Education

Modern Piping seeks additional UI compensation for yearslong Children's Hospital fight

'Iowa advanced a frivolous legal argument'

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

IOWA CITY — The University of Iowa this week reluctantly paid the balance of a $21.5 million award it owed a local contractor for work on the Stead Family Children’s Hospital — officially increasing the facility’s price tag to $392 million and appearing to end a bitter dispute.

Or maybe not.

In a new court filing, Modern Piping of Cedar Rapids is asking the Johnson County District Court to order the university pay another $3.125 million for the time and money it spent fighting an injunction the UI sought to stop an arbitration panel from considering the dispute back in 2016.

Modern Piping — in pursuit of payment for work on both the 14-story Children’s Hospital and Hancher Auditorium — argued that the appropriate method to resolve those disputes was arbitration. But the UI aggressively fought that, taking its case against arbitration to the courts. It lasted for years, but the university eventually was ordered to pay up.

“In short, Iowa advanced a frivolous legal argument in support of a legally flawed and unwarranted injunction in an attempt to avoid the multimillion-dollar consequences of its breach of contract,” according to the Modern Piping filing.

Thus, Modern Piping is asking the court to order the UI pay another $3.125 million to cover what it says its damages were. The UI argues the court lacks jurisdiction to do so and that Modern Piping wasn’t really the party harmed anyway — as UI sought an injunction from the American Arbitration Association.

The university also has argued it can’t be held liable because it’s a government entity. Modern Piping rebuffed that assertion, arguing government bodies can waive any immunity they might have with their conduct — like, for example, taking legal action.

“(UI) seeks to hide behind the shield of sovereign immunity after using the sword of affirmative litigation,” Modern Piping argued in court documents. “Iowa cannot do so.”

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The university didn’t respond to questions from The Gazette about the new Modern Piping demands and whether it intends to pay the millions more or fight back in court.

Before paying the balance of the $21.5 million award earlier this week, the university and Modern Piping didn’t sign any settlement agreement — which had been a sticking point, with UI officials previously accusing the contractor of unfair terms.

“University of Iowa simply paid the amount due on the judgment,” Stone told The Gazette in an email, referencing a court order earlier this week clearing the way for seizure of UI assets if it didn’t.

Despite making the payment, UI still is waiting for its design firm to confirm Modern Piping has produced all the construction documents the contract required showing how the hospital was built.

In addition to paying the full $21.5 million award to Modern Piping, along with $9.4 million to Merit Construction — another contractor fighting for unpaid work on the Children’s Hospital — UI has paid an additional about $2 million to Modern Piping, for things like interest, Stone said. That doesn’t include attorneys fees since March 2018, which Modern Piping could pursue, or the $3.125 million it’s seeking for wrongful injunction.

The university — via the state — also spent more than $820,800 on arbitration costs and expert witnesses for both the Modern and Merit cases. The Board of Regents Office pays an annual $525,000, plus expenses, to the Attorney General’s Office for its legal services. That’s a negotiated rate, and it increased in the 2017 budget year from $457,791 and from $436,464 in the 2016 budget year. The board office did not immediately say how much it has reimbursed the Attorney General for expenses in recent years.

l Comments: (319) 339-3158; vanessa.miller@thegazette.com

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