The Real Deal New York

Contractor hits JDS with suit over joint venture dispute at Brooklyn condo project

Developer refutes claims
By Kathryn Brenzel | October 05, 2018 03:00PM

Domenick Tonacchio (red), Michael Stern (blue), and renderings of 613 Baltic Avenue in Brooklyn (Credit: Domenick Tonacchio)

A Staten Island-based construction company claims JDS Development’s Michael Stern gradually cut the firm out of a Brooklyn condominium project, instead hiring his own construction management team and hiding the financials of the development.

Tona Construction & Management on Friday filed a lawsuit against Stern and JDS in state Supreme Court in Manhattan, alleging that the developer ignored their partnership agreement to build a 43-unit condo building at 613 Baltic Avenue. Tona accuses Stern, among other things, of withholding financial information on the project and reneging on their agreement to hire the firm as the construction manager. Instead, the lawsuit states, Stern opted to “line his own pockets” and use JDS’ own construction arm at inflated rates.

Tona is seeking at least $65.8 million in damages. Domenick Tonacchio, president and CEO of Tona, could not immediately be reached for further comment.

In an email, Stern called the allegations in the lawsuit “baseless.”

“JDS has built a first class project and complied fully with all of its related obligations, including to Tonacchio,” he said. “We are disappointed in Tonacchio’s actions and intend to vigorously defend ourselves in court against this meritless suit. We also intend to pursue our own claims against Tonacchio.”

Property records show that a joint-venture formed by Stern and Tona took over six sites on Baltic Street and Fourth Avenue in 2014 for nearly $6.8 million. The deal came at a time when Tonacchio was facing some money issues. Tonacchio, through the limited liability company that owned the properties, had filed for bankruptcy in February 2013. The filing came one month after Tonacchio agreed to pay $450,000 to settle a lawsuit involved in the bankruptcy of convicted scammer Scott Rothstein, according to published reports. Rothstein pleaded guilty in 2010 to his role in a $1.6 billion Ponzi scheme ran out of his downtown Fort Lauderdale law firm. The trustee in Rothstein’s bankruptcy case had sued Tonacchio and others in relation to the scheme.

According to the lawsuit against JDS, Tona was supposed to serve as construction manager on the project, but Stern instead employed his firm’s construction arm. Tona alleges that the project’s budget has ballooned under Stern’s watch, reaching an estimated $31.5 million for the construction trades and $6.5 million in other costs. Earlier estimates put the costs respectively at $22.4 million and $923,804, according to the lawsuit.

“Stem is using his control over all aspects of the joint venture and the project to benefit himself personally and his affiliated businesses,” the lawsuit alleges.

Tona also claims that Stern is unfairly preventing it from collecting the full $14 million disbursement it was promised in its partnership agreement and accuses the developer of failing to show any evidence of contributing a promised $5 million to the project.

JDS’ website makes no mention of Tona’s role in the Baltic Street project.