City of Jeffersonville v. Envtl. Mgmt. Corp..

• Decision Date: 15 September 2011
• Docket Number: No. 10A01–1005–PL–217.,10A01–1005–PL–217.
• Citation: 954 N.E.2d 1000
• Parties: CITY OF JEFFERSONVILLE, Indiana and City of Jeffersonville Sanitary Sewer Board, Appellant–Defendant,v.ENVIRONMENTAL MANAGEMENT CORPORATION, Appellee–Plaintiff.
• Court: Indiana Appellate Court

954 N.E.2d 1000

CITY OF JEFFERSONVILLE, Indiana and City of Jeffersonville Sanitary Sewer Board, Appellant–Defendant,

v.ENVIRONMENTAL MANAGEMENT CORPORATION, Appellee–Plaintiff.

No. 10A01–1005–PL–217.

Court of Appeals of Indiana.

Sept. 15, 2011.

R. Scott Lewis, David A. Lewis, Smith Carpenter Thompson Fondrisi Cummins & Lewis, Jeffersonville, IN, Attorneys for Appellants.David E. Gray, Mark E. Miller, Bowers Harrison, LLP, Evansville, IN, C. Gregory Fifer, Applegate & Fifer, Jeffersonville, IN, Attorneys for Appellee.RILEY, Judge.

STATEMENT OF THE CASE

Appellants–Defendants, the City of Jeffersonville (Jeffersonville), and the City of Jeffersonville Sanitary Sewer Board (Sewer Board) (collectively, the City), appeal the trial court's judgment in favor of Appellee–Plaintiff, Environmental Management Corporation (EMC), with respect to EMC's claims that (1) the City breached its contract with EMC, (2) violated Indiana's Open Door Law, and (3) acted in contempt of an agreed entry and order.

We affirm in part, reverse in part, and remand.

ISSUES

The City raises six issues on appeal, which we restate as follows:

(1) Whether the trial court erred in finding that the City breached its contract with EMC;

(2) Whether the trial court abused its discretion in excluding documentary evidence;

(3) Whether the trial court erred in finding that the City violated Indiana's Open Door Law;

(4) Whether the trial court abused its discretion in finding Jeffersonville in contempt of an agreed entry and order;

(5) Whether the trial court abused its discretion in awarding attorney's fees to EMC for services that were unrelated to the City's Open Door violations or contempt of court proceedings; and

(6) Whether the trial court erred in ordering the City to reimburse EMC for its costs, including litigation expenses.

On cross-appeal, EMC raises one issue, which we restate as follows: Whether the trial court erred in deducting certain expenses from EMC's lost profits damage claim.

FACTS AND PROCEDURAL HISTORY

Jeffersonville owns a sanitary sewer collection and treatment system that is operated under the control of the Sewer Board. On May 1, 2004, Jeffersonville entered into a contract with EMC (the Contract) through the Sewer Board concerning Jeffersonville's sewer system. Among other provisions, EMC agreed to “operate and maintain the [wastewater treatment plant (Plant) ] so that the effluent discharge [would] meet[ ] or exceed[ ] the effluent requirements established by the U.S. Environmental Protection Agency [ (EPA) ] and [the Indiana Department of Environmental Management (IDEM) ],” to “operate and maintain the [c]ollection [s]ystem in such a manner as to extend its useful life, to provide maximum capacities ... and to prevent public health hazards.” (Appellant's Amended App. vol. 1, pp. 33–4). The Contract also required EMC to:

i) [i]dentify sources of problems within the sewer system through inspection, monitoring and investigation, assisting the City's Engineer and staff with inspection of all new sewer taps and assisting builders in locating existing sewer mains and taps;

ii) [c]lean and maintain sanitary sewers, combined sewers, and [Combined Sewer Overflows (CSOs) ] on a regularly scheduled preventative maintenance basis to ensure that wastewaters are transported to the wastewater treatment facilities in compliance with the [National Pollution Discharge Elimination System (NPDES) ] permit.

iii) [i]nspect, clean, maintain and repair lift stations on a regularly scheduled preventative maintenance basis as set forth in Appendix F to ensure waste waters are transported to the wastewater treatment facilities in compliance with the NPDES permit.

iv) [p]revent sewage from bypassing to waters of the State and protect the [c]ollection [s]ystem from flooding due to high water, in accordance with the Water Pollution Control Acts Amendments, Public Law 92–500, and the Clean Water Acts Amendment.

v) [e]liminate odors and potential sources of odors to the extent possible and practical based on the generally accepted standards of good practice in municipal wastewater management and operations.

vi) [i]mplement a preventative maintenance program to reduce nuisance stoppages, employing effective electronic information system hardware and software.

(Appellant's Amended App. vol. 1, pp. 35–6).

Paragraph 5(b) of the Contract gave both parties the right to terminate the Contract prematurely in the event of a material breach or unsatisfactory performance of a material obligation. However, Paragraph 5(b) required the terminating party to first provide written notice of the material breach or unsatisfactory performance to the breaching party, upon which time that party had 90 days to cure its performance. If the breaching party did not cure within 90 days, the terminating party could then terminate the Contract.

Effective December 1, 2006, IDEM issued a NPDES permit to Jeffersonville and EMC, authorizing the Plant to discharge effluent into the Ohio River, Cane Run, and an unnamed drainage ditch in accordance with certain effluent limitations, monitoring requirements, and conditions. The permit was effective until November 30, 2011 and required EMC to submit monthly reports to IDEM.

Also in 2006, the United States Department of Justice (DOJ), the EPA, and IDEM commenced a legal enforcement action against Jeffersonville and EMC, alleging that they had violated the terms of their NPDES permit and the Clean Water Act. The parties began negotiations for a consent decree based on the violations, but did not immediately resolve the issue. In the meantime, Thomas Galligan (Mayor Galligan) was elected Mayor of Jeffersonville in November of 2008. After his election, but prior to commencement of his term on January 1, 2008, Mayor Galligan held two meetings with representatives of EMC concerning the manner in which EMC was operating and maintaining Jeffersonville's sewer system. In these meetings, he expressed concern that some of the sewer system pumps did not work, that sanitary sewer overflow was spilling into people's yards every time it rained, that EMC did not have an adequate staff, and that the plant was discharging effluent into the waters of the United States, contrary to EMC's pending consent decree.

On April 15, 2008, the Sewer Board held a regular meeting that was open to the public. The Sewer Board consisted of three members—Mayor Galligan, Jeffrey Caldwell, and William Saegesser (Saegesser). EMC representatives and EMC's legal counsel also attended the meeting, and at the meeting Mayor Galligan discussed his concerns regarding EMC's operation of the Plant. He told EMC that he had encountered exposed electrical wires coming out of an electrical unit at the sewer system's Old Stoner Station, that maintenance levels needed to be improved, that sump pumps needed to be improved, and that manpower was an issue. According to both Mayor Galligan and Saegesser, the Sewer Board instructed its attorney, R. Scott Lewis (Attorney Lewis), to send a written notice letter to EMC informing EMC of its deficient operation and maintenance of the sewer treatment system. Attorney Lewis was also instructed to send a second letter to EMC terminating the Contract if EMC had not corrected the issues within 90 days. This exchange, however, was not recorded in the meeting's minutes.

Following that meeting of April 15, 2008, Attorney Lewis sent EMC a letter on April 18, 2008, requesting that EMC provide (1) detailed documentation of all regularly scheduled sewer cleaning activities in the Jeffersonville sewer system, including all maintenance activities for the lift stations; (2) any inspection, monitoring results, or investigations identifying any potential sources of problems that resulted in customer complaints or sanitary sewer overflows; ¹ and (3) records for January 2005 to March 31, 2008 pertaining to the Plant—including lists of equipment and equipment maintenance, a history of work performed, and customer complaints. EMC received Attorney Lewis' letter on or about May 5, 2008. The letter did not indicate that the City intended to terminate the Contract if the performance issues were not corrected within 90 days.

Meanwhile, EMC prepared and submitted a report to the Sewer Board dated April 25, 2008 that addressed the concerns Mayor Galligan had raised during the Sewer Board's April 15 meeting. In the report, EMC provided data on combined sewer maintenance, I/I inspections and notifications, and the schedule for lift station inspections. EMC clarified that the reason EMC had not detected a problem with a broken lateral line that led to infiltration at the Riverport Lift Station was that the lateral line was private property and only active when the creek was at flood stage. EMC also noted that conducting a sanitary sewer evaluation study as requested by Jeffersonville would be a “significant increase” in the scope of the Contract and that EMC's staff was already at full capacity, contrary to the City's allegations. (Appellant's App. vol. 2, p. 276).

Next, in a letter dated May 23, 2008, EMC informed Jeffersonville that the Sewer Board's April 18 letter requested documentation that exceeded EMC's production obligations under the Contract. EMC pointed to Paragraph 5(g) of the Contract, which required EMC to provide “all records reasonably requested to enable [Jeffersonville] to conduct a quarterly performance audit of EMC's compliance with the terms and conditions of [the Contract].” (Appellee's Amended App. vol. 1, p. 92) (emphasis added). According to EMC, the records requested went beyond the scope of that provision both in time and detail, as EMC had already complied with requests for records in the most recent quarter. In addition, EMC denied ever receiving a written notice from Jeffersonville that EMC had breached the terms of the Contract and claimed that Mayor Galligan's oral statements at the April 15 Sewer Board meeting did not...