. “They’re not going to allow a board to make a decision for them.”

If settlements required board review, the MTA’s governing body “would never be able to do anything else,” White said. Nonetheless, County Supervisor Mike Antonovich, the MTA board chairman, has requested a report of all claims and lawsuits in connection with the project.


Transit officials contend that any structural damage suffered by Hollywood businesses was due to the Jan. 17, 1994, Northridge earthquake. Nonetheless, they say, they have paid to repair “cosmetic damages” and cracked sidewalks. “We wanted to be a good neighbor,” MTA spokeswoman Greene said.

The agency also has provided money to compensate for “business interruption” caused by an extraordinary three-day closure of Hollywood Boulevard. But to the chagrin of other merchants, who have suffered from repeated disruptions, the MTA does not otherwise pay for economic losses unless a business suffers structural damage or is forced to move.

To better defend itself, the agency’s insurance company took thousands of photographs of buildings in the construction zone before work began and conducted surveys of structures before and after the earthquake, Greene said.

The $5.5-billion subway project, the most expensive per mile in U.S. history, has been part of the city landscape since 1986 and is expected to be around at least until 2000.

While tunneling will end soon in Hollywood, construction of stations will continue at least for another two years on Vermont and Hollywood Boulevard, and even longer on Lankershim.

Not all businesses are unhappy with the transit agency. Several merchants said claims have been processed promptly. “We’ve gotten a good response from the MTA when problems occur,” a Frederick’s of Hollywood spokesman said.

Among their efforts to lessen the impact, transit officials cite their funding a shuttle bus and providing security on Hollywood Boulevard, posting signs on buses encouraging shopping in Hollywood, and operating a 24-hour complaint hot line.

Transit officials also offered low-interest loans to businesses, but only five have taken advantage of the program because they must waive their right to sue the agency over subway-related damages.

Property owners such as Robert Rozdial have taken little solace in the MTA’s efforts.

“For the last three years, it’s been hell,” said Rozdial, who owns a shoe store on Wilshire. “When you are hit by the economy and the MTA, it’s a double whammy.”

A trip through the construction zone finds dozens of boarded-up storefronts displaying “For Lease” signs. Subway construction alone cannot be blamed, business owners say. But combined with the recession, the subway has been enough to push many shopkeepers over the edge, they say.

Clinton, co-owner of Clifton’s cafeterias, said that the MTA paid him an undisclosed sum for lost business but that his operations have never recovered.

Adding insult to injury, he said, property owners close to subway stations must pay a “benefit assessment” to help fund the project.

Even MTA board members have experienced the downside of the construction.

County Supervisor Zev Yaroslavsky recalled a meal last year at Musso & Frank Grill, when there was a “constant vibration that was so disruptive it made the dinner very uncomfortable. It made us want to hurry up and get out.”

Critics say the sole interest of the MTA and its contractors has been to complete the project as fast as possible with little regard for the neighboring communities.

Transit officials didn’t realize, until Los Angeles City Councilwoman Jackie Goldberg raised the issue, that their approval of a subway station contract for Hollywood would take construction into the height of the tourist season.

“This may not seem like much to you,” Goldberg chided board members. "(But) if we want to put people out of business, this is probably a good way to do it.”

Transit officials are now studying ways to deal with her concerns.

Among those suing have been the owners of the Radisson hotel on Wilshire, who contend that construction noise scared away hotel guests, and the owners of a historic Hollywood apartment house, who say their building is a total loss because of tunneling.

Transit officials contend that the building was seriously damaged in the earthquake.

Shumaker, the talent agency operator, ran his business out of the Hillview apartment building, where he also lived. He contends that the tunneling caused the ground beneath the structure to sink nine inches, floors and walls to crack, water pipes to burst and sewage to seep up from the ground.

An attorney for his landlord said that while the building sustained earthquake damage, many of the residences and stores were still in use until parts of Hollywood Boulevard began to sink.

Lee, a Chinese immigrant turned U.S. citizen, said he operated his key shop for nearly 25 years but now lives at a hotel with little to do but watch the O.J. Simpson trial. He opens the shop for a few hours each day, but says it is hard to attract customers past an “Unsafe to Enter” sign.

Lester Higgins Jr., who also filed a claim, complained that the pounding at night keeps him awake in his third-floor apartment near Hollywood Boulevard and Vine Street.

“My dreams used to be of becoming a star,” Higgins said. “But now, it’s just getting out of here. . . . Hey, I guess it’s progress. But the progress is certainly sinking me.”