Jury finds for Pearl West owners in robotic-parking-garage case

BOULDER — An observer standing on Boulder’s Walnut Street looking up at the Pearl West building isn’t likely to notice anything amiss. They’d see a state-of-the-art, 175,000-square-foot brick and glass mixed-use development bustling with office workers, retail shoppers and restaurant-goers.

Beneath the street, however, is a hidden headache for Pearl West’s owners. The building’s innovative robotic parking garage system — thought to be the first of its kind in the West — has been the source of a multiyear legal battle between ownership and the system’s builders.

The current owners — Ten Eleven Pearl LLC and Pearl West Investor LLC, both registered to the Dallas address of investment and asset management firm Invesco Advisors Inc. — say the automated parking system isn’t operational and point fingers at general contractor J.E. Dunn Construction Co., parking lot subcontractor Park Plus Inc., Pearl West’s developer Randy Nichols and the building’s previous owners The Nichols Partnership VII LLC.

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After a week-long U.S. District Court trial held earlier this month in Boulder, a jury determined that Park Plus was in breach of its contract with the Pearl West ownership group and awarded damages in the amount of $802,190.63. Settlements out of court, the value of which have not been disclosed, were reached with J.E. Dunn, Randy Nichols and the Nichols Partnership.

Not only did the lawsuit shed light on flaws in the parking system, but the proceedings also revealed the value of the overall Pearl West development — a dollar figure that had gone unreported since the building changed hands soon after it was completed.

In a 2016 transaction that involved the purchase of an entire business entity rather than a single piece of real estate, Pearl West was sold to its current ownership group for $122.5 million.

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The Pearl West development’s life cycle can be traced back to 2010, when the owners of the Boulder Daily Camera sold the Walnut Street property that had been the newspaper’s home for 119 years. Los Angeles-based Karlin Real Estate bought the building for $9 million.

The newspaper moved its operations the following year. In 2012, Ten Eleven Pearl LLC, led by Nichols, bought the property for $13.5 million.

In 2013, Nichols contracted with construction firm J.E. Dunn, which brought on board subcontractor Park Plus the following year. According to court documents, the contract between J.E. Dunn and Park Plus was worth just over $1.1 million.

A high-tech parking solution

In marketing materials, Nichols touted that the “Park Plus technology allows for vehicles to be transported by a robotic dolly that has a unique lifting technique for handling vehicles directly from the underside the tires,” according to the lawsuit complaint filed in 2017 by Ten Eleven Pearl LLC and Pearl West Investor LLC.

The parking system functions much like a giant soda bottle vending machine. But rather than drop a 20-ounce drink into a slot at the bottom of the vending machine, the parking system is meant to transport vehicles from an upper level and automatically deposit them in pre-assigned, subterranean parking grids. The system allows for more-efficient use of space in dense areas and provides additional convenience and security for vehicle owners.

Ten Eleven Pearl LLC and Pearl West Investor LLC, the plaintiffs in the suit, were represented by attorneys with Boulder-based firm Berg Hill Greenleaf & Ruscitti LLP.

“Once passing through a channel underneath the vehicle in the transfer station, the robotic dolly uses a comb-exchange/finger-grid mechanism consisting of steel extensions to lift the vehicle and transfers it to a shuttle device; each stall in the storage vault is equipped with a simple rack profile that allows the comb-exchange/finger-grid mechanism to lower the vehicle into position to complete the storage procedure,” the suit said.

But the system, completed in 2017, failed to deliver on those operational expectations, court documents show.

“Operational failures and defects”

“The Park Plus automated parking system installed at Pearl West has … operations failures and defects,” according to Ten Eleven Pearl’s complaint. “The cycle time is routinely excessive, and one parking bay lift is frequently unavailable. At times, parkers are unable to retrieve their vehicles.”

Because Pearl West’s owners relied on Park Plus “representations and agreements as to its automated parking system, Pearl West was not designed to or constructed or permitted for traditional manual parking,” the complaint claims.

As a result of the “unreliability of the parking system,” only six customers use the system, which was intended for 61 vehicles, according to court documents.

“In addition to the loss of revenue of paid parkers and the loss of marketability to tenants, the failures of the parking system are so significant that Ten Eleven Pearl has no choice but to explore and employ an alternative parking solution to offer Pearl West’s tenants and guests.”

According to court documents filed by Ten Eleven Pearl, Park Plus informed the building’s owners in August 2017 that the parking system installation was complete.

Pearl West offers roughly 200 traditional parking spaces in an adjacent garage, according to 2015 media reports about the building’s development.

The parking system’s lift bays are still present at Pearl West; however, there were cars parked in front of the bay doors Tuesday blocking access to the bay. A phone number posted next to the entrance to the robotic parking system routes callers to Park Plus.

In the notice of completion, “Park Plus falsely states that the system has been delivered, erected, commissioned and installed per the manufacturer’s specifications,” the complaint said.

The parties in the suit acknowledge that problems with the parking system exist, but they disagree on who is to blame.

Finger pointing

“Both Park Plus and J.E. Dunn have refused and continue to refuse to take responsibility for the parking system’s failures,” the complaint continued. “Park Plus claims there are structural construction defects, for which J.E. Dunn is responsible, that are the cause for the parking system’s shortcomings. J.E. Dunn contends there are no structural issues and that performance of the parking system, or lack thereof, is solely due to the system itself.”

In Nichols’ response to the suit complaint — which includes a counterclaim that certain funds from the sale of the Pearl West property were never disbursed to the seller — attorneys for the defendant “admit that remedial work has been performed on the parking system … and the parking system continues to have operational failures.”

But the cause of plaintiff’s damages “were the acts and omissions of a third party over whom [Nichols’] had no control,” according to court filings from Nichols’ attorneys with Denver-based firm Brownstein Hyatt Farber Schreck.

For its part, Park Plus claims in court documents that any failures of the parking system “are not the result of any fault or breach of Park Plus” and J.E. Dunn “is responsible for construction defects which prohibit the system from working as designed,” according to court documents filed by lawyers with Greenwood Village-based McElroy, Deutsch, Mulvaney & Carpenter LLP on behalf of Park Plus. Attorneys for both the plaintiff and defendants could not be reached for comment.

A Boulder County jury found that Park Plus was at least partially responsible for the system failure, granting damages worth nearly three-quarters of the parking system contract. The plaintiffs have requested that District Court Judge Thomas Mulvahill sign a written judgment to that effect. Court records show the next scheduled event in the case is a review by Mulvahill set for Aug. 1.