Wednesday, August 28, 2013

Judge delays decision on McKinstry contract

Parties argue in court about contract governing statutes

Express Staff Writer

    In a lawsuit involving the Blaine County School District and Seattle-based McKinstry Essention, Fifth District Judge Robert Elgee has taken under advisement legal arguments regarding which Idaho statute governs a 2010 contract between the two parties.
    At a hearing Monday afternoon in Blaine County 5th District Court, attorneys for the School District argued that the contract is an “energy savings performance contract,” as defined by Idaho Code 67-5711D. McKinstry attorneys argued that the contract is a “design-build” contract as defined under Idaho Code 67-2309.
    If McKinstry prevails in its arguments, the company could be relieved of contractual obligations that the School District claims it failed to fulfill, in particular to provide guaranteed energy savings for work performed at district schools and facilities. A guaranteed energy savings agreement would provide that if a specified energy savings was not realized in a given year, the company would reimburse the School District for the difference between what was projected and what was actually saved.

There’s no dispute that they financed it with a levy.
Energy savings was never a priority for the School District.
Energy savings was secondary.”
Paul Cressman
McKinstry attorney

    If Elgee rules that the contract is an energy savings performance contract as the School District claims, then McKinstry could be required by law to guarantee energy savings. The district further claims that McKinstry has breached the contract by failing to provide a technical energy audit and a financial grade audit that would define what the actual energy savings should be.
    The litigation stems from a 2010 contract that the parties entered into for energy savings work and other improvements at eight School District schools and facilities. The actual argument is over money. McKinstry has claimed it performed work worth $26 million and that the School District still owes the company about $7 million.
    The School District has claimed that it only authorized work worth $18.6 million and is seeking damages from McKinstry of at least that much.
    The arguments over the nature of the contract are preliminary attempts by the parties to strengthen their cases if the lawsuit goes to a jury trial. Thought there have been recent discussions among the parties about settling out of court, the case is still scheduled for trial beginning April 8.
    At Monday’s hearing, McKinstry attorney Paul Cressman argued that the School District never intended that the work would pay for itself through future energy savings. Instead, he said, the work was to be financed primarily by a levy.
    Cressman was referring to a $59.8 million plant facilities levy approved by Blaine County voters in 2009.
    “There’s no dispute that they financed it with a levy,” Cressman said. “Energy savings was never a priority for the School District. Energy savings was secondary.”
    Cressman further argued that the district changed certain wording in the contract prior to its being signed to avoid making it governed by Idaho Code 67-5711D. For example, he said, the contract is called an “energy services performance contract,” whereas ID 67-5711D provides for “energy savings performance contracts.”
    School District attorney Kyle D. Kring argued that McKinstry was trying to avoid having the contract governed by ID 67-5711D so as to avoid obligations the company would have under that statute.
    “They don’t want to have to guarantee energy savings, they don’t want to have to do a technical energy audit, they don’t want to have to monitor results,” Kring said.
    Kring further argued that ID 67-2309 was never discussed by the parties when the contract was being written and McKinstry was trying to use the code now to avoid breach of contract claims.

They [McKinstry] don’t want to have to guarantee energy savings,
they don’t want to have to do
a technical energy audit,
they don’t want to have to monitor results.”

Kyle D. Kring
School District attorney

    “There is no evidence that the parties intended the contract to be anything other than a 5711D,” Kring said. “This is not a design-build contact; this is a performance contract. This is an energy savings performance contract. The title says it’s a performance contract.”
    Elgee said he had intended to make a ruling on the contract at Monday’s hearing, but decided instead to take the matter under advisement because of the complexity of the issues.
    He scheduled a telephonic hearing for Sept. 5 to tell the parties his decision.
    Elgee noted that whatever decision he makes, his ruling could likely be appealed to the Idaho Supreme Court.
Terry Smith:

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