Contractor sues City of Morden after Morenet internet service contract terminated 

By | September 17, 2020

A contractor hired to develop internet service for the city of Morden, Man., is now suing for half a million dollars, alleging in a lawsuit the city wrongfully disclosed confidential information about the technology to competitors.

Sergii Polishchuk, along with his company Infotec Manitoba, was hired in 2018 to develop infrastructure for high speed broadband internet access to be available to all residents throughout the city, says the statement of claim filed in Manitoba Court of Queen’s Bench.

The service was going to be called Morenet. But Morden cancelled the agreement with Polishchuk at the end of 2019.

The lawsuit, filed July 15, alleges information about the technology Polishchuk designed was to be treated as confidential and that the market for such technology is highly competitive.

It claims information provided by Polishchuk to the City of Morden “was wrongfully disclosed by [the city] to third parties, including competitors of Polishchuk.”

By allegedly giving third parties access to the information and technology, “the defendant thereby breached its duty and obligation to keep the technology confidential,” the lawsuit states.

The allegations have not been tested in court and the city has not yet filed a statement of defence.

Polishchuk is seeking $524,400 plus applicable taxes allegedly owing under the Morenet service agreement he signed with the city.

It also seeks almost $24,000 under a separate “IT service agreement” Polishchuk had with Morden for maintaining the city’s computer system under a December 2018 contract. 

After a proposal call last January, Morden city council decided to contract with a different company, Winkler-based Valley Fiber, for setting up fibre optic internet technology to residents and businesses across the city.

Valley Fiber is currently installing the infrastructure, which the city says should be completed by 2021.

‘Untrue statements’ by mayor, councillors, lawsuit alleges

Access to high-speed internet across the city has been hampered by inadequate infrastructure and varies drastically between neighbourhoods, said the city’s marketing and communications coordinator, Viktor Karklins, in an email to CBC News.

“This wild disparity from one street to the next has existed for years in Morden and the old infrastructure in place isn’t viable in today’s digital world,” Karklins said.

“With everything from virtual classrooms to internet connected payment systems for businesses, we consider these areas underserved in terms of their internet connectivity.”

Valley Fiber is installing fibre optic internet technology to serve residents and businesses across Morden. (Submitted by Viktor Karklins)

The development of Morenet in 2018 was meant to address the problem, but city council cancelled the plan last fall after learning the cost to the municipality would be higher than expected.

The lawsuit alleges that when Morden terminated the agreement in December 2019, the city “wrongfully withheld certain equipment and property of the plaintiff, which Polishchuk requires for the ongoing operation of the business of Infotec Manitoba.”

The claim also alleges the mayor and certain councillors made untrue statements about Polishchuk which have “disparaged the services, skills and integrity of Polishchuk,” with the object of damaging his reputation and preventing him from obtaining other business.

Second plaintiff seeking damages

A second plaintiff in the lawsuit, former city engineer David Haines, is seeking more than $20,000 in damages from the city. 

Haines entered into an agreement with the city in December 2018 to oversee and manage the Morenet project on the city’s behalf, the claim says. 

The document says Haines was to be paid $7,500 per month, and alleges he’s still owed $7,500 under that agreement.

The claim also alleges certain members of city council made statements that disparaged Haines’s reputation to prevent him from obtaining other business in Morden and elsewhere.

The city informed Polishchuk and Haines in about April 2019 it intended to discontinue the development of Morenet, and at that time the two informed the city they were interested in acquiring the assets of Morenet and carrying on development of the technology, the document claims.

The lawsuit alleges the city unilaterally ended negotiations on the subject, after Polishchuk and Haines had incurred expenses toward continuing development of the service.

Ending the negotiation constituted “bad faith” on the part of the city, which “unilaterally and without explanation terminated all communications with the plaintiffs,” the claim says.

The City of Morden declined to comment on the lawsuit while it’s before the court.

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