At Del Frisco's, a Grade A fuss over a big tab

Inside the magnificent palace of commerce that was once the First Pennsylvania Bank, diners in pinstripes order prime porterhouse steaks or sip espresso martinis at the sinuous Del Frisco's bar.

Average tab: $90, including $48.95 for that 24-ounce porterhouse.

Outside the building, men in polo shirts, most of them owners of local construction companies, hand out fliers that say:

"Enjoy your meal. When it comes time to pay, please ask the General Manager why the bills for construction remain unpaid."

Their tab: $6.1 million in unpaid invoices to about 17 subcontractors, they said.

In some ways, this is an old story in the world of renovations: The contractor gives a price, hires subcontractors, and the job goes over bid.

Whose fault is it and who is supposed to pay?

That is exactly what happened here, but the high-profile, luxe nature of the restaurant and the contrasting brutality of the economy - where construction credit is beyond tight and 31,000 building-trades jobs have been lost in a year - have raised the stakes.

In Philadelphia, union protesters are a common sight, but this picketing is different.

Wearing placards are company owners, men who live in big suburban houses, who once employed dozens of people, who send their children to private schools, and who have dined at places like Del Frisco's.

They have also filed state and federal lawsuits against Del Frisco's as well as Lorient L.L.C., the Illinois general contractor. Many have sought mechanics liens against the building.

They are not the only ones doing the suing.

Del Frisco's of Philadelphia has also sued Lorient, now out of business. Calls are directed to the company's bankruptcy lawyer in Chicago, who did not return a phone call seeking comment.

James DiMezza's high-school-age sons helped him hand out leaflets Wednesday at the restaurant at 15th and Chestnut Streets - now the chain's second-highest revenue producer among eight restaurants nationally.

"When the restaurant doors opened, the checkbook closed," said DiMezza, president of Indoor Quality Services Inc., of Erdenheim, who handled heating and air conditioning for the project.

The largest creditor, he estimates that he is owed $1.3 million for what started out as a $1.8 million contract and ended up at $2.4 million because of change orders and overtime required to complete the project in a tight time frame.

When DiMezza and the others started distributing fliers months ago, restaurant staffers sympathized, handing out cookies. That is over now, amid accusations of bullying. There is an injunction.

"We feel for these guys," said Del Frisco's regional manager Ray Risley. "We're just as angry as they are."

Del Frisco's people also feel stiffed. They put the job out for bid and chose Lorient, their general counsel Noah Pollack said, because Lorient promised to get the job done in time for an October 2008 opening.

They said they paid Lorient $7.9 million - the original contract plus some agreed-upon changes. But, they said, Lorient paid contractors only $6.1 million.

"Lorient . . . misappropriated these sums for purposes other than contract work," said a Del Frisco's lawsuit filed in federal court in March.

Del Frisco's Philadelphia story began several years ago, when the Texas company began to scout locations.

At first, said former Del Frisco's executive Terry White, the company chose the Union Trust bank building at Seventh and Chestnut Streets.

Now there is a rival steak house by that name there - a project that cost $12 million to build and a project that required much less complicated venting for the steak house's powerful broilers.

Ultimately Del Frisco's settled on the First Pennsylvania building, selected a contractor, and began work in June.

Adding up what Del Frisco's said it paid and what the subcontractors said they were owed, the Del Frisco's price is about $14 million.

To hear the subcontractors tell it, it was a remarkable project in many ways.

First of all, it was remarkably unorganized, with plans and blueprints in a state of flux. The building delivered its own set of surprises, with asbestos found behind the mechanical units.

Change orders flew, but Lorient and the Del Frisco's construction managers always told them, the subcontractors said, that the job had to be done in time for the busy holiday party season. The restaurant opened in November.

"Money was not an issue. Schedule was. It was an open-checkbook project," said Casey Duffy, who heads Delaware Valley Remediation L.L.C., of Bala Cynwyd. He said he was owed $844,000.

Also remarkable was a commitment to the project. Contractors ended up doing jobs well out of the scope of their contracts, just to get the restaurant open. The remediation company sent in an overnight cleaning crew to scrub up the kitchen in advance of the health inspectors.

That is a job usually handled by kitchen staff.

Pollack, Del Frisco's attorney, agreed that timing was key, and to get the doors open, Del Frisco's settled for changes that would make the restaurant less magnificent.

Early invoices were getting paid, but later bills were not. At first, subcontractors could get Lorient on the phone, but then communication dried up.

Pollack said Del Frisco's is reaching out to try to settle claims, but some of the claims are inflated. Duff and DiMezza said it had been weeks since they had heard from Del Frisco's.

In a phone interview Wednesday, regional manager Ray Risely read a statement saying that Del Frisco's is trying to settle with the subcontractors even though Del Frisco's said there was no obligation to do so. "We are willing to go this extra mile, this extra 10 miles, because we have a commitment to this restaurant and this city," the statement said. "Our commitment will not be derailed by organized bullying and smear tactics."

Protesting outside, the subcontractors said they were urging diners to patronize other steak houses.

Most passersby brushed aside the men, but former teacher Judy Spiller said that if the subcontractors' complaints were true, "it's unethical. How dare they? Here they are operating this upscale restaurant and they owe plumbers and carpenters?"

Heating subcontractor DiMezza said he would like to get paid. "This situation is basically breaking my business," he said, as his sons listened. "My customers are afraid to do business with me."

He said that in this frozen-credit environment, he cannot get performance bonds for jobs any larger than $500,000 because he is owed so much money. Before, he often had million-dollar-plus contracts. He now has 25 men working; before, he employed 80.

It is unusual to see subcontractors handing out fliers, said Walter Palmer 3d, president of the General Building Contractors Association, a local trade group.

But it is not a surprise.

"In any recession, construction gets hit the worst, and people get desperate," Palmer said. "It is just a sign of the times. People are doing what they have to do to get paid, because that's all they can do."