By Brent Curtis
STAFF WRITER - Published: October 11, 2010
To recover $3.8 million in a court settlement earlier this year, Rutland paid $2.3 million in legal and related fees, according to city financial statements.
In February, city officials agreed to a settlement in the three-year-old lawsuit brought against four companies involved in the design and construction of a faulty roof at the city's water treatment plant.
The $3.8 million amount agreed to in the settlement accounted for a little more than half of the $6,646,481 that it cost the city to replace the faulty roof that was built in 1993 with the expectation that it would last 100 years.
But the settlement amount was offset by $2,342,184 in city expenses that accounted for everything from lawyers' bills and expert consultations to storage costs for evidence the city planned to present if the case ever went to trial.
The bottom line for those who use and pay for city water and sewer services is an $8,988,665 debt load — offset by the $3.8 million settlement — that the ratepayers must shoulder until 2020.
The additional debt was the primary reason for the 10.54 percent increase in water and sewer rates approved last month by the city.
Broken down, the $2.3 million in litigation expenses account for payments made to 13 different parties between January 2006 and June of this year.
The bulk of those expenses were for attorney and paralegal fees, including “professional service fees for pre-litigation advice, litigation, negotiation of agreements in support of remediation and repair project, claims consultation and project counsel,” according to the city attorney's office.
All told, those expenses cost $1,508,188 and translated into 4,048 hours of attorneys' time. The attorneys worked for the firm Seyfarth Shaw in Boston,
The remaining $833,996 in litigation costs were spent on consulting fees for engineers and other experts who would have testified in the case and $128,000 was paid to Rutland businessman Joseph Giancola as rent for storage space of large sections of the failed roof which served as evidence in the case.
In the end, the evidence and experts weren't needed at trial although they contributed to the strength of the city's case and were needed to reach the $3.8 million settlement, city attorney Andrew Costello said.
The settlement itself was a compromise designed to recover at least a fraction of the $6.6 million the city paid to replace the faulty roof.
When the city's Board of Aldermen approved the settlement earlier this year, they did so at the advice of
Costello who said the cost of taking the case all the way to trial would likely outweigh all but the most lucrative of court awards.
And the likelihood of receiving a large court award was doubtful, Costello told the aldermen, because the engineering firm that designed the faulty roof, Wright Engineering, was defunct and, aside from a
$500,000 insurance policy, penniless.
“There was likely going to be an argument going in from the other parties that most of the damage is attributable to Wright,” Costello told the aldermen in February.
The city received the $500,000 in insurance from Wright as part of the court settlement, Treasurer Wendy Wilton said.
Asked what the city could have done different that would have either recovered more from the roof's builders or saved on litigation expenses, Wilton and Mayor Christopher Louras said there was probably little that would have changed the outcome after the roof was built.
The problem in Wilton and Louras' estimation occurred in 1993 when the city contracted with Wright – an organization they both agreed was too small and inexperienced to design the structure — without demanding a higher level of insurance.
“It's really about doing due diligence on who you're working with,” Wilton said. “The mistake here was relying on an engineering firm that had never done this scope of work and had inadequate insurance.”
“It was a perfect storm that occurred that no one could have predicted,” she added.
Louras agreed, adding that the city had learned an important, albeit costly, lesson from the experience.
In contracts worked out in recent years by the city, including with the designers and construction crews that built the new treatment plant roof, Louras said the city has required higher amounts of insurance coverage.
“The Board of Finance has taken this incident as a lesson,” the mayor said. “There have been several projects where we were very sensitive to the need for a surety bond or proper liability coverage so this will not be repeated.”
brent.curtis@rutlandherald.com
STAFF WRITER - Published: October 11, 2010
To recover $3.8 million in a court settlement earlier this year, Rutland paid $2.3 million in legal and related fees, according to city financial statements.
In February, city officials agreed to a settlement in the three-year-old lawsuit brought against four companies involved in the design and construction of a faulty roof at the city's water treatment plant.
The $3.8 million amount agreed to in the settlement accounted for a little more than half of the $6,646,481 that it cost the city to replace the faulty roof that was built in 1993 with the expectation that it would last 100 years.
But the settlement amount was offset by $2,342,184 in city expenses that accounted for everything from lawyers' bills and expert consultations to storage costs for evidence the city planned to present if the case ever went to trial.
The bottom line for those who use and pay for city water and sewer services is an $8,988,665 debt load — offset by the $3.8 million settlement — that the ratepayers must shoulder until 2020.
The additional debt was the primary reason for the 10.54 percent increase in water and sewer rates approved last month by the city.
Broken down, the $2.3 million in litigation expenses account for payments made to 13 different parties between January 2006 and June of this year.
The bulk of those expenses were for attorney and paralegal fees, including “professional service fees for pre-litigation advice, litigation, negotiation of agreements in support of remediation and repair project, claims consultation and project counsel,” according to the city attorney's office.
All told, those expenses cost $1,508,188 and translated into 4,048 hours of attorneys' time. The attorneys worked for the firm Seyfarth Shaw in Boston,
The remaining $833,996 in litigation costs were spent on consulting fees for engineers and other experts who would have testified in the case and $128,000 was paid to Rutland businessman Joseph Giancola as rent for storage space of large sections of the failed roof which served as evidence in the case.
In the end, the evidence and experts weren't needed at trial although they contributed to the strength of the city's case and were needed to reach the $3.8 million settlement, city attorney Andrew Costello said.
The settlement itself was a compromise designed to recover at least a fraction of the $6.6 million the city paid to replace the faulty roof.
When the city's Board of Aldermen approved the settlement earlier this year, they did so at the advice of
Costello who said the cost of taking the case all the way to trial would likely outweigh all but the most lucrative of court awards.
And the likelihood of receiving a large court award was doubtful, Costello told the aldermen, because the engineering firm that designed the faulty roof, Wright Engineering, was defunct and, aside from a
$500,000 insurance policy, penniless.
“There was likely going to be an argument going in from the other parties that most of the damage is attributable to Wright,” Costello told the aldermen in February.
The city received the $500,000 in insurance from Wright as part of the court settlement, Treasurer Wendy Wilton said.
Asked what the city could have done different that would have either recovered more from the roof's builders or saved on litigation expenses, Wilton and Mayor Christopher Louras said there was probably little that would have changed the outcome after the roof was built.
The problem in Wilton and Louras' estimation occurred in 1993 when the city contracted with Wright – an organization they both agreed was too small and inexperienced to design the structure — without demanding a higher level of insurance.
“It's really about doing due diligence on who you're working with,” Wilton said. “The mistake here was relying on an engineering firm that had never done this scope of work and had inadequate insurance.”
“It was a perfect storm that occurred that no one could have predicted,” she added.
Louras agreed, adding that the city had learned an important, albeit costly, lesson from the experience.
In contracts worked out in recent years by the city, including with the designers and construction crews that built the new treatment plant roof, Louras said the city has required higher amounts of insurance coverage.
“The Board of Finance has taken this incident as a lesson,” the mayor said. “There have been several projects where we were very sensitive to the need for a surety bond or proper liability coverage so this will not be repeated.”
brent.curtis@rutlandherald.com
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