Two Schools

The latest saga began nearly three years ago when Chicago–based construction firm F.H. Paschen contracted to build two schools in Louisiana. The company subcontracted with J&A Construction Management of Jena, La., for concrete foundation and other work at South Plaquemines High School in Port Sulfur, La., and Mildred Osborne Elementary School in New Orleans.

Addie Mills, owner of J&A, learned through the local chapter of the National Association for the Advancement of Colored People that 84 Lumber offered special programs to assist small minority contracting firms like hers with bonding, project supervision, and materials for large construction projects.

Mills started J&A (which stands for Jesus Almighty) in 1983. The company focuses on commercial construction, construction management, concrete work, framing, painting, and roofing, as well as bridge work. “I know the business that well,” Mills says. “I eat, sleep, and breathe it.”

She turned to 84 Lumber primarily because the company offered to provide bonding for the school project, something she couldn’t afford by herself. “They gave the impression they could do all these things, which, in actuality, they could not,” Mills says.

In New Orleans, no sooner had the ink dried on the agreement between J&A and 84, than, Mills says, 84 began squeezing her out, taking over all aspects of the projects. She signed the original Master Service Agreement without having a lawyer look it over, only to discover that it gave the building materials firm 98% of any profits. Hiring a lawyer, she renegotiated the agreement to split the profits 40% to 60%, with the supplier getting the bigger share.

As the concrete work progressed, Mills quickly realized that the supervisors and workers that 84 had hired to perform the concrete work didn’t know what they were doing. Nonconformance reports by a Paschen project manager cite numerous instances of faulty and substandard concrete work, including columns out of line, anchor bolts in the wrong location, poured concrete with honeycombing and voids, and exposed rebar.

Mills claims 84 hired a roofing company that had no experience doing concrete work. She and another contractor on the project say that 84 rotated through six to eight project managers, bringing in salespeople from as far away as Florida who didn’t know how to run a construction project or even order materials.

“My thing was the quality of work and safety,” Mills says. “They left a whole trail of devastation.”

Mills received bonding for the project through the dealer’s insurance arm, Maggie’s Management, named after 84 Lumber president Maggie Hardy Magerko. Mills called in the bonds when she and inspectors noticed mildew in one of the structure’s basements and other installation flaws but found that 84 had registered the bonds in its own name, not J&A’s. Maggie’s Management charged Mills $218,399 for the bonds, but she later discovered that the company only paid $53,526 and pocketed the $165,654 difference, Mills says.

Paschen, itself running short of cash, stopped paying because of faulty work by 84 Lumber; and 84 filed suit in July 2012 against Paschen, seeking more than $10 million in unpaid balances. “Despite 84 Lumber satisfactorily performing its portion of the J&A Subcontract Work on both Projects, 84 has not been paid fully for the work performed,” the company says in its complaint, filed in the U.S. District Court for the Eastern District of Louisiana.

84 Lumber alleges that Paschen owes $1,042,080 on the high school and $808,520 on the elementary school. The company also cites additional sums of $2,489,031 and $731,903 outstanding for “extra work performed by 84 Lumber on both projects that Paschen has refused to acknowledge and for which Paschen has failed to pay 84 Lumber,” according to legal documents.

Paschen responded to the lawsuit, adding J&A as a third-party defendant. J&A then entered the fray, charging 84 with “breach of contract, interference with contractual relationship, fraudulent misrepresentation, conversion, and unjust enrichment,” according to the company’s court filing.

At one point, 84 offered to defend Paschen against any future claims and liens if the contractor would pay $1 million for the South Plaquemines High School project. Paschen agreed and wrote the check. But then, as claims and liens from subcontractors and material suppliers began to pile up, 84 “refused to defend” the contractor, resulting in additional damages and costs, Paschen says in its counterclaim.

In June 2013, 84 filed a motion to stop the trial and settle out of court via an arbitrator, per the terms of the projects’ Master Service Agreement. The district judge ruled in 84’s favor and the dispute headed for arbitration.

Jeff Nobers, 84’s vice president of sales and marketing, acknowledged the case but declined to comment. “As this is in litigation, we will not comment on the case at this time,” Nobers said in an Aug. 13 email. “We will comment after the case is resolved.”