Sanitary District of the City of Hammond, Indiana and the City of Hammond, Indiana v. Town of Griggith, Indiana Town of Highland, Indiana

Jul 13 2015, 8:42 am
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE TOWN
SANITARY DISTRICT OF THE CITY OF GRIFFITH, INDIANA, ET AL.
OF HAMMOND, INDIANA Nicholas K. Kile
A. Scott Chinn Bart A. Karwath
Jane Dall Wilson Barnes & Thornburg LLP
Timothy J. Moriarty Indianapolis, Indiana
Faegre Baker & Daniels LLP
ATTORNEYS FOR APPELLEE TOWN
Indianapolis, Indiana
OF HIGHLAND, INDIANA, ET AL.
Joseph P. Allegretti
Sanitary District of the City of Brian W. Welch
Hammond Margaret M. Christensen
Munster, Indiana Bingham Greenebaum Doll LLP
Indianapolis, Indiana
ATTORNEYS FOR CROSS-APPELLEE Robert F. Tweedle
CITY OF HAMMOND, INDIANA Law Offices of Robert F. Tweedle
Kristina C. Kantar Highland, Indiana
City of Hammond Law Department Rhett L. Tauber
Hammond, Indiana Jared R. Tauber
Kevin C. Smith Tauber Law Offices
Smith Sersic Schererville, Indiana
Munster, Indiana
ATTORNEYS FOR
APPELLEE/CROSS-APPELLANTS
CITY OF WHITING, INDIANA, ET
AL.
Michael A. Wukmer
Thomas K. Downs
Mark R. Alson
Audrey K. Hagedorn
Ice Miller LLP
Indianapolis, Indiana
William T. Enslen
Enslen, Enslen & Matthews
Hammond, Indiana
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 1 of 22
IN THE
COURT OF APPEALS OF INDIANA
Sanitary District of the City of July 13, 2015
Hammond, Indiana and the City Court of Appeals Case No.
of Hammond, Indiana,1 45A03-1404-PL-125
Appeal from the
Appellants-Defendants,
Lake Superior Court
v. The Honorable John M. Sedia, Judge
Cause Nos. 45D01-1309-PL-79,
Town of Griffith, Indiana; Town 45D01-1309-PL-83,
45D01-1309-PL-85
of Highland, Indiana, et al.; and
City of Whiting, Indiana, et al.,
Appellees-Plaintiffs,
and
City of Whiting, Indiana, et al.,
Cross-Appellant-Plaintiff,
v.
City of Hammond, Indiana,
Cross-Appellee-Defendant.
Kirsch, Judge.
1
We note that the trial court granted the City of Hammond’s motion to dismiss it from the case. However,
“[u]nder Indiana Appellate Rule 17(A), ‘[a] party of record in the trial court or Administrative Agency shall
be a party on appeal.’” Hoosier Outdoor Adver. Corp. v. RBL Mgmt., Inc., 844 N.E.2d 157, 162 (Ind. Ct. App.
2006) (quoting Ind. Appellate Rule 17(A)).
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 2 of 22
[1] This case focuses on whether the Sanitary District of the City of Hammond,
Indiana (“the District”) had the authority to cancel three long-term wastewater
services contracts between it and the Town of Griffith, Indiana, the Town of
Highland, Indiana, and the City of Whiting, Indiana (collectively “the
Customer Communities”). Claiming that the contracts had become financially
untenable and that the Customer Communities would not agree to reform the
contracts, the District made a formal finding under Indiana Code section 5-22-
17-5 that funds were not appropriated or otherwise available to support the
continuation of performance of the contracts and passed a resolution cancelling
the contracts. The Customer Communities sued the District and filed motions
for summary judgment and judgment on the pleadings. The trial court granted
the motions and held that the District exceeded its statutory authority when it
passed the resolution, that the resolution purporting to cancel the contracts had
no effect, and that the contracts were to remain in full force. The trial court
ordered the parties to arbitrate all disputes arising under the contracts. The
District appeals, raising the following restated issues for our review:
I. Whether the trial court erred in holding that the District was not
statutorily authorized to cancel the wastewater services contracts
pursuant to Indiana Code section 5-22-17-5(a); and
II. Whether the trial court erred in ordering the parties into arbitration
rather than conducting judicial review where there is no dispute as to
performance under the Treatment Agreements.
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 3 of 22
[2] We affirm.2
Facts and Procedural History3
[3] The District is a municipal corporation and statutorily-created special taxing
district, which is comprised of the City of Hammond (“Hammond”) and the
Town of Munster. The District operates a publicly-owned treatment works
facility for the collection and treatment of sanitary sewage wastewater. In 1994,
the District entered into individual wastewater collection and treatment
agreements with the Town of Griffith (“Griffith”) and the Town of Highland
(“Highland”) and, in 1995, with the City of Whiting (“Whiting”) (we will refer
to the agreements collectively as “the Treatment Agreements”). Under the
Treatment Agreements, the District accepted and treated wastewater from each
of the Customer Communities. The current terms of each contract expire on
December 31, 2018, with an option for the Customer Communities to extend
the Treatment Agreements for an additional twenty-five years, through 2043.
[4] Under the Treatment Agreements, the District was required to (1) “establish a
user charge system which assures that each recipient of waste treatment services
2
The City of Whiting files a cross-appeal and raises the following restated and consolidated issue: whether
the trial court erred in dismissing the City of Hammond from the litigation and in refusing to allow Whiting
to conduct discovery before dismissing the City of Hammond. As we are affirming the trial court, we find
that Whiting’s cross-appeal is moot.
3
Oral argument was heard on this case on February 11, 2015 in Indianapolis. We commend counsel on the
quality of their written and oral advocacy.
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 4 of 22
will pay its proportionate share of the costs of operations and maintenance,”
such payment is proportionate to the user’s contribution to the total wastewater
system, (2) “review its user charges annually and revise them periodically to
reflect actual treatment works operation and maintenance cost,” and (3)
“generate sufficient revenue to offset the cost of all treatment works operation
and maintenance.” Appellant’s App. at 46-47, 109-10, 449-50. The Treatment
Agreements further provided that the Customer Communities “shall pay [their]
fair share of the annual operation and maintenance costs, including
replacement costs and payment-in-lieu of taxes, and capital costs not financed
by debt, in proportion to [their] use of the facilities.” Id. at 56, 119, 459. The
Treatment Agreements also contained provisions regarding procedures and
methodologies by which the charges to the Customer Communities for
operation and maintenance costs and capital costs would be modified, relating
to and governing water flow, and addressing emergency water flow situations,
where wastewater would be held in holding basins owned by the Customer
Communities to reduce the flow into the District’s system. Id. at 56-69, 119-33,
459-72. The Treatment Agreements additionally provided that any
disagreements under the agreements must be submitted to binding arbitration.
Id. at 69-71, 133-35, 472-74.
[5] In a letter dated July 25, 2013, the District, through its legal counsel, sent notice
to the Customer Communities “of the need to renegotiate the material terms
and conditions” of the Treatment Agreements. Id. at 80, 143, 481. The letter
provided that if the District and the Customer Communities could not
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 5 of 22
“successfully negotiate new terms that address certain changed circumstances
and current realities the [District’s] system is facing and provide sufficient
revenue for system operation and improvements, then [the District] must avail
itself of all contractual and legal remedies regarding the existing [Treatment
Agreements].” Id. at 80, 143, 481. The letter further asserted that the Customer
Communities (1) had exceeded their contract capacities for water flow, which
was negatively impacting the District’s system, (2) were not contributing to the
costs of certain capital projects, (3) had rates that were lower than the rates
charged to Hammond’s own residents, and (4) were being subsidized by the
District. Id. at 80-81, 143-44, 481-82. The District stated that a rate increase
was required from the Customer Communities “under a new contractual
agreement” and notified of its intent “to enforce the flow limitation by
mechanically restricting the [Customer Communities’] flow into [the District.]”
Id. at 81, 144, 482. The District further stated it would no longer execute any
sanitary sewer certifications to permit new sewer connections in the Customer
Communities. Id. at 81, 144, 482.
[6] The Customer Communities wrote response letters to the District and disputed
several of the District’s allegations. In addition to disagreeing with the
District’s assertions, the Customer Communities reminded the District of their
right to arbitration under the Treatment Agreements. On August 27, 2013, the
District’s Board of Sanitary Commissioners (“the Board”) met and reviewed the
Treatment Agreements. The Board considered the following issues: (1) the
contract methodology for determining the rates paid by the Customer
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 6 of 22
Communities had become outdated, resulting in the District’s residents paying
a higher share of the costs; (2) capital improvements that the District was
required to make under the Clean Water Act and the cost of these
improvements; (3) the Customer Communities were exceeding wet weather
flow limits contained in the Treatment Agreements, which negatively affected
the District’s system; (4) such excessive flows had hindered the District’s
completion and implementation of a mandated Long Term Control Plan; and
(5) the District was operating at a net operating loss. Id. at 153-56. The Board
made a determination that, “funds are not appropriated or otherwise available
to support continuation of performance of the [Treatment Agreements].” Id. at
157. The Board then passed Resolution 38-2013 and found that the Treatment
Agreements were thereby cancelled. Id.
[7] On August 28, 2013, the District sent letters to the Customer Communities
informing them of its decision to cancel the Treatment Agreements. In the
letter, the District provided “immediate assurance that [the District] will
continue to perform the services contemplated by the [Treatment Agreements],
including treating [the Customer Communities’] wastewater for a reasonable
amount of time (to be negotiated between the parties), to allow [the Customer
Communities] to make other arrangements for treatment of [the Customer
Communities’] flow.” Id. at 85, 151, 492. The letter further informed the
Customer Communities that, “[a]t no time during this Transition Period will
[the District] take action to restrict flow (except as consistent with the former
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 7 of 22
agreement), nor will it take any action against the interest of public health.” Id.
at 85, 151, 492.
[8] Shortly after receiving the District’s letter, notifying them that the Treatment
Agreements had been canceled, the Customer Communities each filed a
complaint against the District, asserting that the District’s purported
cancellation of the Treatment Agreements was not authorized and seeking an
order requiring the District to proceed to arbitration. Whiting and Highland
both filed a complaint against Hammond in addition to the District. Both the
District and Hammond filed motions to dismiss; Hammond sought dismissal
on the basis that it was not a party to any of the Treatment Agreements, and the
District sought dismissal on the basis that statutory judicial review was the only
remedy available to the Customer Communities. Both Whiting and Griffith
filed motions for judgment on the pleadings, or in the alternative, summary
judgment; Highland filed a motion for judgment on the pleadings.
[9] On January 8, 2014, the trial court issued an order, granting the Customer
Communities’ dispositive motions. The trial court found that the District had
no statutory authority to pass Resolution 38-2013 and that the Treatment
Agreements should remain in full force and effect. The trial court further
ordered into binding arbitration all disputes that arose under the Treatment
Agreements. The District and Hammond filed motions to correct error, asking
the trial court to clarify whether Hammond was dismissed from the cases. On
March 20, 2014, the trial court granted the motions to correct error and
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 8 of 22
specified that Hammond was dismissed from Whiting’s and Highland’s actions.
The District now appeals.
Discussion and Decision
[10] In its order, the trial court granted the Customer Communities’ motions for
summary judgment and judgment on the pleadings and found the District had
no authority to pass Resolution 38-2013 and to cancel the Treatment
Agreements. A judgment on the pleadings pursuant to Indiana Trial Rule
12(C) is proper only when there are no genuine issues of material fact and the
facts shown by the pleadings clearly entitled the movant to judgment. Holmes v.
Celadon Trucking Servs. of Ind., Inc., 936 N.E.2d 1254, 1255 (Ind. Ct. App. 2010)
(citing Wagle v. Henry, 679 N.E.2d 1002, 1004 (Ind. Ct. App. 1997)). If, on a
motion for judgment on the pleadings, matters outside the pleadings are
presented to and not excluded by the court, the motion shall be treated as one
for summary judgment and disposed of as provided in Trial Rule 56. Id. at
1255-56. “Matters outside the pleadings” are those materials that would be
admissible for summary judgment purposes, such as depositions, answers to
interrogatories, admissions, and affidavits. Fox Dev., Inc. v. England, 837 N.E.2d
161, 164 (Ind. Ct. App. 2005).
[11] When reviewing a Rule 12(C) motion, we may look only at the pleadings and
any facts of which we may take judicial notice, with all well-pleaded material
facts alleged in the complaint taken as admitted. Consol. Ins. Co. v. Nat’l Water
Servs., LLC, 994 N.E.2d 1192, 1196 (Ind. Ct. App. 2013), trans. denied. The
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 9 of 22
pleadings consist of a complaint and an answer, a reply to any counterclaim, an
answer to a cross-claim, a third-party complaint, and an answer to a third-party
complaint. Id. “Pleadings” also consist of any written instruments attached to
a pleading, pursuant to Ind. Trial Rule 9.2. LBM Realty, LLC v. Mannia, 981
N.E.2d 569, 576 n.10 (Ind. Ct. App. 2012); see also Ind. Trial Rule 10(C) (“A
copy of any written instrument which is an exhibit to a pleading is a part
thereof for all purposes.”).
[12] Here, the parties did not designate evidence outside the pleadings for judicial
consideration, and nothing in the record suggests that the trial court considered
any evidence outside of the pleadings in reaching its decision. Therefore, we
shall treat the Customer Communities’ motions as motions for judgment on the
pleadings. A motion for judgment on the pleadings pursuant to Rule 12(C)
attacks the legal sufficiency of the pleadings. Fox Dev., Inc., 837 N.E.2d at 165.
The test to be applied when ruling on a Rule 12(C) motion is whether, “in the
light most favorable to the non-moving party and with every intendment
regarded in his favor,” the complaint is sufficient to constitute any valid claim.
Id. In applying this test, we may look only at the pleadings, with all well-
pleaded material facts alleged in the complaint taken as admitted, supplemented
by any facts of which the court will take judicial notice. Id. The standard of
review is de novo, and we will affirm the trial court’s grant of a Rule 12(C)
motion for judgment on the pleadings when it is clear from the face of the
pleadings that one of the parties cannot in any way succeed under the operative
facts and allegations made therein. Id.Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 10 of 22
[13] In the present case, the trial court’s decision rests on conclusions regarding the
applicability of a statute. The interpretation of a statute is a legal question that
is reviewed de novo. Carter v. Carolina Tobacco Co., 873 N.E.2d 611, 625 (Ind.
Ct. App. 2007) (citing Golden Rule Ins. Co. v. McCarty, 755 N.E.2d 1104, 1106
(Ind. Ct. App. 2001), trans. denied). Statutory interpretation is the responsibility
of the court and within the exclusive province of the judiciary. McCarty, 755
N.E.2d at 1106-07 (citing Miller Brewing Co. v. Bartholomew Cnty. Beverage Co.,
674 N.E.2d 193, 200 (Ind. Ct. App. 1996), trans. denied). The first and often the
last step in interpreting a statute is to examine the language of the statute. Id. at
1107. When confronted with an unambiguous statute, we do not apply any
rules of statutory construction other than to give the words and phrases of the
statute their plain, ordinary, and usual meaning. Id.
I. Authority to Pass Resolution
[14] The District argues that the trial court erred when it concluded that the District
did not have statutory authority to pass Resolution 38-2013 and to cancel the
Treatment Agreements. The District claims that it was within its statutory
authority to cancel the Treatment Agreements pursuant to Indiana Code
section 5-22-17-5. The District contends that the trial court’s determination that
the Treatment Agreements were excluded from the provisions of Article 22 was
in error because such contracts were specifically authorized under the plain
language of Indiana Code section 5-22-6-1 and were not excluded under
Indiana Code section 5-22-1-3(a)(1).
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 11 of 22
[15] In this case, the District cancelled the Treatment Agreements pursuant to
Indiana Code section 5-22-17-5, which states, in pertinent part, “[w]hen the
fiscal body of the governmental body makes a written determination that funds
are not appropriated or otherwise available to support continuation of
performance of a contract, the contract is considered canceled.” Ind. Code § 5-
22-17-5(a). The District alleged that, because of financially dire circumstances
surrounding the long-term Treatment Agreements, the Board determined that
the District could no longer afford performance under the Treatment
Agreements and, therefore, passed Resolution 38-2013, which mirrored the
contract cancellation language in Indiana Code section 5-22-17-5. Because they
followed the language of the statute, the District asserted that it properly
cancelled the Treatment Agreements because Indiana Code section 5-22-17-5
applied to the District.
[16] In its order finding that the District had no statutory authority to cancel the
Treatment Agreements, the trial court found that, although the District
followed the procedure under Indiana Code section 5-22-17-5 when it cancelled
the Treatment Agreements, section 5-22-17-5 did not apply to the Treatment
Agreements. This is because the Treatment Agreements fell under an exception
set forth in Indiana Code section 5-22-1-3(a)(1), which provides that Article 22,
which is entitled the Public Purchasing Statute, does not apply to contracts
between governmental bodies. The language of Indiana Code section 5-22-1-
3(a)(1) states, in pertinent part: “[T]his article does not apply to the following
types of activities . . .[a] contract between governmental bodies except for a
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 12 of 22
contract authorized under this article.” The trial court further found that the
Treatment Agreements were not agreements authorized under Article 22 (“the
Public Purchasing Statute”). The trial court concluded that, because the
Treatment Agreements fell under an exclusion to the Public Purchasing Statute,
Indiana Code section 5-22-17-5(a) did not apply, and the District had no
statutory authority to pass Resolution 38-2013 and cancel the Treatment
Agreements.
[17] Under the plain language of section 5-22-1-3(a)(1), the Public Purchasing
Statute does not apply to contracts between governmental bodies except for
certain contracts authorized under the Public Purchasing Statute. The District
concedes, and agrees with the trial court, that the Treatment Agreements are
contracts between governmental bodies and would, therefore, be excluded
unless authorized. However, the District claims that the Treatment Agreements
are authorized under the Public Purchasing Statute because they are authorized
under Indiana Code section 5-22-6-1, which states, “[t]he purchasing agency of
a governmental body may purchase services using any procedure the
governmental body or the purchasing agency of the governmental body
considers appropriate.” We disagree.
[18] The language of Indiana Code section 5-22-6-1 does not explicitly authorize
contracts such as the Treatment Agreements. It is a procedural statute that
merely acknowledges that the purchasing agency of a governmental body may
purchase services using any procedure it considers appropriate. Indiana Code
section 5-22-6-1 has been interpreted by this court as recognizing the discretion
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granted to governmental entities in awarding contracts for services and that
strict bidding procedures need not be followed in awarding government
contracts for services. See Hamrick’s Diesel Serv. & Trailer Repair, LLC v. City of
Evansville ex rel. Bd. of Pub. Works, 935 N.E.2d 764, 767 (Ind. Ct. App. 2010)
(concluding that unsuccessful bidder on government contract for services did
not have standing in suit against city for damages after contract was awarded to
bidder that did not meet requirements specified in bid announcement), trans.
denied; Harmony Health Plan of Ind., Inc. v. Ind. Dep’t of Admin., 864 N.E.2d 1083,
1091-92 (Ind. Ct. App. 2007) (concluding that unsuccessful bidder on
government contract for services lacked standing to seek judicial review of the
rejection of its bid as it was not harmed when not awarded the contract because
government body had authority to exercise discretion under public purchasing
statutes to decide who would receive contracts to provide services), trans. denied;
Trans-Care, Inc. v. Bd. of Comm’rs of the Cnty. of Vermillion, 831 N.E.2d 1255, 1259
(Ind. Ct. App. 2005) (concluding that unsuccessful bidder lacked standing to
challenge government body’s award of contract for provision of services to
another business because when party submits a proposal to perform personal
services, it has no legal right to have its bid considered because the procurement
of personal services is not included within the scope of the Public Purchasing
Statute). Thus, section 5-22-6-1 merely gives a governmental body discretion in
deciding the procedures it wants to use for purchasing services and is, therefore,
not a specific authorization for governmental bodies to enter into contracts to
purchase services.
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 14 of 22
[19] We conclude that, because the Treatment Agreements are contracts between
governmental bodies, they are excluded from the scope of the Public
Purchasing Statute unless otherwise authorized in the Public Purchasing
Statute. Contrary to the District’s contention, we do not find that Indiana Code
section 5-22-6-1 specifically authorizes contracts for services between
governmental bodies. As such, under Indiana Code section 5-22-1-3(a)(1), the
Public Purchasing Statute does not apply to the Treatment Agreements, and the
District was not within its statutory authority to cancel the Treatment
Agreements pursuant to Indiana Code section 5-22-17-5. The trial court did not
err in its determination that the District did not have statutory authority to
cancel the Treatment Agreements.
[20] The District also argues that the trial court erred when it failed to order judicial
review of the District’s decision to cancel the Treatment Agreements. The
District asserts that, pursuant to Indiana Code section 5-22-19-1, because the
Treatment Agreements were subject to the Public Purchasing Statute, and
because it followed the requirements of Indiana Code section 5-22-17-5 in
cancelling the agreements, its determination was final and conclusive and
subject to judicial review under Indiana Code section 5-22-19-2. We note that
the statutory sections under which the District contends that judicial review is
required are part of the Public Purchasing Statute. As such, because we have
concluded that the Public Purchasing Statute does not apply to the Treatment
Agreements, judicial review under Indiana Code sections 5-22-19-1 and -2 is
likewise not available.
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 15 of 22
II. Arbitration
[21] The District argues that the trial court erred when it ordered the parties to
participate in arbitration for any disputes arising under the Treatment
Agreements. The District contends that the complaints filed by the Customer
Communities did not identify any disputes over any aspect of performance of
the contracts, and therefore, arbitration under the agreements is not required.
The District alleges that the only dispute raised by the Customer Communities
concerned the attempted cancellation of the Treatment Agreements. The
District further asserts that there are no pending disputes arising under the
Treatment Agreements because the District has not restricted flow since passing
Resolution 38-2013 and no requests for sewer certifications have been
presented; accordingly, there is nothing to arbitrate.
[22] In its order, the trial court directed that all disputes that arose under the
Treatment Agreements were ordered into binding arbitration. Paragraph 10A
of the Treatment Agreements outlines the arbitration process to be utilized “[i]f
a dispute arises concerning any right or obligation under this agreement,
including capacity reservation of rights or allocation of capital costs for existing
or future improvements by the District.” Appellant’s App. at 69, 133, 472. Thus,
by entering into the Treatment Agreements with the Customer Communities,
the District agreed that, if a dispute arose regarding rights or obligations under
the Treatment Agreements, such dispute would be submitted to binding
arbitration. Arbitration was, therefore, the method that all of the parties agreed
to use if a contractual dispute arose during the contractual period, and the
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Treatment Agreements require arbitration when a dispute arises concerning any
right or obligation under the Treatment Agreements. We, therefore, conclude
that the trial court did not err when it ordered the parties into binding
arbitration as to all disputes concerning the Treatment Agreements.
[23] We further conclude that, even if we accepted the District’s argument that it
was authorized to cancel the Treatment Agreements pursuant to Indiana Code
section 5-22-17-5, such cancellation would have been premature because the
Treatment Agreements require arbitration when disputes arise. All of the
District’s issues that formed the basis for its purported cancellation of the
Treatment Agreements were disputes that arose concerning rights and
obligations under the agreements and were, therefore, required to be sent to
arbitration for resolution. Therefore, the Treatment Agreements required
arbitration before the District could have even attempted to cancel the contracts
pursuant to Indiana Code section 5-22-17-5. Because the District did not
submit its issues to arbitration, it did not follow the provisions of the Treatment
Agreements that it entered into with the Customer Communities, and even if it
had been statutorily authorized, the District could not have cancelled the
Treatment Agreements without first submitting its disputes to arbitration.
[24] We conclude that the trial court did not err in finding that the District lacked
statutory authority to cancel the Treatment Agreements because the Public
Purchasing Statute did not apply to the Treatment Agreements. The trial court
also did not err in ordering the parties to arbitration for all disputes concerning
the Treatment Agreements, as arbitration was mandated by the Treatment
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Agreements for all such disputes. We further determine that, even if the Public
Purchasing Statute did apply to the Treatment Agreements, pursuant to
paragraph 10A, the parties were required to submit to arbitration before any
other action could be taken regarding any disputes the parties had under the
Treatment Agreements.4
[25] Affirmed.
Crone, J., concurs.
Robb, J., dissents with separate opinion.
4
Under the procedural posture of this case, we are unaware of what, if any, steps the District took to
reconcile its disputes with the Customer Communities under the Treatment Agreement prior to its first
communication to the Customer Communities alerting them of the issues. However, we do note that the
Treatment Agreements required that operation and maintenance rates be reviewed annually and contained
procedures for how to compute adjusted rates annually. Appellant’s App. at 58-60, 122-24, 461-64. The
Treatment Agreements also included procedures on how to determine the Customer Communities’
participation in capital costs associated with new projects. Id. at 61-63, 125-27, 464-66. We, therefore,
believe that, in the future, when encountering disputes regarding rates or capital costs, the District should first
adhere to the contract provisions contained in the Treatment Agreements, which the parties, by entering into
and signing the Treatment Agreements, agreed to abide by during the contract term.
Court of Appeals of Indiana | Opinion 45A03-1404-PL-125 | July 13, 2015 Page 18 of 22
IN THE
COURT OF APPEALS OF INDIANA
Sanitary District of the City of
Hammond, Indiana and the City
of Hammond, Indiana,
Appellants-Defendants,
v.
Town of Griffith, Indiana; Town
of Highland, Indiana, et al.; and
City of Whiting, Indiana, et al., Court of Appeals Case No.
45A03-1404-PL-125
Appellees-Plaintiffs,
and
City of Whiting, Indiana, et al.,
Cross-Appellant-Plaintiff,
v.
City of Hammond, Indiana,
Cross-Appellee-Defendant.
Robb, Judge, dissenting
[26] I respectfully dissent from the majority’s determination that the District did not
have statutory authority to cancel the Treatment Agreements pursuant to
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Indiana Code section 5-22-17-5 and was therefore not entitled to judicial
review.
[27] Indiana Code section 5-22-17-5(a) provides that “[w]hen the fiscal body of the
governmental body makes a written determination that funds are not
appropriated or otherwise available to support continuation of performance of a
contract, the contract is considered canceled.” In order to be entitled to cancel
a contract pursuant to this provision, the contract must be subject to the Public
Purchasing Statute, which was enacted in 1997 and, in general, governs “every
expenditure of public funds by a governmental body,” Ind. Code § 5-22-1-1,
subject to certain exceptions and limitations, Ind. Code §§ 5-22-1-2, 5-22-1-3;
City of Fort Wayne v. Pierce Mfg., Inc., 853 N.E.2d 508, 512 (Ind. Ct. App. 2006).
As relevant to this case, the Public Purchasing Statute does not apply to “[a]
contract between governmental bodies except for a contract authorized under this
article.” Ind. Code § 5-22-1-3(a)(1) (emphasis added). As all parties concede
this is a contract between governmental entities, the Treatment Agreements are
therefore not subject to the Public Purchasing Act unless they are authorized
under Indiana Code article 5-22. The District contends the Treatment
Agreements are so authorized; the trial court concluded and the majority agrees
they are not. I agree with the District.
[28] The District relies on Indiana Code section 5-22-6-1 as the authority for the
Treatment Agreements. According to that section, “[t]he purchasing agency of
a governmental body may purchase services using any procedure the
governmental body or the purchasing agency of the governmental body
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considers appropriate.” Governmental bodies may “may adopt rules” and
“establish policies” to that end. Ind. Code § 5-22-6-2. In other words, under
Indiana Code chapter 5-22-6, “government bodies are afforded nearly absolute
discretion in purchasing services.” Hamrick’s Diesel Serv. & Trailer Repair, LLC v.
City of Evansville ex rel. Bd. of Pub. Works, 935 N.E.2d 764, 766 (Ind. Ct. App.
2010). The majority interprets this section as “merely giv[ing] a governmental
body discretion in deciding the procedures it wants to use for purchasing
services” and not as a specific authorization to actually purchase those services.
See slip op. at ¶ 18.
[29] I believe this interpretation too narrowly construes Indiana Code section 5-22-6-
1. There would be no reason for the legislature to set forth in the Public
Purchasing Statute that a governmental body has discretion in deciding how to
purchase services if it was not also authorizing the governmental body to make
the purchase in the first place. I believe the intent of the legislature is effected
by interpreting the statute as follows: the governmental body may purchase
services and may use any procedure the governmental body considers
appropriate.
[30] Again, Indiana Code section 5-22-1-3(a)(1) excludes from the Public Purchasing
Statute contracts between governmental bodies unless the contracts are
authorized under the statute itself. Because I agree with the District that the
Treatment Agreements were authorized by Indiana Code section 5-22-6-1, I
would hold that the trial court erred in determining the District was not
statutorily authorized to cancel the agreements. The District made the
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determination required by Indiana Code section 5-22-17-5 to cancel the
Treatment Agreements, and the merits of that determination are now subject to
judicial review. Ind. Code § 5-22-19-2. I would reverse and remand for the trial
court to review the District’s determination accordingly.
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