City Files Counter Suit Against Chill-Can Developer
YOUNGSTOWN, Ohio – The city Thursday afternoon filed a counter complaint in Mahoning County Common Pleas Court against the developer of the stalled Chill-Can project, seeking at least $2.2 million in damages it says it’s suffered as a result of the long-delayed venture.
According to court papers, the city has also asked the court for a permanent injunction prohibiting the M.J. Joseph Development Co. from disposing, mortgaging, or encumbering any assets it holds at the development site on the city’s East Side.
In March, the city notified the Irvine, California-based company that it was in default of two development agreements it signed in 2017. The notice gave the company 60 days to cure the default or face legal action.
One agreement called for the city to award the developer $1.5 million to help prepare 21 acres so Joseph Development could build a research and development campus dedicated to production of the world’s first self-chilling beverage can.
Another enterprise zone agreement awarded the project a 75% property tax abatement over 10 years to reduce costs.
In return, the company was to spend about $20 million to construct three buildings by October 2017 and hire at least 237 employees by August 2021.
“The city has seen zero, or minimal, permanent full-time employees created, and there is not even one fully completed building,” the complaint said.
In the latest filing, the city alleges that the Joseph Co. has “materially breached” both agreements, by failing to meet construction deadlines, hiring targets and to meet its payroll obligations of $8 million.
According to the complaint, prepared for the city by outside counsel Manchester Newman & Bennett LPA, the city says it awarded the project $1.5 million in development grant money, plus spent another $414,948 in property acquisition and relocation costs, and another $318,523 in demolition and abatement expenses.
The city also claims it has been damaged by the loss of income tax revenue based on the project’s promised payroll of $8 million. The city estimates this loss at $575,000, bringing potential damages to more than $2.8 million.
According to the filing, the city has asked the court to award it damages “in an amount to be determined but in excess of $25,000.”
The city has also requested the court issue a declaratory judgment that Joseph Development is in default of its agreements and that the city be able to “declare all secured collateral immediately due and payable” and have the “right to enforce payment.”
The company had earlier offered to pay the city $250,000 to settle the matter, but the city rejected the offer. M.J. Joseph Development has attributed the delays to issues with utilities and the COVID-19 pandemic.
Jeff Limbian, the city’s law director, said that the filing is a “first step” as the case winds its way through the court. “This is the first conventional step in a long line of hearings and depositions to rectify an unconventional circumstance,” he said. “At minimum, the city is seeking $2.2 million,” as well as any real estate that is part of the complex.
Ground was broken on the project in November 2016 during a ceremony in which Joseph Development’s CEO, Mitchell Joseph, declared his intention to build the world’s first “Chill-Can” production facility.
The ambitious project also foresaw a sprawling, $20 million campus dedicated to research and development of self-chilling technology for other applications. Early renditions even included plans for a helicopter pad.
To accomplish this, the city and Joseph cobbled together small lots along Lane Avenue, where Joseph’s grandfather operated the Starr Beverage company during the 1920s through 1970.
More than four years after that groundbreaking, three empty buildings resembling aircraft hangars sit at the site. Weeds choke the entrance of the complex and there’s been little or no activity at the location since the shell of a third building was erected last year.
M.J. Joseph Development on May 25 filed an initial complaint in court, alleging the city did not have the authority to reclaim any money from the company.
According to court documents, Joseph Development claims that the city does not have the right to recover grant funds for the alleged default, has no right to title and possession of the company’s property, and does not possess a right to monetary damages under the enterprise agreement contract.
“Representatives of the city have repeatedly claimed Youngstown has the powers and avenues of recourse that are not explicitly spelled out in the contracts,” Brian Kopp, the attorney representing the company said last month. “To counter these statements, we are asking the court to clarify the rights an obligations of both parties so MJJDC can move forward.”
The city in its filing Thursday called M.J. Joseph Development’s case “baseless” and has asked the court to dismiss the company’s complaint.
The Business Journal has reached out to Kopp for comment but had not received a reply as of this post.
“Our attorneys have clearly delineated what our losses are,” Limbian said. “We believe the court will have to make a determination as to what the city’s rights are and whether Mitchell Joseph has obligations he has to fulfill.”
For more coverage, visit our “Promises Made, Promises Kept?” section of the website.
Copyright 2022 The Business Journal, Youngstown, Ohio.