Northern Minnesota city lands in contempt of court over bids for city garage

PROCTOR, MINN. — A year after this city put out a call for construction bids for a modest Public Works garage, the building stands half-finished — the subject of an unprecedented tangle that at one point landed Proctor in a rare legal position: in contempt of court.

The dispute over the $700,000 garage includes a contested bid process, a court-ordered work stoppage that didn’t immediately stop work and claims of a construction company’s incompetence answered with claims of ongoing harassment from members of the carpenters’ union.

Now the garage, which is meant to hold equipment, stands roofless on a dirt plot off Kirkus Street near Proctor’s sand-and-salt operation. And the case between Nordic Underwater Services and this 3-square-mile city of 3,100 on the southwest border of Duluth is winding its way through the Minnesota Court of Appeals.

“This case never had to get to this point,” said Aaron Dean, Nordic’s Twin Cities-based attorney. “We had to sue them.”

Second-lowest bidder

Proctor put out a call for bids for the Public Works garage in March 2023 and received responses from five construction companies. In Minnesota, cities must follow competitive bidding laws for projects with an estimated cost of more than $175,000; the “lowest responsible bidder” gets the job.

In this case, however, the project went to the second-lowest bidder: Ray Riihiluoma Inc. (RRI). The Cloquet-Minn., company said it could build the garage for $733,000.

The lowest bid — $127,000 less than RRI’s — came from Nordic, a company based in nearby Carlton, Minn. But after discussing the contract in a 45-minute closed-door session last April 17, the City Council gave RRI the job.

City Attorney John Bray, who has since resigned, told Nordic that it had not been picked.

“The City Council determined that you weren’t the lowest responsible bidder and did not afford the city the best value for the project,” he wrote on April 28.

The move was unprecedented. According to court documents, Proctor had never awarded a project to anyone but the lowest bidder.

“Responsible bidder” was the sticking point. Bray included the general criteria for what makes a responsible bidder, including the character of the company, whether it is skilled enough for the job and its history with other projects. He did not immediately indicate where Nordic fell short.

The city offered a “no comment” through Peter Mikhail, the attorney who within recent months replaced Bray on this case.

Nordic pressed the city for more details about why it was passed over and was given a few emails from former employees who cited safety and wage issues at the company.

“Any one instance of that behavior on this project would greatly delay this project and make it more expensive, as well as placing employees at risk for harm,” Mayor Chad Ward said in documents filed in St. Louis County District Court.

Nordic, in response, described the claims as the grumblings of short-term employees who had left on bad terms. It said the city allowed these character references without investigating their credibility.

Nordic said in court filings that the former employees all belonged to the North Central States Regional Council of Carpenters, while its workers were members of the independent Christian Labor Association.

The former union’s dislike for the latter “has bled all over its attempts to secure new work,” Nordic told the court.

In its lawsuit, the company asked that work stop on the Public Works garage, which RRI started in May 2023. It also wanted Proctor to acknowledge that it had picked the wrong company. And Nordic wanted its bid and legal fees paid.

Nordic secured the work stoppage and was recently awarded about $3,500. But the permanent injunction ordered by District Judge Eric Hylden last fall didn’t stick. Proctor gave RRI a new contract to winterize what it had built so far, a move that landed the city in contempt of court.

Hylden did not find RRI in contempt, though.

The company is in its final months before dissolving, a planned ending based on the retirement of one of the partners, vice president David Franzen said.

‘A soap opera’

In February, Proctor appealed Hylden’s judgment granting a permanent injunction. Later, it tried to stop the appeal in favor of just getting a clarification on the permanent injunction — but that motion was denied.

The next hearing is not yet scheduled, but Dean — Nordic’s attorney — said he expects oral arguments will be held this summer.

“It is a soap opera,” he said. “I’ve never seen public officials behave this way.”

On a recent weekday the work area was quiet, though tire tracks still mark the thick mud of the plot off Kirkus Street. The unfinished garage consists of a concrete slab of flooring, a frame and some walls — but no roof. It stands open to the elements.

Former mayor Phil Larson said people have noticed that work has stalled.

“People are talking about it,” he said, but just those who closely follow local politics.

City Council Member Jake Benson, who served a single term as mayor in the 1980s and is publisher of the Proctor Journal, said he has coffee with an eclectic crew of locals who regularly ask for a status update. He said he sticks to what is in the court documents.

Because he is a council member, Benson said, he has to be careful what he says.