Judge Awards USA Parking $5.3M in Deck Dispute

YOUNGSTOWN, Ohio – A federal judge has awarded Cleveland-based USA Parking Systems more than $5.3 million in its dispute with a company that once owned the Plaza Parking garage downtown.

Judge Benita Pearson of the U.S. District Court for the Northern District of Ohio ordered that HEP-EGCC Ohio LLC pay USA Parking $5,380,470 for rental fees and other obligations owed based on the terms of a management agreement signed in 2014.  

However, collecting the award is next to impossible, as it’s unclear whether HEP – an acronym for Higher Education Partners – is still in business. The company’s website and last known phone number have been deactivated. Yet the ruling does lay the groundwork for future legal action in a case that is far from over.

“This is really the first part of the case,” says Lou Frangos, chairman of USA Parking.

USA Parking filed a breach of contract suit in federal court against Eastern Gateway Community College, HEP-EGCC and Store Master Funding VI on Sept. 1, 2020.  The complaint alleged that a management agreement signed between HEP and USA Parking in 2014 was binding and conditional to any future owners of the property.

Judge Pearson’s decision is a partial final judgment and affects just HEP-EGCC, not defendants Eastern Gateway or Store Master Funding. 

In 2012, Eastern Gateway announced a partnership with HEP in which the for-profit company would finance the renovation of the parking deck’s ground floor to accommodate classrooms for the college. It entered into a lease agreement with USA Parking for the space. 

USA Parking purchased the Plaza deck in 2006 for $2 million, records show. In 2014, HEP approached USA Parking about purchasing the building and struck an agreement. 

That agreement stipulated that USA Parking would manage the parking deck at 101 E. Federal St. for another 20 years in exchange for HEP purchasing the deck at a reduced price of $3 million instead of the asking price of $8 million. HEP then surrendered the title to Store Master Funding VI LLC, which then leased it back to HEP, court documents say.

Under the contract, HEP was to pay USA Parking $150,000 a year for the right to 600 parking spaces in the five-floor garage and an annual management fee of $30,000, according to court papers.

Eastern Gateway then purchased the garage and building from Store Master Funding on April 8, 2020, and subsequently informed USA Parking that it would terminate its management agreement effective Aug 31, 2020, court documents say.

Confronted with what the company believed was a breach of contract, USA Parking felt that it had no other choice but to take the matter to court, Frangos says.  

“We just did what we had to do,” he says.

USA Parking continued to collect parking fees and manage the garage, even after EGCC notified the company it was no longer allowed on the premises.

The building houses Eastern Gateway’s downtown classrooms, a college bookstore and The Mocha House café and restaurant. 

Eastern Gateway has claimed that it should not be bound to the agreement since it did not sign the contract with USA Parking, according to court documents.

Eastern Gateway has not had a relationship with HEP since the college purchased the building in 2020, and the ruling has no impact on the school’s operations, a spokeswoman for Eastern Gateway said Thursday. 

In November, the court sided with Eastern Gateway’s request for a preliminary injunction stopping USA Parking from operating the garage. The court also ordered the company to turn over to Eastern Gateway records associated with the operation of the deck such as swipe card codes, rent rolls, equipment and contact information for parking tenants.

At the time, Pearson ruled that the 2014 agreement “makes clear that the parties did not intend for the rights bestowed by the management agreement to run with the land,” according to court papers. 

She also ruled that Eastern Gateway and its parking tenants would “sustain immediate and irreparable injury,” absent injunctive relief. 

However, the judge’s order in November stated that USA Parking could still seek monetary damages, leaving the door open for the court’s most recent ruling.

In April 2021, USA Parking sought an entry of default against HEP, since the entity had failed to plead or otherwise defend its case. The court docket does not list any legal representation for HEP. 

According to a LinkedIn page that was still active, HEP identified itself as an “education management” company that provides start-up capital for community colleges used to construct new facilities. The page also noted the company would “assist with the development of new cutting edge technology so that courses and programs could be delivered in a hybrid or blended fashion and help with the placement of students.”

The LinkedIn page says it had six employees. 

The court on May 4 ruled that HEP was in default as to the issue of liability. The court awarded damages June 16, according to filings.  

HEP has not appealed the ruling.

According to the default judgment, HEP  “engaged in conduct or committed omissions which have otherwise damaged” USA Parking and has denied “its right to enjoy a continued revenue stream until 2034.”

Copyright 2021 The Business Journal, Youngstown, Ohio.