Government, Law, and Technology

Judge dismisses Muskegon County lawsuit

'No evidence' to support claim former finance director breached fiduciary duty.

March 1, 2019
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In the second ruling on a case involving Muskegon County and former Information Systems Intelligence owner Ryan Leestma, a Lansing circuit court judge dismissed a lawsuit against a former Muskegon County finance director.

Judge Joyce Draganchuk granted a motion for summary disposition in favor of former Muskegon County employee Heath Kaplan, who was accused of wrongdoing by county officials in awarding and paying IT contracts on behalf of the county. In her ruling, Draganchuk said Muskegon County presented “no evidence” to support the claim that Kaplan had breached his fiduciary duty to the county or that the county suffered any damages because of his actions.

Kaplan’s attorney, S. Randall Field, argued his client had nothing to do with any of the invoices that formed the basis of the county’s claim.

“We asked numerous times why he was ever brought into this case as the county administrator and chairman of the board approved everything that was done,” Field said. “At the end of the day, the county utterly failed to prove there was any wrongdoing.”

As a former employee, Kaplan still was covered under Muskegon County’s defense policy, and the county had to pay his attorney the $200,000 he charged in legal fees.

“You’d think at one point someone at the county would have raised their hand to say, ‘Why are we doing this?’” Kaplan said. “It’s almost like they kept doubling down on it. If they repeated the lies, it would come true eventually.”

Kaplan, who left nine months prior to ISI’s suit against the county, said he was falsely accused of civil conspiracy and breach of fiduciary duty by Muskegon County because of his friendship with Leestma.

“When Ryan and ISI sued the county, (the county) went into a fox hole and must have said, ‘Oh, Heath is friends with Ryan. Let’s sue him.”

Kaplan started working at Muskegon County in 2010 as director of finance and management services, where under the direction of the county administrator, the team started rebuilding the county’s aged IT infrastructure, among other assignments. Kaplan, under direction of the county, collected bids from IT consulting firms to complete an analysis on the county’s IT infrastructure with the goal of hosting a new accounting system and other technologies in the future. Business and accounting firm Plante Moran was selected to perform the study.

Once the study was complete, Kaplan was directed by the county to advertise for bids to start replacing the county’s server infrastructure, switches, cabling and other components. ISI competitively bid on the work and was awarded the work, which began in 2011.

Muskegon County received a Solutions Award for Significant Achievement and an Achievement Award for its transformative technology implementation from the Public Technology Institute and National Association of Counties, respectively. In addition, Kaplan’s performance evaluation was rated 4.64 out of 5 as rated by Muskegon County Administrator Bonnie Hammersley in 2014. Kaplan especially was commended for his performance as it relates to the IT upgrades.

After these successes, ISI again bid on and was selected in 2013 for a five-year managed service agreement to provide ongoing support to Muskegon County. ISI was awarded the contract based upon the recommendation of an independent committee that did not include Kaplan. 

The initial contract was valued at $66,000 per month. Eight months after Kaplan resigned from the county, though, Muskegon County stopped paying ISI, which Draganchuk ruled in December 2018 was a breach of contract.

An earlier Business Journal report covered the almost three-year case leading to the December ruling. Leestma and his team worked for approximately six months without payment while trying to resolve the issue before county officials terminated the contract without cause in April 2015.

Leestma and his legal counsel worked for another nine months afterward to secure payment for services it had delivered, as well as payment for the remainder of the five-year contract, before filing a breach of contract lawsuit the following year.

Muskegon County countersued, making personal and professional allegations about the character of Leestma and ISI, as well as its former employee, Kaplan, according to the lawsuit.

Leestma said the breach of contract cost him multiple clients and multiple employees, eventually forcing him to close the doors of the $8.25-million IT consulting business he founded in 2002.

“While this has been a long battle, we’re glad to be vindicated,” Kaplan said. “We appreciate the thoughtful and balanced actions of Judge Draganchuk throughout the process. I know Ryan and I are ready to move forward now that our good names have been entirely cleared.”

The Muskegon County Prosecutor’s Office did not respond to requests for an interview at press time.

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