University of Iowa files lawsuit in response to claims it has failed to pay utility companies
The University of Iowa has filed its own lawsuit in response to accusations that it has failed to pay the companies contracted to run its utility system, and the parties have agreed to move their dispute from federal court to the Iowa Business Specialty Court for further litigation.
The University of Iowa Energy Collaborative filed its lawsuit in January accusing the university of a breach of contract, claiming the institution had come up short on payments while also mishandling insurance claims.
Now UIHC has agreed to withdraw its federal lawsuit, according to court documents filed Tuesday. The filing comes after the university and the Iowa Board of Regents countered with a lawsuit of their own in March, claiming the energy companies that make up the UIEC and operate the university’s utilities have withheld financial records needed to make proper payments.
Previously: Power plant operators file lawsuit against University of Iowa alleging breach of contract
The school also accuses the UIEC of making requests for duplicate payments in addition to a failure to perform necessary duties.
Although UIEC is dropping its federal lawsuit, it can still pursue its claims against the university. Tuesday's court filings give the utility partnership until June 13 to file its answer and any counterclaims to the university's lawsuit.
The agreement to move the case to state court comes as the federal court was considering the university's motion to dismiss the case, arguing that federal courts could not hear the case because the university, as an arm of the state, has immunity under the 11th Amendment to the U.S. Constitution.
A $1.2 billion utility partnership
The Iowa Board of Regents in 2019 awarded a 50-year contract to the University of Iowa Energy Collective to operate the University of Iowa's utilities in exchange for a $1.2 billion payment upfront, meant to pay off $153 million of debt while adding "nearly $1 billion" to the school's endowment.
The University of Iowa Energy Collaborative is a partnership between Meridiam Infrastructure North America Corp. of New York, ENGIE North America Inc. of Texas, Hannon Armstrong Sustainable Infrastructure Capital, Inc. of Maryland and other unspecified individuals who own 2% of the company and do not reside in Iowa, according to the lawsuit.
The deal required the university to pay the UIEC $35 million annually for the first five years of the contract, though the UIEC’s lawsuit claimed the university had broken that agreement. UIEC says in court documents the university has refused to make overdue payments, while they also accuse the institution of failing to file claims for casualty insurance coverage.
Issues arise amid contract disputes
The Collaborative’s lawsuit, filed Jan. 26, claimed the university refused to pay $1.5 million compensation packages for the company's CEO and CFO, the company's administrative costs and corporate overhead, and the cost to the company of maintaining its investment-grade credit rating.
The UIEC sought $2.5 million for overhauling a utility system turbine, which the company says the university committed to under the agreement. The lawsuit alleges the turbine was in bad repair because of the university’s "inadequate maintenance."
The lawsuit stated in the late fall of 2020, before the overhaul work had started, the turbine suffered an “overspeed event” that left it damaged and significantly increased the cost of the overhaul.
More: Power plant operators file lawsuit against University of Iowa alleging breach of contract
The university’s March lawsuit, meanwhile, claims the UIEC has “refused to provide critical financial information” needed to accurately determine monies owed. The suit also says the UIEC has “improperly attempted to expand the scope of purported costs eligible for reimbursement,” and accused the UIEC of trying to seek duplicate payments.
Additionally, the suit claims the UIEC hasn’t performed its tasks as agreed upon in its contract with the University, saying they have “failed to perform its operational duties in a manner consistent with prudent utility practices and key performance indicators.”
The Iowa Business Specialty Court, where the dispute will be heard going forward, is designed to "move business and complex commercial litigation cases through the court system more expeditiously." The University and UIEC agree in court filings their dispute is eligible for the specialty court because it would involve more than $200,000 in compensatory damages, among other criteria.
This article originally appeared on Iowa City Press-Citizen: UI Energy Collaborative claimed Regents, University breached contract
