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A few weeks ago, we told you that Darana Hybrid, the Ohio contractor owned by IHRA boss Darryl Cuttell, had filed mechanic’s liens claiming Elon Musk’s data-center operation owed it roughly $137 million, with Cuttell telling a Memphis newspaper the real number was closer to $570 million. Now the other side has answered, and it did not hold back.
On August 4, x.AI LLC, its property affiliate CTC Property LLC, and sister company MZX Tech LLC filed a federal complaint against Darana Hybrid, Inc., Darryl Cuttell personally, and Cuttell Motorsports, LLC doing business as the International Hot Rod Association. The case landed in the U.S. District Court for the Western District of Tennessee, docketed as 2:26-cv-02994. The plaintiffs are not asking for the $137 million Darana says it is owed. They are asking a judge to let them keep withholding every dollar of it, on top of more than $500 million in damages, because they say Darana’s real business model was overbilling a supercomputer campus to fund a race track.
CTC owns the real estate underneath Colossus, the AI training cluster xAI is building inside a former Electrolux appliance factory on the south side of Memphis. Darana, a Hamilton, Ohio electrical and mechanical contractor that has been in business since 1985, signed on in 2024 as the prime contractor responsible for wiring, cooling, and power distribution across the site. The master services agreement, which took effect that April, let Darana bring in subcontractors, but capped its markup on their labor at 10 percent over whatever those subcontractors actually charged. That kind of clause is standard in big construction deals for a reason: it lets an owner use a single point of contact for scheduling and quality control without paying that contact a blank-check premium for labor it never touches.
According to the complaint, Darana blew past that cap by a staggering margin. CTC says Darana employed only 50 to 70 people of its own while using subcontractors for most of the physical labor on site, then invoiced all of it, Darana’s work and subcontracted work alike, at a single blended rate. When CTC eventually got a partial look at the underlying numbers, it found subcontractors billing Darana between $21.60 and $112.50 an hour for labor that Darana turned around and billed to CTC at $125 to $245 an hour, a markup as high as 880 percent instead of the contractual 10. Between labor and other disputed charges, CTC pegs its total overbilling exposure at $500 million to $800 million, out of roughly $1.4 billion it paid Darana between 2024 and mid-2026.
This is where it gets interesting for our readers. In April 2025, the two sides amended the contract to add an exclusivity clause and a personal sweetener for Cuttell: restricted stock worth $28.5 million, vesting only if Darana worked exclusively on CTC’s data-center projects through April 2027 and hit certain GPU-related milestones along the way. CTC now says Cuttell blew that exclusivity requirement apart to feed his other business, the IHRA. The complaint alleges Darana billed CTC for out-of-scope work tied to a Memphis raceway that had nothing to do with any data center, including an $88,000 shipment of vests and safety goggles from a supplier called White Cap that went straight to IHRA’s Ohio headquarters. To hide the diversion, CTC says, Darana coded those charges as though they belonged to unrelated projects, including the Duke Energy power-plant conversion and a second data center called MACROHARDER. CTC says it has since found more than a dozen invoices tied to IHRA addresses.
Because that exclusivity clause was the price of Cuttell’s equity award, xAI is asking the court to declare the entire $28.5 million package forfeited. It is a clean, almost mechanical argument: the contract says the stock vests only if Darana works exclusively on CTC’s projects, Darana provably didn’t, so there is nothing left to vest. That single claim, buried in count ten of a ten-count complaint, may end up mattering more to Cuttell personally than the headline fraud allegations.
There is also a trademark fight tucked inside the filing, and it is a genuinely odd one for a drag racing sanctioning body to be part of. xAI holds a federally registered mark on “X.AI” along with pending applications covering hats, shirts, and jewelry. The lawsuit claims IHRA staff wore jackets carrying both the IHRA logo and xAI’s branding at events between December 2025 and roughly March 2026, without any authorization from xAI. CTC and xAI argue that pairing implied a sponsorship or partnership that never existed, and that it fed public speculation that xAI was quietly bankrolling IHRA’s expansion. The Lanham Act claim seeks an injunction, disgorgement of any profits tied to the misuse, and treble damages, which is the legal mechanism that turns “stop doing that” into “stop doing that or pay three times what you made.”
CTC terminated Darana for cause on June 23, 2026, and the relationship reportedly got worse from there rather than better. The complaint says CTC agreed to wire Darana $44.39 million on July 2 specifically earmarked for suppliers Darana had stiffed, on the promise that the money would flow straight through to them. Instead, CTC alleges, Darana redirected portions of that payment toward roughly 40 different hotel bills, equipment rentals, and staffing agency invoices that had nothing to do with the suppliers it was supposed to protect. The day after termination, Darana also asked Shelby County’s construction code office to void every permit tied to the Colossus and Tulane project sites, a move CTC says forced it to spend more than $8 million on expedited replacement permits it wouldn’t have needed had Darana simply cooperated with an orderly handoff, as the contract required.
Altogether, the complaint stacks ten separate counts: overbilling, billing for out-of-scope work, trademark violations under the Lanham Act, refusing to hand over audit records, misappropriating the post-termination payment, conversion, unjust enrichment, fraud, breaching the wind-down provisions, and the declaratory judgment claim over Cuttell’s forfeited equity. xAI is seeking compensatory damages it estimates at $500 million or more, punitive damages, injunctive relief on the trademark count, attorneys’ fees, and a ruling that it owes Darana nothing further under the contract.
Worth understanding here is the difference between what Darana filed and what CTC just filed. A mechanic’s lien is a paperwork claim against a specific piece of property, recorded at a county register of deeds, and it does not require a judge to sign off before it takes effect. It is a pressure tactic as much as a legal remedy. A federal fraud complaint is a different animal entirely: it requires discovery, sworn testimony, and eventually a trial or settlement, and it opens Darana’s own internal billing records to exactly the kind of scrutiny the company allegedly spent two years avoiding. Filing mechanic’s liens is common in construction disputes of any size. Getting hit with a ten-count federal complaint that accuses your CEO of running a slush fund for his side business is not.
For anyone racing under the IHRA banner, none of this touches the sanctioning body’s core legal status directly, since Cuttell Motorsports and Darana Hybrid are technically separate entities under Ohio and Tennessee law. But separate on paper does not mean separate in practice when one man owns both, and when the same complaint alleges he moved cash between them to dodge a construction contract. We have already tracked how ownership churn at IHRA has fueled speculation about the organization’s stability and expansion plans, and a federal fraud lawsuit against the owner’s other company is not the kind of headline that calms nervous racers, sponsors, or track promoters wondering whether purse checks will clear.
It is also worth remembering that a complaint is one side’s version of events, filed to win, not to be fair. Darana has not yet answered in court, and its position, laid out in the mechanic’s liens we covered when they first surfaced, is that payments from CTC simply dried up faster than its own bills did. Data-center construction has become one of the most litigious corners of the building trade over the last two years, precisely because contracts like this one move fast, involve enormous sums, and get amended on the fly as AI companies chase more compute. Somewhere at the bottom of that pile of amendments and purchase orders sits a dragstrip in Tennessee that, if the complaint holds up, got built on invoices meant for a supercomputer. That is not a sentence we expected to write this year, and yet here we are.
See the document here.
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