Judge lets University of Iowa defer payment until appeal in Children's Hospital dispute

'The court is persuaded that good cause exists to grant Iowa's motions'

Fans wave to the UI Stead Family Children's Hospital between the first and second quarters of the Iowa game against Illi
Fans wave to the UI Stead Family Children’s Hospital between the first and second quarters of the Iowa game against Illinois at Kinnick Stadium in Iowa City on Saturday, Oct. 7, 2017. (Liz Martin/The Gazette)

The University of Iowa doesn’t have to pay any portion of a debt it owes a contractor for work on its Children’s Hospital and Hancher Auditorium until after a higher court settles its appeal, a district court judge ruled Thursday.

The Johnson County Sheriff’s Office also can’t execute the remainder of a $21.5 million award against UI by, for example, garnishing its bank accounts — despite a request from attorneys representing Modern Piping Inc., according to Judge Ian Thornhill’s order.

“The court is mindful of the fact that Modern Piping has waited years to be paid in full for the work it performed on the Hancher and UICH projects,” he wrote. “However, this is not a situation in which Modern Piping has obtained a judgment against an entity that may, for example, cease to exist or be at risk of being unable to pay the judgment.”

Should an appellate court find in favor of Modern Piping, according to Thornhill, the State of Iowa will still be around and have enough money “to satisfy the judgment.”

UI attorneys earlier this week, though, argued that paying a bond typically required of appellants would cause it financial hardship, and they argued the state is exempt from such bonds because of the public service it provides.

Modern Piping shot back Wednesday with the suggestion it tap UI resources not required for a necessary public service — like its Jackson Pollock ‘Mural’ appraised at $140 million. UI spokeswoman Jeneane Beck responded Thursday: “There is absolutely no discussion of selling Jackson Pollock’s Mural, which is the most famous piece in the University of Iowa Stanley Museum of Art’s celebrated collection.”

Modern Piping is one of two contractors that has sued over work on the UI Stead Family Children’s Hospital, which an investigation by The Gazette found was plagued by thousands of mid-project design changes, miscommunication, budget overruns, and blown deadlines.

Its budget ballooned from $270.8 million to more than $360 million and its opening was pushed time and again from a projected date in 2015 to its eventual opening in February 2017.

Modern Piping sued UI in March 2015 and won an arbitration panel award in February. The university appealed that decision and filed its own lawsuit asking a judge to vacate the award. Judge Thornhill this week ruled in favor of Modern Piping, validating the award and dismissing the UI lawsuit.

Because UI has paid some portion of the $21.5 million judgment against it, the court ordered it pay Modern Piping the balance of more than $17 million, which includes hundreds of thousands in interest.

The university promptly appealed that order, delaying further payment despite continually accruing interest at a rate of $2,321.81 a day. Several Republican lawmakers frustrated with the university’s treatment of contractors, refusal to pay its bills, and decision to continue risking taxpayer dollars with ongoing appeals told The Gazette this week they’re launching an investigation once the Legislature reconvenes.

In an effort to compel UI payment, Modern Piping last week filed a “general execution” with the court, which directs the Johnson County Sheriff’s Office to seize the defendant’s assets by taking any one of an array of actions.

Capt. Bill Deatsch told The Gazette the Sheriff’s Office had started the process of garnishment of bank accounts, wages, real estate, or other valuables — and UI asked the court to halt that execution.

In Modern Piping’s resistance, attorneys argued UI failed to show “good cause” to stay the judgment without paying down any bond.

“Iowa has refused to pay even the amounts it does not dispute it owes to Modern Piping,” Thornhill wrote in his Thursday order, recapping Modern Piping’s argument. “Modern Piping claims Iowa’s appeal is frivolous, and, to this point of litigation, all of Iowa’s arguments against confirmation of the arbitration award have failed.”

Still, Judge Thornhill found no legal precedent requiring the appellant show “good cause” to stay the judgment without providing a bond.

“Given the amount of judgment and the state's ability to satisfy the judgment if it is unsuccessful on appeal, and in the interest of not utilizing public funds for the posting of a bond while this matter is on appeal, the court is persuaded that good cause exists to grant Iowa's motions,” he wrote. l Comments: (319) 339-3158; vanessa.miller@thegazette.com