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Wednesday, April 14, 2010

Ind. Gov't. - "Trial court rules Jeffersonville owes sewer plant operator $584,000"

Updating this most recent ILB entry, from Jan. 27, 2009, headed "City water and sewer contracts to be put up for bid", which included links to earlier entries on disputes in Evansville, Jeffersonville, and New Albany, here are two stories on a court decision Monday:

"Jeffersonville breached EMC contract" is the heading to this story by David A. Mann in the Jeffersonville/New Albany News & Tribune. Some quotes:

The city of Jeffersonville breached a contract in 2008 when it seized control of its sewer treatment plant and booted the contractor it had hired to run the place, Environmental Management Corp., commonly called EMC.

As a result, it now has to pay the company about $584,114 in lost profits and attorney fees.

That’s according to a judgement issued by Clark Superior Court No. 1 Judge Vicki L. Carmichael on Monday. The bench trial ruling marks the end of a more than two-year legal dispute between the company and the city.

“I would consider it a victory,” said Greg Fifer, one of the two attorneys who represented the company during a trial last summer and fall. He noted that Carmichael gave the company the substantial part of what it had been asking for, about $982,000. Taken out of Carmichael’s judgement, were damages that the company had claimed as corporate overhead losses, he said.

“From a damages standpoint, it is a substantial victory.”

The judgement affirmed the major findings that EMC had made in its legal complaint. It states that a contested April 18, 2008 letter from Jeffersonville Sanitary Sewer Board Attorney Scott Lewis did not provide EMC with written notice of any specific performance issues that were considered by the city to be a material breach of contract.

It does say that an Aug. 7 letter from Lewis notified the company that the city was terminating the contract. However, the board never conducted a formal vote authorizing Lewis to write the letter.

Furthermore, it says, the board never conducted a formal vote authorizing the city to seize the plant from the company, which Galligan did alongside two police officers in December 2008.

The city’s complaint against the company was that it failed to maintain the plant and the collection system under the terms of the contract.

From a story by Ben Zion Hershberg of the Louisville Courier Journal:
The city of Jeffersonville violated its contract with Environmental Management Corp. by taking over the city’s sewage plant from the company in December 2008 and must pay EMC $584,114, Clark County Superior Court Judge Vicki Carmichael ruled Monday.

“The critical fact in this case is that the City and Sewer Board did not give EMC written notice of any alleged breach” of contract requirements to operate the plant or any chance to fix problems, Carmichael said in her ruling.

Greg Fifer, a lawyer for EMC, hailed the decision as a powerful victory for his client in its breach of contract lawsuit against the city.

“She has found affirmatively for all the allegations EMC made,” Fifer said.

Jeffersonville Mayor Tom Galligan said he was “very disappointed” and that the city would likely appeal. But he added, “Even at $500,000 it’s cheap to get rid of them.”

Galligan noted that EMC had been seeking nearly $1 million. He said he believes EMC was operating the sewage plant poorly and leaving the city open to possible penalties from the U.S. Environmental Protection Agency for federal Clean Water Act violations.

EMC operated Jeffersonville’s sewer system from 1994 until the city took it over, receiving about $1.4 million a year in later years.

The last contract was to expire at the end of this month. But at a meeting of the city Sewer Board two years ago, Galligan told EMC officials he was concerned about the way they were operating the plant, and the sewer board’s lawyer followed up on that discussion with a letter to EMC requesting records and reports about its performance.

On Aug. 7, 2008, the sewer board lawyer sent EMC a letter saying the agency was terminating the company’s contract. About two weeks later the city and EMC filed an agreement in Superior Court saying EMC would continue to operate the plant until a judge determined whether the city properly followed the requirements spelled out in the contract for early termination.

But Carmichael’s ruling said the city didn’t provide the required notice of specific problems it had with EMC’s operation. The ruling also said decisions to end the contract and take over plant operations weren’t conducted in public meetings as required by state law.

Because the city violated the Indiana Open Door Law and the August 2008 court agreement with EMC to let the company keep operating the plant pending a ruling on early contract termination, the judge ruled, the city must pay the company $268,560 in lost profits and $315,554 in legal fees.

The ILB would like to post a copy of this opinion - please contact me if you can help.

Posted by Marcia Oddi on April 14, 2010 09:35 AM
Posted to Environment | Ind. Trial Ct. Decisions | Indiana Government