Chicago architect sues Charles City bank, claiming ‘piracy’ over its plans for McQuillen place

By Bob Steenson, bsteenson@charlescitypress.com

The company which designed and helped start building what was then known as the McQuillen Place in downtown Charles City has filed a lawsuit in U.S. District Court, alleging copyright violations against the company that now owns the building, the contractor who is finishing construction on the building and several subcontractors and individuals.

The company accuses the current owner of “piracy” of its intellectual property, saying the company was never paid for its architectural work.

A spokesman for the bank said it is not using the company’s plans and work finishing the building will continue.

The lawsuit was filed in the Northern District Court of Iowa on Nov. 24 by Cornice & Rose International LLC, an Illinois company that provided architectural and construction services for the three-story residential and commercial project on Charles City’s Main Street.

James Gray, the founder, principal owner and managing director of Cornice and Rose, received a 40% equity stake in McQuillen Place Co. LLC, the company that owned McQuillen Place, as part of his compensation.

Construction on the project, which had begun in 2013, stalled in 2017 over financial problems, and First Security Bank & Trust of Charles City filed foreclosure proceedings against McQuillen Place Co. in March 2018, saying payments had not been fulfilled on a $3.88 million construction mortgage.

McQuillen Place Co. filed for bankruptcy in April 2019, and a year later, in April this year, the bankruptcy judge ordered the property sold.

Four Keys LLC, a company formed by the bank holding company that owns First Security Bank, purchased the property.

A little over two weeks ago, Kurt Herbrechtsmeyer, manager of Four Keys and the president and CEO of First Security, announced that construction had resumed to finish the project, now dubbed the Union House.

Contacted Thursday, Herbrechtsmeyer said the timing of the lawsuit was “odd,” because the only work that has been done so far has been to protect the building.

“The things that we’ve done to date have all been centered around securing the building for heat, against the elements, against further deterioration. Our contractor said another year and this roof would have ruined the entire building. Our attorney says we’re well within our right to maintain the building and keep it safe,” Herbrechtsmeyer said.

“There was an open flame heater in the building. We’ve put professionally installed heat in the building to secure it and keep the damn thing from burning down,” he said.

“We’ve been very, very careful with a copyright attorney to find out exactly what we can and can’t do or should or shouldn’t do, and we’re staying within those lines. That’s why we feel very comfortable that we can finish out the building and we will be able to identify everything that we’ve done, and show that we’ve not violated his copyright,” Herbrechtsmeyer said.

The copyright lawsuit by Cornice & Rose was filed against Four Keys LLC, First Security Bank and Trust, contractor Dean Snyder Construction Co., and subcontractors Young Construction Ltd., Perry Novak Electric Inc., Kamm Excavating Corp., Superior Lumber Inc., Mick Gage Plumbing & Heating Inc., and Northern Cedar Service Co. Inc.; as well as individuals Kurt Herbrechtsmeyer and Brian Young.

Also listed was Marco Technologies LLC, although Herbrechtsmeyer said as far as he knows that company is not currently involved in the project.

In a statement, Gray, of Cornice & Rose, said, “This is piracy, plain and simple. First Security should not have taken over the project in the first place — they were acting in bad faith — but the law says, regardless, they do not own our design. …

“We designed the building, the bank never purchased or acquired a license for the design, and the bank can’t just take the design work. It’s theft, effectively the same as stealing a car or robbing a bank,” Gray said.

Herbrechtsmeyer said they have no designs or plans that they are working from.

“We haven’t done any work that we feel violates, according to our attorney, violates any copyright. We have no plans. But you don’t need plans to put light fixtures in where they’re already set up, and things like that,” he said.

He said that until a court tells them they can’t, Four Keys will continue the work to finish the building and make it ready for occupancy. He said the contractor and subcontractors haven’t contacted him about continuing in light of the lawsuit.

“I haven’t had communication with them,” Herbrechtsmeyer said. “Hopefully they’re all talking to their own attorneys and their attorneys will talk to our attorneys. We’re preparing, obviously, to control making sure that things get filed and answered.”

Regarding the ongoing work on the building, Herbrechtsmeyer said the contractor has found some things that are not as bad as originally feared.

For example, he said the support structure for the clock tower can likely be fixed while the clock tower remains in place, instead of having to remove it.

“There are things that are going to move along a little faster, so that’s encouraging,” he said.

The McQuillen Place financing, foreclosure, bankruptcy and sale have been the subject of about two dozen lawsuits and countersuits filed by the various parties in state and federal courts.

Most of the suits have been filed by or against various business entities involving McQuillen Place project developer and Charles City attorney Charles Thomson, one of the former principal equity holders in McQuillen Place Co.

Several of those suits allege that First Security bank directors acted in bad faith and purposefully worked to make the project fail so that the bank could rescue it and be a “hero” in the community.

The recently filed copyright lawsuit alleges that various activities, including the current construction work to finish Union House, uses Cornice & Rose’s architectural work product without a license.

“We’ve warned them over and over again, in front of federal judges, in the press, and in letters and phone calls. They’ve ignored us — as if they don’t have to obey the law like everybody else,” said Gray.

“These rules are not a secret,” Gray said. “This has been federal law since 1990, and our certification has been public information for some time now. We went to great lengths to make sure the bank and its vendors knew about their legal responsibilities. They’ve ignored us, but they won’t ignore us now.”

A U.S. magistrate judge has been assigned to the copyright case, but as of Thursday no other action had been taken in the case in U.S. District Court. Herbrechtsmeyer said they would probably file a response to the lawsuit early next week.

In one action still ongoing in the original bankruptcy case, the bank alleges that documents show the “design fees” for the project were set at $610,000, and that other documents show Cornice & Rose was paid at least $604,408 toward “design fees.”

“He’s owed about $6,000,” Herbrechtsmeyer said. “Obviously that’s a whole different thing than a lawsuit saying ‘you owe me $2 million.’ If the court agrees with us that we’re talking about $6,000, then we’ll bond for $6,000 and we’ll go finish the building.”

The property sale and various other rulings in the bankruptcy case are currently on appeal with the Eighth Circuit Court of Appeals in St. Louis.

The trustee in the bankruptcy case has filed motions for the bankruptcy judge to allow various lawsuits and claims in the case to be “sold” as assets of the estate, effectively dismissing or ending those cases, arguing that they have little value and would cost more to litigate than they are likely to recover.

Those cases that the trustee would end include a suit filed by McQuillen Place Co. against First Security Bank, asking that the liens held by the bank against the property be dismissed because the bank acted in bad faith and did not fulfill its duty to its client, and another case filed by McQuillen Place Co. specifically against three bank directors, Kurt Herbrechtsmeyer, Dick Herbrechtsmeyer and Gene Hall, for “tortious interference” in the contract between the bank and McQuillen Place Co.

Thomson, Gray, Cornice & Rose, and Amelia Management, a property management company of which Thomson is an owner, have filed a resistance to the trustee’s motion, arguing that the cases have a reasonable probability of succeeding, and that if they do succeed against the bank and the directors they could be worth upwards of $7 million for the estate.