South Bend sues developer Matthews for failure to open downtown grocery store, pharmacy
SOUTH BEND — While the South Bend Redevelopment Commission has formally sued East Bank developer David Matthews, another local entity that gave Matthews nearly $5 million will wait until February to decide on legal action.
In a lawsuit filed Jan. 20, the Commission argues that Matthews’ company Commerce Center LLC violated a development agreement formed in June 2017. In exchange for $5 million from the city, Matthews agreed to build a high-rise apartment building at 300 E. LaSalle Ave., and to open a grocery store and pharmacy on its ground floor.
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Despite pandemic-related delays postponing the project deadline for two and a half years, Matthews failed to open the full-service grocery and pharmacy by Dec. 31, the city says. At Matthews’ request, the initial deadline of April 21, 2020, was pushed back twice.
On Jan. 12, the city served Matthews’ company a written demand to repay $7.5 million for a breach of contract. The amount combines the $5 million award with a 150% penalty, as stipulated in a so-called clawback provision.
Eight days later, with no money returned, the city filed its lawsuit.
Meanwhile, the South Bend-Elkhart Regional Development Authority is waiting on Matthews’ response to a written notice that he breached his contract with the RDA.
The organization awarded Matthews $4.9 million of state money for the same project and has twice decided to extend his deadline. When Matthews came to the RDA’s December meeting to request more time, its board members refused.
A letter sent Jan. 12 by Stephen Studer, the RDA’s attorney, informed Matthews he has 30 days to “cure the material breaches” of an unfinished grocery store and pharmacy. Otherwise, he must reimburse the RDA or potentially face another lawsuit.
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Matthews declined to comment on the lawsuit or to say how severe a blow the $7.5 million would deal to his business. As for the RDA's letter notifying him of a breach of contract, he said his attorneys are in touch with Stephen Studer, the RDA's attorney.
"We are continuing to work on the grocery store and make improvements to it to reopen it soon," Matthews said, "once contractors have completed their upgrade.”
He did not offer an estimated date.
Matthews previously told The Tribune that he believes the makeshift assortment of food items he offered for sale on Dec. 31 fulfilled his legal obligation.
“We did what we had to do to cover our butts,” he said on Jan. 12, the same day the Redevelopment Commission voted to pursue legal action.
Matthews did not show up to the meeting to defend himself, stoking the ire of commissioners and residents who took offense to his last-ditch effort.
Both contracts say a full-service grocery store must sell fresh fruits and vegetables; fresh and uncooked meats, poultry and fresh or frozen seafood; and dairy products. It also must sell three of the following four categories: canned foods, frozen foods, dry groceries and baked goods, and non-alcoholic beverages.
The pharmacy, which Matthews said he intends to open in the nearby Commerce Center, must be stocked with prescription drugs, common over-the-counter drugs and “a selection of other common pharmacy consumer items.”
Read the city's full complaint below:
Email South Bend Tribune city reporter Jordan Smith at JTsmith@gannett.com. Follow him on Twitter: @jordantsmith09
This article originally appeared on South Bend Tribune: South Bend sues developer Matthews for failed grocery store, pharmacy
