A contract dispute between Terre Haute and the company intending to dry the city's wastewater sludge has made its way to federal court.
Highland TH LLC and Overseas Lease Group Inc. on Tuesday filed a federal lawsuit against Terre Haute and other named litigants, including Mayor Duke Bennett, contending breach of contract and fraud. Highland/OLG seeks recovery of projected profits — over the 20-year period of the contract, that's just over $172.6 million — as well as out-of-pocket expenses incurred, previously estimated at $1 million.
Also named in the lawsuit, filed in Indianapolis, are Terre Haute Wastewater Utilities and its director, Mark Thompson, along with the Terre Haute Board of Public Works and Safety, which had earlier approved the contract.
Highland/OLG is requesting the court appoint a receiver over the city or over the city's sludge-drying portion of the wastewater treatment plant "to manage the facility in the best interest of all affected parties." It also is asking for an injunction to prevent the removal of sludge-drying equipment, of which it claims ownership, from the plant.
When reached by phone, Mayor Bennett, who declined to address specifics of the legal action, reiterated his disagreement with the equipment ownership claim.
"We own the centrifuges and we are moving forward" with sludge-drying capability, he said. "We will be doing the dewatering at our own [wastewater treatment] plant.
"I am disappointed that this is the direction that they took," Bennett said of Highland/OLG. "I am looking forward to providing our side of the story to the court. Our attorneys will address all of these issues and we will have a response to the court. There are always two sides to every story."
Paul D. Vink, an attorney with Bose McKinney & Evans, the Indianapolis law firm representing Terre Haute, said that the city's position is that the claims in the lawsuit are invalid.
"We have had less than 12 hours with the complaint and we are still analyzing the legal issue," Vink said by phone. "We do believe these claims have no merit and the contracts are not valid and all these ancillary claims fail. We are still analyzing things and will brief these issues with the court."
Last month, attorney Dennis Otten, also with Bose McKinney & Evans, explained in more detail the city stance on the validity of the contract. He said that if an agreement involves the lease of city real property, it would need the approval of the Terre Haute City Council. He also said that any agreement whereby a private company uses city equipment requires a bid process and the approval of the city’s sanitary board of commissioners. In this case, he said, none of this was done.
The city maintains, according to Otten, that the sludge-drying agreement would have to be reworked and bid procedures followed should Highland TH LLC/Overseas Lease Group remain interested in drying the wastewater.
Company president and CEO George Badcock said Wednesday that his company had no choice but to file the litigation, and did so in federal court because the contested amount exceeds $75,000 and the parties involved are from different states.
Badcock had earlier expressed a willingness to recover expenses and move on, but he said those talks were not productive. "We were willing to settle for a lesser amount," than the $1 million in expenses, "to move on," he said. "Unfortunately, we were not treated fairly and there was a lot of discussion back and forth and it was just a considerable waste of time on our part."
The company's concerns over the city's troubled finances are outlined in the lawsuit, which asks the court to appoint a receiver over either the entire city or its sludge-drying facility, to manage financial affairs for the benefit of creditors.
"Attorneys and representatives of the city have indicated that the city has difficulty meeting its payroll obligations, cannot meet its bond payment obligations and cannot pay for certain equipment needed to operate its facilities," the lawsuit states. "Therefore, the city is likely insolvent."
Litigant Badcock is direct in his assessment of the situation.
"This has been a complete, utter mess," he said. "It has not been handled professionally. There are documents going back and forth that contradict statements the mayor has made in public and private. I think they need an independent body to come in and get this mess straightened out."