Wednesday, November 28, 2012

McKinstry seeks to have school contract voided

Energy company claims contract was only an ‘agreement to agree’

Express Staff Writer

Heather Crocker

McKinstry Essention is seeking to have a contract that the company signed more than two years ago with the Blaine County School District declared “unenforceable,” an action that could undermine the School District’s defense and counterclaims in a lawsuit between the parties.

In its latest filings in Blaine County 5th District Court, attorneys for McKinstry don’t even refer to the contract as a contract. Instead, the company refers to the document as a “mere agreement to agree.”

According to a McKinstry motion filed on Nov. 19, a court order ruling the document unenforceable would eliminate School District defense arguments and counterclaims such as allegations of breach of contract, breach of warranties and breach of financial responsibility to the district on the part of McKinstry.

In its new filings, McKinstry claims that the contract is “unenforceable for lack of material terms.” Specifically, McKinstry alleges that missing from the document is “any detailed definition of the scope of McKinstry’s obligations at the time the document was signed.”

McKinstry further argues that a price for the work was never clearly stated in the contract.

According to the contract, scope of work and final price were supposed to be added by amendments. However, no such amendments were ever made.

“McKinstry’s motion is misguided and unnecessarily costly,” School District Communications Director Heather Crocker said. “If the contract is unenforceable, why did McKinstry refer to it for the past year and a half? And if it’s unenforceable, under which Idaho law did they perform their work?”

The School District has claimed that the contract between the parties was supposed to be in accord with an Idaho law that allows governmental entities to enter into energy savings contracts without awarding a contract on a low-bid basis.

The new McKinstry court filings follow a School District motion filed Nov. 16, wherein the district is seeking to add a claim for unspecified punitive damage to its counterclaim against McKinstry. The district alleges in its filings that McKinstry engaged in unlawful conduct to hide money from the district in order to increase profits.

Judge Robert Elgee listened to arguments from both parties concerning scheduling of hearings on the two new motions during a telephonic court hearing Monday morning.

The district’s motion to add punitive damage to its counterclaim was originally scheduled for Dec. 17 but has been continued to Jan. 28.

McKinstry’s motion on the enforceability of the contract was also scheduled to be heard Dec. 17. As of Tuesday, the hearing remained on Elgee’s docket, but the judge said he will consider rescheduling the hearing following arguments from the litigants at another hearing scheduled for Dec. 5.

Boise attorney Bob Bilow, representing the School District, argued that the two hearings regarding the new motions should be held together in January. However, Elgee agreed with an argument from McKinstry attorney Paul Cressman, of Seattle, that the motion on the enforceability of the contract needs to be heard first and separately because it could affect the district’s claim for punitive damages.

Litigation between McKinstry and the School District started in May when both parties filed lawsuits against each other. The lawsuits were later consolidated into one case with McKinstry listed as the plaintiff and the School District listed as the defendant.

The dispute arose out of an “energy savings performance contract” that the parties entered into in 2010 for energy savings work and other improvements at eight district schools and facilities.

McKinstry has alleged that it performed work at the School District’s direction worth $25.8 million and that the district still owes the company about $7 million. The district claims it authorized work worth only $18.6 million and is claiming damages against McKinstry for at least that amount.

A jury trial on the case is scheduled to begin Oct. 15, 2013, and is expected to last about 25 days.

Terry Smith:

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