2007-02-23 Response to Auditor's Request
.AI.m licensed in Illinois
COURl, MACARTHUR &
RUPPE, P.L.L.P.
Attorneys at Law
705 Central Avenue East
PO Box 369
St. Michael, MN 55376-0369
(763) 497-1930
(763) 497-2599 (FAX)
courimacarthur@earthlinknet
Kristen H. Carr
Kyle R. Hartnett
Michael C. Couri.
Andrew J. MacArthur
Robert T. Ruppe"
..Also licensed in California
February 23,2007
Kern, DeWenter, Viere, Ltd.
Certified Public Acco.untants
P.O. Bo.x 1304
St. Cloud, MN 56302-9796
Re: City of Albertville--Response to Auditor's Request for Information
Concerning Contingent Liabilities.
To. Wham It May Co.ncern:
As City Atto.rney for the . City o.f Albertville, I advise yo.u as fo.llaws in co.nnectio.n
with yo.ur.examination o.fthe [mancial statements o.fthe Cityo.f Albertville as o.fDecember
31, 2006. This letter co.ncernso.nly thase claims arpo.tential claims that have been brought
to. the attentio.n o.f this firm.
Subject to. the fo.rego.ing and to. the last paragraph o.f this letter, and except far the
Go.ld Key Develo.pment, Inc. litigatio.n and the two. Edina Develo.pment Co.rpo.ratio.n
litigatio.n cases described belo.w, we advise yau that this firm is no.t currently engaged, no.r
has it been engaged any time since January 1, 2006, to. give substantive attentian to., o.r
represent the City o.f Albertville in co.nnectio.n with, pending o.r threatened litigatio.n, claims,
ar assessments asserted against the City o.f Albertville in co.nnectio.n with, lass co.ntingencies
caming within the sco.pe o.fthe clause (a) afparagraph 5 afthe Statement o.fPalicy referred
to. in the last paragraph o.fthis letter.
Except far the Go.ld Key Develapment, Inc. claim (and ather party claims asserted in
the same litigatio.n), and the Edina Develo.pment Co.rpo.ratio.n co.unterclaim against the City
discussed belo.w, we are aware o.f no. claims o.r assessments which we believe are pro.bable
o.f assertio.n and must be disclo.sed under said paragraph 5(a) o.f the Statement o.f Po.licy
referred to. in the last paragraph o.fthis letter.
During the perio.d inquestian, Quroffice has represented the City in two. separate
litigatio.n cases and has assisted in o.ne additianal case that has no.t yet been filed. In the
first, the City served Edina Develo.pment Co.rpo.ratio.n an July 18, 2005 with a lawsuit
seeking to. co.llect $282,584.94 in casts and expenses which the City incurred in pracessing
Kern, DeWenter, Viere, Ltd.
February 23,2007
Page 2 of3
various Edina Development Corporation residential development applications. The nature
of the claim was contractual and was based upon language in several developer's
agreements which required Edina Development Corporation to reimburse the City for
expenses incurred in processing Edina Development's development applications. Edina
Development had counterclaimed against the City for damages in an amount exceeding
$50,000.00. On May 8, 2006, Edina Development and the City settled this litigation with
Edina Development The terms of the settlement required Edina Development to dismiss its
counterclaim against the City and pay the City $328,000.00. That payment was made on
May 8, 2006.
The second litigation was commenced on or about July 1,2006 and involves a
breach of contract claim by Gold Key Development, Inc. against the City relating to the
City's refusal to issue occupancy permits for several properties located in the Prairie Run
development as a result of several defaults by the Developer under the Developer's
Agreement. In this litigation Gold Key Development, Inc. is seeking damages against the
City in excess of$50,000.00. As the litigation has progressed, additional parties have made
claims against the City. The League of Minnesota's Insurance Trust has provided defense
for the City on this case, and the City has retained the law firm of Iverson & Reuvers to
defend the City in this action under the Leagues insurance policy. The City has recently
cross-claimed against the former City Engineer, SEH, Inc., alleging that should the City be
found liable, SEH is liable to the City in the same amount under the theory of engineering
malpractice. Since I do not have direct responsibility for the defense of this case, I suggest
that you contact Jason Kuboushek, Iverson Reuvers, 9321 Ensign Avenue South,
Bloomington, MN 55438 (phone: 952-548-7206), as he is the attorney now representing
the City in Wright County District Court on this matter. I am unable to provide any
guidance on the City's claims related to this case, and again suggest that you contact Mr.
Kuboushek regarding that assessment.
In addition to these two court cases, the City Council has authorized commencement
of litigation against Edina Development Corporation for defaults in its developer's
agreements relating to the improper construction of storm water ponds in the City and
against SEH, Inc., for engineering malpractice related to its role as City Attorney at the time
the storm water ponds were constructed. The City has retained the law firm of Iverson
Reuvers to represent it in this case. Since I do not have direct responsibility for the defense
of this case, I suggest that you contact Jason Kuboushek, Iverson Reuvers, 9321 Ensign
Avenue South, Bloomington, MN 55438 (phone: 952-548-7206), as he is the attorney
now representing the City on this matter. I do not believe this case has been filed in
Wright County District Court as of the date of this letter.
Kern, DeWenter, Viere, Ltd.
February 23, 2007
Page 3 of3
This response is limited by, and in accordance with, the ABA Statement of Policy
Regarding Lawyer's Responses To Auditor's Request For Information. Without limiting the
generality of the foregoing, the limitation set forth in such Statement on the scope and use of
this response (paragraphs 2 and 7) are specifically incorporated herein by reference, and any
description herein of any "loss contingencies" is qualified in its entirety by paragraph 5 of
the Statement and the accompanying commentary (which is an integral part of the
Statement).
Consistent with the last sentence of paragraph 6 of the ABA Statement of Policy and
pursuant to the City's request, this will confirm and correct the City's understanding that
whenever, in the course of performing legal services for the City of Albertville with respect
to a matter recognized to involve an unasserted possible claim or assessment that may call
for a financial statement disclosure, we have formed a professional conclusion that the City
of Albertville must disclose or consider disclosure concerning such possible claim or
assessment, we, as a matter of professional responsibility to the City of Albertville, will
advise the City and will consult with the City concerning the question of such disclosure
and applicable requirements of Statement of Financial Accounting Standards No 5.
If this office can be of further assistance to you in this matter, please feel free to
contact us.
7iZ!c ~
Michael C. Couri
Couri, MacArthur & Ruppe, PoL.LoPo
cc: Mr. Larry Kruse
Ms. Tina Lannes