Siemens lawsuit


A federal judge on Tuesday granted the city of Monticello’s motion to dismiss Siemens’ lawsuit against the city and left standing the city’s countersuit for return of nearly $7 million paid by the city to Siemens, and for fraud by Siemens.

The city, through its attorney Cliff Gibson, previously filed a motion asking Judge Price Marshall to dismiss Siemens’ lawsuit against the city because the contract for a water project was not let for competitive bids as required by Arkansas law.

Though Judge Marshall has ruled on the motion, dismissing Siemens’ claims against the city, the lawsuit isn’t over, Gibson noted.

“We have the city’s claims against Siemens to bring before a jury,” he said.

A jury trial has been scheduled in federal court for October 11-14, 2016, according to Gibson.

The Case

In October 2013, the city of Monticello entered into a $10 million contract with Siemens Industry, Inc. to upgrade the city’s water system with new water meters and replace aging water lines.

Months later, in March 2014, just days after then mayor Allen Maxwell died and before Siemens started work on the project, the company billed the city for $5 million. The city paid the $5 million, which came from revenue bonds to finance the project. Work on installation of the water meters then began, and a couple of months later Siemens billed the city for another $2 million. The city paid that bill as well.

Meanwhile, the city began to have serious concerns about the project. Those concerns include the lack of a performance bond, Siemens’ failure to install the type of water meters contracted for by the city, the high failure rate of the meters Siemens subsequently installed, water billing problems, the fact that the plans for the water line replacement project had not yet been put in a final form acceptable to the city, and the fact that Siemens billed the city $7 million before any work was started or completed.

On October 7, 2014, almost a year to the day the city entered into the contract with Siemens, then mayor Joe Rogers broke a 4-4 tie vote to hire Gibson to represent the city in issues surrounding the water project.

The city council subsequently authorized Gibson to enter into mediation with Siemens to terminate its $10 million contract and recover the unearned portion of $7 million the city had already paid the company.

Mediation failed.

On April 28, 2015, a week after a mediation meeting in Little Rock, the city learned that Siemens had filed a federal court lawsuit against the city on the same day the mediation meeting was held.

“They were suing us behind our backs,” Gibson said in an April 2015 interview.

Gibson then filed a countersuit against Siemens asking for, among other things, that the contract between the city and Siemens be declared illegal and void for failure of project to be let for competitive bidding as required by Arkansas law.

The countersuit noted that there was an exception to the requirement for competitive bidding where the contractor did the things necessary to have a Qualified Efficiency contract under the Arkansas performance-based contracting law, but maintained that Siemens had not provided the financial assurances and other things required to have a bid-exempt performance contract.

In December, 2015, Gibson filed a motion on behalf of the city to dismiss the Siemens lawsuit and Siemens’ claims against the city based on the contract being void for failure to comply with competitive bidding laws.

Judge Price Marshall on Tuesday handed down his ruling on the motion, dismissing Siemens’ lawsuit against the city. Marshall found that Siemens had not provided the financial assurances required to have a contract with the city that is exempt from Arkansas’ competitive bidding laws.

The judge Marshall left standing the City’s countersuit against Siemens for return of its $7 million advanced to Siemens on the project and for fraud on the part of Siemens.

Tuesday afternoon after the ruling, Gibson said he was pleased with Judge Marshall’s ruling in favor of the city.

The city is represented in the case by Monticello attorneys Cliff Gibson and Lee Curry.

Related stories in chronological order
Monticello mayor wants independent review of $10 million water project
Monticello mayor breaks tie to hire attorney to resolve water project issues
Gibson says he’s going to ‘shine light’ on Siemens issues
Monticello eyes possible mediation with Siemens
Outgoing mayor requests state police investigation of $10 million water project
Monticello, Siemens going to mediation
Monticello, Siemens apparently headed to court
Monticello sues Siemens for fraud, breach of contract
Federal judge denies Siemens motion to dismiss Monticello’s fraud claim
Monticello seeks summary judgement in Siemens lawsuit