Friday, November 1, 2013

McKinstry lawsuit officially closed

Settlement agreement describes litigation as ‘unfortunate’

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By TERRY SMITH
Express Staff Writer

Bellevue Elementary School head custodian Jeff Jones checks out the geothermal boiler room at the school. Photo by Roland Lane

   The lawsuit between the Blaine County School District and its energy contractor, Seattle-based McKinstry Essention, was officially closed on Tuesday in Blaine County 5th District Court. The case was closed “with prejudice,” a legal term that means the case cannot be reopened by either party.
    Closure of the case followed the filing of a “stipulation” by both parties. A stipulation is a document that informs the court that the parties in a legal action have reached an agreement on a point of contention, or possible point of contention, and that a ruling by the court is no longer required. The stipulation specifically states that the parties agreed that the case be closed with prejudice.
    Closure of the case came two weeks after a settlement was reached in the multi-million dollar litigation. The settlement agreement, 130 pages long, was not filed with the court so a copy cannot be reviewed by the public in the court file.
    However, the Idaho Mountain Express was able to obtain a copy of the settlement agreement by filing a formal public records request with the School District.
    The settlement agreement describes the dispute as “unfortunate” and provides that no fault for the litigation be attributed to either party. The agreement also has a “non-disparagement” clause, which provides that “neither party shall attribute fault or wrongdoing to the other party, nor make any disparaging representations or statements about the other party.”
    The agreement further provides that all documents and electronic information obtained by the parties during discovery be returned to the other party, deleted or destroyed.
    The bulk of the 130-page settlement agreement concerns baseline data and complex tables showing how energy savings from new systems installed by McKinstry will be determined.
    As part of the settlement, McKinstry agreed to guarantee $9.5 million in energy cost savings over the next 25 years from the new energy systems and improvements that McKinstry made as part of its contract with the district. If energy savings as projected aren’t met, as calculated every five years, then McKinstry has agreed to pay the district the difference.
    The settlement agreement also provided that McKinstry drop its $7 million dollar claim against the district and the district drop its counterclaim for damages against McKinstry, which were listed in court documents as at least $18.6 million.
    The litigation stemmed from a contract the parties entered into in 2010 for energy savings work and other improvements at eight district schools or facilities. McKinstry claimed in court filings that the company had performed work worth more than $26 million and that the district still owed the company about $7 million. The district claimed it had authorized work worth only $18.6 million and that the bulk of McKinstry’s claims for more money were not warranted.
    Both parties filed lawsuits against each other in May of 2012. The lawsuits were later consolidated into a single case with McKinstry listed as the plaintiff and the district listed as the defendant and counterclaimant.
    The case was scheduled for a jury trial to begin on April 8, 2014. The parties expected the trial to last about 28 days.
    The district spent about $2.3 million in legal expenses. District Business Manager Mike Chatterton said earlier this month that legal expenses would have cost at least another $2 million had the case gone to trial.
    District attorney Bob Bilow, of the Boise law firm of Greener Burke Shoemaker Oberrecht, told the Express in an interview that some of the credit for the settlement should go to former district Superintendent Lonnie Barber, whose contract was terminated by the school board effective Oct. 1.
    “I understand that the settlement was initiated by a call from Dr. Lonnie Barber to McKinstry CEO Dean Allen about two months ago,” Bilow said. “That was followed by meetings between them in Hailey and Seattle. Those preliminary negotiations outlined the basic terms of the settlement and were followed up by detailed discussions by board member Kathy Baker, Business Manager Mike Chatterton and engineer Brian Formusa.
    School board members said earlier this month that Barber’s end of employment was not connected to the McKinstry litigation.
Terry Smith: tsmith@mtexpress.com

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