Tuesday, May 17, 2016
Ind. Decisions - "Judge dismisses Highland lawsuit against Terre Haute"
Howard Greninger of the Terre Haute Tribune-Star is reporting this afternoon:
A federal judge today dismissed with prejudice a lawsuit filed by Highland TH LLC and Overseas Lease Group against the city of Terre Haute, city officials, including Mayor Duke Bennett, and a company that constructed the city's new wastewater treatment facility.The Trib-Star also includes a link to the 33-page opinion in Highland v. City of Terre Haute. Some quotes, starting at the bottom of p. 10:
The lawsuit had sought $172 million, alleging the city and its officials had defaulted on an agreement to remove water from waste, using the sludge to produce diesel fuel.
Federal Judge Jane Magnus-Stinson dismissed all eight counts filed against the city and officials, as well as against Plocher Construction Co., which built the wastewater treatment plant. By ruling a dismissal with prejudice, the plaintiffs are barred from filing another case on the same claim; however, they can file an appeal with the U.S. 7th Circuit Court of Appeals.
"We are thrilled with the outcome and it is exactly what we have been arguing from the beginning," said Paul Vink, attorney for the Indianapolis law firm Bose McKinney & Evans, representing Terre Haute.
"We have stated from the outset that the contracts at issue are not valid under Indiana law due to the fact that they lacked a prior appropriation and were illegal investment contracts. The Court agreed with that position, and in so doing, we believe faithfully followed Indiana law. The Court also dismissed with prejudice all non-contract counts, including the fraud and receivership claims that lacked any merit whatsoever," Vink said.
Here, Plaintiffs have affirmatively pled themselves out of any possibility of demonstrating that there was an appropriation to cover the City’s obligations under the Agreement by alleging: (1) that revenue for the City’s obligations would come from the agreements with other cities related to sludge treatment; (2) that the Agreement provided this was the source for revenue; (3) that the revenue never materialized; and (4) that, consequently, the City, THWW, and the Board breached their obligations under the Agreement. These facts, which the Court accepts as true at the motion to dismiss stage, show that the Agreement was invalid due to lack of an appropriation. See Atkins, 631 F.3d at 832 (plaintiff’s claim is insufficient when it “plead[s] facts that show that [it] has no legal claim”). In other words, the Court is not finding that Plaintiffs have not adequately alleged there was an appropriation, but rather finds that Plaintiffs have affirmatively pled facts that establish there was no appropriation – a prerequisite for the Agreement’s validity.
Additionally, Indiana law is emphatic that it is the duty of a private party contracting with a municipality to ensure that the municipality has taken the necessary steps to enter into the contract. See, e.g., Cablevision of Chicago v. Colby Cable Corp., 417 N.E.2d 348, 355-56 (Ind. Ct. App. 1981) (“What is certain is that when our laws clearly limit the authority of government officials to act, or when the law clearly prescribes a procedure to be followed, private parties must carefully take note of that limitation or procedure before dealing with a governmental entity…. Similarly, when the public record contains information relevant to the individual’s circumstance, he must seek it out”); Lohrig v. Rochat, 169 N.E. 77, 81 (Ind. Ct. App. 1929) (“It is well established that any person dealing with a municipality, or with municipal authorities…, is bound to know their limited authority to enter into contracts involving the expenditure of public funds….”). Consequently, Plaintiffs’ allegations in the Amended Complaint that Highland relied on Mr. Thompson’s statements in entering into the Agreement are of no moment, and do not excuse Highland or OLG from fulfilling the requirement of an appropriation. Those allegations instead establish that Highland took Mr. Thompson’s word regarding the City obtaining revenue from agreements with other cities which, again, indicates that there was no appropriation.
The Agreement is invalid because Plaintiffs allege facts indicating that there was no appropriation related to the City’s obligations under the Agreement, and the Terre Haute Defendants are entitled to dismissal of Count 1. However, the Court will briefly address an additional argument the Terre Haute Defendants raise in connection with the validity of the Agreement.