‘Dishonesty’ and ‘fraud’?: Rock Hill files lawsuit against Tepper company over failed project
The city of Rock Hill filed an adversarial lawsuit Wednesday against GT Real Estate Holdings, LLC, in federal bankruptcy court in Delaware.
The lawsuit was filed as part of the ongoing bankruptcy proceeding that GT Real Estate filed in June. GT Real Estate is the company Carolina Panthers owner David Tepper specifically created to build the team’s headquarters and practice site in Rock Hill. That project ultimately failed and has led to a host of court battles.
In its lawsuit, Rock Hill claims GT Real Estate breached its contract with the city through “fraud” and “dishonesty” over the Panthers’ failed project.
The city wants a jury trial.
“GTRE’s conduct in breaching the contract is characterized by dishonesty in fact, unfair dealing, or the unlawful appropriation of the city’s property,” the lawsuit states. “GTRE is liable to the city for breach of contract accompanied by fraud.”
Rock Hill’s city council met Wednesday morning in a special session to discuss a pending lawsuit. After meeting in executive session for about an hour, council unanimously voted in open session to file the complaint. Council member Kevin Sutton was not at the meeting.
“The last thing we wanted to do was end up in a lawsuit, so we worked as hard as we could to save the taxpayers from having to worry about this, but we reached a point where it’s just time,” Mayor John Gettys said after the meeting.
He said the city’s filing speaks for itself.
“The city has not given public statements about this because it’s a legal matter and we’ll refrain from doing that because it hurts the people of the city of Rock Hill should we get into a back-and-forth with other parties in this lawsuit,” he said. “The petition that will go into bankruptcy court clearly lays out all the facts and if you’ll remember at the very beginning of this episode earlier this year, we said, ‘Facts are stubborn things,’ so ... you’ll have a good feel for all the details.”
What’s in the lawsuit?
In the lawsuit, Rock Hill wants the $20 million it spent on the project, plus damages the city says were caused by GT Real Estate’s breach of trust, fraud, and dishonest dealings.
The lawsuit alleges GT Real Estate breached the agreements between the city and the real estate company to build the headquarters, which was projected to spur as much as $100 million in economic development in Rock Hill.
The lawsuit claims “GT Real Estate failed to timely and effectively cooperate with and agree to any initial bond issuance in an amount sufficient to fund the project fund with at least $135,000,000 but less than maximum project fund amount” as prescribed in the agreement between the two entities.
Rock Hill also alleges GT Real Estate, by failing to deliver information and documents about the project’s financing, was at fault for the city not being able to get at least $135 million in bonds for the project, the lawsuit states.
“GTRE failed to timely provide the bond team the necessary documents and information as to the development of the project, failed to sign and deliver the documents necessary for the issuance of tax-exempt bonds and twice prevented the city from proceeding to an initial bond closing,” Rock Hill stated in the lawsuit.
Bond dispute
GT Real Estate halted construction in March on the Rock Hill site, which was expected to be completed in 2023. Then, the company filed for bankruptcy in June after claiming Rock Hill failed to issue millions of dollars in bonds for the project.
But the city’s lawsuit claims that in January 2022, GT Real Estate wanted to scale back the project to include only the practice site, using some financing other than bonds. The city also stated it was ready to market the $135 million in bonds in January, but GT Real Estate told the city not to proceed.
“In January 2022, the city was prepared to market bonds in an amount sufficient to fund the project fund with at least $135 million,” the lawsuit states. “However, on January 13, 2022, GTRE instructed the city not to proceed with the bond offering. Further, on January 13, 2022, GTRE advised the city that GTRE was likely to be unable to proceed and would have to scale the project down to include the Panthers’ facilities only, using some other financing methods.”
Additionally, the city alleges that GT Real Estate, as early as 2021, refused to agree to tax agreements that would have allowed the bonds to be issued.
“GTRE prevented any bond closing from occurring in March 2021 and thereafter by refusing to agree to a commercially reasonable tax certificate, by failing to provide documentation and certifications as prescribed in the FCAA and failing to cooperate as prescribed in the FCAA,” the lawsuit states.
And a year before GT Real Estate filed for bankruptcy, the company was unable to finalize a deal with Atrium or any other hospital operator at the site, the lawsuit alleges. GT Real Estate also was not able to sign a hotel operator for a planned hotel at the site, the lawsuit alleges.
GT Real Estate has not yet responded to Rock Hill’s lawsuit in court documents.
Efforts to reach lawyers for GT Real Estate in the bankruptcy proceeding Wednesday by email were not successful.
What happens now?
The city’s lawsuit against GT Real Estate marks the fifth legal action involving GT Real Estate and three other Tepper-owned companies over the failed project.
As part of the ongoing bankruptcy proceeding, creditors, including York County, Rock Hill and dozens of contractors, want at least $90 million from GT Real Estate.
York County has sued GT Real Estate and other companies owned by Tepper, including DT Sports Holding, Tepper Sports Holding, and Appaloosa Management, as well as the city of Rock Hill. That suit is pending in federal court.
GT Real Estate has filed counterclaims asking for an injunction to stop York County’s lawsuit.
Additionally, the creditors, York County and Rock Hill all want the pending bankruptcy proceeding moved from Delaware to South Carolina federal court. It remains unclear when a federal bankruptcy judge in Delaware will rule on the change of venue.
This story was originally published September 7, 2022 at 12:46 PM with the headline "‘Dishonesty’ and ‘fraud’?: Rock Hill files lawsuit against Tepper company over failed project."
