KPH Construction Corp. has emerged from Chapter 11 bankruptcy and is taking several parties to court, including Milwaukee-based architecture firm Kahler Slater, over the Hotel Northland project in Green Bay.
The Milwaukee-based construction company filed a complaint in state court on Monday, alleging wrongful termination on the construction project that resulted in "significant damages" to KPH, according to a news release.
In the complaint, filed in Milwaukee County Circuit Court, KPH alleges negligence in issuing a certification letter to terminate the firm as general contractor on the project, and that the termination was done in bad faith with "intentional disregard" to KPH's rights.
KPH does not specify the exact amount it is seeking in damages, but is seeking an amount to be determined at trial, plus interest and attorney fees.
Co-defendants include Kahler Slater chief executive officer George Meyer, former Kahler Slater associate principal David Plank, Des Moines, Iowa-based Amco Insurance Co. and Depositors Insurance Co., and other unidentified insurance companies as defendants.
Representatives of Kahler Slater did not immediately respond to a request for comment.
The renovated historic Hotel Northland opened early 2019, after what proved to be a tumultuous development effort. KPH president and CEO Keith Harenda was a co-owner of project developer Hotel Northland LLC, along with partner Michael Frantz. KPH served as general contractor.
The complaint states that Kahler Slater served as the Hotel Northland project architect but had no contract with KPH. Kahler Slater, Meyer and Plank managed the relationship between KPH and project owner, Hotel Northland LLC.
By December 2015, Harenda and Frantz had gathered the needed financing for the development and commenced construction in January 2016. A year later, the project ran into financial problems when one of its lenders pulled out. A court-appointed receiver eventually sold the hotel to an entity controlled by a different lender.
Hotel Northland LLC decided in mid-October 2017, when the project was in the midst of financial troubles, that the easiest way to avoid paying KPH was to terminate it from the project, the complaint alleges. A representative of Hotel Northland LLC told Kahler Slater he needed a certification letter from the firm in order to fire KPH, as Kahler Slater was "the initial decision maker."
But the contract with KPH states the only way the contractor could be terminated is if it failed to pay project subcontractors. The complaint states that Kahler Slater went forward with the certification letter without reviewing or obtaining agreement between KPH and the subcontractors.
The complaint concedes that KPH had, in fact, not paid certain subcontractors at the time. But this was because the agreements provided that subcontractors only be paid after KPH was first paid by the owner. KPH had not yet received payment from Hotel Northland LLC, the complaint states.
"The Kahler Slater defendants ultimately agreed to certify that grounds existed for terminating KPH for cause, even though they either knew or intentionally ignored the fact that no such grounds existed," the complaint states.
KPH filed for bankruptcy in March 2019 to prevent one of its creditors from obtaining its assets.
It emerged from bankruptcy in May of this year, according to the news release. A U.S. Bankruptcy Court approved a reorganization plan for KPH, and allowed the company to pursue action against Kahler Slater.
"We have claims against Kahler Slater that we are pursuing for our losses," Harenda said in a statement. "KPH is a strong, stable company with a stellar reputation, and we look forward with great optimism to our next 20 years."