Tuesday, September 09, 2014

Forest City files second lawsuit over modular stop, asking judge to reopen factory; suit says B2 may have to be completed conventionally

Well, I'm late to covering the news that, late Friday, Forest City Ratner filed its second lawsuit--and the third in recent volleys--against Skanska, its partner in the modular factory at the Brooklyn Navy Yard. (There was coverage in Crain's and, behind a paywall, Capital New York Pro. They got the press release before I did.)

The Forest City affiliate FCRC Modular sued Skanska Modular and CEO Richard Kennedy for unilaterally shutting down the modular factory where modules for the B2 tower are being fabricated, saying it had to be done by a vote of the board, which is split among the co-owners.

Forest City asked for an injunction to return matters to the status quo. "FCRC Modular continues to pursue every possible measure to re-open the factory and put more than 150 people back to work. Yesterday, we offered to take full responsibility for the factory, which Skanska rejected after having unilaterally stopped work and furloughed the workers," Forest City CEO MaryAnne Gilmartin said. "Today we are asking the Court for an injunction that would allow us to re-open the factory immediately. We remain committed to completing B2 as soon as possible despite Skanska's indifference to the wellbeing of these workers and the project."

"If they really did care about the workers, they would have engaged in dialogue with us and resolved the significant commercial and design issues facing the B2 Project," Skanska's Kennedy told Crain's.

Skanska blames Forest City for design problems causing cost overruns worth some $50 million. Forest City says Skanska signed a fixed-price contract to build the 363-unit tower and fabricate the 930 modules and mismanaged the process.

Political support

By the way, Forest City's p.r. team forwarded that curious statement by Borough President Eric Adams and Council Members Laurie Cumbo and Brad Lander supporting re-opening the factory, so it was obviously seen as supporting the developer's position.

In another Crain's article, Adams, somehow lumped in among a purported "many housing advocates... calling for work on the modular tower to resume," more pointedly said, "Legal battles have unnecessarily delayed this process long enough; while the dispute at hand makes its way through our court system, these workers should be allowed to proceed with construction."

From the lawsuit

As far as I can tell, the lawsuit covers much the same ground as the previous one. Forest City notes that Skanska USA and B2 Owner, a Forest City affiliate, signed a contract in which the former "agreed to construct the Project, including all module fabrication and on-site work, such as the structural brace frame, module erection, and connection of the modules to one another, for a fixed price of $116,875,078."

The modular company, co-owned by Skanska and Forest City but managed by the former,
was hired as a subcontractor to Skanska USA and agreed to furnish it with prefabricated modules for the B2 Project for a fixed-price of $31,450,087." Skanska Modular, the suit says, was responsible for all cost overruns.

The lawsuit adds some new details, including a protest by the unions representing the factory workers:
On August 27 Skanska Modular’s counsel responded to the letter from FCRC Modular’s counsel, asserting that the issuance of these notices did not require any Board approval because the Manager had the authority to control the Factory pursuant to Sections 7.1(b)(i) and (ii) of the LLC Agreement and that the prior Board meetings had been called merely “to report to the Board.” On September 2, FCRC Modular’s counsel again demanded, in a letter to Skanska Modular’s counsel, that Skanska Modular immediately withdraw the furlough and WARN Act notices and take steps to restart work at the Factory, or that management of the Factory be turned over immediately to FCRC Modular so it could attempt to prevent further harm and mitigate damages caused by Skanska Modular. These requests were rejected by Skanska Modular’s counsel on September 4.
...On August 28, 2014, counsel for the Modular Construction Division Affiliates of the Building and Construction Trades Council of New York City and Vicinity (“BCTC Modular Affiliates”), the trade unions representing the Factory’s workers, issued a letter to Susan Jenkins, the Factory’s Plant Manager, grieving the Company’s furloughing of its employees and deeming such action to be a violation of the collective bargaining agreement between the Company and BCTC Modular Affiliates (the “CBA”). Specifically, the grievance letter stated that the “[t]he parties’ CBA does not give the authority to the employer to unilaterally implement a furlough policy that impacts wages, benefits and other contractual and statutory rights under federal and state law.”
The impact of delay on modular business

The lawsuit notes that  the work stoppage not only will delay the project, already more than a year behind schedule, the specially trained workers may find new jobs, and that skilled workforce will be lost.

The lawsuit states:
Moreover, the work stoppage jeopardizes the viability of the Project as a whole. Without an operating Factory, B2 Owner may have to abandon the modular concept entirely and instead resort to completing B2 BKLYN using traditional construction techniques, resulting in a loss to the Company of this unique business opportunity. The actions of Skanska Modular and Kennedy also threaten the viability of a continuing modular business because, without a completed hi-rise building, the practicality of modular construction, and therefore the need for a modular factory business, will have been called into question.
(Emphases added)

This would make an odd hybrid.

Of course, Forest City's new partner, the Greenland Group, has already said the next three towers would be built using conventional construction.

And even if this tower is completed using modular construction, question marks will remain until a full building is built in a more rapid fashion.

The impact of delay on affordable housing

The lawsuit states:
Defendants’ actions also have a significant negative impact on third parties. The decision to lay off over 150 workers (over 70% of whom are minorities) and stop fabrication of modules hurts not only the workers themselves, who are now left to hunt for new employment, but also the community and government officials who were relying on a speedy and affordable solution to mitigate the City’s current housing crisis.
Though some people have placed considerable hope in modular as helping mitigate the housing crisis, even if this building is completed, it won't represent a "speedy and affordable solution," for the reasons noted above. That would have to come with the second modular building.

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