JDS sues 111 West 57th contractor, insurer over shoddy work and “blunderbuss requests”

Developer claims poor HVAC installation led to water damage

JDS Development's Michael Stern and 111 West 57th Street (JDS)
JDS Development's Michael Stern and 111 West 57th Street (JDS)

Fool me once, shame on you; fool me twice, you’re fired — and see you in court.

That’s the approach JDS Development is taking toward a contractor once employed at 111 West 57th Street, its luxury residential skyscraper on Billionaires’ Row.

In a lawsuit filed last week in New York State Supreme Court, the developer claims contractor Copper II failed to properly install the HVAC system at Steinway Tower, blowing deadlines and causing water damage on 10 floors.

The developer is also suing the contractor’s insurer, Talisman Casualty, over $11.7 million in damage claims, and wants the court to invalidate $6.9 million of what it calls “willfully exaggerated” liens brought by Copper.

The complaint alleges that JDS first put Copper on notice in November 2018, telling the contractor it was behind schedule installing overhead piping, completing the building’s mechanical rooms and circulating water needed for the HVAC system, among other tasks.

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Before landing the job, Copper was required to deliver nearly $23.5 million of surety bonds, an insurance instrument meant to protect JDS against damages or liens Copper might cause. Las Vegas-based Talisman Casualty holds the bonds.

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Things came to a head in July 2019, when on three separate days, JDS documented “extensive damage” across floors 10 to 15 and 27 to 31 from water leaks Copper allegedly caused by failing to properly install the HVAC system. According to the lawsuit, the contractor agreed to a new deadline of installing the system on two residential floors per week, with work on floors 44 and below completed by Aug. 15.

But by early 2020, JDS was fed up. It fired the contractor, repaired the damage and fulfilled the rest of Copper’s contractual obligations at its own expense, according to the complaint.

In March, JDS initiated its claim on an $11.7 million bond held by Talisman. Meanwhile, Covid-19 was spreading throughout the state, and two weeks later, Gov. Andrew Cuomo ordered non-essential businesses to close — including JDS’s office.

Talisman responded to JDS’s bond claim in a letter dated March 16, allegedly making clear it was in no hurry to pay out the $11.7 million bond. According to JDS, the letter reached its shuttered New York office and “unconscionably demanded a response to blunderbuss requests” for documentation of 36 specific items related to the claim “within 20 days of receipt.”

Nine months later, the developer will be expected to produce its own receipts — $11.7 million worth — in court.

Talisman Casualty did not immediately reply to a request for comment. Copper II could not be reached. JDS Development declined to comment.

This isn’t the first time that JDS has dealt with legal issues at 111 West 57th Street. Early investor AmBase has fought in court since losing its $56 million equity investment in a 2017 foreclosure. Prior to that, webs of LLCs revealed the project’s already complex funding structure.

Meanwhile, three units in the building went into contract during the pandemic.