University of Iowa faces off with children's hospital contractor in court today

Judge calls this the last chance to make their case

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)

IOWA CITY — Stakes are rising and tensions are growing as the University of Iowa faces off in court this morning with a contractor demanding an increasing payback for work on its new Stead Family Children’s Hospital.

UI attorneys for months have been battling an arbitration panel’s $21.5 million award in favor of Cedar Rapids-based Modern Piping Inc., one of 25-plus contractors hired to help build the 14-story children’s hospital — which grew in scope, size, and cost over the project’s five-year duration.

If a judge rules in favor of Modern Piping by confirming the February arbitration award and ordering the university pay up, the total cost will be hundreds of thousands more — as interest has been accruing.

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At a rate outlined in the award, $13,206.81 in interest has accrued on retainage the university eventually paid April 5. On the outstanding amount, interest stands at $308,803.39 — with $2,321.83 added every day.

The dispute with Modern Piping provides a glimpse behind the scenes of what construction executives have characterized as a “messy” and chaotic project, replete with thousands of design changes, miscommunication, cost overruns, and missed deadlines that bumped the project’s budget up from $270.8 million to $360.2 million — with UI commitments standing at $370 million and contractors demanding more.

UI officials have said they expect to shave enough off that total and bring the project under budget. Although they haven’t disclosed how much they’re pursing in contractor back charges and how much payment is in dispute.

Like its spat with Modern Piping, the university is headed to arbitration later this year over a lawsuit and counter suit with children’s hospital contractor Merit Construction, which held four bid packages on the project that started at a total value of $35 million and ballooned with hundreds of change orders. Today, Merit argues the packages are worth $64.1 million — not including attorneys fees, back charges, and other costs -- although much of that is in dispute.

UI executives have boasted its new children’s hospital was paid for entirely through gifts, patient revenue, and bonds — which they’ve had to increase to keep up with the rising costs. The university has repeatedly touted no taxpayer dollars are being used.

However, the university — not the state — would be on the hook for litigation payouts above the hospital budget — even as the university at large faces persistent cuts in state support that have it closing campus centers, halting construction, freezing pay, and increasing tuition.

Months ago, the university appeared headed toward resolution with Modern Piping — with court documents and emails indicating UI President Bruce Harreld had agreed to an $18.5 million settlement. But those negotiations fell apart in the details, and both sides have swapped accusations in recent days — leading up to today’s showdown. 

UI attorneys, who have repeatedly argued the arbitration panel did not have jurisdiction to consider the children’s hospital dispute with Modern Piping, last week accused the contractor of blocking their access to the court. They also said the award is not legal and the arbitration panel that decided it was not impartial.

“This became immediately evident when the panel members referred to Modern’s counsel by his first name and the undersigned as Mr. Carroll,” according to UI attorneys.

Modern Piping attorney Jeffrey Stone this week shot back at the university, accusing it of making “factually incorrect and untruthful” statements to the court.

“Iowa is neither truthful nor accurate when it intentionally misrepresents to the court that the panel members referred to Iowa’s counsel as ‘Mr. Carroll’ and Modern Piping’s counsel by ‘his first name’ as proof of the panel’s partiality,” according to Stone’s filing. “Panel Chair Loulakis addressed Iowa’s counsel as ‘George,’ 95 times in the official record of the hearing.”

Stone supported his assertions with an official transcript of the hearing, and noted the only time the panel referred to UI attorney George Carroll as Mr. Carroll was when speaking about him to a witness.

“Iowa has consistently and intentionally misrepresented the record of the proceedings. To support its late allegation of the panel’s ‘partiality,’ Iowa intentionally misrepresents what actually occurred and contradicts the transcribed record,” according to Stone. “Iowa simply failed to tell the truth about this issue, and Iowa just makes up untruths to try to mischaracterize the proceedings.”

UI attorneys have repeatedly asked for extensions to file documents associated with the case, and Modern attorneys have argued that’s the university’s strategy — pointing to emails and internal documents supporting plans to delay payment through litigation.

Heading into today’s hearing, Johnson County District Court Judge Ian Thornhill has addressed the UI delays by calling this, essentially, the last chance to make their case.

“Once the matter is submitted to the court following the July 11, 2018 hearing, the court will take this matter under advisement and issue a final ruling that resolves the pending motions,” Thornhill wrote in an order. “The court will not entertain further requests by the parties for additional time to engage in settlement/mediation efforts.”

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


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