Brooklyn Atlantic Yards Yields Dueling Suits on Tower

Forest City Ratner Cos., the initial developer of Brooklyn’s $4.9 billion Atlantic Yards project surrounding Barclays Center arena, exchanged lawsuits with the Swedish construction firm Skanska AB over claims of design flaws and delays in building a stalled residential tower.

The lawsuits, filed today in Manhattan state court, focus on a contract for the 34-floor “modular” residential high-rise building under construction next to the arena for the National Basketball Association’s Brooklyn Nets that opened in 2012 as the centerpiece of the former rail yard and a symbol of the New York borough’s resurgence.

Skanska, a Stockholm-based firm that has grown to become New York’s second-largest building contractor, seeks at least $50 million in damages for changes to the building that were made without consultation, according to its complaint. Brooklyn-based Forest City Ratner blames Skanska for the project’s problems, citing “tens of millions of dollars” in cost overruns caused by a lack of skill and a failure to adhere to terms of the 2012 contract.

“Skanska’s current stoppage of work constitutes a further breach,” an affiliate of Forest City Ratner said in its complaint. “Skanska’s unilateral decision has needlessly put more than 150 people out of work, and has also compounded damages.”

‘Revolutionary’ Technology

The tower was intended to be the first of its kind to use a “revolutionary” modular technology that would allow much of the building to be constructed in pieces at a factory off-site and then assembled into a tower, according to Skanska’s complaint.

Skanska says it invested in the planned construction method as part of the contract and is losing out due to Forest City Ratner’s public statements questioning the technology. The factory where the modules are being built is owned by a joint venture between units of the two companies, according to Forest City Ratner’s complaint.

The redevelopment project, approved in 2006, has been delayed in part by the recession, which froze credit markets, and by lawsuits filed by nearby residents objecting to the seizure of private land for the project.

Single-Purpose Entity

Skanska’s lawsuit names as defendants Forest City Ratner and Atlantic Yards B2 Owner LLC, a single-purpose entity formed to build the tower. The construction company says the entity is “dominated and controlled” by Forest City Ratner and its affiliates. The entity is being “abused” by Forest City Ratner to wrongfully shield the developer from liability for the breach, according to the complaint.

In its countersuit, Atlantic Yards B2 Owner blames the construction company for bringing the project to a standstill.

“Skanska and the personnel it assigned to this project lacked the skill, experience and diligence to complete the project in accordance with the promised schedule and price,” the developer said in the complaint. “The more Skanska floundered, the more it manufactured excuses to evade responsibility for its own malfeasance.”

Forest City Ratner claimed to have “cracked the code” for the modular technique -- an assertion that turned out to be false, leading to the delay, Richard Kennedy, the co-chief operating officer of Skanska’s U.S. unit, said in an e-mailed statement.

‘Steadfastly Refused’

“Forest City Ratner has steadfastly refused over many months to engage in an honest dialogue about the serious commercial and design issues facing the project,” Kennedy said. “Now, rather than acknowledging their problems, they are slinging mud at Skanska.”

Greenland Holding Group Co., based in Shanghai, agreed in December to buy 70 percent of the site, excluding Barclays Center and the tower at the center of the litigation. Greenland isn’t named in either suit.

The case is Skanska USA Building Inc. v. Atlantic Yards B2 Owner LLC, 652680/2014; and the countersuit is Atlantic Yards B2 Owner LLC v. Skanska USA Building Inc., 652681/2014, New York State Supreme Court, New York County (Manhattan).

Before it's here, it's on the Bloomberg Terminal.