City hit with another lawsuit

By Jason Schock

Falls City Mayor Jerry Oliver delivered “good” news and “bad” news to the City Council Monday, Jan. 19, when they met in chambers at City Hall. 

The “good” news: the State Supreme Court’s Jan. 16 judgment in favor of the City and EDGE (“Supreme Court sides with EDGE, City” in the Jan. 20 edition of The Journal), which reversed a lower court’s decision that essentially declared EDGE a government body whose records are public in nature, and vacated some $17,000 in lawyer fees awarded to David Leon Frederick. Frederick, co-owner had sought full disclosure of said records.

The “bad” news: The City is being sued again…and there’s a lot more than 17 grand at stake. A summons from Houghton, Whitted & Weaver, PC, LLO, of Omaha, and Weaver & Merz, of Falls City, was received at City Hall earlier in the day, asking the City for “at least” some $1.5 million for attorney fees owed from a 2006 case in which the City filed a complaint against the Nebraska Municipal Power Pool and Central Plains Energy Project. Falls City alleged that NMPP breached a contract with an interlocal agency (NPGA) created in order to secure natural gas for participating municipalities, including Falls City. 

In May 2008, following an 11-day trial, Falls City in Lancaster District Court was awarded a monetary judgment of approximately $700,000 against NMPP and three of its staff members, but two years later, the Nebraska Supreme Court reversed the earlier ruling.

In essence, the Nebraska Supreme Court found that Falls City had “no standing” in filing the lawsuit. 

“Neither the Nebraska Interlocal Cooperation Act nor the agreement Falls City signed when it joined the NPGA granted Falls City the right to bring suit against NMPP or the individual defendants,” the Supreme Court ruled.  “NPGA is a public body and its duties are owed to the public. Therefore Falls City did not have standing to bring the cause of action and the action must be dismissed. 

The matter was sent back to the Lancaster District Court for disposition. NMPP maintained that it was “simply investigating improved ways of purchasing low-cost natural gas supply for the benefit of citizens served by our member communities.” At issue were long-term purchases of natural gas and Falls City did not want to change suppliers. 

At that time, then-City Attorney Doug Merz told council members that the complicated aspects of the case were not a part of the Supreme Court Decision. Rather the Court ruled that Falls City had “no standing” in filing the suit.

“The record is clear,” Merz said in 2010. “The trial (District) court agreed we were damaged and that there were a lot of misdeeds by the defendants.”

The summons, dated Jan. 16 (the City has 30 days to respond) reads as if the Supreme Court decision has little to no bearing on an agreement made between Falls City and the lawyers who represented them. They say they’re still owed money, arguing “Falls City has been the recipient of cash distributions of more than $3 million from the business activities of APEA through Falls City’s membership in NPGA. The lawyers advised Falls City’s representative that it would undertake an initial investigation of the facts and some basic legal research to determine the rights of Falls City in the claims. The lawyers and Falls City understood and expected that the lawyers would be reimbursed for all expenses incurred in performing the initial work, that its attorney fees would be paid at its regular hourly rates and that an agreement to provide legal services would have to be executed if the parties went forward with the claims.”

Furthermore, “The City Council,” it reads, “wanted to join with the APEA and bring the litigation necessary to protect these rights and to save APEA, but did not want to the risk of paying attorney fees on a regular monthly basis. Falls City requested that the lawyers consider undertaking the representation on a contingent fee basis. Therefore, Falls City and the lawyers negotiated a written agreement taking into consideration that the issues raised would be novel and unpredictable and that the precise relief was not clearly definable…

A “Contigent Fee Agreement” was executed and the litigation was filed in November 2006. 

The plaintiffs claim they represented Falls City for 38 months and did so “in reliance on the fee agreement.” They claim that Falls City honored the agreement “for many months of litigation” by “paying the expenses.” 

The suit claims Falls City breached the agreement “by refusing to pay the agreed upon fees for the significant financial benefits Falls City has already received and the future financial interests, payment streams and value Falls City is entitled to as a result of the work of the lawyers.”

Benefits include 

 that they claim the City owes them for a lawsuit filed several years ago, on their behalf.  “… we firmly believe that the city has paid them everything that we owed ”, Mayor Oliver stated.

      Patrick Malcolm, of Olsson Associates, presented the One & Six Year Street Improvement Plan.  He advised that Falls City had received approximately $440,000.00 in 2014.   These annual allocations are made possible by a 1969 law that sets aside money from gas taxes and other sources.  The money is placed into a State Highway Trust Fund.  Some of these funds are earmarked for municipalities. The allocation requires a local 25% match in funds.  The 2015 plan has three new projects.  One project from 2014 has been completed.

      Following a public hearing, at which no one spoke, the council approved and adopted the  1 & 6 yr. Street Improvement Plan for 2015 with 7 – 0 vote. Council member Mike Dougherty was absent.

      The Council also approved a request from Steve & Carol Hollens to rezone approximately 1.54 acres along Old Highway 73 from C – 3 Highway Commercial to I – 1 General Industrial.  The change was recommended by the Planning Commission.  No one spoke during the public hearing.

      Beckie Cromer, Executive Director with Falls City EDGE, presented the fourth quarter report.   She highlighted several positives, including, but not limited to, the hiring and retention of employees in the industrial sector and the recent announcement that Gold Star Sausage of Denver, CO will be moving into the old FC Meat Company building.   Work on the site has already begun and they plan to be up and running later this spring with forty employees.

       Her report also included information concerning Excel Development and their plan to submit application for funding on the Phase 2 housing project.  It will include four two-bedroom units;  eight three-bedroom units and two four-bedroom ‘family only’ units.  There are currently 25 seniors on the waiting list and they would receive first chance at the new units.   

       “ We are currently revamping the EDGE web-site and will possibly be developing a re-branding campaign”, said Mrs. Cromer.  “ We welcomed two new investors  and we held our second welding class during the 4th quarter. “

         Mrs. Cromer advised the Mayor and Council that all entities having Loan Receivable Balances have been fulfilling their obligations by paying down their loans in a timely manner.  The EDGE report was accepted and approved by the Council, as presented.

       The request for favorable comment on a Special Designated Liquor License for a booster club event at Prichard Auditorium was deleted from the agenda and likely will appear on a future agenda.   However, a similar request for a wedding reception was approved on a vote of five yeas and two nays, with one absent.  Murphy and Vaughn cast the nay votes.

      Several  requests relating to the 2nd Annual Sauces & Cycles BBQ Contest were approved by all council members present.

      “ I was not expecting the outcome that we got “, stated David Branch, Executive Director of  Falls City Chamber / Main Street.  “ There were a lot of excited people “, he continued, “ and it sounds like this event will just get bigger and bigger! “  Mr. Branch thanked the Mayor and Council for their approval.

      With nothing further on the agenda, Mayor Oliver adjourned the meeting at 7:19 PM.    The next regularly scheduled meeting will be held in Council Chambers in City Hall, at 7:00 PM on Monday, February 2, 2015.


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