Monday, September 17, 2012

Macomb Lacks Standing to Pursue Claims against 15 Mile Sewer Repair Contractors, Federal Court Rules

Earlier today, U. S. District Judge Robert Cleland ruled that the Macomb Interceptor Drain Drainage District lacks the legal standing necessary to maintain claims for racketeering and anti-trust violations it filed in July, 2011 against 25 of the 40 contractors involved in the 15 Mile Interceptor Repair Project. The Court granted summary judgment in favor of the contractors. The Court also ordered Macomb to show cause by September 24, 2012 why summary judgment shouldn't be entered in favor of the the remaining 15 contractors. 

In a 30 page Opinion and Order, Judge Robert Cleland determined that when Macomb County bought the Macomb Interceptor in 2009 from the City of Detroit, it did not acquire the rights to pursue all claims arising out of the repair contract. The assignment of rights provision only extended to "rights under all contracts, warranties and guarantees that apply to services or goods related to the Macomb System." Macomb County did not acquire rights to the non-contractual claims asserted in its July 18, 2011 lawsuit, which include racketeering (RICO), anti-trust (Sherman and Clayton Acts), and certain common law tort claims (fraudulent misrepresentation and tortious interference). 
Contrary to Macomb Interceptor's argument, the Bill of Sale does not grant it the right to prosecute "any and all claims" of every description, but only all such claims and rights transferred or assigned in the Acquisition Agreement. Subsection (b) strengthens the conclusion that section 2.4 did not transfer or assign non-contractual claims arising from the [15 Mile Interceptor Repair] Project and strengthens the court's determination that Macomb Interceptor does not have standing as an assignee to bring its non-contractual claims.
Judge Cleland also rejected Macomb's argument that it had standing on the basis that it allegedly paid an inflated price for the Macomb Interceptor or that it was allegedly overcharged between 2005 and 2009, when it bought the interceptor from the City of Detroit. 

The Macomb Interceptor Drain Drainage District, which did not exist in 2009, was an "indirect purchaser," Judge Cleland wrote, and "[u]nder the indirect purchaser doctrine, a plaintiff who does not purchase directly from an alleged antitrust violator generally lacks standing to sue under the antitrust statutes." 

Notwithstanding the Court's ruling, the 40 contractors involved in the 15 Mile Interceptor Repair Project are not yet out of the woods. The City of Detroit, which does have the legal standing to prosecute the non-contractual claims, was granted permission to intervene in the Macomb Interceptor Drain Drainage District's federal lawsuit in May, 2012

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