Exclusive: Alorica sued for allegedly breaching contract, interfering with jobs coming to Owensboro

March 7, 2022 | 5:33 pm

Updated March 8, 2022 | 5:20 pm

File photo by AP Imagery

Matt Hayden’s OWB Downtown LLC is suing Alorica for allegedly failing to pay nearly $800,000 that OWB claimed was owed and for not giving up possession of the premises — despite no longer physically occupying their building and previously agreeing via email to terminate their lease early. OWB also claims Alorica is intentionally interfering with a new $7 million lease with Bell Bank, which could jeopardize the bank’s entire move to Owensboro.

As first reported by Owensboro Times on Monday, OWB was suing Alorica for allegedly failing to pay nearly $800,000 that OWB claimed was owed and for not giving up possession of the premises — despite no longer physically occupying their building and previously agreeing via email to terminate their lease early. 

A lawsuit was initially filed in late February in Daviess County Circuit Court. The case has since been moved to federal court. Additional documents — including ​​a motion for preliminary injunction, an affidavit from Hayden, and an email exchange regarding negotiations for early lease termination — were filed Monday.

OWB Downtown is a Kentucky LLC managed by Matt Hayden. Alorica is incorporated under the laws of Delaware with its principal office in California, but is conducting business in Kentucky. Bell Bank is a privately owned interstate bank headquartered in Fargo, North Dakota. Gulfstream Commercial Services is involved as a broker.

Quick Summary

In 2016, Alorica leased the second through fifth floors of the building at 234 Frederica Street and subsequently occupied the space and commenced operations.

OWB Downtown is now seeking an injunction that would force Alorica to fully vacate the premises, and that would enforce a lease termination agreement. OWB Downtown claims the space has sat empty since 2020, and that Alorica “wanted to terminate its lease with Landlord, pay a termination fee, and relieve itself of further rent payments and other obligations under the lease,” according to court documents. 

OWB claims the parties negotiated and reached a termination agreement. 

“As was reported in the local media last June, Alorica publicly announced that it had moved its employees out of the building,” Ed Ray, Gulfstream Chief Operating Officer and Counsel, said in a written statement Monday afternoon. “Around that same time, Alorica hired Gulfstream Commercial Services, LLC to actively market the space for a new tenant to potentially relieve or reduce Alorica’s continuing lease obligations and inject new life into the space Alorica had vacated. The building owner (OWB Downtown, LLC), the City of Owensboro, and Gulfstream Commercial Services LLC, each played a huge role in recruiting Bell Bank to fill that void in our downtown.”

According to court documents, after the lease with Bell Bank was signed, Alorica “saw a chance to improve its business deal with Landlord and has since sought to renegotiate the terms of its lease termination with Landlord. Landlord has a new tenant ready to occupy the space but cannot install it due to Tenant’s refusal to honor the agreement reached by the parties.” 

Ray said Bell Bank’s move to Owensboro would be a win for four parties: for Alorica due saving money; for the Owensboro community due to new jobs and activity downtown; for OWB Downtown due to having a new tenant; for Bell Bank to further grow their company.  

“With office buildings all over the country left empty following the pandemic and current economic conditions, it defies logic as to why Alorica would not honor its agreement with the landlord and openly support a deal that saves Alorica a significant amount of money while simultaneously advancing the best interests of the community where Alorica’s home-based employees reside (per its June press release),” Ray wrote.

Lease agreement between OWB Downtown and Alorica

According to documents filed on Feb. 25 and March 7, OWB Downtown and Alorica entered into a lease agreement regarding the second through fifth floors of the building at 234 Frederica Street in September 2016.

According to documents filed, in early- to mid-2020 Alorica’s employees began working remotely, “leaving the Leased Premises entirely or almost entirely unoccupied.” Then in 2021, Alorica “concluded it would be advantageous to eliminate the Leased Premises from its real estate portfolio,” according to a complaint filed by OWB Downtown.

In June 2021, Alorica Director of Communications Sunny Yu said they had not shut down but were working remotely, writing in an email that “our employees in Owensboro are continuing to work as we transitioned our approximately 250 onsite employees to work-at-home months ago.” 

OWB Downtown and Alorica began negotiations relating to early termination of the lease, according to the documents filed.

According to the March 7 filing, OWB Downtown began searching for another tenant “in order to mitigate the damages of both parties associated with early Lease termination.” A broker, Gulfstream Commercial Services, was also hired to market the premises.

Lease agreement between OWB Downtown and Bell Bank

“Several months” after the space was put on the market, Gulfstream “delivered a viable option for backfilling the Leased Premises” with Bell Bank.

OWB Downtown entered into a lease agreement dated Feb. 15, 2022, with Bell Bank regarding a portion of the building, with payments from the lease expected to exceed $7 million, according to multiple documents filed.

Lease termination agreement between OWB Downtown and Alorica

In the affidavit filed March 7, Hayden said that as early as September 2021 Alorica offered to pay $850,000 “in exchange for simply being released from the rent and maintenance obligations that Tenant would incur over the next several years of the remaining Lease term.”

According to the affidavit, Hayden had a phone conference with Alorica to discuss terms of the early lease termination. His offer was for Alorica to pay $925,000. Per the documents filed, Alorica made a counteroffer to pay $795,000 if it could leave all fixtures, furnishings, and equipment (FFE) for the next tenant.

An email exchange regarding the negotiations was submitted as evidence alongside Hayden’s affidavit.

On Feb. 15, Fahr Juneja of Gulfstream Commercial Services emailed Alorica Executive Vice President & General Counsel Dan Montenaro along with Hayden. Juneja noted that Alorica’s current buyout offer was $450,000. Montenaro responded a couple hours later asking Hayden to call the next morning, writing that “Our CFO is interested in getting this off the books but we are not going to give it away.”

A string of emails on Feb. 16 shows that, following the phone call Hayden referenced, Montenaro asked to confirm the $925,000 offer; Hayden confirmed; Montenaro countered with $795,000 and asked to leave the FFE “as there’s a cost to remove;” Hayden accepted the offer and said he would have a draft settlement agreement for review by noon the following day.

OWB Downtown claims the agreement represented more than $1 million in savings to Alorica.

In the last email sent Feb. 16, Hayden also wrote that “An Alorica rep (either employee or consultant) should plan to meet a Landlord rep at the Premises by the end of the week to turn over the keys, provide a walk-through and documentation of the HVAC, security, and other control systems, and otherwise ensure an orderly transition of the Premises.”

Montenaro replied the following morning, Feb. 17, by writing “we have someone lined up to walk through the building but it won’t be until next week.”

In their initial complaint filed in February, OWB Downtown said on Feb. 17 they transmitted a draft memorialization of the termination agreement but that Alorica stated it disagreed with some details included.

“Since then, Tenant has refused to abide by the terms of the Leasing Agreements, by failing to (a) pay the amounts due and owing to Landlord under the Leasing Agreements; (b) remove Tenant’s property from the Leased Premises; (c) vacate the Leased Premises; and (d) otherwise tender possession of the Leased Premises to Landlord,” the complaint reads.

OWB further alleges that “Upon information and belief, Tenant has directly and indirectly contacted Bell Bank, City of Owensboro officials, and local economic development officials regarding the Bank Lease, Bell Bank, and/or the Leasing Agreements in an effort to leverage a better business deal for Tenant to the detriment of Landlord, and in response to what Tenant perceived as personal slights in the manner by which Landlord retained Bell Bank to occupy the Leased Premises.”

Alorica still in possession of vacant premises, never met employee goal

According the document filed March 7, Alorica “is still in possession of the Leased Premises to Landlord and Bell Bank’s exclusion despite having none of its employees conducting business at the facility” and “has given no indication of when, or if, it plans to vacate and surrender possession of the Leased Premises to Landlord despite its agreement to do so.”

That has left OWB Downtown unable to tender possession of the premises to Bell Bank, which has in turn prevented the bank from commencing operations in Owensboro, according to the filing.

OWB Downtown wrote that every day Alorica remains in possession of the premises, the landlord is at “greater risk for liability exposure to its new tenant” and “loss of the new tenancy entirely.”

Alorica’s history in Owensboro has been troubled since the beginning.

When Alorica announced in 2016 that they’d be opening a location in downtown Owensboro, officials said they’d employ more than 800 people. That number was never met.

In late 2019, the City of Owensboro approved a year-long extension for Alorica to meet payroll targets in order to receive “certain economic incentives.”

The original incentive agreement required that Alorica employ 550 people at $10 an hour with an allowance for 10% staff turnover, while the new agreement required Alorica to employ 400 people at $13 an hour with the same turnover allowance.

Those objectives were supposed to be met by Jan. 1, 2021, rather than the originally set date of Jan. 1, 2020, City Manager Nate Pagan said at the time of the extension.

Also at that time — in November 2019 — Alorica’s Senior Site Director Susan Davis-Boorse said the company currently had 348 employees working at the Owensboro site.

In March 2020, as companies were migrating to remote work, a corporate communications representative for Alorica said they had 230 employees in Owensboro.

Mayor Tom Watson said Friday that it was troubling when Alorica announced last year they were working remotely.

“They stated that they were basically going to vacate the building and everybody was going to work from home. That worried me,” Watson said. “The idea of filling that building up with a couple hundred employees helps our downtown and our restaurants. It’s kind of odd that somebody would be so upset about being able to be let out of a lease since they weren’t able to even (meet the goals they had). We still had spots in the parking garage that were designated to him that they never used.”

OWB Downtown is seeking an injunction as lawsuit unfolds

OWB Downtown filed documents Monday asking for a temporary injunction because they established that a contract existed and “will suffer immediate and irreparable harm without the Court’s intervention.” The injunction would force Alorica to give up possession of the space and allow OWB Downtown to move forward with their lease with Bell Bank.

OWB Downtown has brought claims against Alorica for breach of contract, declaratory judgment regarding the enforceability of the termination agreement, and tortious interference with business advantage.

Regarding the breach of contract, OWB Downtown pointed to the email exchanges during negotiations with Alorica.

OWB Downtown wrote “the Termination Agreement is an enforceable agreement because Landlord’s written exchanges with Tenant demonstrate: (1) an offer and acceptance; (2) mutual assent on the essential terms of the agreement; and (3) consideration. While Tenant may argue the Termination Agreement is not enforceable because it lacks essential terms, such as a timeline for Tenant vacating and tendering possession of the Leased Premises to Landlord, such an argument is misplaced for several reasons.”

OWB Downtown further argues that Alorica is breaching the terms of the leasing agreement by “by refusing to abide by their terms, including payment of amounts due and owing to Landlord under the Leasing Agreements, removing Tenant’s property from the Leased Premises in accordance with the Leasing Agreements, vacating the Leased Premises, and otherwise tendering possession of the Leased Premises to Landlord.”

OWB Downtown says it has been damaged by the breaches, including being unable to re-let the premises and suffering reputational harm in the commercial leasing business and with a new tenant.

Regarding the tortious interference with business advantage, OWB Downtown said Alorica was aware of the landlords’ business relationship with Bell Bank and “attempted to improperly interfere with that relationship for its personal gain.”

OWB Downtown alleges that, in part, Alorica’s “motivation for doing so was improper as it was interfering in Landlord and Bell Bank’s business relationship in an attempt to gain leverage in its own dealings with Landlord.”

The actions have resulted in a net loss to the landlord of at least $5.5 million, according to OWB Downtown.

OWB Downtown further said it continues to suffer immediate and irreparable injury due to Alorica’s conduct, and Alorica failing to tender possession is “tantamount to a trespass on the Leased Premises to Landlord’s detriment.”

“Tenant’s delay in delivering the Premises to Landlord is nothing more than an attempt to extort a more favorable deal for Tenant to Landlord’s unquantifiable detriment,” OWB Downtown wrote, also later adding “there is no way to determine the amount of Landlord’s lost revenue due to prospective tenants deciding to take their businesses elsewhere after witnessing this escapade.”

OWB Downtown claims Alorica would actually “likely benefit” from an injunction rather than be harmed. According to the filing, Alorica has continued making rental payments until termination of the lease. 

“There is no harm to Tenant here as Tenant is not being deprived of space used to conduct its business operations, and Tenant would simultaneously gain the benefits associated with no longer being in possession of the Leased Premises,” the filing reads.

OWB Downtown is also seeking a declaratory judgment that the termination agreement “is a valid, enforceable, and binding agreement between Landlord and Tenant.”

What this means for Owensboro

OWB Downtown is also arguing that the City of Owensboro and the general public are being negatively impacted.

“The City of Owensboro and its residents will benefit from increased revenue influxes associated with an out-of-state business moving in, as well as the increased employment opportunities that come along with such an enterprise,” OWB Downtown wrote. 

The language used in the complaint filed in February indicates that if the issues are not resolved with Alorica, Bell Bank will not be moving into the building. That could jeopardize the bank’s move to Owensboro altogether based on the needs of the company and the spaces available to meet those needs.

Bell Bank publicly announced their planned move on Jan. 31, 2022. The company projected to hire 37 employees by year-end 2022 and grow the workforce to 178 employees by 2026. 

Bell Bank’s Senior Vice President/Mortgage Servicing Director Bob Smiley announced that the transition to Owensboro was decided because of the population and the current market. He said they planned to fill the jobs with current Owensboro residents and didn’t plan to transfer anyone to the new location.

At the time, President/CEO of the Greater Owensboro Economic Development Corporation (EDC) Brittaney Johnson said that the bank would have an immediate economic impact on the community, estimating $50 million annually.

Johnson had no comment Monday regarding the latest issues with Alorica or how it affects the bank’s planned investment.

Watson said after Smiley called with the desire to add an Owensboro branch, the City of Owensboro worked quickly with the EDC and got an incentive package together. 

“We had no idea that there would be an issue like this, which is basically a landlord-tenant issue, not really a city issue,” Watson said. “But the big picture is we need that hole filled and we have a great client. From an economic development side of it, the great thing, we thought, was that as the bank ramped up to nearly 180 employees there would be a downtown building full of good-paying jobs, and it helps us all the way around.”

March 7, 2022 | 5:33 pm

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