Friday, June 27, 2003

Hyneman blames contractors for mudslide in lawsuit

Memphis Business Journal [link]
by Kate Miller Morton

Nearly a year after a massive landslide sent tons of dirt careening into the Wolf River Harbor just south of the Auction Street bridge, a legal battle has begun to assign blame.

Kevin Hyneman Cos., Inc., filed a lawsuit in Circuit Court last week against multiple parties associated with the site work designed to lift 13 acres of land above the flood plain and stabilize it for the development of single and multi-family homes. Defendants in the case include Ellington-Foster, Inc.; Sailors Engineering Associates, Inc.; and L&T Construction, Inc.

Hyneman is seeking to recover $600,000 the company spent to reopen the harbor, restore the shoreline and stabilize the harbor's banks immediately following the Aug. 12 catastrophe. The developer is also seeking unspecified damages addressing increased carrying costs on the land; reduction in the land's value; and damages and expenses associated with claims by upstream businesses affected by the temporary closure of the harbor.

Kevin Hyneman and Jeff Bronze, co-owners of the property, did not return phone calls. Ellington-Foster and L&T Construction declined comment. Sailors did not return phone calls.

Shuttleworth Williams PLLC partner Michael Derrick, one of Hyneman's four attorneys, says the developer tried to resolve the issue out of court.

"It takes two to dance and from day one we've been trying to involve the contractor and engineer to step up to the plate with their insurance carriers to take care of this mess and they've drug their feet," Derrick says. "Unfortunately we've had to sue them to recover what this has cost Kevin."

North Carolina-based Ellington-Foster designed and installed the wicking system and the slope stability and settlement monitoring instruments used to measure the performance of the drainage system. Sailors Engineering was contracted by Ellington-Foster to perform geotechnical drilling, conduct density tests, install monitoring instruments and observe placement of dirt fill. Hernando-based L&T Construction was contracted by Kevin Hyneman Cos. to excavate dirt from the construction site of the FedExForum and transport it to Hyneman's Mud Island site.

Charging breach of contract and negligence, the lawsuit claims Ellington-Foster failed to properly design and/or install the wick drain system; failed to properly perform testing to ensure slope stability; and failed to monitor the amount and location of the dirt fill stockpile on Mud Island.

Negligence claims against Sailors include failing to properly conduct an adequate number of density tests on the site to ensure slope stability; failure to take accurate readings of the performance measurement instruments; failure to take instrument readings with proper frequency; and the failure to monitor the data accumulated from those readings.

Breach of contract and negligence claims against L&T assert a failure to properly place and compact dirt fill per the engineer's instructions and failing to monitor the placement of that dirt on the site.

Also at issue is insurance. Hyneman alleges that Ellington-Foster and L&T breached their contracts by failing to ensure that Hyneman was listed as an additional insured under its general and professional liability insurance policies. He also claims Ellington-Foster failed to ensure that subcontractor Sailors Engineering listed Hyneman as an additional insured under its general and professional liability policies.

Ellington-Foster's insurer, Victor O. Schinnerer and Co., Inc., the insurer's parent company, CNA Financial Corp., and its agent H.B. Cantrell Co. are also named as defendants in the lawsuit.

Derrick says specific amounts for cost of carry, diminution in land value and remediation plans weren't given because they are still being tallied. "Those numbers run continually, which is why you can't just say this is the number," Derrick says. "It changes over time."

Hyneman has previously estimated his annual interest costs on the land he paid $2.6 million for in 2001 as approximately $125,000 to $130,000 a year. Real estate taxes run $20,000-$25,000 a year.

Hyneman has cited these costs as an impetus to move forward developing the land with or without potential development partners The Henry Turley Co. and the Riverfront Development Corp.

Hyneman was just days away from finalizing sale of the land to a joint-venture consisting of The Henry Turley Co., Belz Enterprises and the Riverfront Development Corp. when the landslide occurred.

Hyneman and Bronze filed a PILOT application with the Center City Revenue and Finance Corp. last month for a $50 million, 19-acre development that would create 234 apartments, 220 condos and 10 single family homes. Hyneman hit yet another snag last week when the CCRF essentially closed the door on tax abatements for Mud Island, citing the area's million-dollar homes and multiple, successful apartment projects.

The organization left open the possibility for a PILOT on Hyneman's land because of its size and proximity to Downtown, but only if the RDC approves the plan.

"We'd like for the RDC to give their expressed approval to any development that goes on that piece of ground before it's given an abatement," says Lee Askew III, vice chairman of the CCRF.

RDC president Benny Lendermon says he remains in close contact with Hyneman. He says the RDC could move forward with a collaborative project before the issue of liability is completely resolved in court. He says liability for costs resulting from the mudslide would mostly likely be carved out of any deal and remain with Hyneman until the court ruled.

"I remain committed to see a comprehensive development done," Henry Turley says. "By comprehensive I mean one that includes various parcels south of Auction Street -- Kevin's, ours, the city's and the city-county piece."

Belz Enterprises will not be involved.

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