Katz Group, former exec trade lawsuits
Katz Group Real Estate and a former senior executive who was involved in the downtown ICE District development are taking each other to court.
In April, ex-katz Group Real Estate president Glen B. Scott filed a statement of claim alleging the company still owed him $6 million after his December termination.
Scott, a longtime friend of Edmonton Oilers owner and Katz Group chairman Daryl Katz, served as one of the ICE District’s public faces prior to being terminated.
The multibillion-dollar downtown redevelopment includes Rogers Place — home of the Oilers — as well as the JW Marriott Edmonton ICE District hotel and Stantec Tower, the tallest high-rise in Canada outside Toronto.
Days after Scott filed his claim, KGRE hit back, arguing in a statement of defence that Scott was owed no additional compensation. In a June 26 counterclaim, the company went on to allege that Scott oversaw excessive delays and cost overruns on the hotel project, and that Scott gave “unduly favourable” leasing terms to a Subway restaurant in the district. In all, KGRE is seeking tens of millions in damages.
Scott denied the allegations in subsequent court filings. Statements of claim and defence contain allegations that have not been proven in court.
Through its lawyer, KGRE declined to comment. Scott and his lawyer did not respond to requests for comment.
‘UNDULY FAVOURABLE’ SUBWAY LEASE
KGRE announced in January that Scott’s time as president “concluded” as of Dec. 31, 2018. The company credited him with four years leading the “build-out” of the ICE District, saying he was “instrumental in bringing the ICE District vision to reality and laid a solid foundation for its future success.”
A few months later, on April 12, Scott and his company, Glen B. Scott Professional Corporation, filed a statement of claim in Calgary Court of Queen’s Bench naming KGRE Inc. as a defendant.
Scott says he and KGRE entered a consulting agreement on Feb. 1, 2017. Under that agreement, Scott would provide the company with legal, management and advisory services, as well as advice regarding government relations, real estate acquisition and development.
Scott also held the position of company president.
Scott claims he was terminated without cause around Dec. 20, and alleges he is still owed about $6 million in incentives and other benefits. He is also seeking a court order voiding a non-competition clause in the contract that he claims is “unreasonable.”
KGRE filed a statement of defence three days later, denying it owes Scott anything. Then, on June 26, it followed up with a counterclaim alleging problems during Scott’s tenure, seeking more than $24 million in damages. KGRE filed the counterclaim as a lawsuit in Edmonton on July 25.
Scott denies the allegations, saying in a court filing that KGRE launched the counterclaim “as revenge, harassment, intimidation, retaliation, to oppress, or to inflict harm” on him and his company. Scott says he was never “disciplined or even spoken to” about allegations raised in the counterclaim.
According to KGRE’S claim, Scott was responsible for leasing buildings in the ICE District. On Dec. 1, 2017, he allegedly entered a lease agreement with Subway Franchise Restaurants of Canada on terms which were “unduly favourable to Subway.”
KGRE claims that at the time the lease was being negotiated, Scott or corporations he controlled “had existing commercial relationships with Subway, or an affiliate of Subway, such that Scott stood to gain financial benefit by granting lease terms ... which were especially favourable to Subway.”
Those terms allegedly included the exclusive right to sell an “exceptionally broad” variety of food in four of the ICE District’s 10 buildings — including cuisine not typically served at the sandwich chain, specifically Mexican food.
KGRE alleges the lease terms weren’t justified by market conditions. The company says it discovered the Subway lease while negotiating the sale of one of the buildings, which “threatened the completion of the sale and damaged KGRE’S relationship of trust with the prospective purchaser.” Katz Group says it was able to remove the terms from the lease after negotiations with Subway.
Scott denies he was responsible for leasing buildings in the ICE District, saying a joint venture partner was in charge of leasing. He denies the terms offered to Subway were unduly favourable.
Scott also denies any conflict or personal financial interest in granting the lease, saying while he had existing commercial relationships with Subway, KGRE and Katz knew about them. Neither raised the issue “either during his employment or on its termination or indeed at any time before the counterclaim was filed,” Scott’s defence states.
It adds: “Katz and KGRE knew about the Subway lease and its terms, and approved it.”
ALLEGED HOTEL COST OVERRUNS
The suit goes on to allege Scott was responsible for construction cost overruns and delays on the development’s high-end hotel. KGRE estimated its losses at $14.5 million.
“Scott neglected to take responsibility for the management of the construction of the hotel,” KGRE’S claim alleges.
“He failed to take any steps to ensure that the construction team, including KGRE employees, design professionals, the construction manager, and contractors, were properly monitored, coordinated, and controlled so as to avoid unnecessary delays in construction time, and unnecessary increases in construction costs.”
Scott claims nothing in his contract guaranteed that the hotel would be completed by a certain date for a certain cost, and that 35 out of roughly 40 contracts on the project were approved by another senior executive.
He further claims he warned KGRE and Katz about issues with a joint venture partner, but that not enough was done.
Scott alleges he also tried to resolve the situation by requesting additional staff to guide the project, but that those recommendations were twice turned down by the company’s board.
‘CONFIDENTIAL INFORMATION’
KGRE’S third claim is Scott and his company retained “confidential information.” While the company says it does not know the full extent of that information, some of it is allegedly contained in Scott’s court filings.
The claim states: “use and disclosure of the confidential information has caused, and will continue to cause, damage to the goodwill and business of KGRE.” Scott denies he breached confidentiality.
He also claims that as of around Dec. 27 — about a week after being terminated — he and Katz were on good terms.
Scott says Katz acknowledged their “long relationship and friendship” and invited Scott to visit him in California.
KGRE is seeking $10 million for alleged damages to its business reputation, $250,000 in punitive damages, and special damages of $14.5 million related to the alleged hotel delays. It is also asking the court to set off damages against claims made in Scott’s lawsuit.