Exterior of Crunch Fitness

After a conflict over the construction of a Crunch Fitness facility in Valdosta, Georgia, Texas-based company UFI Valdosta LLC has filed a complaint in a United States District Court against Lucida Construction.

UFI Valdosta’s complaint alleges that the Alabama-based Lucida Construction Company, LLC “failed to complete the Project and failed to pay its subcontractors and suppliers — resulting in multiple liens on the Project property.” 

As per documents, Lucida Construction submitted fraudulent payment applications and lien releases.

Further reading: Fraudulent Lien Claims: Disputed Amounts or Fraud? | Lien Law News

The complaint against Lucida Construction includes a total of 13 counts — including among them claims of breach of contract, unjust enrichment, and negligent construction. 

Additionally, the complaint focuses on the identity of Lucida Construction and its president, Michael J. Addison, and seeks to establish the company as being an extension of Addison — possibly allowing UFI Valdosta to receive more of its project funding back.

Despite time being ‘of the essence’ in construction, Lucida Construction ‘never completed’ the project

According to the complaint, UFI Valdosta hired Lucida Construction to be the general contractor on the renovation to an existing shell in Valdosta’s Valdosta Mall for the buildout of a Crunch Fitness facility, coming to a contract on September 4, 2020.

Despite considering that time was “of the essence” in the completion of the contract, UFI Valdosta claims that Lucida Construction never completed the project or paid its subcontractors and suppliers, ”failing to make timely payments for all labor, materials, equipment, or services furnished.”

Additionally, the work done on the project by Lucida Construction is also being considered as “negligent.” UFI Valdosta notes that the “contract duty [was] breached when the builder [failed] to exercise a reasonable degree of care, skill, and ability,” and that the construction work that the builder did on the project was defective.

The complaint notes that some of the defective work would have been very dangerous for any customers of Crunch Fitness. One example given showed a handicap bench that fell off of the wall of a handicap shower, potentially causing significant injury to any user.

UFI Valdosta notes that the original contract sum was $1,342,250 and paid Lucida Construction $1,602,059.32 throughout the project’s process.

According to UFI Valdosta, Lucida Construction accepted its payment while knowing that it was not going to use it for its proper purpose, making UFI Valdosta entitled to repayment — as “Lucida Construction reasonably understood that UFI would not have paid Lucida Construction for Lucida Construction’s subcontractors and suppliers without an expectation that Lucida Construction would have passed the money along to those subcontractors and suppliers.”

As per documents, “Because the money was paid by UFI to Lucida Construction for Lucida Construction to pay its subcontractors and suppliers for labor, materials, equipment, or services furnished to the Project, the circumstances are such that it would be inequitable for Lucida Construction to retain the money without paying.”

Exterior of Crunch project under construction

Lucida Construction allegedly lied about payments to subcontractors

Additionally, the complaint adds that Lucida Construction actively misled UFI Valdosta about what it was doing with project funds.

As per UFI Valdosta, “Lucida Construction and Addison’s false representations in the Conditional Releases of Lien concerned material facts that all amounts had been paid by Lucida Construction and the facts were of such a nature to induce action on the part of UFI to ensure that payments were made by UFI to Lucida Construction.”

“Lucida Construction and Addison knew the representations in the Conditional Releases of Lien were false at the time they made them because they knew that Lucida Construction had not paid its subcontractors or suppliers,” the company continued.

Following this, subcontractors reacted quickly to secure their payment. At the time of the complaint, four of Lucida’s subcontractors had filed mechanics liens on the Crunch Fitness project.

As part of its complaint, UFI Valdosta is also claiming that the difference between Lucida Construction and its president, Michael J. Addison, is nonexistent, saying that Addison “completely dominated and controlled the finances, policies, and business practices of Lucida.”

UFI Valdosta claims that “Lucida was Addison’s alter ego because Lucida was wholly under the domination and control of Addison, and recognition of Lucida’s existence will result in injustice and inequitable consequences…Lucida was a mere instrumentality for the transaction of Addison’s own affairs.”

The company’s claims extend to saying that Addison and Lucida “comingled” funds and didn’t observe corporate formalities. It adds that Applying the concept of piercing the corporate veil is appropriate here because Addison has extended his privilege in the use of a limited liability company in order to defeat justice, perpetuate fraud, or to evade contractual or tort liability.”

Due to this consideration, UFI Valdosta is seeking to have Addison held personally responsible, rather than Lucida.

Pay has been a significant recent issue for subcontractors

Proper payment has been a significant problem for subcontractors in the last year — a difficult handicap when many subcontractors are looking to expand.

As per a May 2021 report from construction finance company Billd, a large number of nationwide commercial subcontractors are looking to expand their operations during 2021. However, as the report also notes, problems with cash flow and financing could severely hold back this growth.

As per previous Levelset reporting, “Nearly 75% of the subcontractors surveyed noted that they were planning to expand business operations during 2021 — a desire threatened by the fact that 46% of the respondents also noted that they have had problems with maintaining proper cash flow.”

Levelset’s 2021 Construction Cash Flow & Payment Report, a report based on a survey of 764 construction professionals and exploring the challenges faced by those in the US building industry, additionally displayed that subcontractor concern is widespread.

Much like the issues seen by UFI Valdosta and its project’s subcontractors, a major common concern is that general contractors are often delayed in paying subcontractors — or fail to pay at all. One respondent to the survey noted that “lack of prompt payment is putting subcontractors out of business.”

Other respondents to the survey noted a heightened level of concern over their treatment by general contractors, with many showing concern over the lack of penalties for general contractors who hold on to payments owed to subcontractors, as Lucida Construction has been accused of in this case.

The outcome of UFI Valdosta’s complaint could possibly provide subcontractors and project owners a future precedent in any disputed claim over a project, hopefully providing both more assurance over proper payment.