SM Entertainment Is Getting Sued Over Unpaid Construction Costs

SM Entertainment (SM hereon) is in legal trouble in Los Angeles, California, over unpaid construction project costs.

In 2019, SM announced its plans to build an entertainment venue in LA called SMTOWN LA, which was supposed to be a milestone project to mark the company’s definitive arrival in the international market. About a year later, the city of LA even went as far as naming the intersection of 6^th Street and S Oxford Avenue in Koreatown as the “SM Entertainment Square.”

The plans for this LA building, however, have been abandoned as of now. According to recent reports, the construction was paused as SM has not cleared construction costs possibly worth hundreds of thousands of dollars. In response, Pub Construction, responsible for the interior work of the building, is taking the entertainment label to court.

Additionally, the architectural firm, contractors, and other firms who were also involved in this SMTOWN LA project have also confirmed that SM never paid their dues either. These parties might join Pub Construction in filing a lawsuit against the K-Pop agency.

Talking about the difficulties faced by this project, a representative from the architectural firm told the media that it underwent changes multiple times due to the company’s changing demands.

This project underwent five changes due to SM Entertainment’s repeated demands, and we were responsible for designing the third and fifth versions,” stated Steve Kim, an architectural designer, during an interview with the Korea Daily on April 17. “We are owed tens of thousands of dollars, and I know several other companies involved in the project are also owed significant amounts.

— Steve Kim, architectural designer

While the SM Entertainment Square sign still exists, the project itself has been fenced off for years due to issues with drawing permits.

SM hired a third-party contractor to open the sidewalk in front of the building in January last year. However, the project was halted while the sidewalk was being removed, and the road conditions at the time posed significant safety risks for pedestrians.

— John Park, field office manager of Pub Construction

Pub Construction’s CEO also stated that the project was “virtually halted” during the label’s management change following its acquisition by Kakao. While the new executives have yet to respond to questions about unpaid costs, the construction firm is bearing all the expenses for the building’s security and fencing.

In addition to the non-payment lawsuit, Pub Construction also plans to file a formal complaint with the Korean government about this incident as they believe it highlights the unfair treatment received by Korean companies in America.

SM’s conduct has been exploitative and detrimental as they continue to transfer their problems to other companies. We plan to file a formal complaint with the Korean government in the hope that Korean companies will not suffer further losses due to SM’s inaction.

— Chris Yi, CEO of Pub Construction