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September 16, 2014

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More subcontractors accuse Fontainebleau of failing to pay for work

Fontainebleau Resort

The Fontainebleau, construction stopped, is seen dark along the Strip. Launch slideshow »

Two more Fontainebleau subcontractors have sued the resort's general contractor, charging it has wrongly failed to pay them for their work on the Las Vegas resort.

Three Fontainebleau development companies filed for bankruptcy protection June 9 after funding problems halted construction on the $2.9 billion project, which is about 70 percent complete.

Turnberry West Construction is Fontainebleau's general contractor and is a sister company to the Fontainebleau development firms. As of Friday, Turnberry West had not filed for bankruptcy protection.

This means subcontractors suing Turnberry West are doing so in Clark County District Court, and this month five have done so.

The latest to sue Friday were Tracy & Ryder Landscape Inc. and Ram Construction Services of Michigan Inc.

Tracy & Ryder is also suing Turnberry West's bonding company, Western Surety & Co.

Tracy & Ryder alleges that after disputes over payments for its work arose, it and Turnberry West attended mediation, resolved their differences and agreed to a payment arrangement.

But Turnberry West has failed to make all the required payments, the contractor alleges.

The suit claims Turnberry West has violated one or more provisions in Nevada law governing construction.

"Turnberry West failed to complete the project for the price stated in the contract and willfully and deliberately failed, without legal excuse, to prosecute the project with reasonable diligence, causing material injury to plaintiffs," the suit alleges.

And, or, the suit says: "Turnberry West diverted funds which were received for a specific purpose in the prosecution of the construction of the project and failed to pay subcontractors and suppliers and willfully and deliberately failed to pay money due for labor and materials provided to the project after receiving sufficient funds for payment."

Ram Construction Services, in its suit, alleges Turnberry West breached a covenant of good faith and fair dealing.

"Turnberry West knew or should have known that it would be unable to honor Ram Construction's payment applications, but still required Ram Construction to perform its obligations," the suit says.

Neither company said how much it is owed. Turnberry West hasn't responded to any of the suits filed this month.

Separately, an attorney for subcontractors in the bankruptcy case said Monday it's too early to say whether the case is headed toward resolution with a liquidation -- or with funding to get construction under way again.

Gregory Garman of the Las Vegas firm Gordon Silver said his clients hope a restructuring is approved that gets them paid and back to work on the resort. Absent that, he said, the failure of the project has the potential to put some of them out of business.

Representing clients seeking $111 million, Gordon Silver has teamed up with a Florida law firm on a motion to move the bankruptcy case from Miami to Las Vegas.

Garman says the move is necessary because most of the creditors and other players in the case are in Las Vegas.

"Bankruptcy is a participatory-based system," he said, arguing it makes sense for hearings and negotiations to be held in Las Vegas because that's where most of the participants live or are based.

And it's important for subcontractors to have the case heard in Las Vegas because the bankruptcy court in Nevada is familiar with Nevada's construction lien laws, Garman said.

As debts are prioritized in this case, those laws put the liens of subcontractors ahead of lenders' trust deeds, he said.

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