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Home / News / Reversal sends suit over $2.3 million fee back to Union County

Reversal sends suit over $2.3 million fee back to Union County

By PAUL THARP, Staff Writer

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Charlotte attorney James B. Gatehouse of Rayburn Cooper & Durham said he always hopes for an amicable result in litigation, especially in complicated construction matters.

That said, “I anticipate that this one will be tried,” Gatehouse said of Signature Development, LLC v. Sandler Commercial at Union, LLC (Lawyers Weekly No. 10-07-1057, 33 pp.).

The Court of Appeals reversed a superior court judge’s dismissal of most of Signature’s claims and remanded the case to Union County.

“Overall, we are thrilled with the court’s decision,” Gatehouse said.

“There is a lot of money at stake,” he added.

Mecklenburg County-based Signature claims that Sandler Commercial at Union, LLC – the property owner of Cureton Town Center on Providence Road, southeast of Charlotte – owes it a participation fee in excess of $2.3 million pursuant to an agreement the companies executed in 2005.

Under the agreement, Signature “acted as Sandler’s agent in managing, developing, constructing, marketing and leasing the property,” according to the opinion.

In exchange, Sandler agreed to pay Signature an initial development fee, a base development fee, a leasing fee, a sales fee and a participation fee.

Sandler failed to pay the participation fee, which Signature alleged was $2,338,806.

Signature placed a lien on the property, brought suit and obtained an order of attachment.

Sandler moved to dismiss Signature’s suit on the basis that Signature, “as the development project manager, was really acting like a general contractor and doing so without license,” Gatehouse said. “The trial court was persuaded erroneously that Signature was wearing the general contractor’s hat without having a license.”

Gatehouse told Lawyers Weekly that courts have been grappling with how to define a project manager.

“There was not great clarity in terms of what appellate decisions said about the role of project managers and developers and whether they were serving as general contractors,” Gatehouse explained.

The Court of Appeals focused on “the degree of control exercised by a particular contractor over the entire project” in order to determine whether Signature was a general contractor.

“The agreement in this case unambiguously vested control over the entire project in Sandler,” the court wrote.

After considering the contractual provisions in the agreement, the court concluded that Signature was not a general contractor but instead served as Sandler’s agent “under a pure project management arrangement.”

Signature never held a general contractor’s license and never pretended to be a general contractor, Gatehouse said. The general contractor who oversaw the construction at Cureton Town was licensed, he added.

The Court of Appeals found that Signature was hired to “act as Sandler’s agent in the day-to-day management of the project.”

The court also found that Signature “satisfactorily completed its duties under the agreement, and Sandler failed to pay Signature the participation fee as required by the agreement.” 

That failure, it added, “was a direct result of the Sandler’s having inadequate financial resources to meet its obligations under the agreement, a condition which the plaintiff certainly did not bring upon itself.”

Since 2007, L.M. Sandler & Sons has become the subject of numerous state and federal actions involving unpaid bills for services and liens on developments throughout the southeast.

The general contracting licensing statute, the Court of Appeals wrote, “should not be used as a shield to avoid a just obligation owed to an innocent party.”

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