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H.M. Kern Corporation being sued for allegedly failing to pay subcontractor on Eastern High bond project

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A Greensboro-based construction company hired in 2021 as the general contractor for two multi-million dollar bond projects for the Alamance-Burlington school system is being sued by a subcontractor claiming it has yet to be paid for its services.

H.M. Kern Corporation, which is based in Greensboro but also has an office along Hanford Road in Burlington, was apparently awarded two separate contracts in 2021 for renovations and expansions at Eastern and Western High schools, based on documents that were presented at the time to school board members.

The school system’s administrators had recommended awarding a contract for the Eastern High School project to a different company – New Atlantic Contracting of Winston-Salem – in early 2021.

However, a subcontractor that has filed a suit in Alamance County civil superior court, Vega Construction of Pilot Mountain, claims that ABSS actually hired H.M. Kern as the general contractor for the Eastern Project; and H.M. Kern hired Vega Construction of Surry County to furnish masonry, “dampproofing” and waterproofing, rigid insulation for masonry, and other portions of the project.

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Vega Construction claims to have completed its original scope of work, as well as subsequent change orders, but has not yet been paid by the general contractor, H.M. Kern.  The complaint states that H.M. Kern hired Vega on May 6, 2021, but does not give a date or general timeframe when Vega completed its work.

In its suit, Vega, the subcontractor, claims that H.M. Kern “unlawfully withheld retainage” – i.e., a percentage of the balance due that’s commonly withheld in the construction industry until a project is complete and/or any defects are corrected – but held back far more in retainage against Vega than the 5 to 10 percent of the total payment permitted under state law.

The Surry County subcontractor is seeking damages against H.M. Kern under multiple alleged claims for relief, including:

  • $120,955.56 for alleged breach of contract by H.M. Kern, plus 8 percent interest, court costs, and attorneys’ fees;
  • $54,444.50 for labor and materials, plus 8 percent interest, court costs, and attorneys’ fees, under an alleged claim of unjust enrichment;
  • Recovery “of special interest” damages against H.M. Kern for an alleged violation of the “North Carolina Prompt Pay Act” for failing to pay Vega for labor and materials it claims to have furnished for the Eastern High School project.

In its suit, Vega further claims that H.M. Kern withheld $22,895.50 in retainage “in excess of the statutorily permitted amount” during the first half of the project and up to $23,798.31 in retainage in excess of the statutorily allowed amount during the second half of the project.  Vega is seeking an award for “recovery of special interest” damages for all amounts that H.M. Kern allegedly illegally withheld against the subcontractor during the project.

Also named as a second defendant to the suit that Vega Construction Company has filed in Alamance County civil superior court is Arch Insurance, an insurance company based in New Jersey which Vega claims furnished a payment bond for the Eastern High School project, naming H.M. Kern as the principal.

Vega is also seeking a separate award for $120,955.56 against Arch Insurance, as well as H.M. Kern, for labor and materials furnished, interest and “special interest” for delayed payments, plus court costs and attorney’s fees.

For the renovation and expansion at Eastern, the approximately $8 million contract with H.M. Kern called for: the construction of an addition to house administrative offices, science classrooms, and labs; construction of a new cafeteria adjacent to the existing one; bathroom renovations; new walkway canopies; masonry “security walls”; and curb and guttering throughout the property, among other finishes.

H.M. Kern also received a second contract worth approximately $7 million to complete a renovation and expansion project at Western High School that consisted of: the construction of a one-story, 8,432-square foot  addition to house new classrooms, a new dining area adjacent to the existing cafeteria; and renovation of 35,221 square feet of existing building space.

The Western High School bond project, however, is not at issue in the lawsuit that Vega Construction recently filed in Alamance County civil superior court.

Both of the renovation and expansion projects at Eastern and Western High School were part of the $150 million bond package that voters approved for ABSS in November 2018.

Vega Construction is being represented by Brian J. Schoolman of the Safran Law Office in Raleigh.  Neither defendant had filed a response by press time.

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