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1400 CouNrr -CrTr BUILDING <br />227 W. JEFFERSON BOULEVARD <br />SouTH BEND, INDIANA 46601 -1830 <br />CHARLES S. LEONE <br />CITYATTORNEY <br />CITY OF SOUrH BEND STEPHEN J. LUECKE, MAYOR <br />DEPARTMENT OF LAW <br />Mr. Timothy Rouse <br />President, South Bend Common Council <br />4`I' Floor, County -City Building <br />South Bend, IN 46601 <br />PHONE 5741235 -9241 <br />FAx 574/235 -9892 <br />TDD 574/ 235 -5567 <br />ALADEAN M. DEROSE <br />August 20, 2008 CHIEF ASSISTANT CITYATToRNEY <br />E-k_ �� 00- 3"-t -0Q <br />0 <br />Re: Ordinance Appropriating Funds to Pay Compromise of Judgment in Clay Utilities Class Action <br />Lawsuit Against City <br />Dear Mr. Rouse: <br />On February 14, 2008 the St. Joseph Superior Court entered a judgment against the City of South <br />Bend in the sum of $614,725.64. The Court found that the City had improperly charged its non - resident <br />Clay Utilities customers for debt service after the City's debt to acquire Clay Utilities had been paid and <br />retired. Both the City and the rate payers asked the Court to reconsider its decision. The City claimed <br />that the Court exceeded its power by altering an existing utility rate schedule; the class members claimed <br />the City owed Clay customers $145,998 more principal than what the Court ordered, and that the City <br />also owed prejudgment interest of $304,229.85. The Court denied both requests and affirmed the prior <br />judgment of $614,725.64 on May 12, 2008. <br />Presently, this case is in the process of appeal to the Indiana Court of Appeals. If the City were to <br />prevail on appeal, the result would be a $0 judgment. If Clay customers prevail, the judgment would be <br />in excess of One Million Dollars ($1,064,953.49 to be precise) plus post judgment statutory interest at 8% <br />from February 14, 2008. As of August 14, 2008 post judgment interest alone is about $24,600. <br />Considering the financial risks of an adverse judgment notwithstanding the City's firm belief in <br />the merits of its legal position, it is wise and prudent to resolve this dispute. The City's Legal Department <br />and attorneys for Clay Utilities have agreed to settle this claim in full for the sum of $710,000 subject to <br />Court approval. Hearing on the Court's approval is set for September 8, 2008. This Ordinance will <br />authorize the appropriation of funds necessary to pay the agreed settlement promptly on Court approval. <br />The Sewer Works General Operating Fund No. 641 has sufficient funds to pay this sum. <br />I will present this Ordinance to Council at its Committee meeting and public hearing. The <br />Council's favorable consideration of this Ordinance is requested. <br />Thank you. <br />Filed in Ci6� �;'s ()f#iGO <br />AUG 2 0 2008 <br />ut,1`iilvl :F(�ra'I�O k <br />CITY CL[m$ , so. EZII), IPl._ <br />yAadean �" M. DeRose <br />Chief Assistant City Attorney <br />THOMAS L. BODNAR CHERYL A. GREENE ANN -CAROL NASH <br />JEFFREY M. JANKOWSKI LAWRENCE J. METEnTR JEFFREY L. SANFORD JOHN E. BRODEN <br />