The biggest membership warehouse club operator in Central America and the Caribbean won a roughly $4.4 million award in a lawsuit alleging faulty construction at its Flagler Station warehouse.
PriceSmart claimed in its complaint that the concrete floor slab at its 323,494-square-foot facility at the sprawling industrial complex in northwest Miami-Dade County had cracks. In some places, the fissures widened to holes and pits, endangering employees and heavy duty equipment, according to the complaint.
PriceSmart filed suit in 2019 and amended its complaint last year, suing general contractor Marcobay Construction as well as an affiliate of Flagler Global Logistics, which developed Flagler Station. PriceSmart also sued FGL Property Company, which was a guarantor.
Flagler Global Logistics is a subsidiary of Miami-based Florida East Coast Industries, which in turn is the parent of the Brightline passenger train.
PriceSmart paid $45.6 million for the land at 11441 Northwest 107th Street, records show. The price included an agreement that the Flagler Global Logistics affiliate would build the facility. The deal closed in 2017, after the warehouse was completed, according to PriceSmart’s complaint.
The claims against the Flagler Global Logistics affiliate and its guarantor were settled in September, while those against Marcobay Construction went to a three-day bench trial.
Following that trial, Miami-Dade Circuit Judge Michael Hanzman last week ruled against Marcobay, determining that the entire warehouse floor has to be replaced.
PriceSmart proved “replacement is necessitated by the [shoddy] workmanship and defects
in the original floor,” Hanzman said, according to a transcript of the hearing last week. “They are not required to take what is a pair of blue jeans and try to turn it into a tuxedo. They bargained for a tuxedo, they paid for a tuxedo, and they [are entitled] to rip up this pair of blue jeans they got and lay a proper tuxedo, period.”
The transcript also shows that Hanzman reduced an expert-determined floor replacement cost of $4.8 million by a couple of hundred thousand dollars for items he concluded were not compensatable. This brought down the final award to roughly $4.4 million, according to PriceSmart’s attorney Eleanor Barnett.
A written order with the final amount is expected to be issued in the coming days. The final award is to be reduced by the amount PriceSmart received in a settlement with Flagler Global’s affiliate, according to the hearing transcript. Although the settlement is confidential, the hearing transcript shows it was for $2.1 million.
Barnett said that PriceSmart continues to use the space, but the floor issue has been a “hindrance.”
“They spent $45 million for the land and the building of the warehouse and they got a defective floor. It was clear there were workmanship errors,” she said. The judge “understood that it is likely a systemic problem throughout the entire floor and the most cost-effective way to repair it is to start over again.”
Marcobay Construction and its attorney did not immediately return a request for comment.
In court filings, Marcobay in part argued it bears no fault because the alleged cracks resulted from “the floor being under-designed for the use of the heavy forklifts and equipment” like those that PriceSmart uses.
Also, the issue partly stems from a vague description in the construction agreement that merely said PriceSmart will use the facility as a warehouse and distribution center, Marcobay argued in court filings. This could mean anything from warehouses using forklifts weighing up to 12,000 pounds to warehouses using much smaller machinery.
“As a result of this failure to communicate, the engineers and architects failed to adequately design the warehouse floor for the wear caused by” PriceSmart’s heavy forklifts, Marcobay said in an August 2020 filing.
The Flagler Global Logistics affiliate placed blame on the warehouse architect, structural engineer and two labor and materials subcontractors. Most of these claims were put to rest as part of the September settlement, and any remaining claims against subcontractors also were resolved before the trial, said Flagler Global Logistics attorney Albert Blair.
“We are pleased we were able to resolve, amicably, all of PriceSmart’s claims, as well as all of our claims against the general contractor and subcontractors who actually performed the construction work at the warehouse,” he said.
Publicly traded, San Diego-based PriceSmart, led by Sherry Bahrambeygui, recently started an expansion into South America, opening membership warehouse clubs in Colombia. It was founded in 1993 by Sol and Robert Price, who also founded warehouse store chain The Price Club.
Lawsuits alleging construction defects are common in South Florida, and have targeted some of the area’s biggest developers and construction companies.
Last year, the condo association for Biscayne Beach in Miami sued developer Two Roads Development, general contractor Plaza Construction and 14 other companies alleging construction defects. The same year, the condo association for Faena House in Miami Beach also sued the developer, general contractor and subcontractors for a laundry list of alleged construction defects.
And in 2019, condo owners at One Ocean condo tower in South Beach sued Jorge Pérez’s Related Group over allegations of shoddy construction.