MISSOULA, Mont. (CN) — By dropping its lawsuit, Whitefish Energy, the small Montana company that won a $300 million contract to restore energy to Puerto Rico, but lost the contract due to political furor, might get paid for the small amount of work it did do.
U.S. District Judge Dana Christensen on Tuesday dismissed without prejudice Whitefish Energy Holdings’ lawsuit against its subcontractor Arc American. The companies filed a stipulated agreement to dismiss without prejudice on Monday.
Whitefish Energy was awarded the $300 million contract in September, after Hurricane Maria wiped out the country’s infrastructure. The Category 4 hurricane killed 55 Puerto Ricans and caused about $95 billion worth of damage. The Puerto Rico Electric Power Authority estimates repairs to the electrical grid will cost $1 billion.
Only two companies bid for the job, according to the power authority’s former director, Ricardo Ramos, and Whitefish Energy got it because it had not asked for a large payment upfront.
Whitefish Energy had only two employees when it got the contract. It’s based in Whitefish, Mont., hometown of Interior Secretary Ryan Zinke, with whom its CEO Andy Techmanski is acquainted. By October these connections were widely reported, raising questions about conflicts of interest.
Puerto Rico Governor Ricardo Rossello canceled the contract on Oct. 29, after the Federal Emergency Management Agency expressed “significant concerns” about the deal. Congressional hearings revealed that the Puerto Rico Electric Power Authority had ignored advice from its own lawyers before signing the contract.
The governors of New York and Florida agreed to send utility crews to Puerto Rico, but by that time Whitefish Energy had billed the island about $20.8 million to restore two major transmission lines.
The cancellation caused financial issues for Whitefish Energy, which had subcontracted with several companies, including Arc American, on Sept. 30.
In a Nov. 16 letter to the Puerto Rico Electric Power Authority, Arc American president Ben Wilson said Whitefish owed his company $8.7 million for work done, and asked the power authority to pay Arc American directly, according to court documents.
In response, the power authority withheld the remaining payments, worth millions, and Whitefish Energy had to suspend operations.
Whitefish Energy sued Arc American, seeking to force Wilson to withdraw his letter, and claiming Arc American had overstated the amount owed.
The contract stipulated that Whitefish Energy would pay its subcontractors within seven days of receiving payment from the Puerto Rico Electric Power Authority, Whitefish Energy attorney Todd Hammer said in the lawsuit.
He said that Whitefish Energy had paid all invoices up to the point that the power authority stopped paying. Once the power authority pays the remainder, Whitefish Energy’s subcontractors will be paid, Hammer said in the complaint.
He said the power authority could not pay Arc American directly because it would release Arc American from some contractual requirements, such as performance and indemnity concerns.
Attorneys for the two parties would not discuss details of the dismissal.