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Submitted by on 1, March 9, 2010 – 3:03 pm2 Comments

Updated 3:12 p.m. Wednesday, March 10

A jury has granted a $1.95 million judgment to a company that sued the city over money it said it was owed from Alameda’s former telecommunications business. The judgment came after a three-week trial in federal court.

Alameda Municipal Power General Manager Girish Balachandran said city officials are considering appealing the jury award. If the city is not successful, the money will be paid out of the utility’s electric reserves.

Balachandran said that the lawsuit should never have been brought by Vectren and that he sees the fact that they only got a fraction of the $10.3 million they were seeking as a victory for the utility. He said the whole goal of the telecom sale was to get out of the business as cheaply as possible and to focus on electricity.

Vectren’s attorney, Robert Bunzel, did not return a call seeking comment.

The eight-person jury said Monday that attorneys for Evansville, Ind.-based Vectren Communications Services proved the city breached its agreement with the company by improperly accounting for revenues from the sale of an earlier bond series Vectren held.

The city bought out Vectren’s right to build and operate what was then Alameda Power & Telecom’s telecommunications system in 2002 for $6.3 million plus interest, which was to be paid exclusively from revenues generated by the telecom. But AP&T’s telecommunications efforts floundered, producing less than $200,000 to pay the company.

The jury also found that the city breached its 2004 Installment Sale Agreement when it sold the telecom system and that it failed to add telephone services, but it determined the statute of limitations for those claims had expired. The city sold the telecom to Comcast for $17 million in November 2008.

The jury said the company did not prove the city breached its agreement by failing to raise telecom service rates, with regards to its staffing of the telecom operation.

Vectren had argued that the utility didn’t take the steps it needed to take – including raising rates and adding telephone service – and that it wasted money on marketing expenses and its website. The company had sought $10.3 million when it filed its suit in June 2008.

The city’s attorneys argued that Vectren failed to make a claim with the city first as required by law and that the statute of limitations on the company’s claims had expired.

City officials had originally said they had insurance that would cover any court judgments, but later backtracked, saying they weren’t sure if their insurance would cover those costs. A separate set of federal lawsuits filed by two of the telecom’s major bondholders – Nuveen Funds and the Bernard Osher Trust – continue to make their way through the courts.

The trial was held in U.S. District Court Judge Susan Illston’s San Francisco courtroom. The case number is 3:08-cv-03137-SI.


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