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Jury sides with Elm Grove in tunneling lawsuit

Sean Ryan
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Michels Corp. owes Elm Grove $317,206 and must swallow more than $1 million in charges on a tunneling project after a jury ruling in favor of the village.

Neil Palmer, Elm Grove village president, said the award is nice, but the bigger victory is the village does not have to pay Michels the money the company had demanded.

“The major part of this victory is they sued us for a big, big pile of money,” Palmer said, “and they were denied.”

Wednesday evening’s decision by the Waukesha County Circuit Court jury caps a two-year legal battle in which the village and Brownsville-based builder debated responsibility for delays and cost overruns on a tunneling project. The project faced delays and costs that exceeded Michels’ $4.6 million bid after underground soil conditions, including boulders and loose sand, impeded the company’s tunneling machine and created the risk of collapses.

Thad Nation, Michels spokesman, said the contractor’s legal team is reviewing the decision. He said an appeal is unlikely. The Elm Grove tunnel, which Michels completed in September 2007, works as intended, he said.

“We’re disappointed with the outcome,” Nation said. “But we’re proud of the product that we delivered.”

Elm Grove sued Michels over the project in April 2008 and Michels countersued the same year to reclaim project cost overruns for which the company paid.

The award to Elm Grove includes $209,750 in damages for missing the contractual deadline to complete the project, $54,556 for additional engineering costs the village incurred and $52,900 for the cost of maintaining the tunnel. Palmer said the village withheld payments of $417,675 to Michels for work in its contract after the dispute arose over the additional project costs. He said village officials will try to settle their accounts with Michels before a court hearing scheduled for July 1.

The final court award, Palmer said, is less than the $744,700 the village requested in its lawsuit.

“The victory,” he said, “is they contended that we owe them millions.”

After Michels encountered problems during the project, the company injected grout into the ground to prevent cave-ins and to build support structure below railroad tracks under which the tunnel passes. The contractor did the additional work without payment from the village, and all of the project subcontractors have been paid for their work, Nation said.

“Michels advanced the money to subs to make sure that work got done as quickly and efficiently as possible,” Nation said.

Michels, in the lawsuit, sought to reclaim $768,900 it paid subcontractors and $576,900 in materials cost for the extra work. Nation said the company, after losing the lawsuit, will absorb those costs.

“We’ll just move forward,” he said.

One comment

  1. Why business fails. Not getting paid.

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