A Hamilton County Circuit Court lawsuit says some agents involved in a hotel and conference center project at Canyon Ridge on Lookout Mountain began working for a rival project.
Canyon Ridge Resort LLC, Singing Sisters LLC and Scenic Land Company LLC are suing Sterne Agee & Leach Inc., Grove Street Partners LLC and Edmund J. Wall of Atlanta.
Developer Duane Horton was initially involved with Randy Baker at Canyon Ridge on a project to build a $100 million Starwood Golf Resort at the location south of the Trenton-LaFayette Highway.
Mr. Horton and other investors in Singing Sisters Falls LLC bought over 400 acres adjacent to the resort site as an investment.
The suit says, "Despite serving as Canyon Ridge's investment banker, its bond underwriter and as one of Canyon Ridge's managers at different times, Wall and Sterne worked at odds with Canyon Ridge and in support of a competing project for their own benefit.
"Grove Street conspired with and, on information and belief, employed Wall and Sterne and joined in their work at odds with Canyon Ridge."
It says a group led by Mr. Baker decided to build a less expensive project featuring a Sonesta Hotel.
Stone Agee & Leach is headquartered in Birmingham. Grove Street Parners is based in Atlanta.
The suit says by January of 2010 "everything had fallen into place for Canyon Ridge's project. Canyon Ridge had acquired the land and signed an exclusive Luxury Collection Franchise License with Starwood Resorts. Starwood's outside consultant, Paul Wischermann, performed a financial analysis indicating that the project would be highly profitable, a projection verified by two independent feasibility studies conducted by leading industry experts.
"The Canyon Ridge team was rounded out by the additional support of Ryan Companies, ESG, River Street Architecture and Hart Howerton, a world-class development team.
"Through Singing Sisters, the Canyon Ridge team had also acquired land surrounding the hotel to develop or sell after the hotel opened. Finally, Walker County, Ga., was behind the project, lending its financial support and credit rating to the project's bonds."
The suit says Mr. Baker "fell onto hard financial times and, desperate for funds that the Canyon Ridge project would not provide him, recruited Wall to develop a project more lucrative to himself, Sterne and Wall, to compete with Canyon Ridge's project.
"On information and belief, Wall contacted Grove Street, a commercial real estate development company Wall and Sterne had previously worked with, and enlisted them to assist in creating and promoting a competing project that would be more lucrative for both Baker and Sterne.
"Grove Street, with Wall's, Sterne's and Baker's guidance, planned to build a Sonesta hotel on the same site where Canyon Ridge's Starwood hotel would have stood."
The suit says Walker County eventually backed away from the initial Starwood proposal due to the competing project.
It says Sterne and Wall resigned as Canyon Ridge's bond underwriter on Sept. 15, 2010, but nine days later joined Canyon Ridge's board of managers at Mr. Baker's request "assuming fiduciary duties to CRR despite their clear conflict of interest."
The suit says Mr. Wall's "first act as a Canyon Ridge manager was an unsuccessful attempt to oust Horton as president of Canyon Ridge."
The complaint says, "Next, Wall - while simultaneously serving as a Canyon Ridge manager and working for the competing Grove Street project - reduced the amounts of recovery zone bonds that Canyon Ridge had received from the state of Georgia as part of the hotel development plan. Wall had helped Canyon Ridge execute the request for the RZBs, but did not inform Canyon Ridge of the reduction in the bonds' size because he intended to use the bonds for his competing Grove Street project, which was smaller in size and required a smaller RZB allocation."
The suit says Wall and Sterne "began simultaneously working as Walker County's 'financial advisor'. Accordingly, by late October, Wall and Sterne were serving in, or had served in, conflicting roles as 1) a Canyon Ridge financial advisor and bond underwriter, or a Canyon Ridge manager; 2) Walker County's financial advisor, and 3) on information and belief, working for Grove Street supporting and promoting the competing project. Wall and Sterne repeatedly used their influence in all three positions to thwart Canyon Ridge's efforts."
Neither one of the hotel projects got off the ground.
The suit, filed by attorneys Robert Manley and Avery Williams of Dallas, Tex., and Joe DeGaetano of Chattanooga, asks unspecified compensatory and punitive damages.