FLB Prevails for City of Allentown in $5 Million Arbitration

FLB Law      Mar. 5, 2019

Douglas J. Smillie and Maraleen D. Shields

Shareholders Douglas J. Smillie and Maraleen D. Shields recently won an arbitration on behalf of the City of Allentown in a dispute brought by Lehigh County Authority (“LCA”) and several suburban sewer authorities (Coplay-Whitehall Sewer Authority, Salisbury Township, South Whitehall and South Whitehall Township Authority and Lower Macungie Township), claiming that the City intentionally over-charged them for wastewater treatment services, going back to 2007.

In the dispute, LCA and the suburban sewer authorities (collectively “Signatories”) claimed the City breached an agreement between them and the City, originally entered into in 1981. The Signatories’ forensic accountant claimed that the City overcharged the Signatories by more than $5 million through alleged inflated staffing. The City consistently denied these allegations and maintained that the claims were meritless.

The case was tried before an Arbitrator, retired Lehigh County Judge William E. Ford, over five days in January and February.

Mr. Smillie and Ms. Shields argued that for more than 30 years, the City consistently billed the Signatories in accordance with the 1981 Agreement. The City budgets were readily available and published on the City’s web site. The Signatories had the right to inspect the City’s books and records, and to inspect the wastewater treatment plant. The Signatories had every opportunity to question the yearly estimated charges, including the final determination of actual reasonable and necessary operating expenses. Despite the open nature of the City’s practices, Signatories never challenged the City’s staffing plan and voluntarily paid the bills year in and year out.

In a one-page decision, Judge Ford found “that the Claimants failed to prove by the required burden of proof the breach of contract and fraud claims stated in their Demand. The Arbitrator hereby denies and dismisses the Demand and all claims for relief.”

“We are pleased with the Arbitrator’s decision and gratified that the City’s position was fully vindicated,” said Mr. Smillie. “With significant support from the City, we were able to defend against the allegations, which were ultimately determined to be without merit. The claims were particularly troubling because the City had always been more than transparent with LCA and the other Signatories concerning the staffing and operation of the City’s wastewater treatment plant, which had always been a source of pride for those in charge.”

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