Suburb in contempt after Nike annexation battle

~ The town's alleged plan to annex the Nike headquarter campus sparked a feud.

BEAVERTON, Ore. -- Can Nike Inc. and this growing suburb ever be good neighbors again? After the "smoking gun?" After running up a legal bill of about $1.1 million over a file less than a couple dozen pages thick? And, oh, how about the judge finding the city in contempt?

The only Fortune 500 company in Oregon, which also happens to be the world's largest athletic shoe and clothing manufacturer, is an island in unincorporated Washington County.

After a two-year legal battle with the city and a helpful exemption from the Oregon Legislature, the Nike headquarters campus will likely remain an island for at least 30 years -- despite urban growth that has filled in nearly every nook and cranny around it.

Mayor Rob Drake and Nike spokesman Vada Manager say they're ready to put the whole bitter affair behind them.

"We want to move forward and continue to be both a progressive employer and a contributor to the economy," Manager said. "We certainly don't foresee any repercussions from this litigation."

But the question remains: How did it get to the point that Goliath had to ask a judge to go looking for David's slingshot?

Nike's campus and some nearby parcels encompass about 178 acres and house about 5,600 employees. Before the campus opened in October 1990, the company operated out of a collection of buildings in Beaverton and the surrounding area.

Nike is involved in the community, funding some local events. There have been some run-ins over zoning issues, but nothing that has risen to the level of the feud over Beaverton's alleged plan to annex the campus.

Drake contends it was all a misunderstanding. The city considered annexation for Nike, but it never got past the discussion stage -- nothing more than a 19-page issue paper that was never going to see the light of day, he says.

But Nike says that issue paper -- nicknamed the "smoking gun" -- laid out city plans to forcibly annex the headquarters campus and make it pay about $700,000 in taxes annually, while getting practically nothing in return.

Drake says the issue paper was in plain view, and all Nike had to do was look. Nike says it was hidden away during a useless search of more than 2.9 million pages of computer files.

Washington County Circuit Judge Gayle Nachtigal says the city should have just made it easy and handed it over, avoiding all the fuss -- and her contempt ruling against Beaverton in mid-September.

It all depends on who you talk to.

"This famous smoking gun memo they keep referring to was in the end a document that our planner devised," Drake said.

He compared it to shopping for a Rolls Royce Silver Cloud.

"OK, for the joy of it, I might have test driven that Silver Cloud -- but no way in the end would it have been practical to buy it," Drake said.

Jackie Byers, research director for the National Association of Counties, says it should not have come as much of a surprise to Nike that Beaverton considered annexation -- that is what growing cities do, after all. And state laws generally encourage them to avoid leaving any islands behind.

"Generally, you have to take everything in your path even if you don't want it," Byers said. "They don't like leaving islands of unincorporated areas in the middle of an annexed area because it makes it difficult for a county to service that area."

And it works both ways. Sometimes neighborhoods or business owners request annexation for services or other benefits. She cited a story of a famous golf resort in Georgia that asked a city to annex its parking lot from a county that was dry -- liquor sales were prohibited -- so the golf course could open a bar allowed by the city.

But Manager says it is the way Beaverton handled its annexation plans that drew such a strong response from Nike.

"It's the state's only Fortune 500 company," Manager said. "There should have been a plan submitted over to Nike to say: 'This is what we're thinking.' They needed a better approach than to furtively and clandestinely and forcibly annex us in the way that was attempted."

Drake blames the response partly on the personality of Nike co-founder and chairman, Phil Knight, a man Drake has never met despite repeated requests.

"When I took office in '93, I naively called over there and said, 'Hi I'm the new mayor, I'd like to come over and meet Mr. Knight. And I was greeted with, 'Why would you want to do that?"'

The mayor said that his police chief, Dave Bishop, went to high school with Knight and has been a regular visitor to the Nike campus. But Drake has never been invited.

Drake noted that former Nike CEO William Perez, who left the company a year after Knight had anointed him his successor, said in a BusinessWeek interview last February that Knight had difficulty giving up control of the company he started by selling shoes out of the back of his car. His attitude toward the city may have arisen from the potential loss of control over annexation, the mayor said.

"My guess is Knight and I have a lot in common," Drake said. "We're both strong personalities."

But Joel Mullin, the lawyer for Nike who is handling the case, sees it much differently than a clash of personalities.

He points out Judge Nachtigal said clearly in court the case was a public records dispute, not an annexation dispute.

Mullin says the city knew the issue paper was a public document under state law, even in draft form when it was created in 2001, and should have made it available two years ago, when Nike began looking for it.

Instead, the city forced Nike to go looking through those 2.9 million pages of documents on computer hard drives -- for months.

"As opposed to the city attorney sending me a letter saying, 'Dear Joel, here's a document that has been brought to my attention. Sorry we didn't give it to you sooner.'

"I've been practicing law for 25 years and I have never seen behavior like this," Mullin said. "And there's not a lawyer in Portland who would tell you otherwise."

Judge Nachtigal agreed that the burden was on the city, saying "the city stonewalled, hid and engaged in behavior that caused this lawsuit to get out of control."

Now Mullin is submitting proposed forms of judgment to Nachtigal to request payment for legal costs, including about $475,000 in attorney fees.

In her contempt ruling, the judge made a point of rephrasing a 2004 memo on annexation from Joe Grillo, the city's community development director, to Drake, that said, "Ahhhh . . . it is good to be king!!!!"

Nachtigal put it a little differently: "Sometimes it's not so good to be king."