Twin Cities small business wins one against subcontractor in wake of Thor Construction collapse

A small-business man, victimized by the failure last year of Thor Construction, has salvaged his fledgling Woodbury business thanks to a January ruling by a Washington County District Court judge.

Judge John Hoffman ordered Egan Co. of Brooklyn Park, a mechanical and electrical contractor, to remove a $62,740 lien placed last year against Justin Butler's Duck Donuts shop, for alleged nonpayment.

The lien placed Butler in default with his lender and landlord, prompting the landlord to withhold $37,240 for tenant improvements.

However, Butler's banker and landlord were patient as Butler had the lien lifted by the court.

Butler, in fact, had paid Thor, the general contractor, to cover the work of Egan in fall 2018.

Butler's lawyer, Lee Hutton, proved that Thor had then paid Egan $91,000 in three separate payments. That contradicted Egan's claim in filing the mechanic's lien against Butler's leased property.

The Egan lien put Butler in default of his bank-loan agreement, which led the lender to temporarily withhold $30,000 in loan proceeds, on top of a hold on $37,240 in tenant-improvement funds from the landlord. Butler lost $60,000-plus he expected to receive from the bank and landlord, threatening Duck Donuts and "risking the accelerated repayment [to Butler's bank] of more than $300,000 in loan proceeds," Hoffman found.

"Egan tried to shake me down," Butler said. "I was obligated to Thor and I paid Thor. [Egan] went after us [anyway]. This caused a default in my lease and problems with our bank."

According to Hoffman's order, Egan later acknowledged it had been paid by Thor.

The court further found that Egan knew the mechanic's lien would harm Butler unfairly. Both Egan and the landlord are represented by the law firm Fabyanske, Westra, Hart & Thomson.

Hoffman granted Butler's request for a temporary restraining order against Egan and further ordered that Egan remove the mechanic's lien against Duck Donuts. Egan and an attorney for Fabyanske did not respond to inquiries last week.

"This hasn't been fun," Butler said. "We had to think about our employees, ourselves and Choice Bank, our lender.

Butler, 36, an accountant, one-time banker and IRS investigator, has proved resilient in his quest to keep his family business alive and his judgment vindicated. He may go after Egan in court to recoup his attorney's fees and financial damages.

He has also researched Minnesota law and concluded that contractors can file "a lien on your home or business with zero documentation. The homeowner or business owner needs to put up a bond for the amount of the lien. It's very one-sided."

He has launched a one-man lobbying campaign, starting with several legislators and the attorney general to change the law.

Butler got into this mess when he hired Thor in 2018, partly because he wanted to support a black-owned company. He didn't know that Thor was heading for collapse, just as it moved in September 2018 into a new north Minneapolis headquarters.

Butler was incredulous when I first met with him last summer over Thor's failure. Its parent company, Thor Cos., had represented itself as a prosperous, $300 million-revenue firm, with offices in Las Vegas and the Twin Cities, including an independent energy-conservation outfit.

Thor said it borrowed $12 million for three floors it planned to occupy in the building and related parking spots.

Hennepin County invested an initial $22 million for one floor in the building and most of the parking ramp built largely to serve its nearby NorthPoint Health clinic across the street. By last summer, Hennepin County had increased its investment to $26 million to cover additional parking.

The Thor financing was arranged by LISC, the national, private-nonprofit lender supported by banks, corporations and foundations, that helps finance commercial-and-residential projects in low-income neighborhoods.

A LISC official said in a recent e-mail that LISC is working on the sale of the Thor space.

Copeland, 64, settled last summer with his longtime lender Sunrise Banks. Sunrise triggered Thor's closure when it demanded repayment of a $3 million loan that Sunrise claimed was in default.

The corner is the site of what was billed as a $100 million private-public reclamation of once-blighted Plymouth and Penn avenues, including a new Estes Funeral Home.