WASILLA -- A new lawsuit has been filed over the real estate deals involving the property the city of Wasilla has planned for its $14.7 million sports arena project. The nonprofit The Nature Conservancy (TNC) -- the former owner of the property -- is now suing Gary Lundgren, the land investor who purchased the property while the city was attempting to purchase the property from TNC. Lundgren has filed counterclaims against TNC. Neither party has named Wasilla as a defendant. Mayor Sarah Palin said Wasilla's attorney Kenneth Jacobus anticipated this action.

"[Jacobus] knew their disputes were going to have to come to a head, and I guess for an attorney that always means in court," Palin said.

In court documents Lundgren's attorneys argue that the TNC lawsuit is premature because a lawsuit the city filed naming TNC and Lundgren as defendants remains to be resolved. "The outcome of the Wasilla case has to be decided before we can even know if there are any damages," Lundgren said. "If the Wasilla case fails we may have a case for specific damages against the Nature Conservancy."

The TNC deal with Lundgren was for three parcels that overlapped and included the land Wasilla wanted. Wasilla sued both TNC and Lundgren, asking the court to negate part of Lundgren's purchase and uphold TNC's alleged promise to sell that portion of the land to Wasilla.

In July 2000, Wasilla apparently won its case when U.S. District Judge John Sedwick in Anchorage ruled in the city's favor. Sedwick ordered Lundgren to return the property to TNC and ordered TNC to sell it to the city. Lundgren appealed. The case went to the Ninth Circuit Court of Appeals but has since been sent back to Sedwick's court because platting actions at the Mat-Su Borough didn't match the evidence presented to Sedwick.

Jacobus brought news of the TNC versus Lundgren lawsuit to the Wasilla city council meeting Sept. 9.

"[TNC and Lundgren] are not being very nice to each other," Jacobus said.

That might be an understatement. Each side claims damages in excess of $100,000 from the other. Each side also claims it was misled during the land negotiations and that the other side acted in bad faith. Lundgren filed a request to move the case into federal court, and the two sides are currently arguing over whether a state or federal court will hear TNC vs. Lundgren.

Jacobus also updated the city council on Wasilla's suit against TNC and Lundgren, but aside from a tentative schedule of meetings, his message was the same as before. Jacobus advised the city to stay on course and build the arena and associated road and utility improvements. Wasilla will have clear title to the land "fairly quickly" Jacobus said, and the city can use its legal power of eminent domain should the city lose in court.

"Wasilla is a developing area, and you've got to put up a fair but hard line with people that come here to develop property," Jacobus said.

One issue that Judge Sedwick will be asked to decide is whether Wasilla negotiated one deal with TNC for two parcels or made two separate deals for the parcels. Jacobus said he has been meeting with TNC Conservation Director Randy Hagenstein to establish for the court that Wasilla made two separate deals. Hagenstein confirmed that he had met with Jacobus, but could give only limited comments.

"He has depositioned me on the matter," Hagenstein said.

When asked if TNC would support Wasilla's version of the land deal, Hagenstein drew a line.

"First, it's no comment. But secondly, I can say that it has been a number of years, and I am in the process of reviewing documents," Hagenstein said.

As for the new lawsuit and counterclaims between his organization and Lundgren, Hagenstein said he couldn't comment at all.

According to court documents Lundgren agreed to pay $325,000 for the parcel known as D2, the parcel Wasilla is suing to purchase. Wasilla's offer to TNC was $146,500 and was set by an appraiser hired for the deal between TNC and the city.

Lundgren said TNC is suing him to make up the $179,000 difference between his offer and the city's offer should the city win its lawsuit.

"We say, 'We are standing ready to give you back the 325 if you give us the property,'" Lundgren said.