Devices & Diagnostics

No buildings yet at Elk Run biobusiness park, but lawsuit has been filed

People waiting for construction to start at the much-touted Elk Run biobusiness park are getting used to the idea of delayed gratification as yet another construction deadline has come and gone. Elk Run of course is that 2,000-plus acres, mixed-use real estate development in rural southeastern Minnesota whose grand plans once called for the construction […]

People waiting for construction to start at the much-touted Elk Run biobusiness park are getting used to the idea of delayed gratification as yet another construction deadline has come and gone.

Elk Run of course is that 2,000-plus acres, mixed-use real estate development in rural southeastern Minnesota whose grand plans once called for the construction of a biobusiness park along with residential facilities, schools, wellness center and retail. It has been a much-watched project ever since San Francisco financier Steve Burrill declared that he was going to raise $1 billion for the project, some of which would be to fund innovative startups at Elk Run.

The $1 billion fund has proved to be as fantastic as construction of the first building.

And now, after many delays, a lawsuit has emerged.

Project manager Geoffrey Griffin, who was hired by Tower Investments, Elk Run’s California developer, to lead the project is being sued by landowners Judy and Elmer Stock. The land that the Stocks sold to Tower is the site of the first building that would eventually be part of the biobusiness park. The inclusion of the biobusiness park in the overall Elk Run project helped to win state investment to bring infrastructure improvements including a multimillion-dollar Elk Run interchange on Highway 52.

The Stocks, now divorced, charge that when Griffin negotiated a deal for them to sell their land to Tower in 2006 and collected a $382,500 commission from them, he neglected to disclose that he was in fact working for Tower Investments and thereby breached his fiduciary duty. (In fact, the same day that the purchase agreement was signed in August 2006 by Tower and the Stocks, the developer announced that Griffin would be Elk Run’s project manager.)

The complaint alleges that the Stocks were led to believe that Griffin was acting on their behalf because he received commission from them. It also notes that Griffin told the Stocks that he would ask Tower to increase the price they were going to pay them so that he could obtain a $1,000 per-acre seller’s commission, while the Stocks would receive $20,000 per acre.

In his response, Griffin contends that he was merely a “facilitator” as described in the purchase agreement and was neither Tower’s agent nor the Stocks’.

The Stocks are asking Griffin to return the original $382,500 commission and pay a 6 percent annual interest from January 2007 until the commission is repaid in full, according to the complaint.

What is missing from the lawsuit of course is the fact that Griffin broke state law when he accepted the commission from the Stocks. At the time of the sale, Griffin was a real estate salesperson and not a real estate agent, which means that he was barred from accepting commission directly on any land sale. It needed to flow through a real estate agent who was supervising his activities. In fact, the state of Minnesota fined Griffin on this land transaction in 2010, but since then Griffin has met all the requirements and has a new real estate agent license from the state.

Griffin’s lawyer declined comment and the Stocks’ lawyer did not return a call in response to questions about the lawsuit.

A source long skeptical about the business model behind Elk Run has said that the  project will end in lawsuits. I am not sure whether the end is nigh, but it looks like the prediction about a legal tussle turned out to be correct.