Nashville at law: Terrazzo developer, contractor sued over unpaid invoices

Also: Psych Solutions faces class actions, and more... [From our print edition featured in Monday's City Paper]

Email | Print By Turner Hutchens and Kyle Swenson

Problems in construction timelines and general delays have put the Terrazzo high-rise in The Gulch on the legal defensive on multiple fronts.

A recently filed suit by subcontractor Baker Glass Co. claims Terrazzo’s developers and their general contractor, Nashville-based Parent Company, haven’t paid what they owe to Baker, which installed windows and doors on the 14-story building.

In the suit, Antioch-based Baker also lays claim to $526,000 in liens against the property. Through Liberty Mutual Insurance Co., Parent has secured bonds against those claims — a guarantee of sorts that whatever debts are owed will be paid.

Changes in work orders and construction delays during the building of the $68 million condo and office tower cost $1.92 million in materials and labor, according to the suit filed Sept. 10 in Davidson County Chancery Court. The complaint, which names Terrazzo, Parent and all those who have bought units in Terrazzo as defendants, also asks for $6 million in punitive damages.

The suit is not a problem for the development as a whole, but rather about which company deserves to get paid how much, said Parent Partner Jim Brownlee, who oversaw the project. He said his company has a right to money from the project for the work it has completed, and that it plans to dispute the claims by Baker.

“Basically, it’s a squabble between Baker Glass and us, though they put everybody in the world in there,” Brownlee said. He added that in regard to construction contracts, the project did not come in behind schedule, although changes did have to be made to reach the planned opening dates this past March.

Terrazzo had initially been scheduled to open in 2007, according to early announcements by the project’s developer, Charlotte, N.C.-based Crosland. Jim Baker, president of the firm that bears his name, declined comment. Brad Scarbrough, attorney for the company, said only that the suit “speaks for itself.”

Chris Dunn, attorney for Terrazzo, also declined to comment on the details of the suit, other than to say that the dispute was between the general contractor and its subcontractor. He also noted that the liens filed by Baker had been bonded off in the Liberty Mutual deal.

“Baker’s lawsuit will not impact any existing Terrazzo homeowners or my client’s ability to close new contracts," Dunn said in a written response to questions regarding the suit.

The project has sold a total of 14 condos since March – about 12 percent of the building’s 117 residential units. Together, the sales produced revenues of $5.5 million before marketing and brokerage costs are deducted.

More units might have been closed if some buyers who had agreed to purchase units weren’t suing the projects developers in federal court. There, they have accused the developers of failing to comply with federal regulations required under the Interstate Land Sales Full Disclosure Act, which requires detailed disclosures of a project’s finances if it contains more than 100 residential units and takes more than two years to build. (There are multiple exemptions available to developers under the law.)

In two of those federal cases, the judges have approved motions to protect from public access some information presented as evidence — specifically financial and business-related information that wouldn’t have been disclosed if not for the case. It is very common for judges to approve such motions, said Baker Donelson Bearman Caldwell & Berkowitz attorney Larry Papel, who is not involved in the cases.

Baker, which booked 2008 revenues of $14 million, was acquired this past spring by Philadelphia-based private equity firm Larsen MacColl Partners for about $7 million. Jim Baker is expected to remain with the company until at least 2011, according to the company.

United States District Court

Garden City Employees Retirement System v. Psychiatric Solutions Inc. Filed Sept. 21. In the first of at least four putative (and essentially identical) class actions filed against Franklin-based Psych Solutions, a Michigan investment fund claims the behavioral hospital operator misled investors about the scope and timing of government investigations into patient safety problems at its Riveredge facility in Illinois.

Through their public statements over the course of 2008 and into early 2009, President and CEO Joey Jacobs, Executive Vice President Brent Turner and Chief Accounting Officer Jack Polson artificially inflated their stock’s price, the suit alleges, and “engaged in acts, practices and a course of business that operated as a fraud or deceit.” The court asks for class certification and unspecified damages.

Darren J. Robbins, David C. Walton and Catherine J. Kowalewski of California firm Coughlin Stoia Geller Rudman & Robbins are leading the case. Local attorneys for the plaintiff are George E. Barrett, Douglass S. Johnston Jr. and Timothy L. Miles of Barrett, Johnston & Parsley in Nashville.

Equal Employment Opportunity Commission v. Southeastern Telecom Inc. Filed Sept. 22. The federal watchdog agency claims the Nashville-based company improperly dismissed an employee who had complained of gender discrimination. Its lawsuit states the retaliation represents a violation of the woman’s civil rights.

Suzanne Sword, an account executive with Southeastern Telecom, had complained to her supervisors about how sales accounts were distributed in the office, stating she felt the distribution was based on gender, the suit says.

After receiving the complaint, the company disabled Sword’s e-mail account and computer. She was fired a week later.

“Retaliation against employees who exercise their federally protected rights is strictly prohibited under federal law,” said the EEOC’s Memphis office director, Katharine W. Kores in a press release.