9864-08 Appropriating $710,000 from the Public Works Sewer General Operating Fund No. 641 to pay compromise judgement

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14U0 C.OUNTY-CrrY BUILDING 227 W. JEFFERSON BOULEVARD SOUTH BEND, INDIANA 46601-1830 PHONE 574/ 235-9241 FAx 574/235-9892 TDD 574/ 235-5567 CITY OF SOUTH BEND STEPHEN J. LUECKE, MAYOR DEPARTMENT OF LAW CHARLES $. LEONE ALADEAN M. DEROSE CIrYATTORNEY August 20, 2008 CHIEF ASSISTANTCITYATTORNEY Mr. Timothy Rouse President, South Bend Common Council 4"' Floor, County-City Building South Bend, 1N 46601 Re: Ordinance Appropriating Funds to Pay Compromise of Judgment in Clay Utilities Class Action Lawsuit Against City Dear Mr. Rouse: On February 14, 2008 the St. Joseph Superior Court entered a judgment against the City of South Bend in the sum of $614,725.64. The Court found that the City had improperly charged its non-resident Clay Utilities customers for debt service after the City's debt to acquire Clay Utilities had been paid and retired. Both the City and the rate payers asked the Court to reconsider its decision. The City claimed that the Court exceeded its power by altering an existing utility rate schedule; the class members claimed the City owed Clay customers $145,998 more principal than what the Court ordered, and that the City also owed prejudgment interest of $304,229.85. The Court denied both requests and affirmed the prior judgment of $614,725.64 on May 12, 2008. Presently, this case is in the process of appeal to the Indiana Court of Appeals. >f the City were to prevail on appeal, the result would be a $0 judgment. If Clay customers prevail, the judgment would be in excess of One Million Dollars ($1,064,953.49 to be precise) plus post judgment statutory interest at 8°10 from February 14, 2008. As of August 14, 2008 post judgment interest alone is about $24,600. Considering the financial risks of an adverse judgment notwithstanding the City's firm belief in the merits of its legal position, it is wise and prudent to resolve this dispute. The City's Legal Department and attorneys for Clay Utilities have agreed to settle this claim in full for the sum of $710,000 subject to Court approval. Hearing on the Court's approval is set for September 8, 2008. This Ordinance will authorize the appropriation of funds necessary to pay the agreed settlement promptly on Court approval. The Sewer Works General Operating Fund No. 641 has sufficient funds to pay this sum. I will present this Ordinance to Council at its Committee meeting and public hearing. The Council's favorable consideration of this Ordinance is requested. Thank you. ~I~~t'~ ~B ~~~i'~;'a~ (~~~CB AUG 2 0 2008 ~.ry /~7~C~7~1{a ~i[0ry~~/~ri~ Sincerely, ~ ,~.!~ ,~, Aladean M. DeRose Chief Assistant City Attorney THOMAS L. BODNAR CHERYL A. GREENE ANN-CAROL NASH JEFFREY M. JANKOWSKI LAWRENCE J. METEIVER JEFFREY L. SANFORD JOHN E. BRODEN