James Cape & Sons Co. will get its chance to sue a former employee and two construction companies convicted of defrauding the state when bidding for highway projects.
The Wisconsin Court of Appeals on Wednesday twice ruled against Vinton Construction Co., Manitowoc, and Streu Construction Co., formerly of Holmen, in separate cases stemming from a lawsuit Cape filed in 2006.
Cape went out of business in 2005, but the court-appointed attorneys who are handling its assets and debt are suing former Cape employee Daniel Beaudoin, Vinton and Streu, which is no longer operating.
Executives from Vinton and Streu pleaded guilty in 2005 to federal charges of receiving proprietary bidding information from Beaudoin, Cape’s former project manager. The executives then used the information to undercut Cape’s bids for Wisconsin Department of Transportation contracts.
The scheme lasted from 1997 to 2003, when Cape executives uncovered the plot and called the Federal Bureau of Investigation, according to court documents.
A circuit court originally dismissed Cape’s lawsuit against the companies and Beaudoin before it went to trial. The court based its decision on Beaudoin’s claim that he was trying to protect Cape from overextending itself by winning too many contracts.
The Wisconsin Court of Appeals dismissed that argument, sending the case back to Racine County Circuit Court.
The decision probably means there will be a full trial to determine if Cape can collect for projects it lost to the bidding conspirators, said Cape attorney Matthew Flynn, of Quarles & Brady LLC, Milwaukee. He would not comment on the details of the case because it is headed back to court.
“I’m pleased with the decision and look forward to further proceedings,” Flynn said.
Vinton, its attorneys and lawyers representing Streu did not respond to calls for comment. Beaudoin’s attorney also did not respond to calls for comment.
In a separate decision, the appeals court reversed a circuit court ruling tied to the same case. In that reversal, the circuit court had ruled that the insurers for Vinton and Streu owed Vinton $893,300 and Streu $256,600 because the insurers refused to defend the contractors.
According to the Court of Appeals, the insurers are not obligated to get involved because their coverage does not include criminal acts such as those involved in the Cape lawsuit.
The three insurance companies are Zurich American Insurance Co., Valiant Insurance Co. and Northern Insurance Co. of New York.
A decision is expected this month in a separate Cape case in Racine County. Federal Insurance Co., Cape’s Warren, N.J.-based bonding company, sued the contractor’s former owners in 2005.