Judge scolds University of Iowa for delays in children's hospital dispute

UI fights back, argues arbitration panel bias

The University of Iowa Stead Family Children's Hospital is seen from Kinnick Stadium in Iowa City on Friday, Apr. 21, 20
The University of Iowa Stead Family Children's Hospital is seen from Kinnick Stadium in Iowa City on Friday, Apr. 21, 2017. (Stephen Mally/The Gazette)

A Johnson County District Court judge this week scolded the University of Iowa for missing legal deadlines in a dispute with a contractor on its Stead Family Children’s Hospital, and he referenced an argument opposing attorneys recently made that UI intentionally is dragging its feet.

The “continued requests for extensions of time to file briefing are putting the court in a difficult position when it comes to being able to adequately prepare for the July 11, 2018, hearing,” District Court Judge Ian Thornhill wrote in an order filed Tuesday, referencing next week’s hearing over the UI dispute with Cedar Rapids-based Modern Piping, Inc. “At worst, respondent’s actions could be viewed as attempting to delay resolution of this case.”

Among other things, Thornhill was waiting for the university to back up its resistance to Modern Piping’s request the court confirm an arbitration panel’s $21.5 million award in its favor. That arbitration panel sided with Modern Piping in March, and UI noted its resistance to the award in April.

The sides since have been working behind the scenes to reach a settlement over work on the more than $360 million children’s hospital, which began treating patients in February 2017 after thousands of design changes, contract extensions, and schedule delays.

Enabling that behind-the-scenes negotiating were repeated UI requests to postpone court deadlines.

And an $18.5 million settlement was close, according to recent court documents, with the university paying nearly $3 million of that in April, according to Modern Piping attorneys. But the deal — which the contractor argued was so close to happening it’s now “enforceable” — fell through, with Modern Piping accusing the university of bad-faith bargaining.

Specifically, the contractor accused UI of nixing “subcontractors” from a list of entities it would not sue and rather release, acquit, and “forever discharge,” according to court documents.

“Iowa has attempted to reopen negotiations about the release language after the parties had reached an agreement,” according to a Modern Piping court filing. “Iowa offered release language on April 16 and May 1 that Iowa refused to honor starting on May 11.”

Both sides are scheduled to appear before a Johnson County District Court judge Wednesday on several related matters, and the university earlier this week asked to have until Monday to file its relevant paperwork.

A judge said no and ordered the documents this week, just days after Modern Piping filings supporting an argument the university’s delays are deliberate.

Jeffrey Stone, an attorney for Modern Piping, asked the court to “repudiate Iowa’s strategy of using litigation as a means to delay payment of amounts due simply to budgetary problems.”

A judge this week warned UI that if it missed its Thursday deadline, “the court will have minimal time to review the briefing and prepare.”

“This case is not the only matter on the court’s docket in the coming days, and there are other matters before the court that also require considerable time for hearing preparation,” Thornhill wrote.

UI attorneys did meet their deadlines Thursday, but disputed any allegations they’re stalling and instead accused Modern Piping of blocking their access to the court.      

“Any suggestion by any party that respondents are delaying the resolution of this matter ignores the fact that respondents have the right to access the courts,” according to the UI documents.

In arguing against the arbitration panel’s $21.5 million award, UI attorneys said — among other things — the panel did not have jurisdiction to consider the hospital dispute, its award is not supported legally or factually, and it was not impartial.

Citing a case involving the National Football League, UI attorneys said arbitrators must avoid “even the appearance of bias.”

“The panel in this case was not impartial,” according to the UI argument. “This became immediately evident when the panel members referred to Modern’s counsel by his first name and the undersigned as Mr. Carroll.”

Additionally, during the proceedings, panel members and Modern Piping attorneys attended a National Conference on Construction Arbitration, according to the university.

“Although attendance is not improper, no steps were taken to avoid the appearance of impropriety,” according to UI documents, which reported the panel’s chairman and Modern attorneys consistently had “ex parte communications” during the UI-Modern Piping hearing. “Once again demonstrating a level of friendship that at best that does not even avoid the appearance of impropriety.”

In addition to next week’s Johnson County court hearing, Modern Piping has asked a judge to order a settlement conference, noting it “remains willing to attempt to resolve all issues.”

UI attorneys were blunt in their response.

“The parties cannot be compelled to mediate a dispute, and respondents do not agree to mediation.”

This court battle comes as the university as a whole is struggling to accommodate a second year of midterm legislative cuts as part of a larger trend in the state’s defunding of its higher education institutions. In response to de-appropriations, the university has curtailed some non-need-based scholarship programs, imposed a temporary pay freeze, enacted a five-month moratorium on new building construction, and backed tuition increases — which the Board of Regents approved last month.

The hospital system, too, is battling back from a $7.2 million deficit at the start of the budget year that just ended, which came after it ended the 2017 fiscal year with operating income nearly 50 percent under budget.

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