Wednesday, March 6, 2013

McKinstry seeks to undo fraud claim

Company accuses School District of conducting ‘smear campaign’

Express Staff Writer

McKinstry Essention is seeking once again to have a Blaine County School District fraud claim removed from litigation, alleging in recent court filings that the district has failed to provide adequate evidence of fraudulent dealings.

McKinstry argues that the School District has instead falsely “sought to portray itself as a hapless know-nothing that was completely at the mercy of McKinstry regarding everything from the meaning of Idaho statutes to the specific terms of the document it eventually signed, the Energy Savings Performance Contract (ESPC) to govern the project.”

McKinstry’s arguments are contained in a motion for partial summary judgment and supporting documents filed in Blaine County 5th District Court on Jan. 23. A hearing on the motion is now scheduled for April 22 before Judge Robert Elgee. If McKinstry is successful before the judge, it would not mean complete victory for the company but only that the School District could no longer allege fraud in its claims.

The recent court filings show a change in litigation tactics on the part of McKinstry, which earlier filed a motion seeking to have the contract between the parties declared null and unenforceable. McKinstry has now had that motion removed from legal proceedings but reserved the right to reintroduce it later.

The most recent School District major filing, a motion to have punitive damages added to its claim against McKinstry, remains in litigation but is not currently scheduled for a court hearing before Elgee.

Pretrial court hearings continue to be postponed or cancelled, with hearings earlier scheduled for Jan. 28, Feb. 25 and March 11 now vacated.

The case itself isn’t scheduled for jury trial until Oct. 15.

The School District and McKinstry find themselves in litigation over 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 claimed it performed work at the district’s direction worth $25.9 million and that the district still owes it 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.

Both parties filed lawsuits against the other in May 2012 and the cases are now consolidated.

McKinstry’s recent court filings are the company’s second attempt to have the district’s fraud claim removed from litigation. In late July, following a court hearing, Elgee dismissed a district claim of racketeering against McKinstry but allowed a fraud claim to remain. The judge ruled then that the district had shown evidence that fraud had been committed but said eventually the district would have to come up with more solid information regarding the claim.

McKinstry now argues that the district has failed to do that. In its court documents, the company quotes statements by district Superintendent Lonnie Barber made in a recent deposition given to McKinstry attorney Paul R. Cressman Jr.

According to McKinstry, Barber acknowledged that the School District was not reliant on McKinstry for advice regarding the contract and relied on advice from its own attorneys, engineering and planning specialists, and business manager before entering into the contract.

McKinstry argues that Barber’s statements undermine a district claim that McKinstry misled it regarding Idaho law and the terms of the contract.

Referring to Barber’s deposition, the McKinstry filings state: “As the foregoing demonstrates, BCSD was hardly alone in the wilderness when the deal was made. Rather, it had at its disposal a phalanx of legal, technical and business experts, who all gave BCSD their advice as BCSD considered whether to pursue the transaction and what the final version of the [energy savings performance contract] should contain.”

The McKinstry documents also accuse the district of making “slanderous accusations” in a “smear campaign” against the company.

The documents conclude that the fraud claim should be dismissed so that McKinstry can repair the damage that the district “has done to its reputation without further delay.”

Terry Smith:


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