Developer, contractor spar over FedEx facility overruns

At the crux of the legal dispute are Indiana-based build-to-suit development firm Scannell Properties and general contractor Keystone Construction Co. of Chesterfield, near St. Louis.

In 2004, Scannell contracted with Keystone to build a more than $2 million, 63,000-square-foot office/warehouse for FedEx on nine acres at 2960 N. Martin Ave. near Partnership Industrial Center. Construction costs apparently exceeded the original contracted amount, triggering litigation.

Through its attorneys, Scannell has argued that its contract with Keystone requires the contractor to pay half of all cost overruns. Keystone’s attorneys have said Scannell alone should foot the bill.

Open accounts

Several Springfield-area subcontractors are still awaiting payment for work they did at the FedEx facility. Some of them are owed tens of thousands of dollars.

Shirley Essary, president of Dan L. Essary Construction Inc. and Atlantic Fire Protection Inc., said her records indicate the two companies are owed nearly $72,000 for landscaping and installation of interior fire sprinklers.

Smaller subcontractors such as Tim Rice, owner of Retail Renovations, aren’t owed nearly as much, but the impact on his bottom line is the same.

“They hired a lot of people locally to build this place,” Rice said. “Everybody’s left town and there’s a lot of people that haven’t gotten paid. It’s just real frustrating.”

Rice had a $26,000 contract with Keystone to install cabinetry, counters and wainscoting at the FedEx building. The work was completed in fall 2005, but he’s still owed about $4,000.

“Basically, what they owe me is my profit,” Rice said.

Subcontractors file liens

By late 2005, Rice said some subcontractors who contacted Keystone were told they would be paid after the first of the year.

But many of the companies awaiting payment gave up on Keystone and filed mechanic’s liens against the general contractor in Greene County Circuit Court in February. Many of the liens are still pending.

Larry Rick with Prestige Painting filed a lien for about $4,200 – nearly a quarter of his $20,000 contract. Rick said he last communicated with Keystone about four months ago, when the contractor sent him a form asking how much he was owed. When he followed up with Keystone two months ago, no one returned his call.

“It’s just a mess,” he said.

To complicate matters, Scannell sold the property to current owner MSSD LLC during construction but never notified Keystone. Scannell’s Springfield attorney, Lee Poppen of Lathrop & Gage LC, said his client routinely sells properties after developing them.

MSSD LLC was created in January 2005 and amended its articles of organization in May of last year in anticipation of the impending property transaction, according to filings with the Missouri secretary of state’s office.

Patrick McKee is MSSD LLC’s registered agent. McKee bought Holloway Machine Co. from United Machinery & Supply Co. in October 2005 – the same month the Greene County Recorder of Deeds recorded a special warranty deed transferring Scannell’s property to MSSD.

Payment forthcoming

Attorneys for Scannell and Keystone say their clients are prepared to enter arbitration to settle the legal spat.

Poppen said Scannell has paid all the subcontractors who filed liens against the company except for APAC-Missouri, which performed a significant amount of paving and grading work at the site. APAC-Missouri filed a mechanic’s lien of $262,000 against Keystone on Feb. 1. APAC officials declined to comment on the amount still owed.

Poppen said Keystone is contractually obligated to pay half of all costs above the total construction cost agreed upon in the original contract.

“The issue … is whether the additional costs of construction are the responsibility of the contractor or the owner,” Poppen explained. “We’ll pay whatever the judge tells us we’re responsible to pay, but we feel we’ve invested our half. The rest of it has to come from Keystone.”

Keystone’s St. Louis attorney, Eleanor Maynard, said Scannell requested a substantial amount of work beyond what was in the original contract and then refused to pay Keystone. The contractor, in turn, was unable to pay its subcontractors, she said.

“It’s always been Keystone’s position that they want those subcontractors to be paid,” Maynard said. “It’s Keystone’s position that that’s Scannell’s obligation.”

Poppen said the subcontractors – even those who haven’t filed liens – would eventually receive payment for their work on the FedEx building. While FedEx is the tenant, the company has not been present in the litigation.

Rice said the dispute never should have been allowed to drag on so long.

“It’s a simple sixth-grade math problem that should be figured out easily, but it’s been drawn out into a yearlong saga,” he said. “It really bothers me that somebody ripped everybody off and somehow thinks it’s OK.”

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