Government, Law, and Technology

Judge orders Muskegon County to pay $3.25M

Ruling determines county terminated contract with Ryan Leestma and now-closed IT firm without cause.

November 8, 2019
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After a 3½-year legal battle, Muskegon County was court ordered to pay $3.25 million in damages, plus another 12% in annual interest and attorney fees, for breaching a contract with Ryan Leestma and his now-closed IT firm.

The payment could top $4.5 million when everything is tallied.

Ingham County Circuit Court Judge Joyce Draganchuk entered findings that detailed damages that must be paid to Leestma and Information Systems Intelligence LLC by Muskegon County for terminating a five-year contract with ISI without cause. The county also is responsible for its own legal fees, which have topped $350,000.

Muskegon County officials declined to comment on the ruling.

“To this very day, the county has never produced any evidence that would support the allegation that ISI was billing for work not performed,” Draganchuk said. “The (contract) was terminated without cause, without notice and without the opportunity to cure.”

The decision ruled Leestma and ISI had met the burden of proof and were entitled to $2.08 million in lost profit damages, $345,216 in additional contract damages for the county’s failure to pay for increased staffing during the contract period, $500,000 in lost profits from equipment and software sales to the county, 12% contract interest plus judgment interest on the entire judgment and yet-to-be calculated attorney’s fees after more than 3½ years of fighting false allegations in court.

These amounts are in addition to an award of damages incurred for the pre-breach period, an amount with interest that exceeds $275,000. A final judgment will be entered later in November.

“I would rather have kept the company I had built and preserve my reputation rather than going through the most harrowing and terrible experience of my entire life,” Leestma said. “While the court rulings are vindication and the money is helpful, I would much rather have the last four years of my life back. I think it’s absolutely disgraceful how the county has behaved.”

Leestma was forced to close ISI’s doors in 2002 but has since had success in the real estate sector with Leestma Management LLC, which he founded in 2009 and through which he runs a portfolio of commercial and residential properties.

“I completely got my head crushed in on something that was untrue … it destroyed my ability to do customer-facing business, but I ended up coming out on top in a big way by just figuring it out,” he said.

As the Business Journal previously reported, ISI won its original contract responding to a request for proposal sent out for the county in 2010. The firm began working for the county after an analysis by Plante Moran revealed serious problems with the county’s IT system. Through ISI, Leestma successfully bid on and secured an RFP upgrade project to provide a new server room and firewall to strengthen the backbone of the county’s IT system. Leestma’s designs reportedly saved the county approximately $1 million annually.

ISI secured a second contract to replace more than 650 outdated computers, working to bring a virtual desktop infrastructure, or VDI, to the county. The switch allowed the county to put all processing functions into a centralized data center, standardizing operations and ensuring all employees could interchange data while having access to current versions of software.

It took ISI approximately two years to migrate all 27 departments in Muskegon County to the new system. Through that effort, the county received national IT awards, which persuaded municipalities throughout the county to abandon their IT platforms and join Muskegon County’s new system.

In 2013, ISI bid on and was selected again for a five-year managed service agreement to provide ongoing support to Muskegon County. The initial contract was valued at $66,000 per month. During the second year of the contract, though, Muskegon County stopped paying ISI. Leestma and his team worked 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 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 that were amplified in media reports. Leestma said the allegations cost him multiple clients, forcing him in 2016 to close the doors of the $8.25 million IT consulting business he founded in 2002.

Draganchuk granted a motion for summary disposition to ISI for its breach of contract in December 2018. In her ruling, the judge noted after two years of discovery, Muskegon County presented “no evidence” to support its claim that ISI had breached the contract or had engaged in civil conspiracy, “fraudulent billing or fraudulent anything” in its dealings with the county.

In February 2019, Draganchuk dismissed a lawsuit against Heath Kaplan, a former Muskegon County finance director, who was accused of wrongdoing by Muskegon County officials in awarding and paying IT contracts on behalf of the county. In the ruling, she noted Muskegon County presented “no evidence” to support its claim that Kaplan had breached his fiduciary duty to the county or the county suffered any damages because of his actions.

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 of the county’s IT infrastructure with the goal of hosting a new accounting system and other technologies in the future.

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