The Nobu Hotel Chicago: Where Did The Money Go? | The Hotel Experience

written by Dayna Anderson

CHICAGO – A federal jury in Illinois awarded NHC LLC (“NHC”), the developer of the Nobu Hotel in Chicago, approximately $23 million, finding against the design builder of the hotel, Centaur Construction Company Inc. (“Centaur”), and its executives.

On April 16, 2018, NHC entered into a design-build contract with Centaur for construction on the project for a Guaranteed Maximum Price of $48,257,000.  Centaur worked on the project until October 2019, at which time NHC terminated Centaur.  During Centaur’s time on the project, NHC paid Centaur 99% of the contract amount. However, as of the time of termination, Centaur had not completed hotel construction and did not issue any change orders to NHC.

During the trial, the jury relied on expert witness testimony in determining its award. Specifically, testimony was given related to the cost to complete the construction of the project following Centaur’s termination, as well as an analysis of the disparity between NHC’s payments and Centaur’s use of these payments for Project-related expenses. Ultimately, the jury heard testimony that:
• Based on a funds tracing analysis, Centaur used over $10 million of NHC’s project payments to fund non-Project-related expenses, including personal withdrawals by Centaur’s executives, repayment of personal loans, payments to limited liability companies with no project-related purpose, among others;
• Numerous of Centaur’s subcontractors performed work on the project but were not compensated for their work. NHC paid Centaur’s subcontractors $9.5 million; and
• In total, NHC incurred approximately $21 million in additional costs to complete the Project (including NHC’s payments to Centaur’s subcontractors) as a result of Centaur’s actions.

The jury’s $23 million award included approximately $20.5 million in compensatory damages:
• $9.5 million for NHC’s payments to subcontractors that Centaur failed to compensate;
• $10.8 million to pay a different company to finish the hotel following Centaur’s termination; and
• $150,000 in attorney fees NHC paid to settle lawsuits and disputes from unpaid vendors,

The award also included over $2.5 million in punitive damages:
• Centaur was ordered to pay $630,000;
• Mr. Tsaparas was ordered to pay $1.5 million; and
• Mr. Alexopoulos was ordered to pay $400,000.

Nicole Wing, Josh Orweiler, and Cody Libman of Vedder Price represented NHC. Dayna Anderson and Noah Baird of Breakwater Forensics, LLC provided expert witness services and testimony on behalf of NHC.

Dayna Anderson is co-founder and senior partner, Breakwater Forensics, LLC, Chicago.