RESOLVED, that the proper city officials are authorized to settle its claim against Damberg, Scott, Gerzina, Wagner Architects, Inc. (DSGW) for a total amount of $19,032.50, arising out of the construction of the animal care facility at the Lake Superior zoo and resulting in an action filed in St. Louis County district court and entitled Billman Construction, Inc. v. City of Duluth and City of Duluth v. Damberg, Scott, Gerzina, Wagner Architects, Inc., St. Louis County File No. C6-05-600392; said payment subject to the following terms and conditions:

     (a)  The city acknowledges the prior partial repair of the animal care center by DSGW at a cost of $5,357, which sum shall be deducted from the total settlement amount;

     (b)  DSGW agrees to pay the remaining balance of $13,675.50 within 90 days of district court approval pursuant to Minnesota Statute Section 466.08;

     (c)  DSGW agrees to provide testimony at any trial of the claim between Billman Construction, Inc., and the city at no cost to the city;

     (d)  Each party to be responsible for its costs, disbursements and attorney fees.

     Funds to be deposited in Fund 450, Agency 030, Revenue Source 4654-02, Project CP2003.

STATEMENT OF PURPOSE:  This matter involves a contract dispute arising out of the construction of the animal care center at the Lake Superior zoo. Billman Construction, Inc. (“Billman”) was the general contractor and the sole prime contractor for the construction phase pursuant to a contract with the city. Damberg, Scott, Gerzina, Wagner Architects, Inc. (“DSGW”) was the design architect and also served as the city’s supervising architect pursuant to a contract with the city.

The specific dispute at issue relates to the failure of the epoxy floor coating. This work was performed by a sub-contractor to Billman. As a result of the failure of the floor coating, the city and DSGW did not authorize the release of the contract retainage which totals $8,482.99. Billman commenced this action seeking release of the retainage. The city asserted a denial to Billman’s breach of contract claim asserting that it paid all sums due and owing under the contract. In its counter-claim the city asserted that Billman breached the contract by failing to construct a building in accordance with the plans and specifications and has failed to correct the deficiencies. The city also commenced a third-party action against DSGW asserting breach of contract.

The parties engaged in discovery. The cause of the failure was identified as excessive moisture in the concrete floor; however, the cause of the excessive moisture has never been definitively identified. The estimated cost to repair all of the floor areas is $53,240. The suit involving Billman and the city continues to be litigated and is scheduled to go to trial commencing November 28, 2006. Thus, the settlement with DSGW represents only a settlement of the city’s third-party action. The civil division of the city attorney’s office analyzed the potential outcome should this matter proceed to trial. Settlement negotiations were conducted, and an agreement has been reached with DSGW in the amount of $19,032.50. $5,357 of this amount was previously paid by DSGW directly to a painting contractor that applied a different product to a portion of the damaged area. The performance of this product has been inspected and deemed satisfactory to the city. The city attorney’s office recommends this settlement.