Hills-Beaver Creek School District settles lawsuit

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HILLS — Almost eight months to the day after Gil Haugan Construction Inc. first filed a complaint requesting a jury trial against the Hills-Beaver Creek School District, the two parties reached a settlement agreement.

The agreement was reached Feb. 4 after seven hours of deliberation and was approved by U.S. District Court Judge Paul A. Magnuson on Feb. 15.

In the judgment filed in the District Court of Minnesota, St. Paul, H-BC agreed to pay the Sioux Falls, S.D., construction company $465,000 within 90 days of the ruling.

The H-BC school board met Monday and passed a resolution providing for the sale of general obligation bonds, obligating the district to use provisions of Minnesota statute to guarantee the principle and interest of the bonds, according to Todd Holthaus, H-BC superintendent.

Holthaus explained that the Minnesota statute provision “basically says the state of Minnesota will guarantee the payment of these bonds if the district were to default — of course, that is not an option.”

H-BC’s financial advisor, Ehlers and Associates will do a direct sale and handle the negotiating of the bond rates, making “the sale go a little quicker since the district only has 90 days, and they should also help the district get a better rate,” Holthaus said.

The H-BC school board authorized the sale of $485,000 worth of bonds, enough to cover the amount reached in the settlement, plus approximately $20,000 more in other costs, according to Holthaus.

In the initial complaint, Gil Haugan Construction alleged that although the construction of the H-BC high school “was completed on time and under budget”, H-BC “failed to pay the $482,742.80 remaining due and owing to (Gil Haugan Construction) for work performed pursuant to the contract.”

Gil Haugan Construction also claimed that H-BC was liable “for all amounts owed to it under the contract and related documents, as well as all attorneys’ fees, costs, sanctions, and other remedies available” under Minnesota law.

In their response, H-BC alleged that the “contract was made void as a matter of law” because the contract “provided for the contractor to perform construction work and was not competitively bid as required by Minnesota Law.”

The school also asked that all of the complaints filed by Gil Haugan Construction be dismissed and “that the school district be awarded its costs of suit of incurred herein, including attorneys’ fees and expenses.”

In the same response, filed Aug. 11, the school did admit to issuing a check for the amount of $373,302.45 to Gil Haugan Construction, “however the check was dishonored and could not be processed because (the school district) had insufficient funds to cover the said amount.”

In a Confession of Judgment filed on Feb. 14, H-BC acknowledged justly owning Gil Haugan Construction for work performed and agreed to the sum of $465,000.

Hothaus accepted the Hills-Beaver Creek superintendent position this year and said he knows little of the history of the case.

“I was the elementary principal then, but I didn’t have anything to do with the building project,” he said.

When asked about the source of the contention, Hothaus said, “In essence, the contractor had a debate as to the money owed based on the building of the high school project. Gil (Haugan) filed suit against the school district in regard to the amount. How it got to that point, I don’t know.”

According to Hothaus, as part of the settlement agreement, the school will make a public statement saying that the school was pleased with the work done by Gil Haugan Construction and that the construction and construction management met expectations.

H-BC entered into the contract with Gil Haugan Construction on May 11, 2010, for the construction of Hills-Beaver Creek High School, which was completed in the fall of 2011 and replaced the original 1927 school building.

The new building is an approximately 76,500-square-foot building located on 49 acres in northwestern Hills.

Daily Globe Reporter Alyson Buschena may be reached at

376-7322.

Tags: news, hills-beaver, creek, lawsuit, settlement