The Indiana Court of Appeals issued a ruling recently that will reduce the attorney fees Jeffersonville is required to pay to Environmental Management Corp. related to a breach-of-contract suit in 2008.
The lawsuit was filed in 2008 after EMC, the contractor for the former Jeffersonville sewer plant, was kicked out of the plant by then-Mayor Tom Galligan.
Galligan, during the trial, testified that he was fed up with EMC, and said it failed to properly perform collection-system maintenance and that such failures had resulted in the U.S. Environmental Protection Agency instituting an enforcement proceeding against the city.
EMC claimed the action breached its contract and the contractor sued the city.
The city entered into the contract with EMC in 2004 and the terms of the deal were set to last through 2010.
A provision in the contract allowed the city to terminate the deal and EMC’s operations of the sewer plant with 90 days notice “in the event of a material breach or unsatisfactory performance of a material obligation.” A letter was sent to EMC from the city requesting lists of equipment and equipment maintenance, a history of work performed and customer complaints, but the letter did not indicate that the city intended to terminate the contract if the performance issues were not corrected, according to court documents.
As a result, EMC filed a suit against the city and the Jeffersonville Sewer Board requesting damages for lost profits and attorney fees. The suit included four claims: two Open Door Law claims, a breach-of-contract claim and a contempt claim against Jeffersonville, as well as the city’s counterclaim for trial.
A ruling from Clark County Circuit Court No. 4 Judge Vicki Carmichael — which at the time was Clark County Superior Court No. 1 — ruled in favor of EMC on all four of its claims and the city’s counterclaim. It awarded damages to EMC that included attorney fees. The amount awarded for lost profits was $268,560 and attorney fees totaled $315,554.
Jeffersonville appealed the decision.
The appeals court agreed that the city did not violate the Indiana Open Door Law as alleged in the suit as EMC waived its right to file a complaint because it was not done so in a timely manner. Because the open-door decision was reversed, the appeals court said the attorney fees should be recalculated and reflected in the judgment.
“We concluded that the trial court had abused its discretion and remanded to the trial court with instructions that the trial court modify its award of [attorney] fees and costs to EMC to include only the amount of [attorney] fees EMC incurred as a result of its contempt complaint and costs reflecting EMC’s losses for filing fees and statutory witness fees,” according to the appeals court ruling.
The trial court calculated attorney fees, with interest, and deducted the amount for EMC’s Open Door Law claims during the same period, resulting in a new total award of $269,004.
But again, Jeffersonville challenged the ruling and argued that the trial court awarded attorney fees for legal services unrelated to the contempt claim.
However, EMC argued that the contempt and the breach of contract claims were intertwined.
Again, the trial court accepted the argument, while the appeals court did not.
“Although the attorney fees were incurred in preparation for and during the consolidated trial of the Open Door Law, breach of contract and contempt claims, we are not persuaded that the trial court correctly concluded that the trial of the breach of contract claim was substantially a result of Mayor Galligan’s contemptuous conduct,” according to the appeals court ruling. “As shown by the trial court’s findings of fact and conclusions of law, evidence pertaining to the contempt claim was distinguishable from evidence on the breach of contract claim.”
The appeals court said of the 22 conclusions of law reached, five addressed the city’s contemptuous conduct.
“Thus, the trial court abused its discretion by not specifically apportioning the attorney fees so as to impose fees only for the contempt claim,” according to the ruling. “We therefore reverse the trial court’s award of attorney fees to EMC, and remand for a determination as to the amount of attorney fees incurred solely for the prosecution of the contempt claim,” according to the ruling.
Jeffersonville Sewer Board Attorney Scott Lewis said the city is obviously pleased with the appeals court decision, but would not discuss the case in detail because it is still pending litigation.
However, he said that if the trial court determines that attorney fees should be assessed the fees would be paid for by the sewer board.
Attorney Greg Fifer, who represented EMC in the proceedings along with attorneys from an Evansville firm, did not return calls seeking comment as of press time.