Law firm claims Missouri stiffed it on incentives for creating Kansas City jobs
A law firm claims the state of Missouri has withheld thousands of dollars in economic development incentives that the firm is owed for creating new jobs in Kansas City.
San Francisco-based Littler Mendelson has filed a lawsuit against the Missouri Department of Economic Development, claiming it violated its contract with the company. The firm says it faces “immediate and irreparable harm,” and claims the state‘s action will cost it as much as $1.5 million.
The state disputes the claims, saying the company failed to create the agreed upon number of jobs.
Littler Mendelson sought incentives as it contemplated creating a new global services center to provide support services for its North American law offices. It selected a Kansas City location and opened at 2301 McGee St. in the Crown Center complex. It joined California-based law firm Sedgwick LLP, which also opened a service center in the building.
At the time of its 2015 opening, other local law firms worried it would siphon talent and put pressure on wages. Russ Welsh, then the head of Polsinelli, one of Kansas City’s largest law firms, said he would withhold the firm’s annual dues from the Kansas City Area Development Council, which helped recruit both Sedgwick and Littler Mendelson.
By 2019, Littler Mendelson said its Crown Center offices housed 300 full-time employees who work in human resources, finance and technology. Littler Mendelson says it’s the largest employment and labor law practice dedicated to only representing management.
For opening the new office in Kansas City, the state said it would give the firm nearly $14 million in state withholding taxes and tax credits through the Missouri Works program. The state says the company committed to creating 476 total jobs.
But in the lawsuit, filed in Cole County Circuit Court, Littler Mendelson claims it only committed to creating 270 new jobs. It references two separate notices of intent with the state: one for the 270 jobs and another for a future expansion of 200 jobs that it describes as “only a possibility.”
The state has since notified the company that it will withhold more than $500,000 in tax credits each year for three years, the suit alleges.
A spokesperson for the law firm declined to comment on the litigation.
An October 2014 letter from the state outlining the agreement does reference two separate notices of intent on the incentive awards. But the letter, provided to The Star by the state, calls for the creation of 476 full-time positions within four years.
A signed 2015 agreement between the state and the law firm also distinguishes two jobs commitments. One is for the creation of 275 jobs and $8.9 million in state benefits. The other is for 201 jobs and about $5 million in incentives.
Maggie Kost, spokeswoman for the Missouri Economic Development Department, said companies make specific commitments around job creation, wages and capital investments when seeking incentives from the state.
In this case, the state agreed to give nearly $14 million if the company created 476 jobs, she said. But it did not meet that threshold, so the benefit amount was subject to change.
“Missouri’s incentive programs are designed for this exact scenario, to ensure that companies keep their commitments or they can’t receive benefits,” Kost said. “Because of these protections, the state isn’t out a dime for the jobs that weren’t created by the company.”
This story was originally published January 14, 2020 at 5:00 AM.
