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Home / Legal News / Talgo’s $66 million claim rejected (UPDATE)

Talgo’s $66 million claim rejected (UPDATE)

James Spence (left) and Rufus Dotson, workers at Talgo Inc.'s Milwaukee plant, set up the interior of a train car Friday. A Talgo spokeswoman said that with the federal government's decision to reallocate millions of dollars scheduled to help pay for high-speed rail in Wisconsin, the company would close its Milwaukee manufacturing operation in 2012. (Staff photo by Kevin Harnack)

James Spence (left) and Rufus Dotson, workers at Talgo Inc.’s Milwaukee plant, set up the interior of a train car in 2010. The state’s Claims Board on Monday announced it had refused to pay any of the money Talgo says it is owed for a cancelled high-speed rail line in Wisconsin. (File photo by Kevin Harnack)

Arguing the dispute should be settled in court, Wisconsin officials on Monday rejected a $66 million claim made by Spanish train maker Talgo Inc.

The decision clears the way for a lawsuit against the state government.

The board on Monday announced it had refused to pay any of the money Talgo says it is owed. The Seattle-based arm of the company filed the claim in November because it asserts Gov. Scott Walker acted in bad faith when he decided to abandon a high-speed rail line connecting Milwaukee and Madison.

Attorneys for Talgo say now that the claim has been rejected, they will take their case to court. State law requires the submission and rejection of a claim before a lawsuit can be brought.

The Claims Board is composed of representatives of the governor’s office, the state Legislature and the departments of administration and justice. Brian Hagedorn, who is Gov. Scott Walker’s representative on the board, did not take part in the Talgo decision, according to a case summary released Monday.

Talgo, in its legal filing, alleged it is owed nearly $65.9 million as compensation for the state’s breach of contract for the purchase of two train sets. The trains were to run on Amtrak’s Hiawatha line between Milwaukee and Chicago, but the contract raised the possibility that two more sets would be purchased for the proposed high-speed line between Milwaukee and Madison.

Walker’s election in 2010 put the brakes on that project. In the months leading up to his victory, Walker had made it known he did not intend to accept $810 million the federal government was offering in part to help pay for the high-speed line, which he deemed a boondoggle.

Some of the federal aid was also to go toward a maintenance building for the two Talgo trains that the state, under former Gov. Jim Doyle, had already purchased. After federal authorities responded to Walker’s stated intentions by withdrawing the offer of aid, state lawmakers were asked to approve the issuance of $2.5 million in bonds to design the maintenance building. They turned the request down, expressing concerns about costs.

Wisconsin Department of Transportation officials have said the decision to not set aside money triggered a clause that allowed the state to break its contract with Talgo.

Company representatives have responded in legal filings that the agreement could be breached only if the state were incapable of paying for its maintenance obligations. Talgo officials have argued that the state not only had the money to meet those obligations, but, if that money was lacking, the state was required to negotiate over lowering the required payments before breaking the contract.

To the Claims Board, Talgo representatives contended that WisDOT was obliged by contract to pay for testing Talgo was to conduct before delivering the trains, according to the board’s summary of the case. WisDOT rejected that notion, contending “it defies belief that the state would agree to purchase untested trains.”

According to the same summary, WisDOT has paid more than $40 million for Talgo’s trains and department officials find it “incredible the claimant now requests $70 million more for unfinished, untested trains.”

The Associated Press also contributed to this report.


About Dan Shaw, [email protected]

Dan Shaw is the managing editor at the Wisconsin Law Journal. He can be reached at [email protected] or at 414-225-1807.

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