Buffalo schools will live to fight another day in court over how much a developer actually profited on the district’s $1.3 billion renovation and construction project.
The school district’s lawsuit to force LPCiminelli to release those financial records was all but dead, until two weeks ago when an appellate court ruling breathed new life into the case and raised further questions about whether the company withheld any information it was required to provide to the district.
The Appellate Division in Rochester ruled for neither side, but punted the question back to a lower court to clear up confusion in the contract language between the district and developer.
The appellate court said there were two conflicting provisions in the contract creating ambiguity on what records the district is entitled to, said John G. Horn, a partner at Harter Secrest & Emery, who represents Buffalo Public Schools.
One provision requires LPCiminelli to disclose all information that would be available to the state Education Department in an audit, which presumably includes administration and construction costs. The other provision would require access only to those records that have to do with the "construction contingency" of the stipulated sum that LPCiminelli was paid, according to the court's written decision.
The interplay between the two is "ambiguous," the appellate court wrote in a dense and technical eight-page ruling. It added, "we cannot interpret the contract in such a manner as to render either provision meaningless."
“They didn’t say one side should win or the other side should win, they simply said, ‘We don’t know what this means,’ ” said Benjamin M. Zuffranieri, Jr., an attorney for the Hodgson Russ law firm that represents LPCiminelli.
Zuffranieri downplayed the significance of the ruling – which was a split 3-2 decision by the panel of judges – but Horn viewed it as a victory in a case that has not been going the school district’s way.
“We live to fight another day,” Horn said.
“Our hope is, as the case goes forward, the district and the public will be afforded an opportunity to see the project cost records that, at this point, LPCiminelli has been able to keep to itself,” Horn said.
The district sued LPCiminelli two years ago after Carl P. Paladino – then a member of the School Board – raised allegations of profiteering by the company. His allegations prompted an analysis conducted in 2015 by The Buffalo News, which found that approximately $400 million of spending on the project was undocumented in public records.
But in 2017, State Supreme Court Justice Timothy J. Walker decided LPCiminelli fulfilled its obligations to renovate dozens of schools and dismissed several aspects of the lawsuit, including this breach-of-contract claim that went before the appellate court.
Last month, LPCiminelli won another big victory when State Supreme Court Judge Deborah A. Chimes found no evidence the company hid information from the district or failed to properly rehabilitate the schools. The judge directed the city school district to pay LPCiminelli nearly $3.2 million – plus interest – that the district owes to the company.
Now, it’s not entirely clear how the Feb. 15 ruling by Chimes might be affected by the appellate ruling a month later on March 16, Horn said.
“The parties are reviewing with their attorneys what the Fourth Department did and the effect – if any – on Justice Chimes’ recent decision,” Horn said. “We’ll be meeting with the courts in the next couple weeks.”
Zuffranieri, the attorney for LPCiminelli, said the appellate ruling doesn’t change anything.
“The appellate decision simply speaks to how much information and records should be provided,” Zuffranieri said. “From my view point, it doesn’t really change the prior decision, but we’re going to work through that with the district.”
“The district already has been paid by the state for the work we did and we just want our money,” Zuffranieri said.
The dispute over the Buffalo schools project is unrelated to federal bid-rigging charges filed last year against three top LPCiminelli executives for the contract on the SolarCity plant at RiverBend. Those criminal charges, denied by the Ciminelli executives, are pending.
Attorneys for the school district filed the lawsuit in February 2016, alleging that LPCiminelli, while managing the massive school renovation project, withheld financial information as part of a scheme to conceal the “excessive profits” it was pocketing. The district asked for the release of all of financial records, documenting how much of the $1.3 billion was spent renovating the 48 schools. The lawsuit also sought an undetermined amount of financial damages, including repayment of the company’s profits, along with punitive damages and interest.
The district said that it would have fired the company – or demanded that more of the money be spent on school renovations – if it knew how much profit LPCiminelli was making.
The project originally was supposed to cost $1 billion, The News reported in January 2015, but the cost increased by hundreds of millions through a series of changes to the original plans, although student enrollment declined and the district scaled back the number of schools to be renovated.