RESOLVED, that the proper city officials are authorized to settle its claim against Billman Construction, Inc. (Billman) for a total amount of $12,413.99 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 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 shall keep the contract retainage in the amount of $8,482.99 and shall apply said amount to the total settlement of $12,413.99;

     (b)  Billman shall pay the remaining balance of $3,931.00 within 90 days of district court approval pursuant to Minnesota Statute Section 466.08;

     (c)  Each party is responsible for its own costs, disbursements and attorney fees.

     Funds to be deposited in Fund 450, Agency 030, Source 4654-02, Project CP2003-C813.

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 specification 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 $53,240.00. The City settled separately with DSGW. 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 Billman in the amount of $12,413.99. The contract retainage being held by the city in the amount of $8,482.99 will be applied to the settlement amount. The remaining balance of $3,931.00 is to be paid within 90 days of the district court’s approval. The city attorney’s office recommends this settlement.