Developer wins $1 million prize in contract dispute with Tonawanda | Local News


A developer who sued the city of Tonawanda over a financial dispute over a warehouse project in the city has won a $1 million verdict in the case.

Zaepfel Development, in a 2016 lawsuit, accused the city of breaching several contract terms that covered the company’s purchase of part of a business park near I-290. Zaepfel claimed that caused the company to spend hundreds of thousands more dollars to prepare the site and build the warehouse, and a six-person jury agreed last week.

“Ultimately, we couldn’t get along between the parties. So we asked six of our fellow western New Yorkers to help us out. They did,” said Kevin Burke, the one of Zaepfel’s lawyers.

Tonawanda plans to appeal the verdict, said Supervisor Joseph Emminger, who turned to outside city attorney Paul Joyce for further comment. Joyce declined to speculate on why he thinks City lost.

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“I wasn’t on the jury, so I can’t tell you what the jury thinks,” Joyce said.

This is one of many legal claims arising from Zaepfel’s Pirson Parkway project. Zaepfel built the facility as a food distribution center for First Source, which abruptly closed it in 2020 when 300 workers lost their jobs.

Zaepfel’s dispute with the city dates back to 2014, when he paid $725,000 for 25 acres in a section of town known as “Mudflats.”

It was renamed the 70-acre North Youngmann Commerce Park in the fall of 2015.

At that time, Zaepfel was completing work on the $18.7 million, 310,000 square foot warehouse and production facility for First Source, a maker of private label candy, snacks and gourmet products and brand.

However, a year later, Zaepfel owner James A. Zaepfel sued the city, alleging breach of contract.

The first point of dispute involved a Lamar Advertising billboard on the property.

Zaepfel insisted that once he took possession of the site from the city in November 2014, the city was required to transfer Lamar’s lease payments to Zaepfel. Instead, Zaepfel claimed, the city accepted a $21,000 lease payment from Lamar for 2015.

“Please give us a copy of the check that was cashed,” Joyce replied.

Second, Zaepfel said in his complaint, because construction would disturb 7.22 acres of wetlands on the property, Zaepfel and the city had to create 14.44 acres of replacement wetlands offsite, on property owned by the business in Genesee County.

The city was supposed to pay some of those costs, and Zaepfel sent the city a bill for $226,500 in 2016 but never received payment, the company said.

“They just gave us a round number and they said, ‘That’s the value of the wetland and you have to pay us for that,'” Joyce said.

Finally, Zaepfel said, the city did not build connections between public roads, sewer lines and water lines to the development boundary, as required by the contract.

The company requested $60,000 for this claim. However, when the city engineer later said that the First Source project required the construction of a retention pond, Zaepfel claimed that this forced the company to purchase an additional 14 acres for $204,000 – minus one. credit for asbestos removal – to ensure there was enough room for retention. pond.

The company then requested $781,000 to cover the costs of acquiring the land and constructing the pond, as well as road and utility connections.

“There was infrastructure on city land. There was no obligation to build infrastructure on Zaepfel land,” Joyce said.

Burke said deals like this between a developer and a municipality are complicated.

“Sometimes, you know, when a project is moving at the speed of light, there are misunderstandings that happen along the way,” he said.

The civil trial in the state Supreme Court took place last Monday and Tuesday morning. The attorneys presented their closing arguments on Wednesday, when the jury deliberated and delivered their verdict.

The jury awarded Zaepfel the requested $781,000 for site improvements, $226,500 for wetland mitigation, and $15,500 for the billboard claim.

The city is considering its appeal options and will wait to see if the judge adjusts the sentence in any way. The parties could also reach a settlement.

There are other outstanding issues.

The project had received approximately $5 million in tax breaks, with much of the incentives tied to jobs retained and created by the tenant.

Zaepfel then found a Rochester-based logistics company, Jemko Transport, to take over First Source’s lease, but with only about 20 workers on site.

The change prompted the Erie County Industrial Development Agency to drastically reduce the terms of the original incentive program, pay out less money over the remaining years of the deal, and claw back the $43,000 already. paid to Zaepfel.

Zaepfel also sued First Source, claiming the company failed to make the final monthly rent payment following his abrupt departure and claiming the company caused significant damage to the building during his exit.

Zaepfel received a default judgment of $795,000 including interest, but has not yet received any money from First Source, Burke said.

Additionally, Zaepfel filed a valuation dispute last month, seeking to have it reduced from $4.7 million in estimated value to $1.5 million.

Finally, a company called Used Warehouse Equipment sued Zaepfel for $300,000, claiming that it purchased racks of pallets left behind, but the developer did not allow the equipment company access to the racks. Burke said the companies were in talks to resolve the claim.


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