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Palladium construction lawsuits costing panel millions

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The cash-strapped Carmel Redevelopment Commission has spent more than $6 million since 2009 “responding to, defending and settling” legal claims from contractors involved in construction of the city’s Palladium concert hall, according to filings in Hamilton Superior Court – and the meter is still running.

Commission members last month approved a $575,000 settlement with Bloomington-based Crider & Crider Inc., a subcontractor that filed suit three years ago alleging it had not been paid for excavation work it did in 2008.

But that deal does not resolve a related dispute with Hagerman Construction Corp., the concrete contractor that hired Crider for the project. Fishers-based Hagerman says it’s still owed more than $650,000 from the CRC (plus interest), which the CRC denies.

“Any amount owed by CRC to the plaintiff is offset, in whole or in part, by the amount owed by Hagerman to CRC for poor workmanship or other failures … in performing its obligations,” commission attorneys wrote in response to the allegations.

And then there’s the ongoing battle with Michigan-based Steel Supply & Engineering Co., which the CRC is suing over Palladium roof defects that halted construction for three months in 2009 amid concerns about a possible structural collapse.

The delay set off a chain reaction of scheduling problems that disrupted the project, CRC attorneys say in court filings, leading to a flurry of contractor claims for lost time and other damages. The estimated cost to the CRC at the time: $6.1 million.

Steel Supply, meanwhile, says it’s not to blame for the faulty design that resulted in a rip in the structural steel web supporting the venue’s domed roof. It maintains that contract documents and industry standards make that the responsibility of the project’s engineer of record, which is not a defendant in the lawsuit.

Its attorneys have asked Judge Steve Nation to rule on the responsibility question now, potentially avoiding a bench trial scheduled for late this year. A hearing on the matter has been set for May 5.

Whoever is at fault, neither party is disputing the fact that the roof-support system’s design was flawed. It has quite a load to bear: The 110-foot dome is fo

palladium-factbox.jpg

rmed by a steel frame covered with 12-inch-thick concrete planks, court records show.

Crews spent three months fixing the defects discovered during construction, and the $119 million Palladium opened in 2011. Still, roof problems persisted. Early last year – during a review conducted as part of the Steel Supply litigation – structural engineers found new problems with the roof trusses, prompting $140,000 in repairs.

The CRC hired Houston-based structural engineering firm Walter P. Moore to identify the technical deficiencies and recommend a fix, and said in a December court filing that the company also found additional issues with bolts in eight connection points and “various additional connections that are defective and which will require remediation.”

Although the CRC’s roof lawsuit did not target engineer-of-record Lynch Harrison & Brumleve Inc., the commission reserved the right to pursue related claims against the Indianapolis-based firm in the future.

It had a similar tolling agreement with project manager Shiel Sexton Corp., but in November struck a deal that calls for letting the Indianapolis contractor off the hook in exchange for the company’s forgiving more than $200,000 in promissory notes from the CRC and the Palladium.

The settlement also calls for Shiel Sexton to provide up to 240 hours of project-management services during the investigation and remediation process at no cost; any additional services will trigger a $167.50-per-hour charge.

The deal is a way to avoid the expense of litigation and “really, to facilitate the continued professional relationship” with Shiel Sexton while the Palladium roof is repaired, City Attorney Doug Haney told commission members Nov. 21.

Buried in the fine print is an acknowledgment that the hold-harmless agreement does not apply to any potential claims tied to the Crider & Crider litigation.

Crider sued Hagerman and the CRC for $747,342, the amount it said it still was owed after an $808,768 payment in October 2009. The excavation project was more costly and time-consuming than expected, the lawsuit says, because a stockpile of fill dirt Crider was supposed to use was not suitable for its intended purpose.

Hagerman laid the blame with the CRC, which it said had overseen a mass excavation on the site under a separate deal with another contractor. And since that work delayed the start of Hagerman’s concrete project, the company also is seeking reimbursement for “significant additional costs” incurred to meet construction deadlines.

The CRC responded in court filings with the criticism of Hagerman’s work and an assertion that nothing else was owed: “CRC has made all payments … pursuant to its agreement with Hagerman.”

Mayor Jim Brainard, who has participated in settlement talks since the resignation of CRC Executive Director Les Olds last year, called the Crider deal “a fair outcome given that the work was completed.”

And the $575,000 settlement – payable in three installments by the end of next year – is a bargain compared to the $1 million-plus value of Crider’s claim and accrued interest.

Hagerman is seeking about the same amount. Brainard said that claim has not been settled “because we feel the monetary request is inflated.” He declined further comment on the pending litigation.

Hagerman Group Chairman Jeff Hagerman is hopeful a resolution is near despite years of negotiations that have gone nowhere.

“It has been extremely disappointing we have not been able to resolve issues that are now over three years old, let alone receive final payment for work completed,” he wrote in an email to IBJ.

That’s not for lack of trying. City Councilors Rick Sharp and Luci Snyder—immediate past president and finance committee chairwoman, respectively—went to the mayor early this year with an offer: Settle the Crider/Hagerman litigation for a total of $1 million, and the council would use money from the city’s Rainy Day Fund to pay the tab.

“We thought it was in the best interests of the city as a whole that these lawsuits be put behind us,” Sharp said. Allowing the litigation to drag on “is creating a bad image of Carmel in the construction community. And it’s quite a drain on the redevelopment commission. The only ones benefiting are the attorneys.”

The mayor “expressed appreciation” but declined the offer.

Hagerman hasn’t given up. “We are hopeful the mayor will accept the terms of this negotiated settlement recommended by his team,” he wrote in the email.

Without access to the Rainy Day Fund, the CRC has to come up with the money for the Crider settlement (and any others). The first $250,000 is due within 30 days of the final signature on the deal; the next $250,000 by Jan. 31, 2015; and the last $75,000 by Dec. 31, 2015.

CRC Finance Committee Chairman Dave Bowers told the council the commission will have to “rearrange some things” in its 2014 and 2015 budgets.

The commission is still adjusting to the new reality of pinching pennies after borrowing $240 million over the past decade to support redevelopment projects like the Center for the Performing Arts, Carmel City Center and the Arts & Design District. Revenue from the city’s tax-increment financing districts pay the bills.

Sharp worries that obligations like the Crider settlement will jeopardize its ongoing redevelopment work, given the CRC’s tight finances.

“Expenses already are barely covered by the increment,” he said. “If anything goes wrong with the CRC, the city is going to have to step in and bail them out.”•

This story originally ran in the Indianapolis Business Journal.

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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