2/12/14 LifeCare, Bogner dispute goes to arbitration

  • By Nick Sabo
  • February 12, 2014
  • 401
                        
SUMMARY: Claims by Bogner, Duer Construction to be settled out of court Legal proceedings in a civil suit against LifeCare Hospice brought by Bogner Construction Management Co. will be stayed while the two entities and Duer Construction Company attempt to settle outside of court. In a Feb. 7 judgement in Wayne County Common Pleas Court, LifeCare and Bogner agreed to pursue arbitration through the American Arbitration Association (AAA). The arbitration will be carried out by the AAA’s construction division. The arbitration will attempt to settle Bogner’s claims of $2,723,391.17 for work owed on LifeCare Hospice’s new inpatient facility, located at 1900 Akron Road, Wooster. Claims by third-party Duer Construction Company for $42,205.24 will also be part of the arbitration process. Attorney Joseph Isabella, representing LifeCare, said he expects the arbitration to take at least four months. Isabella declined comment on the specifics of the arbitration. “We appreciate the fact that we’ve been able to make an amicable resolution,” Isabella said. “(However), what occurs in arbitration is confidential.” In all, 14 contractors filed claims against LifeCare in the form of mechanics liens. Including claims by Bogner and Duer, the liens totaled $4,410,314.71. As of Feb. 5, the claims of 12 of those contractors, which total $1,645,718.30, have been paid by LifeCare, leaving only claims by Bogner and Duer to be settled in the arbitration. Bogner started construction of the inpatient facility, but stopped after LifeCare switched architects. Bogner has alleged that the new architect, Eberhard Architects, LLC, mishandled the project and withheld payment for completed work. Construction of the facility is financed through First Merit Bank. Bogner’s action resulted in the filing of a primary lien for $3,022,135.38 by First Merit, who required LifeCare’s loan be free of mechanics liens. First Merit legal representative Robert Preston said First Merit’s intention in filing the lien was only to protect its stake in the building. Now that the case has proceeded to arbitration, First Merit has lifted the lien and will continue to provide financing for the inpatient facility. “First Merit will continue to finance the project,” Preston said. “It was never (First Merit’s) intention to foreclose...the lien was about preserving their interests.” Had the new inpatient building gone into foreclosure, the primary lien would have allowed First Merit to collect first. LifeCare Hospice took out a five year construction loan with First Merit Dec. 10, 2012 to fund construction of the hospice inpatient facility. According to court records, the initial amount of the loan was for $5 million, with an $800,000 line of credit. The loan was amended to $7 million and a $405,000 line of credit May 30, 2013. Isabella said the inpatient facility is within “eight to 10 weeks” of completion. A new contractor has not been hired, Isabella said. The results of the arbitration will be turned over to the Wayne County courts, where a judges’ order will be issued. The order will bind the three parties to the terms arrived at in the arbitration. The American Arbitration Association is a non-profit agency that provides alternative dispute resolution. Its construction division utilizes professionals in the field of construction, who bring industry specific knowledge to the arbitration.


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