AI-assisted summaryTucson developer The Gadsden Co. is being sued by a third investment company, KC Lillian Court, over an alleged lack of progress on an apartment project.KC Lillian Court alleges breach of contract and misuse of funds exceeding $1 million.Previous lawsuits and a criminal indictment against The Gadsden Co. and its founders are ongoing.A third investment company is suing a well-known Tucson developer, alleging little progress was made on an apartment project on Tucson’s west side over a five-year span.KC Lillian Court, which is tied to real estate investment firm Holualoa Companies, sued The Gadsden Co., a real estate development company run by Adam Weinstein and Gerald Dixon, on June 2. This lawsuit followed lawsuits by two other investment companies and a criminal indictment by a federal grand jury.Disputes against The Gadsden Co. reached a key point in the summer of 2024 when a private arbitrator found that it had defrauded investor Allen Sands. After two of Sands’ companies sued The Gadsden Co. and its founders, a Pima County Superior Court judge sided with Sands in May, saying one of his companies, AWS Funds I LLC, was entitled to millions of dollars in damages.Now, KC Lillian Court LLC, which has Holualoa as a member, is suing Gadsden and alleging breach of contract, among other accusations.KC Lillian Court and Gadsden formed a third company, Lillian Court, to construct an apartment community, according to KC’s lawsuit.“Gadsden’s actions violated the Operating Agreement for Lillian Court and have harmed Lillian Court,” the lawsuit contends.The lawsuit states Lillian Court owns a property in Tucson at 885 W. Congress St., which was contributed by Gadsden. Lillian Court’s purpose was to construct a 32-unit apartment community, including 50 ground-level parking spaces, according to court documents. KC alleges that it contributed $1.73 million for its membership in Lillian Court.KC claims that although the companies formed Lillian Court in January 2020, minimal progress has been made on the project. The investment company said it began looking into the project’s finances after Gadsden wanted to pivot the development to a different purpose and asked KC to contribute more capital, the lawsuit says.In reviewing the finances, KC learned that Gadsden caused Lillian Court to pay more developer fees to Gadsden even though there was no development agreement, KC alleges in the lawsuit.“The improper loan and development fee that Gadsden paid to itself exceeds $1,000,000, which is more than allowed by the limitations imposed on Gadsden by the operating agreement,” the lawsuit says.KC also claimed that Gadsden failed to pay property taxes for Lillian Court over the past five years.After Lillian Court had been named as a garnishee in a garnishment action, Gadsden failed to inform KC about the garnishment application and failed to obtain approval from KC when it hired an attorney for Lillian Court, the lawsuit contends.Lillian Court was also named as a defendant in another case between The Gadsden Company and Allen Sands’ companies.In the June 2 lawsuit, KC asked the court to remove Gadsden as manager and member of Lillian Court, accusing Gadsden of breaking the operating contract. The investor requested damages in an amount to be proven in trial, plus pre-and post-judgment interest and attorneys’ fees.KC alleges it tried to resolve the issues informally, but Gadsden failed to address the issues. The company then tried to initiate mediation, but Gadsden “failed to respond or agree to mediation within the parameters set by the Operating Agreement,” the lawsuit says.This led KC to turn to the courts, attorneys said.The Gadsden Co. maintains it is in active discussions with all parties involved “to achieve a swift and mutually agreeable resolution.””We are confident these collaborative efforts will lead to a positive outcome, and we do not anticipate the need for litigation to proceed,” The Gadsden Company said in a statement.View in new tabWhat is The Gadsden Co.?The Gadsden Co. is a real estate development company that has been operating in Arizona since 2006. The company was founded by Weinstein, who now serves as its president and CEO, and Dixon, who is its chairman.The company has been developing Tucson’s Mercado District, located in the historic Menlo Park neighborhood west of downtown. The vibrant and pedestrian-friendly Mercado District is nestled at the base of Sentinel Peak, known as “A” Mountain. It boasts upscale homes, retail shops, fine dining, cafes, a Mexican bakery and more.Some of the company’s projects include the popular MSA Annex, the Mercado San Agustin, and a $110 million mixed-use project known as the Bautista.What is happening with the civil cases?Gadsden faces lawsuits from two other companies, AWS Funds I LLC and IB New Ventures, both owned by Sands.In the AWS case, Pima County Superior Court Judge Jeffrey Bergin ruled that AWS was entitled to almost $5 million after it invested in a 59-unit multifamily development in Menlo Park that was never built.In the IB New Ventures case, Sands’ company was a member of another company, Monier Investors Member LLC, along with Weinstein and Dixon, Holualoa Companies and others, according to court records.Bergin placed Monier Investors Member LLC, which operates the Monier Apartments in Menlo Park, under receivership in April. A receivership is a process where a court-appointed official is charged with taking control of assets to preserve, maintain or sell them. Monier Investors Member appealed to the Arizona Court of Appeals over the receivership, according to a notice on May 28.Since then, the receiver, Jeremiah Foster with Resolute Commercial Services, said he found numerous issues with the apartment building and its management in a June 6 st …
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