Wednesday, October 16, 2013

District settles with McKinstry

Energy company drops $7 million litigation claim

Express Staff Writer

Kathy Baker & Mike Chatterton

The Blaine County School District and contractor Seattle-based McKinstry Essention have reached an out-of-court settlement in multi-million dollar litigation between the parties.
    The settlement agreement was announced Tuesday in a joint news release from the district and McKinstry. The agreement includes dismissal of a $7 million claim McKinstry had against the district. Likewise, the district dropped its counterclaim for damages against McKinstry, which were listed in court filings as at least $18.6 million.
    The settlement ends all claims the parties had against each other in lawsuits filed against each other in May 2012.
    The litigation stemmed from a contract the parties entered into in 2010 for energy-savings work and other improvements in facilities at eight district schools. McKinstry had claimed in court filings that the company had performed work worth about $26 million and was seeking an unpaid balance of about $7 million. The district claimed it had authorized work worth only $18.6 million and was seeking damages against McKinstry for at least that much.
    Another provision of the agreement provides for a district payment to McKinstry of $665,612. District Business Manager Mike Chatterton said in an interview Tuesday that the money is for “justifiable” billings for McKinstry work performed in excess of the district authorized amount.
    Also, McKinstry agreed to pay $800,000 in district attorney fees. Chatterton said the district has actually accrued to date about $2.3 million in legal fees since disagreement over the work contract started between the district and McKinstry in 2011.
    Furthermore, according to the settlement agreement, the district won a major concession from the company to guarantee $9.5 million in energy savings over the next 25 years for energy-savings work at the eight district facilities.
    The agreement was unanimously approved by the district board of trustees following an executive session Tuesday morning.
    Later Tuesday, Chatterton and Trustee Kathy Baker, who both represented the district in negotiations, and district Communications Director Heather Crocker met with the Idaho Mountain Express to discuss the settlement.
    “I think the board is very pleased with the settlement,” Baker said. “I think it’s going to be a great benefit to our district.”
Guaranteed energy savings
    One of the major allegations in district legal claims against McKinstry involved the company’s failure to previously guarantee energy savings, a claim the district argued was required by Idaho law for energy-savings performance work.
    With that guarantee now in place, Baker said McKinstry will now be in a “symbiotic relationship” with the district for the next 25 years. The settlement requires that McKinstry monitor energy savings, which Baker said gives the company a “vested” interest in energy savings because the company will be required to pay the district the difference if projected savings are not met.

Just so you know, when we first started negotiating, they didn’t want anything released, and we fought that really hard.”
Mike Chatterton
District business manager

    She said the agreement provides that an energy-savings assessment be performed every five years, instead of at the end of 25 years as the law allows.
    Chatterton said a major “sticky point” in negotiations, which started in late August, concerned a confidentiality clause that could possibly preclude public release of terms of the agreement.
    “Just so you know, when we first started negotiating, they didn’t want anything released, and we fought that really hard,” Chatterton said.
    Baker said McKinstry “agreed to drop the confidentiality clause” after attorneys from both sides reviewed case law and decided that terms of the agreement could not be kept from the public.

‘Amicable settlement’
    The joint news release from the parties describes the agreement as an “amicable settlement.”
    “Both the district and McKinstry honored the spirit of the contract we originally agreed to in 2010,” Chatterton stated in the release.
    The release also provides quotes from McKinstry Vice President Ash Awad, who was involved in negotiations.
    “We believe the agreement reached is a fair and equitable way to resolve our differences and move forward,” stated Awad. “One thing the parties have never disagreed about is the rationale for McKinstry’s work. Both the district and McKinstry focused first and foremost on improving the learning environment for the students of Blaine County.”
    Baker and Chatterton said negotiations to settle the dispute were commenced some seven weeks ago by former district Superintendent Lonnie Barber. Then, during the negotiations, the school board voted last month to release Barber from his post and pay him $600,000 in a settlement to separate. However, Baker said on Tuesday that the decision to end Barber’s tenure as superintendent was in no way related to the McKinstry case.
Terry Smith:

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