UI ordered to pay contractor $12.8 million more over Children’s Hospital dispute

cigaretteman

HR King
May 29, 2001
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What a fiasco this has been!:

More than seven years after a Cedar Rapids contractor first sued the University of Iowa over payment for work on a pair of high-profile projects — its new Hancher Auditorium and children’s hospital — a jury has delivered another blow to UI, ordering it pay $12.8 million more.


A jury last week deliberated just over an hour before finding UI in April 2016 wrongfully blocked the American Arbitration Association from arbitrating its disputes with Modern Piping on both the Hancher and Stead Family Children’s Hospital projects.


The new $12.8 million judgment will further swell expenses tied to the 14-story Children’s Hospital — which originally had a $270.8 million budget but as of today has cost more than $400 million, due to delays, budget overruns, mismanagement, litigation, and faulty work forcing UIHC to replace wide swaths of windows.


Counterclaim​


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A judge in the Modern Piping dispute first sided with the contractor and arbitration association in 2017, ordering UI pay tens of millions — prompting UI to seek a new trial. When a judge denied that request, UI appealed, and Iowa’s Court of Appeals in 2019 ruled against UI — affirming a Johnson County District Court judge’s $21.5 million award for Modern Piping.


“We find no error in the district court's determination,” according to the appellate court.


A short time later, Modern Piping filed a counterclaim seeking compensation for all the costs UI’s original refusal to arbitrate precipitated.


“Modern Piping incurred damages, attorneys’ fees, expenses, and other economic harms related to its efforts to dissolve that injunction, its related appeal, and this action,” according to the 2019 counterclaim. “Therefore, Modern Piping requests an award of damages arising from Iowa’s wrongful … injunction.”


Following several court delays, jurors began hearing evidence on the assertion Oct. 25. They began deliberating just after noon Oct. 27, and at 1:30 p.m. that same day jurors returned a verdict finding UI wrongfully obtained an injunction and harmed Modern Piping in doing so.


When asked by how much UI was “unjustly enriched” as a result of its “wrongful injunction,” the jury reported $12.8 million — a total award that included $21,785 in attorney fees.


Window dispute ongoing​


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The new UI Stead Family Children’s Hospital began treating patients in February 2017 — years after its original planned opening in 2015, when Modern Piping filed its first lawsuit against UI demanding payment on the Hancher and children’s hospital projects.


Just two years after the Children’s Hospital opened, UIHC officials discovered floors of damaged windows — which they went to the Board of Regents about in April 2021 asking for $10 million to $15 million more to replace.


An extra $15 million would push the university’s total Children’s Hospital cost — with other judgments — to $407.7 million, although UIHC in June sued the two contractors who installed the defective, delaminating, and cracking windows.


Those contractors — Cupples International, Inc., of St. Louis, and Iowa City-based Knutson Construction — in July asked the court to dismiss, or at least pause, the case and compel arbitration, which they argued is required by their original contract.


“The contract between the Board of Regents and Cupples contains a valid mandatory arbitration provision that covers the claims brought in the board,” according to the contractor, citing the Modern Piping dispute in preemptively objecting to any UI pushback against arbitration.


"Any question regarding whether the specific contract at issue contains a valid and mandatory arbitration clause has already been decided several times by this court and affirmed by the Iowa Court of Appeals. See Modern Piping, Inc. v. Bd. of Regents.“


UI and the Board of Regents did push back, resisting arbitration by asserting the window issues aren’t covered by arbitration clauses in the contracts like they were with Modern Piping — although UI fought against arbitrating the Modern Piping case too.


“In order to stay this litigation in favor of an arbitration between the parties, Cupples must establish that the university’s entire claim falls within the scope of the arbitration provision,” UI argued, according to court documents. “Arbitration is strictly ‘a matter of consent,’ and thus ‘is a way to resolve those disputes — but only those disputes that the parties have agreed to submit to arbitration’.”


Chief District Court Judge Lars Anderson in September ruled in favor of the contractors — ordering arbitration.


“The procedural questions presented are for the arbitrator, and not this court, to decide,” according to Anderson, who paused the litigation in late September for arbitration.


UI officials on Thursday didn’t immediately answer The Gazette’s questions about how much the university has spent to date addressing the failed windows — including consulting fees, temporary fixtures, new windows, and court costs.


With last week’s judgment, and without any compensation for money spent replacing windows, expenses tied to the Children’s Hospital could top $420.5 million.

 

onlyTheObvious

HR Heisman
Jan 3, 2021
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Maybe the Law school should step in and help with future contracts. Find out if those teaching law can indeed execute it.
 

SolarHawk

HR MVP
Jun 27, 2021
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Good, luckily for modern they are big enough to take that hit for so many years. Bullshit like what the university tried to pull should bring up criminal charges.
 
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pablow

HR Legend
Gold Member
Mar 14, 2010
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It is the job of good lawyers to make sure crap like this doesn't happen. I'd sure like to know who was advising the U of I.
 
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coasterhawk75

HR Legend
Gold Member
Dec 2, 2001
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Iowa City
A lot of the bad decisions and bad advice initially came from the construction managers of the project, Gilbane. I'm surprised UIHC didn't sue them. It does appear there was a lot of foot dragging with the lawyers as well.

Since this fiasco they've started using the "Construction Manager at Risk" method for most university projects and I think the Regents are now forbidding the use of Design-Build methods on future projects.
 

swagsurfer02

HR King
Gold Member
Dec 8, 2010
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So does that mean they get $34.3 million total in damages or was the original $21.5 million awarded thrown out?