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. 

For more about DWSD Update, click here.   

Court Grants DWSD Motion to Intervene in 15 Mile Sewer Collapse Lawsuit

On May 7, 2012, U.S. District Judge Robert Cleland granted the City of Detroit's Motion to Intervene and join a federal lawsuit filed in July, 2011 by the Macomb Interceptor Drainage District against some 40 contractors who participated in the 15 Mile Sewer Repair  project in 2004-05.

Macomb County and (now) the City of Detroit seek to recover more than $20 million from the contractors involved in the project under counts for civil racketeering (RICO) and violation of federal anti-trust statutes (Sherman and Clayton Anti-Trust Acts). 

The Court denied the City of Detroit's request to expand the scope of the existing case by adding new claims and new parties unrelated to the 15 Mile Sewer Collapse. The City of Detroit will likely file a separate lawsuit to advance those claims.  

2012-05-07.Opinion and Order Granting City of Detroit Motion to Intervene in Macomb Interceptor Lawsuit

For more about DWSD Update, click here.

Water Board Lifts Contractor Suspensions, then Authorizes Lawsuit Against Most of the Contractors (UPDATED)

At a Special Board Meeting on January 11, 2012, the Detroit Board of Water Commissioners voted to lift the suspension resolution it passed just three weeks ago on 5 of the 13 cited contractors. The following contractors are no longer suspended, but the resolution included the caveat -- "pending further action of the Board": 

• Lakeshore Engineering Services, Inc.
• Inland Waters Pollution Control, Inc.
• DLZ Laboratories, Inc., 
• D'Agostini & Sons, Inc.,  and 
• Walbridge Aldinger Company, Inc. 

The Water Board then (a) approved an extension of its attorney's legal services contract, and (b) authorized Miller Canfield to intervene in the federal lawsuit initiated by the Macomb Interceptor Drain Drainage District in July, 2011 (the "15 Mile Sewer Repair" case)  and  file a lawsuit against approximately 17 Defendants, including 4 of the 5 contractors whose suspensions were just lifted (D'Agostini & Sons, Inc. is excluded).  

The Board also directed its Legal Committee to work with Miller Canfield to draft a (new) suspension policy for presentation to the Board at its next regular meeting on January 25, 2012.

Then the Board voted to accept (for consideration) a bid protest filed by Walbridge Aldinger, on Contract PC-786, which the Board had approved for award to Walsh Construction on December 21, 2011. The Board voted to conduct a public hearing to determine whether Walbridge Aldinger is a "responsible bidder."  

(Does this mean the Board might rescind its award to Walsh if it finds Walbridge to be a responsible bidder? And what about the policy of not contracting with persons you're suing? Why conduct such a hearing if you've already directed your legal counsel to sue Walbridge and the other contractors for racketeering and civil conspiracy?) 

(Confused? You're not alone!)

Additional Resources:

• Detroit water department seeks $60 million in suit tied to 'Kilpatrick enterprise' contractors, Crain's Detroit Business, January 11, 2012.

For more about DWSD Update, click here. 

 

Inland Waters Submits Low Bid on OMID Contract 3 Re-Bid

Earlier today, Inland Waters Pollution Control submitted the low bid on the Oakland Macomb Interceptor Drain (OMID) Contract 3, Re-Bid.

1. Inland Waters - - - - - - - - $17,965,840
2. Lanzo Lining Services  - - - $18,347,000
3. Jay Dee Contractors  - - -  $21,556,900

As we noted here, bids for Contract 3 were originally received on July 19, 2011, but thrown out because they reportedly exceeded the Engineer's Estimate.  Macomb County officials denied their decision was motivated by the lawsuit they had filed against Inland Waters and 39 other contractors on July 18, 2011.  When the bids were opened this morning, the Engineer's Estimate was reported to be $20,195,000.

For more about DWSD Update, click here.

Oakland Macomb Interceptor Drain (OMID) Contract 3 - Owner Rejects All Bids

Earlier this morning, the Oakland Macomb Interceptor Drain Drainage Board voted to reject both bids submitted for OMID Contract 3 that were submitted on July 19, 2011 (here).  

The principal reason cited for rejecting the low bid of Inland Waters Pollution Control and second bid of L. D'Agostini & Sons, Inc. was that the bids exceeded the engineer's estimate by some 38%. However, the Drainage Board also rejected a second resolution that would have deducted more than $19 million from Contract 3, which would have brought the project into line with their budget. 

Board Members also voiced concerns over the lawsuit filed on July 18, 2011 by the Macomb Interceptor Drain Drainage District against some 40 contractors, including Inland Waters and L. D'Agostini & Sons. In addition, Board Members noted that under Contract 3, Inland Waters apparently identified D'Agostini as one of its  subcontractors; D'Agostini's second bid had included Inland Waters as a proposed subcontractor. 

Update (7/26): Crain's Detroit Business has additional coverage (here) of the OMI Board Meeting and the Board's decision to reject both bids. 

For more about DWSD Update, click here.

Oakland Macomb Interceptor Drain (OMID) Contract 3 - Inland Waters Submits Low Bid

On July 19, 2011, the Oakland Macomb Interceptor Drain (OMID) Drainage District received and opened bids for Contract 3.  Two bidders submitted bids:  

• Inland Waters Pollution Control . . . . .$34,773,040
• L. D'Agostini & Sons . . . . . . . . . . . . . . . . $36,127,338

The details of this project were in an earlier post (here).

Comment: There is great irony in the fact that both of these bidders were named in the federal lawsuit filed by Macomb County on July 18, 2011. That lawsuit arises out of repair work performed by Inland Waters and L. D'Agostini & Sons on the very same interceptor in 2004. 

Update (7/25): The OMI Drain Board is meeting on July 26, 2011 and is scheduled to vote on a resolution to award Contract 3 to Inland Waters Pollution Control.

Macomb County Takes Aim At DWSD Contractors Involved in 15 Mile Sewer Repair Project

While the Detroit City Council was still considering a legal services contract with Miller Canfield, to investigate contractors linked to disgraced former Mayor Kwame Kilpatrick, former Director Victor Mercado and contractor Bobby Ferguson (here), Macomb County was busy preparing its own lawsuit to recover millions of dollars in  allegedly inflated sewer repair bills dating to 2004.   

  

Earlier today, the Macomb Interceptor Drain Drainage District fired the first volley when it filed a six-count civil lawsuit in U.S. District Court against 40 contractors involved in the repair of the 15 Mile sewer interceptor in Sterling Heights. 

The lawsuit alleges that the Co-Defendants, led by Kwame Kilpatrick, Victor Mercado, Bobby Ferguson and Inland Waters Pollution Control, participated in a scheme to inflate repair costs associated with the 15 Mile sanitary sewer interceptor that collapsed on August 22, 2004. The sewer was repaired by DWSD under an emergency contract.

Macomb County alleges that Inland Waters originally proposed a repair budget of $31.7 million to DWSD, but that final costs ballooned to $54.4 million due to inflated invoices submitted by Inland Waters and its subcontractors, including $350,000 paid to Ferguson Enterprises for which no work was allegedly performed. 

Macomb County seeks to recover $23 to $26 million from the 40 Co-Defendants under counts for civil racketeering (RICO), anti-trust violations, both the Sherman Anti-Trust Act and Clayton Anti-Trust Acts, and fraud. 

Macomb County first signaled its interest in pursuing these claims in January, 2011 (here). 

For a copy of Macomb County's lawsuit, click here. 

For more about DWSD Update, click here.