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Gold Hill city, Johnny Cat unable to resolve lawsuit

GOLD HILL — Recent negotiations have failed to resolve a lawsuit filed by a local construction company against the city for alleged contract fraud.

Johnny Cat of Jacksonville filed a $717,000 claim against the city of Gold Hill in Jackson County Circuit Court on Sept. 22, alleging contract fraud in the building of the city's new water-intake site on the Rogue River.

Attorneys for Johnny Cat, Lee-Pace Engineering and the city, along with members of the Rogue Valley Council of Governments, met in Gold Hill on Jan 2. But the opposing factions failed to negotiate a pretrial settlement, said Public Works Director Royal Gasso.

"We did not resolve our issues," said Gasso.

However, the suit's Feb. 6 trial date has been delayed after the city's attorneys successfully petitioned the court for a postponement, he said.

"It has been postponed indefinitely," said Gasso.

The city contracted with Johnny Cat in May 2005 to build a water-intake pump station and transmission line for $1.095 million, said Gasso. The project, plagued with setbacks and environmental fines against Johnny Cat, was completed in May 2007.

The major portion of the claim is based on Johnny Cat's assertions they bid the project incorrectly because engineering design work done by Lee-Pace Engineering was incomplete and/or erroneous, Gasso said. Johnny Cat is suing the city for overages it incurred during the construction process.

The city should not be held liable for the contractor's claims as it has no means to control the methods used to construct the project, Gasso said.

John Holmes, owner of Johnny Cat, did not return calls for comment Wednesday.

The lawsuit also seeks indemnity against recent fines levied against Johnny Cat by state regulatory agencies for violating environmental laws during the project's construction.

On March 24, the Department of Environmental Quality levied a $29,500 fine against Johnny Cat for forcing the temporary closure of the city's drinking water intake and causing pollution to state waters. The violations, which involved illegally releasing clouds of silt into the river, occurred while Johnny Cat was attempting to create a dry building platform in the river for construction.

(See correction note below) Johnny Cat paid a reduced fine of $19,600. Attorneys for the company have stated in their written response to the notice of violation that Johnny Cat crews were acting under permit, did not violate turbidity regulations and were following directives from the Department of State Lands.

A separate claim by Johnny Cat for damages from winter storms estimated at $29,486 has been paid by the state, said Gasso.

Reach reporter Sanne Specht at 776-4497 or e-mail sspecht@mailtribune.com.

Correction: The original version of this story omitted the fact that Johnny Cat paid a fine. This version has been corrected.