After losing a $59 million arbitration case over Hurricane Gustav cleanup costs, Livingston Parish finds itself in the odd position of possibly having to raid the Federal Emergency Management Agency’s witness list for evidence the parish could use to defend itself against a contractor’s lawsuit.
Whether that lawsuit, filed in state court in 2011 by debris removal contractor International Equipment Distributors, will move forward is uncertain. Parish legal adviser Chris Moody said Tuesday the attorneys for the parties will hold a conference call this week to discuss the implications of the arbitration ruling.
International Equipment’s attorneys could not be reached for comment Tuesday.
Parish officials are hoping the contractor and its bank, which financed the parish’s pricey Washington, D.C., legal team for arbitration, will realize there is no money to pursue and drop the lawsuit, which seeks $52 million plus interest from the parish.
The contractor’s lawsuit has been on hold since 2012, pending the outcome of the parish’s appeals of FEMA’s funding denials.
The U.S. Civilian Board of Contract Appeals in Washington, D.C., ruled Monday that the parish already received more money from FEMA than the parish’s documentation of the cleanup work supported.
Livingston had sought an additional $59 million in funding for removing debris from rights of way and canals across the parish after the 2008 storm.
Parish President Layton Ricks has said the parish does not have the money to pay what the contractor and the parish’s monitoring firms say they are still owed.
International Equipment and its affiliated companies borrowed roughly $31 million from their bank, a subsidiary of Park National Corp. of Newark, Ohio, in advance of the storm. About $26 million remained unpaid in early 2012 when Park National’s underperforming loans were rolled into another subsidiary, SE Property Holdings LLC.
The holding company later obtained a judgment against International Equipment for the outstanding debt. The judgment is secured in part by any money the contractor might win in its lawsuit against Livingston Parish — giving the holding company enough financial incentive to pay for the parish’s arbitration attorneys.
The parish’s legal team at Baker Hostetler in Washington, D.C., charged hourly rates as high as $650 for lead attorney Hilary S. Cairnie, who previously told the Parish Council the firm’s bills could reach as much as $2 million.
The parish’s agreement with the law firm states that invoices would be sent to the parish, with courtesy copies going to the financial institution paying the bills. But Cairnie said neither Ricks nor his firm would release them to the public or even the Parish Council.
Moody said Tuesday the holding company is unlikely to throw good money after bad by pushing forward in the contractor’s lawsuit against the parish, now that its gamble on the parish’s case against FEMA has failed to pay off.
Even if the contractor won its case, Louisiana law does not force public entities to pay the judgments rendered against them, Moody said.
“I think they put all their eggs in the arbitration basket with everyone else,” Moody said Tuesday. “I think they understand we don’t have the money to pay them, and I don’t know that anyone can afford to pay lawyers to chase a remedy that’s not practical. But if they continue the suit, we’ll defend it.”
Defending against the lawsuit could involve raiding FEMA’s arbitration case for witnesses and evidence against the contractors, a prospect Moody said the parish had not yet considered in depth.
“The underlying case FEMA put on is something I think we could use if we had to defend the case against the contractor,” Moody said. “We’re so far from picking who would be witnesses, but I would say that anyone who participated in the process could be called.”
Whether the parish’s arguments at arbitration that the work was eligible and deserving of payment could be used against the parish at trial in the lawsuit was something Moody could not answer.
“That is a good question as to whether that would be considered a judicial admission,” he said.
Ricks said Monday he was glad the arbitration judges did not specifically find any fraud, waste or abuse of resources by the parish or its contractors.
“It is our attorneys’ opinion that, because they did not specify any alleged violations or fraud or any such nature, their decision was based on reasons having really nothing to do with any type of legal issues,” Ricks said.
Whether that silence will work against the parish in defending the lawsuit remains to be seen.
Moody said International Equipment’s contract did not make payment for the company’s services contingent on reimbursement from FEMA but was clear in requiring the company to remove only eligible debris.
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