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HomeMy WebLinkAbout9864-08 Appropriating $710,000 from the Public Works Sewer General Operating Fund No. 641 to pay compromise judgementORDINANCE No. Passed by the Common Council of the City of South Send, Indiana September 8, 20 08 Attest: Attest: ~ I ...vftirP~l•C~l , ., /,l - Presented by me to the Mayor ojthe City of Sout/t Bend, Indiana September 9, 20 08 City Clerk President of Common Council City Clerk Approved and signed by me September 9 , 20 0 8 ~~~`'~L ~ Mayer ORDINANCE NO. ~ ~ (° 1 ~ g AN ORDINANCE OF THE COMMON COUNCIL OF THE CITY OF SOUTH BEND, INDIANA, APPROPRIATING $710,000.00 FROM THE PUBLIC WORKS SEWER GENERAL OPERATING FUND N0.641 TO PAY COMPROMISE JUDGMENT STATEMENT OF PURPOSE AND INTENT The South Bend Sewer Works was sued in a class action lawsuit by non-resident customers located within the former Clay Utilities service area. The lawsuit alleged that the City's municipal sewage utility had a duty to terminate sewer rates applicable solely to the Clay Utilities class of customers as soon as South Bend received sewer rate revenue from those customers sufficient to pay off the cost of financing acquisition of the Clay utility system. The City contended that the City had no duty to alter rates for the Clay class of customers until it adopted another rate ordinance. The St. Joseph Superior Court found in favor of the Clay Utilities customers, and on February 14, 2008 it entered judgment against the City and its sewer department in the sum of Six Hundred Fourteen Thousand Seven Hundred Twenty Five Dollars and Sixty Four Cents ($614,725.64). It reaffirmed this judgment in a separate order on May 12, 2008. Post judgment interest accrues by statute at 8% from February 14, 2008. As part of its decision the trial court denied prejudgment interest to class members which would have resulted in an additional Three Hundred Forty Thousand Dollars ($340,000.00) to class members payable by the City Wastewater Utility. Appeal of this issue by class members as well as the City's counter appeal of the underlying judgment was in progress, but the settlement of Seven Hundred Ten Thousand Dollars ($710,000.00) is a reasonable compromise of disputed issues. NOW, THEREFORE, BE TT ORDAINED BY THE COMMON COUNCIL OF THE CITY OF SOUTH BEND, INDIANA as follows: Section I. The sum of Seven Hundred Ten Thousand Dollars ($710,000.00) ~ is hereby appropriated and set aside within Sewer Works General Operating Fund No. 641 to tender to the Clerk of the. Court for settlement and release of all claims arising from the class action lawsuit brought by Clay Utilities customers of the South Bend Wastewater Utility. Section II. This Ordinance shall be in full force and effect from and after its passage by the Common. Council and approval by the Mayor. ~' Member. Sout d Common Council A st: City Jerk Presented by me to the Mayor of the City of South Bend, Indiana on the `_~~ day of e,~,,~v , 2 wog, at 3 `-~S o'clock ~. m. ~.., City Cler l ~.e~~ Approved and signed by me on the /~~' day of ~~""`~`~""`' , 2 ~P~ , at ~''~ ~ o'clock a . m. Mayor, City of outh Bend, Indiana ' ~t READING O Z"~'- ~~ nom. [~.iC HEARING Q -~-erg 3 1r';,a READING q ~-g-c7~' NJT APPROVED (~ CFERRED SASSED ~~ ~-~ b F1~€~~ X31 ~~~C~{'~ ~~`~8+1;@ Aug 2 0 2aos V Nf11~ VJuRRE CITY CIE:~eC, 54. iEiv~, IN. 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 TO THE COMMON COUNCIL OF THE CITY OF SOUTH BEND: Your Committee of the Whole, to whom was referred: BILL NO. 54-08 A BILL OF THE COMMON COUNCIL OF THE CITY OF SOUTH BEND, INDIANA, APPROPRIATING $710,000.00 FROM THE PUBLIC WORKS SEWER GENERAL OPERATING FUND NO. 641 TO PAY COMPROMISE JUDGMENT Respectfully report that they have examined the matter and that in their opinion, this bill is being recommended to the full Council with a favorable recommendation. Derek Dieter Chairperson, Committee of the Whole