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Chill-Can ordered to repay city $1.5M

YOUNGSTOWN — A Mahoning County magistrate ordered the owners of the Chill-Can site to pay back $1.5 million the city gave it in water and wastewater grants in 2017 for the stalled project.

Magistrate Dennis J. Sarisky of common pleas court, who is overseeing lawsuits filed by both sides, agreed Wednesday with the city that M.J. Joseph Development Corp., the Chill-Can owners, had “breached the contracts” by failing to construct four finished buildings at the East Side location and create 237 jobs by Aug. 31, 2021.

“The city is entitled to damages,” he wrote.

“We are pleased the court ruled in our favor and look forward to litigating the remaining issues in the upcoming jury trial,” said city Law Director Jeff Limbian.

Limbian said he anticipated Joseph’s attorneys would appeal Sarisky’s decision to Judge Maureen Sweeney and once Sweeney ruled, the requirement to pay $1.5 million would “be fairly quickly after that.”

But Limbian said city officials question whether Mitchell Joseph, who owns M.J. Joseph Development and its sister company, Joseph Manufacturing Co. Inc., has the ability to pay back that money to the city.

“That has been a concern of ours for some time,” Limbian said.

He added: “It’s still a question that’s yet to be answered whether there are assets to be returned to the city. We’re a long way away from discovering that just yet.”

Brian Kopp, Joseph’s attorney, couldn’t be reached Wednesday to comment on Sarisky’s ruling.

Sarisky wrote the city entered into a development agreement with M.J. Joseph Development on Oct. 20, 2016, in which the company agreed to “construct and operate bottling and warehouse facilities and employ local residents. In turn, the city would issue payment of certain grant funds, transfer title to certain parcels of land and provide tax incentives to” Joseph. That specifically included the $1.5 million grant.

On July 27, 2017, there was an “amended and restated development agreement” that requires M.J. Joseph to construct four buildings and employ 237 workers by Aug. 31, 2021, Sarisky wrote.

Before entering the agreement, Sarisky wrote “the city law director made clear to Mitchell Joseph by letter dated March 28, 2017, to his attorney that if the Chill-Can owners “failed to fulfill their obligations, the city would seek or could seek a number of specific remedies in addition to monetary damages. Plaintiffs chose to enter” into the agreement.

Sarisky added: “The city’s law department made clear in that letter that with regard to remedies relating to reacquiring the real estate that these remedies were ‘in addition to, and not a limitation of, the damages that the city may seek if we do not resolve the issues between the parties.'”

The city lawsuit seeks other money: $414,948.09 it spent on acquiring 15 properties it bought for the project, which also include relocation expenses. It also lists $318,532.71 in demolition and abatement costs and as of June 2021, at least a $575,000 loss in income tax revenue from the project’s failure. That lawsuit said the “full amount of lost income tax revenue will be proven at trial,” but the city was losing about $18,333 a month. At that rate, the city would have lost about $275,000 in additional income tax revenue.

Sarisky’s decision says the city’s claims on “certain site preparation, acquisition and relocation costs to further help the project” were not part of its summary judgment request “so those costs will not be further evaluated as part of this decision.”

M.J. Joseph’s partial motion for summary judgment was denied Wednesday by Sarisky.

Also, the magistrate postponed the Oct. 17 start of the trial. Instead, a telephone conference hearing will take place that day to “determine the city’s restitutionary damages, if any, and to determine if any injunctive relief is merited,” according to Wednesday’s ruling. Any future hearings will be scheduled that day.

The project broke ground in November 2016, was expected to cost $20.2 million and be in full operation by 2018, producing what the company calls the world’s only self-chilling beverage can.

The company was to have 237 employees and four completed buildings. To date, there is one employee and three unfinished buildings at the 21-acre location.

M.J. Joseph Development incurred about $2.9 million in labor and materials “and opportunity costs in not taking this project elsewhere, including buying equipment, that is sitting idle because we cannot come to a resolution,” Kopp said during an Aug. 4 hearing.

Thomas F. Hull, an attorney hired by the city for this case, said at the hearing that there’s a provision in the contract that permits the city to “take the property back under default. However, nowhere does that provision say that is our sole and only right.”

The city decided to seek restitution for the grants after seeing the project unfold as “a complete disaster,” Hull said Aug. 4.

The city filed a $2.8 million breach-of-contract lawsuit June 17, 2021,contending the company failed to live up to its promises to develop the site.

Knowing the city’s lawsuit was coming, M.J. Joseph and Joseph Manufacturing Co. Inc. filed a May 24, 2021, lawsuit against the city to stop it from reclaiming the $1.5 million in grants. That suit also contends the city doesn’t have any legal rights to money, property and buildings.

In a March 29, 2021, certified letter, the city informed Joseph he had 60 days to construct a number of buildings and hire about 150 workers or it would file a lawsuit. The city followed through June 17 with the lawsuit that was postponed because of the Joseph legal action.

dskolnick@vindy.com

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