A developer that the city of South Bend is suing for $7.5 million is seeking protection from creditors in federal bankruptcy court. It’s yet another twist in the city’s long-running battle with developer David Matthews.
For three years the city and Matthews have been trading motions in state court, where the city wants Matthews to repay tax incentives he received to build his 11-story 300 E. LaSalle apartment high-rise. Matthews had pledged to include a grocery store on the building’s ground floor as a condition of receiving $5 million in incentives from the city, but he failed to deliver the store, prompting the city’s lawsuit to recover another $2.5 million in penalties.
The bankruptcy filing at least temporarily prohibits creditors from pursuing Matthews. His filing lists a $30.1 million debt to KeyBank for the project, along with $4.5 million owed to Forum Credit Union. The filing also lists the city’s pending lawsuit.
The lawsuit had been set for an October trial but court records now show the trial date has been canceled. Matthews explained his side in a recent Facebook video, where he says the city recently decided to also sue his other corporate entities. He says that could reset the entire case.
“During this process we can’t refinance our building because I can’t get a new loan with this pending litigation from the city," Matthews says. "So how do we protect ourselves? Where can we go for help? This is the county/state courts, so we go to the feds.”
