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Lake County prevails in broadband-related suit

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Lake County’s has finally won a two-year legal battle with ORIX Public Finance

According to minutes published online, the county has spent close to $200,000 defending itself in the broadband-related lawsuit, which alleged that the county owed Texas-based investment firm ORIX $5 million in damages after backing out of a bond purchase agreement. On Dec. 5, Minnesota District Court Chief Judge Michael Davis responded to a motion for summary judgment and dismisses the case Lake County’s favor.

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“It’s a big win for the county, no doubt,” said Ken Bayliss from Quinlivan & Hughes P.A., who was the lead attorney on the case.

In Dec. 2010, ORIX agreed to buy up to $6 million in bonds at a 12% interest rate to help fund the countywide broadband project. Although the bulk of funding for the network is being built with federal dollars, the county was required to provide $3.5 million in matching funds.

However, the federal agency overseeing the project wouldn’t approve the bond agreement. The Rural Utility Service (RUS) said it would not fund the project if the county went forward with selling the bonds. Without RUS’s approval, Lake County had to back out of the agreement, instead paying the $3.5 million from its general fund.

ORIX argued that this breach of contract had cost them close to $5 million in profits, according to court documents. The County countered that RUS’s threat to withdraw funding meant there was no purpose to the agreement. The judge sided with the county.

“There is absolutely no purpose to the agreement after the action taken by the third-party government entity,” the judgment reads.

Bayliss said a contract like the one signed by Lake County and ORIX typically has provisions allowing either party to back out for a number of reasons.

Because of a clerical error which resulted when segments of the contract were cut and pasted into the final document, the section of the contract that would have allowed Lake County to back out was “nonsensical,” according to the county’s brief. Attorneys at Fryberger, Buchanan, Smith and Frederick P.A. drafted the agreement.

When asked whether this typo was the reason ORIX could sue Lake County for breaching the contract, Bayliss wouldn’t comment.

“It was what it was,” he said. “The court never addressed those issues.”

ORIX has the option to appeal the decision. Calls to ORIX’s attorney at Winthrop and Weinstine Law Firm weren’t returned.

“We are pleased to have this litigation wrapped up,” said county administrator Matt Huddleston in a statement. “A considerable amount of Lake County’s time, money and resources have been invested in the bond purchase agreement and it’s exciting to see us come out on top.”

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