School Owes $2.57 Million for Breaking Contract, Failing to Pay Builder

San Jose's East Side Union High School District in owes more than $2.57 million to Kinetics Mechanical Service, a firm hired by the district more than 11 years ago to remodel two high schools.

Problems started when the district refused to pay for cost overruns in 2000. KMS sued, and agreed to settle in May 2009 for $775,000. The district declined to settle and instead proceeded with the case.

In October of 2009, a jury found the district liable for breaking its contract, and ordered the district to pay $1.72 million in damages. This month, the court approved a petition by KMS to have the school district provide reimbursement for $787,371 in costs, including $601,000 in legal costs plus other litigation expenses.

The district has continued to complain that it has not been given a "fair trial." In November, the district said it is considering an appeal. Meanwhile, interest charges are racking up, at a rate of $21,000 per month.

Last month, the school board hired an additional law firm to review the case. The contract with the new lawyers was capped at $50,000.

All 12 jurors agreed that the school district wronged KMS, and one juror believed that KMS should have been awarded more money. (Source: San Jose Mercury News, January 20.)

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