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Forest City Sues Skanska Over Atlantic Yards Tower B2

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UPDATE: As it turns out, Skanska also sued Forest City. In fact, the contractor sued the developer first (Skanska's lawsuit was filed at 11:36 a.m. today, while Forest City's was filed at 11:52 a.m.), but Forest City publicized its lawsuit before news broke about Skanska's lawsuit.

Last week, Skanska issued a Stop Work Order at Atlantic Yards's first residential tower, the modular B2, citing a dispute over cost overruns, and now developer Forest City Ratner has fired back with a lawsuit. Oh, and Skanska sued Forest City, too. Both lawsuits were filed today—Skanska at 11:36 a.m. and Forest City at 11:52 a.m.—in the New York State Supreme Court.

Since Curbed learned about Forest City's suit first (they clearly had a media plan), let's start with them. Before issuing the stop work order, Skanska claimed that the extra costs came because the design for the mods was faulty, but Forest City said that Skanska agreed to a "fixed price" and the problems were the fault of Skanska's own "failures and missteps," which are detailed in the lawsuit. The suit asks the court to declare the Stop Work Order void. A full copy of the complaint hit the Curbed inbox at 12:40 p.m., with a statement from Forest City President and CEO MaryAnne Gilmartin: "Our priority is to reopen our factory and put the employees that Skanska wrongfully furloughed back to work so we can resume construction on B2. Skanska's unilateral action has barred construction from continuing, and this lawsuit is the first of many steps we intend to take to get this building moving again."

Forest City's suit alleges that Skanska "failed to perform" from the outset of the development, and that the company and "the personnel it assigned" to B2 "lacked the skill, experience and diligence to complete [B2] in accordance with the promised schedule and price." It continues:

The more Skanska floundered, the more it manufactured excuses to evade responsibility for its own malfeasance. The Project was to be constructed using modular technology—i.e., with prefabricated modules that fit together to create completed apartments— that was thoroughly reviewed and approved in advance by Skanska and also approved by the New York City Department of Buildings. However, when Skanska and its subcontractors proved incapable of producing or assembling the modules in accordance with the pre-agreed schedule and cost, Skanska belatedly – and falsely – claimed the modular design was defective and required modification. Similarly, when B2 Owner required Skanska to accelerate its work to recover from its own delays in accordance with the CM Agreement, Skanska refused. Instead of taking responsibility for its own failures, Skanska chose to fabricate the excuse that delays were caused by others.The suit goes on to say that Forest City has invested more of its own money to cover the cost overruns, but does not give an exactly figure, only that it is " in the tens of millions of dollars." However, it does not that Skanska believes it is owed $49,757,746 more than the contract price. Forest City also claims that by sending stop work notices to all employees and subcontractors, Skanska violated the Construction Management and Fabrication Services Agreement that they two companies sign in October 2012. The agreement stated that Forest City would pay Skanska a fixed sum of $116,875,078 for the project, and that "the 'Scheduled Date for Substantial Completion' is 416 Business Days from the effective date of B2 Owner's 'Notice to Proceed' (i.e., to commence the Work) to Skanska." This was issued on December 21, 2012, meaning that "substantial completion" was supposed to be reached by July 25, 2014. Obviously that is not what happened.

The complaint continues for 32 pages, charging Skanska with mismanagement that began "with the initial startup of the modular factory." "For example, Skanska employed three different project managers over the course of a fit-out process that was supposed to take approximately five months. Ultimately, due to Skanska's mismanagement, the factory fit out was delayed by seven months, significantly delaying the production of modules, and in turn, the entire project."

Skanska, however, says just the opposite. In an emailed statement, Richard Kennedy, Co-Chief Operating Officer of Skanska USA, said,

The work at the B2 Project is currently stopped because Forest City Ratner has steadfastly refused over many months to engage in an honest dialogue about the serious commercial and design issues facing the project. Forest City Ratner represented with great confidence they had developed the high-rise modular solution. According to Forest City, they had "cracked the code. That turned out not to be true. Now, rather than acknowledging their problems, they are slinging mud at Skanska. But slinging mud at Skanska in the press and in legal documents that misstate the actual facts is not going to get the B2 Project moving again or put the modular factory workers back to work. Skanska prides itself on its ability to work through challenges in a way that is timely, effective and respects the commercial interests of all parties involved. Unfortunately Forest City Ratner operates by a different standard and so we find ourselves in this current situation. Despite the rhetoric from Forest City Ratner, we remain hopeful commercial and economic sensibilities will prevail and these matters will be resolved so we can get back to building the B2 Project and get the factory workers back to work.Unlike Forest City, Skanska did not send out their full complaint, and it is not yet available through the court's electronic database. In an email, reps for Forest City said that this dispute will not affect the next phase of Atlantic Yards, which was recently renamed Pacific Park, and Forest City's new partner Greenland USA, is not involved in this lawsuit. The next building, to be located at 535 Carlton Avenue on the corner of Dean Street, is set to break ground this December. At this rate, we might see that building reach the finish line first.
· Modular Tower At Atlantic Yar—Er, Pacific Park Stalls Again [Curbed]
· Atlantic Yards Tower B2 [Curbed]
· Atlantic Yards Rebrands As Pacific Park, Reveals Next Building [Curbed]

461 Dean Street

461 Dean Street, Brooklyn, NY