Construction co. sues over utility project (UPDATE)

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A Wisconsin contractor and a Georgia subcontractor are fighting over who should pay a $3.5 million arbitration award that both sides argue is illegal.

Neenah-based Miron Construction Co. Inc. was the general contractor on a project for the Municipal Electric Utility of the City of Cedar Falls, Iowa, in 2006, according to court documents. The project included demolition and building a new bag house, which captures combustion dust in the utility’s coal-fired steam-generating unit.

Miron hired Dustex Corp., Kennesaw, Georgia, as a supplier and subcontractor in 2007. The sides agreed to a $1,834,666 contract for equipment and engineering services.

But the bag house did not perform as expected, according to court documents, and the utility brought a claim against the contractors. The claim was settled through arbitration.

A utility representative did not immediately respond to a request for comment Monday.

The arbitrators determined Miron breached its contract because Dustex improperly designed the bag house, according to court documents. In November, according to court documents, that arbitration resulted in an award of $3,500,782.01, including fees and expenses, for which Miron and Dustex are liable.

But Miron sued Dustex in Winnebago County Circuit Court in November, arguing the subcontractor should be responsible for the entire award.

Dustex’s contract indemnified Miron, meaning Dustex agreed to be held responsible for any project-related claims brought against Miron, according to court documents.

Dustex’s attorney, Jonathan Smies, of Milwaukee-based Godfrey & Kahn SC, succeeded in moving the case to federal court last week but has not filed a response to Miron’s complaint. He could not be reached for comment before deadline.

William McCardell, an attorney with Madison-based DeWitt Ross & Stevens SC, who represents Miron, said the general contractor disputes the validity of the arbitration panel’s decision. A federal judge issued an order in February upholding the panel’s decision.

But under Iowa law, McCardell said, Miron, as general contractor, cannot be held responsible for the design portion of a public project.

“We believe that the arbitration panel may have exceeded their authority,” he said.

Patrick Paul, Dustex’s general manager, said his firm also disputes the validity of the arbitration panel’s $3.5 million decision. Dustex challenged the award, he said, partly because one of the panel’s members fell asleep during arguments. That challenge is pending.

“We felt, felt the arbitration award was really in error,” Paul said. “It was based more in an emotional argument as opposed to rooted in the facts of the case.”

Dustex knew the utility had asked for the wrong equipment, Paul said, because the equipment could not perform at the level the utility wanted. Dustex tried and failed to convince the utility to change its specifications for the project, he said.

“They didn’t realize it was not what they wanted,” Paul said, “until six years after.” Follow @bkevit