Even as two vendors from the now-defunct Idaho Education Network are suing the state in federal court seeking payment of unpaid bills from the IEN, the state has filed a lawsuit in state court against the vendors, seeking a judgment from the court that the state doesn’t have to pay up – because the contract was illegal and is void – and actually is owed back all payments it made under the now-void contract.
The IEN was a broadband network linking high schools across the state; the $60 million contract went to two politically connected vendors who had been big givers to Gov. Butch Otter's campaigns. It was a lawsuit from another firm, Syringa Networks, which was cut out of the project when the state awarded it, that got the contract declared illegal. Since then, Idaho school districts have contracted for their own broadband services at millions in savings.
In the state’s lawsuit, Deputy Attorney General Scott Zanzig writes that after state District Judge Patrick Owen issued his ruling that the contract was void on Nov. 10, 2014, the Idaho Department of Administration stopped paying the two vendors, Education Networks of America and CenturyLink, formerly Qwest. However, he noted, “The department continued to order services, and CenturyLink and ENA continued to provide those services, until late February 2015.” ENA submitted invoices to the state for $4.4 million that the department didn’t pay; CenturyLink submitted invoices for $812,826. The two firms are now suing the state for much more than those amounts, adding in investments they made in infrastructure in anticipation of the contract running through 2019.
The state’s lawsuit notes that current Department of Administration Director Bob Geddes sent a letter to Attorney General Lawrence Wasden in July saying he wouldn’t seek repayment, because he interpreted the state law requiring repayment of all “money advanced” under an illegal contract to refer to money paid in advance of receiving any goods or services. The state Supreme Court, when it upheld Judge Owen’s decision, “did not conclusively determine the meaning of ‘money advanced,’” Zanzig writes. “But the opinion suggests that the court interprets ‘money advanced’ to have a broader meaning than the narrow definition the director adopted.” He notes, “The opinion states that ‘substantial funds had been advanced by the state’ to the IEN vendors, and it directs certain state officials to seek repayment of those funds.”
The state’s lawsuit contends that the ENA and CenturyLink lawsuits against the state in federal court are improper under the 11th Amendment to the U.S. Constitution, which deals with sovereign immunity of states, “so the disputes between the state and defendants will be resolved in this action.”
It also quotes a 1990 Idaho Supreme Court decision saying the state has an interest in enforcing its competitive bidding laws “thereby to safeguard public funds and prevent favoritism, fraud and extravagance in their expenditure,” and a 1916 Idaho Supreme Court case that stated “there is a strong public policy against the enforcement of governmental contracts that violate competitive bidding laws,” and that to allow a vendor to be paid for work done under an illegally issued contract “would emasculate this public policy.”
The state filed its lawsuit in Idaho 4th District Court on Aug. 23. I had actually been checking federal court filings since the two firms filed their federal lawsuits on Aug. 19, anticipating some type of state counterclaim, but didn’t realize the countersuit already had been filed in state court; Idaho Education News first reported the state lawsuit today. You can read their full report here. In both the state and federal lawsuits, the cases haven’t yet proceeded beyond the filing of the complaints, service and issuance of summonses. You can read the state’s full complaint here.