LOUISVILLE, Ky. (WDRB) – Property owners in a Charlestown, Ind., neighborhood filed a federal lawsuit against city officials and developers on Friday, alleging they were pressured to sell their land under threats of millions of dollars of fines.

Nine property management companies and landlords claim the public officials and private interests launched a “scheme of extortion” to coerce them to sell homes in a low-income area that Charlestown long has sought to raze and redevelop.

The plan allegedly involved city representatives applying increasing fines in an effort to force the property owners to sell; developers then would buy the homes at a “steeply discounted price of $10,000” and have the fines waived, according to the lawsuit filed in U.S. District Court in New Albany.

Among other things, the property owners allege the city violated their equal protection rights under the Constitution’s fourteenth amendment “by discriminating against them in favor of a private developer.” They claim they were threatened with fines while the developers weren’t – even both owned houses subject to inspections.

And they accuse the city of using penalties to coerce Pleasant Ridge property owners to sell to a private entity – a violation of federal anti-corruption laws, according to the lawsuit.

Charlestown Mayor Bob Hall’s office referred questions to city attorney Michael Gillenwater, who said in an email that the owners are not residents of Charlestown and "did not live in the substandard housing they owned and rented to others in Pleasant Ridge." 

Gillenwater said the property owners did nothing to bring the homes up to minimum levels required by an industry-standard maintenance code during a grace period for inspections in 2016, when the city council approved an ordinance calling for inspections of at-risk properties.

"By all objective standards the Plaintiffs are simply slum lords," Gillenwater wrote. "They have taken advantage of the poorest and least sophisticated in our community by renting them unsafe, unhealthy, substandard housing. They also bear much responsibility for the fact that the Pleasant Ridge neighborhood has devolved into a drug and crime hostpot, largely because of the Plaintiffs' indiscriminate leasing practices and refusal to properly maintain their rental housing in a safe, healthy, condition."

Court documents describe how the some of the property owners apparently ended up selling their land after racking up daily fines.

In one example, an owner of 20 properties in Pleasant Ridge was being fined $6,350 per day, but was told the penalties would be waived if he sold to John Neace, owner of Pleasant Ridge Redevelopment LLC, court documents claim.

Brown Rental Properties eventually sold the properties to Neace for $220,000 – although their assessed value was $591,600 as of 2015, the lawsuit says.

Named as defendants are Hall and other public officials, including city council members, the Charlestown Redevelopment Commission and the city’s public works board; and developers Pleasant Ridge Development; Neace Ventures LLC; Neace; and John Hampton.

Neace is chairman and president of the Louisville City FC professional soccer club. The team's owners are preparing to build a soccer stadium and mixed-use development in Louisville's Butchertown neighborhood with a mix of public and private funds, including $30 million in city bonds.

The lawsuit filed Friday comes one month after a judge granted a partial victory to Pleasant Ridge residents in a separate case in Clark Circuit Court, ruling that Charlestown unevenly enforced a property maintenance code against homeowners.

In using an injunction in that case, Special Judge Jason M. Mount of Scott Circuit Court ordered Charlestown to treat developers and current homeowners the same when issuing or waiving fines for code violations.

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