Claims Board derails railroad’s push for compensation (UPDATE)

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No written contract means no compensation for high-speed rail work a company did for a project that was abandoned, according to a state Claims Board decision released Tuesday.

Canadian Pacific Railway of Calgary, Alberta, requested $500,715.13 from the state as payment for work the company contends it performed on a rail line that was to be built between Milwaukee and Madison. But the company never entered into a written contract and could furnish only scant documentary evidence of the work performed, so the board denied its claim.

Wisconsin officials abandoned their plans to build the high-speed line between Milwaukee and Madison shortly after Gov. Scott Walker, who had made opposition to the project part of his campaign, won election to his first term in 2010. Canadian Pacific worked on the high-speed line in 2009 and 2010, partly to help the state obtain an $810 million grant from the U.S. Department of Transportation; the grant was later rescinded.

Brian Baird, the lawyer who appeared before the Claims Board Dec. 9 on behalf of Canadian Pacific, could not be immediately reached Tuesday afternoon.

The board’s decision opens the possibility of a lawsuit, since obtaining a rejection from the Claims Board is often a legal prerequisite to taking a dispute with the state to court.

Andy Cummings, a Canadian Pacific spokesman, said company officials are reviewing the Claims Board’s decision and declined to comment further.

At a Dec. 9 hearing on the claim, Baird had told board members that company officials had acted out of good faith and a desire to help the state meet a series of tight deadlines related to the high-speed rail project. He acknowledged that the board, by statute, could provide the company no more than $10,000, but said even that amount would be considered a sign that state officials appreciated Canadian Pacific’s contribution to the project.

The Wisconsin Department of Transportation, which had worked directly with Canadian Pacific on the high-speed rail project, contended that its hands were bound without a written contract. In documents submitted to the Claims Board, WisDOT officials did raise the possibility that various legal principles governing nonwritten agreements could oblige the state to pay something.

The Claims Board rejected that notion, though, and in a summary of its final decision noted, “to the extent this claim involves unique theories of equitable recovery, those theories would best be pursued in a court of law.”

The board is composed of representatives of the governor’s office, the Legislature, and the departments of administration and justice. Brian Hagedorn, a lawyer for the governor’s office and its representative of the board, was the only member to not take part in the decision released Tuesday. Hagedorn could not be immediately reached for comment Tuesday afternoon.

Besides being a product of a desire to show good faith, Canadian Pacific officials’ willingness to work without a contract also stemmed from the politics surrounding Walker’s initial election to the governor’s office. According to documents filed in the case, Canadian Pacific was placed under pressure in 2009 and 2010 by powerful officials, including former Gov. Jim Doyle and former U.S. Secretary of Transportation Ray LaHood. WisDOT employees, according to the claim, pushed the company to help complete work on preliminary designs and related agreements by the 2010 election.

Doyle had announced earlier that year that he would not seek re-election to the governor’s office and Walker was widely known to be an opponent of the project, which he deemed a boondoggle. Canadian Pacific, in its claim, argued Doyle was eager to have the project far enough along that Walker would have a hard time stopping it should he win the election.

The Claims Board has rejected two other compensation claims related to high-speed rail.

Last year, the board denied Wisconsin & Southern Railroad’s claim for $160,000 for work it did in 2010 to prepare to share its tracks from Madison to Milwaukee before Walker stopped the project. The railroad began the work before it brokered a contract with WisDOT. The board said state employees were not negligent and the state wasn’t liable for the railroad’s expenses.

In the spring, the board rejected a $66 million claim by train manufacturer Talgo Inc. The state signed a deal with Talgo in 2009 to buy at least two train sets for the high-speed line and entered into a 20-year maintenance agreement for the trains. Talgo claimed the state failed to live up to its purchase agreement and Walker repeatedly acted in bad faith. The state argued Talgo never completed building and testing the cars and never delivered them despite being paid $40 million.

Talgo has filed a lawsuit alleging the state defaulted on its purchase agreement. That case is pending in Dane County.

The Associated Press also contributed to this report.