A dispute between two local real estate players over the management of nearly a dozen apartment buildings has spilled into court.
Entities tied to Rick Gregory of Lynx Ventures have filed a lawsuit against Dodson Property Management and namesake Duke Dodson, claiming DPM mismanaged Gregory-owned apartments and seeking $2 million in damages.
Filed in Richmond Circuit Court in late December, the complaint also claims that Dodson himself “fraudulently covered up” DPM’s alleged mismanagement and refused to turn over necessary financial information to Gregory after the parties’ property management agreement was terminated.
Dodson and DPM have denied the allegations in a response filed with the court.
Gregory, currently a principal at Lynx Ventures, is a longtime local developer who’s done plenty of multifamily work in Manchester, including the New Manchester Flats and Textile Lofts apartment buildings, which are among the properties DPM allegedly mismanaged.
He was previously partners with Tom Papa at Fountainhead Real Estate Development before breaking out on his own to launch Lynx in 2018.
Duke Dodson has been managing and investing in properties in the region for more than 15 years. In recent years he’s focused more on development and last summer merged DPM with Alabama-based Evernest and Dodson Multi-Family with Atrium Management Co., a Florida firm.
The lawsuit claims that in 2016, Gregory’s LLCs engaged DPM to act as property manager for 10 residential developments in Richmond. DPM’s duties included overseeing the buildings’ general operations, collecting rent and security deposits, evicting tenants and providing financial reports to the property owner.
The lawsuit alleges that in September 2021 Gregory began to “notice irregularities in the books and records being provided to them by Dodson Management.”
It states that Gregory then conducted audits and uncovered that DPM was allegedly failing to: raise rent to market rates upon the turnover of a unit; investigate unexplained increases in utility expenses; resolve water leaks; pay vendor invoices; advertise and fill units; and, collect rent and security deposits.
Among the alleged issues related to rent and security deposits, Gregory’s camp claims that DPM allegedly failed to collect more than $200,000 in rent payments through the COVID-19 Rent Relief Program and wasn’t maintaining proper security deposit reserves.
The audits also allegedly found that DPM was months behind in filing financial reports for the properties.
“Upon uncovering the widespread negligence and mismanagement,” the lawsuit states, “plaintiffs moved to terminate Dodson Management from its role as property manager.”
The lawsuit claims that in May 2022, the LLCs and Dodson terminated their property management agreements, which allegedly included a clause that compelled Gregory to pay DPM a $30,000 early termination fee.
“Dodson falsely represented to the plaintiffs that it needed to receive the $30,000 in order to provide severance to employees it would need to lay off as a result of the termination,” the lawsuit claims.
Gregory’s camp eventually hired Drucker + Falk to be the properties’ new property manager, who then allegedly sought to hire the former DPM employees that had been laid off, only to find that DPM used the $30,000 termination payment to rehire the laid-off employees at higher wages.
“Mr. Dodson never intended to use the $30,000 early termination fee to provide severance to employees and, thus, fraudulently induced the plaintiffs into signing the early termination agreement,” the lawsuit alleges.
After terminating the agreement with DPM, the lawsuit claims that Gregory “immediately requested full access to the books, records and financial reports that (DPM) had maintained during its tenure.”
When DPM eventually sent financial statements, they were allegedly “severely flawed and unusable,” and it was only later, through examining financial software related to the properties, that Gregory and Drucker + Falk were able to discover the extent of DPM’s alleged mismanagement of the properties.
“Plaintiffs’ audit and inquiry into Dodson Management’s misdeeds is ongoing, and plaintiffs expect to uncover additional ways in which Dodson Management’s mismanagement of the properties has harmed plaintiffs,” the lawsuit states. It also notes DPM’s recent merger with Evernest and that “additional defendants may need to be added.”
Gregory’s lawsuit alleges two counts of breach of contract, among other claims against DPM and Dodson.
In a response to the lawsuit filed Jan. 11, Dodson and DPM denied the allegations and asked for an award in their favor.
Dodson declined to comment when reached last week. Gregory wasn’t available for comment.
Gregory’s LLC are represented by Whiteford, Taylor & Preston’s Vernon Inge and Patrick Houston. Dodson is represented by Dennis Quinn and Colin Neal of D.C.-based Carr Maloney P.C.
No hearing date has been set in the case, per court records.
While Gregory and Dodson duke it out in court, Dodson has begun to do more development work with Gregory’s former business partner Tom Papa, who continues to run Fountainhead. The two are currently collaborating on a six-story apartment building along Maury Street in Manchester.