Navillus, one of the city’s most active concrete contractors, has reached an agreement with the unions to toss a $76 million judgment against the company, potentially clearing the way for it to exit Chapter 11 bankruptcy.
In an order filed in Manhattan Federal Court on Friday, Judge Colleen McMahon signed off on an intention to vacate the the judgment, which plunged Navillus into bankruptcy back in November. The federal court doesn’t yet have jurisdiction to clear the judgment — the case, which is currently before an appeals court — will need to be remanded to the U.S. District Court for the decision to be finalized.
“This will keep one of New York City’s largest construction contractors in business; it will protect dozens of ongoing projects from disruption, preserve numerous union jobs and provide continuing benefit to the plaintiff funds, and all of Navillus’ stakeholders,” McMahon notes in the order. “This is indeed the rare instance where vacatur of the final order pursuant to the settlement agreement substantially outweighs the interest in preserving final judgments — an interest that this court does not minimize, especially given the judicial resources expended on this matter.”
The vacation is subject to a reorganization of Navillus, according to Thomas Kennedy of Cohen, Weiss and Simon, who represented the unions. “The parties have reached a term sheet so the plan process should be consensual,” he said.
Navillus expects the decision will pave the way for it to exit bankruptcy by October. The company filed for bankruptcy protection last November, two months after it was hit with the federal lawsuit settlement. Five union benefit and pension funds accused the company of evading agreements to use union labor on its projects through a company owned by its CEO Donal O’Sullivan’s brother, Kevin. Navillus appealed the judgment. Because the unions are on board with vacating the decision, Navillus only has to wait for the case to be remanded back to the district court.
It’s unclear what other terms the unions and Navillus have agreed to in order to throw out the massive judgment, which has been described as the largest of its kind.
The case has served as a cautionary tale for companies dabbling in double breasting — operating union and nonunion companies simultaneously. The practice causes problems when the nonunion outfit is merely an alter-ego of the union company, used as a means to avoid contributing to a union’s pension and welfare funds.
“We are pleased to put this process behind us, and we remain focused on delivering for our clients,” O’Sullivan said in a statement. “Our work has continued uninterrupted throughout the process, and with the court expressing its willingness to vacate its judgment after the appeals court remands the cases, Navillus will be able to continue to contribute to the economic vitality of New York City for years to come.”
The company has continued to work on both One Vanderbilt and One Manhattan West, despite initial reports that the projects’ construction manager AECOM Tishman had moved to terminate its contracts with Navillus.