HIGHLAND TH, LLC et al v. CITY OF TERRE HAUTE et al

Filing 89

ORDER - Presently pending in this case is a Motion to Alter or Amend the Judgment filed by Plaintiffs Highland TH, LLC ("Highland") and Overseas Lease Group, Inc. ("OLG"). [Filing No. 83.] The Court DENIES IN PART Plaintiffs� 39; Motion to Alter or Amend the Judgment, [Filing No. 83], to the extent that it declines to alter or amend its findings or judgment regarding Plaintiffs' breach of contract and quantum meruit claims against the Terre Haute Defendants. Howe ver, the Court GRANTS IN PART Plaintiffs' Motion to Alter or Amend the Judgment, [Filing No. 83], to the extent that it alters the judgment such that the dismissal of Plaintiffs' claims against Plocher is WITHOUT PREJUDICE. An Amended Judgment shall issue accordingly. (See Order.) Signed by Judge Jane Magnus-Stinson on 8/10/2016. (BRR)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
TERRE HAUTE DIVISION
HIGHLAND TH, LLC and OVERSEAS LEASE
GROUP , INC.,
Plaintiffs,
vs.
CITY OF TERRE H AUTE, CITY OF TERRE HAUTE
WASTEWATER UTILITIES, BOARD OF PUBLIC
WORKS AND SAFETY, D UKE BENNETT , MARK
THOMPSON, TERRE H AUTE DEWATERING
COMPANY, LLC, and PLOCHER CONSTRUCTION
COMPANY, INC.,
Defendants.

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No. 2:15-cv-00196-JMS-DKL

ORDER
Presently pending in this case is a Motion to Alter or Amend the Judgment filed by
Plaintiffs Highland TH, LLC (“Highland”) and Overseas Lease Group, Inc. (“OLG”). [Filing No.
83.]
I.
BACKGROUND 1
On July 15, 2014, the City of Terre Haute (the “City”), Terre Haute Wastewater Utilities
(“THWW”), the Board of Public Works and Safety (the “Board”), and Powerdyne Terre Haute
Holdings LLC (“Powerdyne”) signed a Purchase and Sale Agreement (the “Agreement”) which
provided that the City, THWW, and the Board agreed to: (1) deliver waste activated sludge and
other biological material to Powerdyne for Powerdyne to process into diesel fuel; and (2) buy the
diesel fuel back from Powerdyne. [Filing No. 28 at 2-3.] The Agreement was signed by Duke

1

These background facts are taken largely from the Court’s May 17, 2016 Order. [Filing No. 81.]

Bennett (the Mayor of Terre Haute) on behalf of the City, Matt Thompson (Director of THWW)
on behalf of THWW, Robert Murray (President of the Board) on behalf of the Board, and Geoffrey
Hirson (President of Powerdyne) on behalf of Powerdyne. [Filing No. 28-1 at 19.] Producing
renewable diesel fuel involves removing the water from the waste activated sludge through
centrifugation – a process known as “de-watering.” [Filing No. 28 at 3.] The document provided
that the City, THWW, and the Board would pay 240 consecutive monthly payments of
$719,326.58 for de-watering services, for a total cost of $172 million over the life of the
Agreement. [Filing No. 28 at 3.] It also provided that “since [the City, THWW, and the Board
will be receiving significant revenues from remote cities for their [waste activated sludge] and
other third parties for the sale of Renewable Fuel, provided that [Powerdyne] is not in default of
this Agreement, [the City, THWW, and the Board] shall not have the right to use non appropriation
of funds as a reason [for] termination of this Agreement or as a defense for nonpayment of any
amounts due under this Agreement.” [Filing No. 28-1 at 18.]
On May 15, 2014, Highland entered into a Lease Agreement with THWW (the “Lease”)
whereby Highland agreed to lease from THWW the facility where de-watering would occur.
[Filing No. 28 at 3.] 2 In July 2014, Plocher Construction Company, Inc. (“Plocher”) and Highland
entered into an agreement whereby Plocher would purchase, install, and test the de-watering
facility equipment (the “Plocher Contract”). [Filing No. 28 at 6.] At that time, Plocher knew of
the existence of the Agreement. [Filing No. 28 at 6.]
On November 20, 2014, the parties to the Agreement agreed to assign the rights and
delegate the obligations related to de-watering to Highland in a Partial Assignment and Delegation

2

There is no explanation in the Amended Complaint or elsewhere as to why Highland and THWW
entered into the Lease before the Agreement was signed. The Court also notes that Plaintiffs have
not asserted any claims relating to the Lease.
2

of Purchase and Sale Agreement (the “Assignment”). [Filing No. 28 at 3.] Highland was owned
by Powerdyne when it entered into the Lease and Assignment. [Filing No. 28 at 3.] In late
November 2014, OLG acquired Highland. [Filing No. 28 at 3.]
Also in November 2014, Mark Thompson, Director of THWW, spoke in person with a
representative of OLG regarding the Agreement, and the commitment by the City, THWW, and
the Board to purchase renewable diesel fuel. [Filing No. 28 at 4.] Mr. Thompson stated that
THWW had entered into waste water supply agreements with other cities, and that those
agreements would provide a sufficient revenue stream to ensure that the City, THWW, and the
Board could perform their obligations under the Agreement. [Filing No. 28 at 4.] Mr. Thompson
also provided spreadsheets to OLG representatives regarding the projected revenue. [Filing No.
28 at 4.] The representations regarding the existence of waste water supply agreements with other
cities were false. [Filing No. 28 at 9.] Based on Mr. Thompson’s representations, Highland drafted
a pro forma to present to the Terre Haute City Council. [Filing No. 28 at 4.]
In reliance on Mr. Thompson’s representations to the OLG representative, OLG acquired
Highland and “made substantial investments to ensure that Highland could perform its obligations
under the Assignment.” [Filing No. 28 at 4.] Additionally, in December 2014 OLG accepted
assignment of Highland’s obligations under the Plocher Contract. [Filing No. 28 at 4.] For
example, OLG has insured the de-watering equipment from November 2014 through the present.
[Filing No. 28 at 4.]
Highland was prepared to begin operating and maintaining services for the de-watering
facility in late December 2014, but the City, THWW, and the Board never delivered waste
activated sludge to the de-watering facility. [Filing No. 28 at 4-5.] Additionally, neither the City,

3

THWW, nor the Board have ever made payments to Highland under the Agreement. [Filing No.
28 at 5.]
Beginning in November 2014 and through March 2015, Highland and OLG representatives
had discussions with Mr. Bennett, the Mayor of Terre Haute, and Mr. Thompson regarding
whether the City, THWW, and the Board would honor their contractual commitments. [Filing No.
28 at 5.] Mr. Bennett and Mr. Thompson repeatedly stated that the Agreement and the Assignment
were valid contracts, and that the City, THWW, and the Board would honor their obligations under
them. [Filing No. 28 at 5.] Additionally, at a Terre Haute City Council meeting in February 2015,
Mr. Bennett stated that the Agreement was valid and did not need any further approvals. [Filing
No. 28 at 5.] In the meantime, relying on Mr. Bennett’s and Mr. Thompson’s representations,
OLG and Highland continued to incur costs to prepare and maintain the de-watering facility.
[Filing No. 28 at 5.]
In March 2015, the City began negotiating with a different company, Terre Haute
Dewatering Company, LLC (“THDC”), to provide de-watering services to the City. [Filing No.
28 at 5.] The City and THDC entered into a preliminary agreement on March 30, 2015 (the “THDC
Agreement”), which required THDC to pay the City a deposit of $750,000 as a “prepayment of
anticipated lease payments for the City’s wastewater treatment facility.” [Filing No. 28 at 5.] Mr.
Bennett and Robert Murray, President of the Board, signed the THDC Agreement on behalf of the
City, and Mr. Murray had the understanding that the Board would later approve the THDC
Agreement. [Filing No. 28 at 5.] When he learned that the THDC Agreement would not be
presented to the Board for approval, Mr. Murray resigned his position with the Board. [Filing No.
28 at 6.] Mr. Murray stated that he was told the City needed the $750,000 payment from THDC

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under the THDC Agreement to meet its payroll obligations, and that is why he signed the THDC
Agreement. [Filing No. 28 at 6.]
In May 2015, the City, THWW, and the Board repudiated the Agreement and the original
Assignment with Highland, claiming they were both invalid. [Filing No. 28 at 6.] A City attorney
has represented that the City cannot make payments on its bonds, and cannot pay for equipment
necessary for the operation of certain facilities. [Filing No. 28 at 6.] To date, the City, THWW,
and the Board have not delivered any waste activated sludge to Highland as provided in the
Assignment, have not made any payments due to Highland under the Assignment, and have
indicated that they do not think the Assignment creates any binding obligation upon them. [Filing
No. 28 at 6.] Plocher, which had contracted to provide equipment for the de-watering facility, sold
that equipment to the City for less than the market value of the equipment. [Filing No. 28 at 6.]
Highland and OLG filed the original Complaint in this matter on June 9, 2015, [Filing No.
1], and the operative Amended Complaint on October 23, 2015, [Filing No. 28] in response to a
Motion to Dismiss filed by the City, THWW, the Board, Mr. Bennett, and Mr. Thompson
(collectively, the “Terre Haute Defendants”), [Filing No. 16]. In the Amended Complaint,
Highland and OLG asserted the following claims: (1) declaratory judgment against the City,
THWW, and the Board, declaring that the Agreement and Assignment are valid, legally binding
contracts; (2) breach of contract against the City, THWW, and the Board; (3) quantum meruit
against the City, THWW, and the Board; (4) fraud against Mr. Bennett and Mr. Thompson; (5)
appointment of a receiver against the City; (6) an injunction against the Terre Haute Defendants
prohibiting them from removing equipment from the de-watering facility; (7) tortious interference
with contract against Plocher and THDC; and (8) tortious interference with business relationships
against Plocher and THDC. [Filing No. 28 at 7-13.] The Terre Haute Defendants moved to dismiss
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Counts 1 through 6 of the Amended Complaint, [Filing No. 32], THDC moved to dismiss Counts
7 and 8 of the Amended Complaint as against it, [Filing No. 58], and Plocher moved to dismiss
Counts 7 and 8 as against it or, in the alternative, to stay the litigation and compel Highland and
OLG to arbitrate their claims against Plocher, [Filing No. 60].
On May 17, 2016, the Court: (1) granted the Terre Haute Defendants’ Motion to Dismiss
Counts I – VI of the Amended Complaint, [Filing No. 32], and dismissed with prejudice all claims
against the Terre Haute Defendants; (2) granted THDC’s Motion to Dismiss Counts 7 and 8 of
Plaintiffs’ Amended Complaint, [Filing No. 58], and dismissed with prejudice all claims against
THDC; and (3) granted Plocher’s Motion to Dismiss, Alternatively to Stay, and to Compel
Arbitration, [Filing No. 60], and dismissed with prejudice all claims against Plocher. [See Filing
No. 81.] Plaintiffs have now filed the pending Motion to Alter or Amend the Judgment, [Filing
No. 83], and Plocher and the Terre Haute Defendants oppose the motion, [Filing No. 85; Filing
No. 86].
II.
STANDARD OF REVIEW
Plaintiffs move to alter or amend the judgment under Fed. R. Civ. P. 59. [See Filing No.
84 at 3.] Rule 59(e) allows a party to move the Court for reconsideration of a judgment within 28
days following the entry of judgment, and encompasses reconsideration of matters decided on the
merits. Osterneck v. Ernst & Whinney, 489 U.S. 169, 174 (1989). Affording relief through
granting a motion for reconsideration brought pursuant to Rule 59(e) is an “extraordinary remed[y]
reserved for the exceptional case.” Foster v. DeLuca, 545 F.3d 582, 584 (7th Cir. 2008). Rule 59
motions are for the limited purpose of “correct[ing] manifest errors of law or fact or…present[ing]
newly discovered evidence.” Rothwell Cotton Co. v. Rosenthal & Co., 827 F.2d 246, 251 (7th Cir.
1987) (quoting Keene Corp. v. Int’l Fidelity Ins. Co., 561 F.Supp. 656 (N.D. Ill. 1982), aff’d 736
6

F.2d 388 (7th Cir. 1984)). “A ‘manifest error’ is not demonstrated by the disappointment of the
losing party. It is the ‘wholesale disregard, misapplication, or failure to recognize controlling
precedent.’” Oto v. Metropolitan Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (quoting Sedrak
v. Callahan, 987 F.Supp. 1063, 1069 (N.D. Ill. 1997)). Additionally, a party “may not use a motion
for reconsideration [under Rule 59] to introduce new evidence that could have been presented
earlier.” Oto, 224 F.3d at 606. The Court will analyze the pending motion pursuant to this
standard.
III.
DISCUSSION
Plaintiffs set forth two main arguments in their motion: (1) that the Court’s dismissal of
Plaintiffs’ breach of contract and quantum meruit claims against the Terre Haute Defendants was
erroneous because it was based on “unwarranted factual assumptions,” [Filing No. 84 at 4-8]; and
(2) that the claims against Plocher which the Court held are subject to arbitration should have been
dismissed “without prejudice,” instead of “with prejudice,” [Filing No. 84 at 8-9]. The Court will
address each argument in turn, but will discuss the breach of contract and quantum meruit claims
separately.
A. Breach of Contract Claim
In its May 17, 2016 Order, the Court granted the Terre Haute Defendants’ Motion to
Dismiss Plaintiffs’ breach of contract claim because Indiana law requires that a city obtain an
appropriation before entering into a contract that obligates the city to pay money. See Ind. Code
§ 36-4-8-12(b). The Court emphasized that Plaintiffs alleged in the Amended Complaint that
Highland entered into the Agreement relying on Mr. Thompson’s representations that agreements
between THWW and other cities would provide “a sufficient revenue stream to ensure the City,
[THWW], and the Board could perform the Agreement.” [See Filing No. 81 at 8-9 (quoting Filing
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No. 28 at 4).] The Court stated that Plaintiffs’ allegations “indicate that the City’s, THWW’s, and
the Board’s obligations under the Agreement were being funded by revenue from contracts with
other cities, and not from an appropriation. Further, as Plaintiffs themselves allege, those revenues
from other cities never materialized.”

[Filing No. 81 at 10.]

It found that Plaintiffs had

“affirmatively pled themselves out of any possibility of demonstrating that there was an
appropriation to cover the City’s obligations under the Agreement….” [Filing No. 81 at 10-11.]
In sum, the Court found that “[t]he Agreement is invalid because Plaintiffs allege facts indicating
that there was no appropriation related to the City’s obligations under the Agreement….” [Filing
No. 81 at 12.] Significantly, the Court also found that the Agreement was invalid because it
constitutes an illegal investment contract under Ind. Code § 36-1-3-8(a)(11). [Filing No. 81 at 1214.]
In their Motion to Alter or Amend the Judgment, Plaintiffs argue that they did not plead
themselves out of their breach of contract claim because they “would not need to contradict the
allegations in their complaint to prevail on their claims.” [Filing No. 84 at 5.] They argue that
they “did not allege that the City had no revenue from other cities or would not receive any revenue
in the future,” and that there is evidence of sources of funds other than tax revenues to fund the
City’s obligations under the Agreement – including Mr. Bennett’s statement that the City would
receive “two payments each for $3 million from Powerdyne,” and minutes from the Board of
Sanitary Commissioners’ meetings indicating that “the City is hauling sludge for other
municipalities” and that “the City continues to provide services to some of those municipalities.”
[Filing No. 84 at 5-6.] Plaintiffs argue that based on this documentary evidence, the Court should
not have dismissed their breach of contract claim because “the project may still generate revenue,
thereby providing a funding stream to pay contractual obligations owed to Plaintiffs.” [Filing No.
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84 at 6.] Plaintiffs assert that the Court erroneously concluded that they failed to fulfill their duty
to ensure that the City took all necessary steps to enter into the contract, because “[t]he City
provided Highland with detailed estimates of revenue through an organized plan to secure outside
monies it would receive from other cities.” [Filing No. 84 at 6-7.] They also contend that “agents
of the City repeatedly stated that the Agreement was a valid contractual obligation that the City,
the Utilities, and the Board would honor,” and that the Court “should consider [an] opinion letter
by the City’s highest legal officer [stating that the Agreement complied with applicable statutes
and was binding] before dismissing Plaintiffs’ claims, with prejudice.” [Filing No. 84 at 7.]
In their response, the Terre Haute Defendants argue that Plaintiffs ignore the fact that the
breach of contract claims were also dismissed because the Court found that the Agreement was an
illegal investment contract. [Filing No. 86 at 6.] The Terre Haute Defendants also argue that
Plaintiffs present new facts that were available to them prior to filing the Amended Complaint,
and that Plaintiffs have not presented any legal authority standing for the proposition that a prior
appropriation is not needed so long as there are other sources of revenue. [Filing No. 86 at 7-9.]
The Terre Haute Defendants note that the Agreement “unconditionally obligates the City to pay
up to $172,000,000 for dewatering services and to pay up to $590,400,000 for diesel fuel,” that
“[t]he danger of public officials and boards creating a $762,000,000 liability without City Council
oversight and approval is obvious,” and that “[t]his is precisely why Indiana law does not permit
officials or boards to create such obligations without a prior appropriation.” [Filing No. 86 at 1112.] The Terre Haute Defendants contend that Highland’s reliance on Sanitary Board meeting
minutes is misplaced because the Sanitary Board did not approve the Agreement, the Sanitary
District has exclusive control over its revenue and that revenue cannot be used to satisfy an
obligation created by a contract to which the Sanitary District is not a party, and Plaintiffs could
9

have raised the issue of Sanitary District approval in the Amended Complaint but did not. [Filing
No. 86 at 12-14.] The Terre Haute Defendants argue that Highland could not rely on the City’s
mistaken belief that no appropriation was necessary, as it did not plead the facts it now relies upon
for that argument in its Amended Complaint, did not make that argument in response to the Terre
Haute Defendants’ Motion to Dismiss, and could not rely on the City’s counsel’s representations
regarding the validity of the Agreement. [Filing No. 86 at 14-16.]
On reply, Plaintiffs again argue that they fulfilled their duty to ensure that the City had
taken the proper steps to be able to enter into the Agreement, including relying upon
representations from the City attorney. [Filing No. 88 at 5-6.] They also assert that any amount
in damages they seek is significantly less than the numbers Defendants cite because Defendants’
numbers include amounts owed for the purchase of diesel fuel, which Plaintiffs never contracted
to provide. [Filing No. 88 at 6.] Finally, they state that they “do not seek to use Defendants’
misconduct to obtain taxpayer money unfairly[, but rather] seek to recover from Defendants the
money that Plaintiffs spent providing services to Defendants and that are resulting in revenue to
Defendants.” [Filing No. 88 at 7.]
Plaintiffs essentially argue that the Court should not have dismissed their breach of contract
claim because evidence not previously presented to the Court indicates that there were other
sources of revenue to fund the City’s obligations under the Agreement, and that Plaintiffs
justifiably relied upon representations by the City that it could fulfill those obligations. There are
two main problems with Plaintiffs’ arguments. First, a motion brought under Rule 59 cannot be
based on evidence that could have been presented during the pendency of the motion at issue. See
Caisse Nationale de Credit Asricole v. CBI Indus., Inc., 90 F.3d 1264, 1269-70 (7th Cir. 1996) (a
motion for reconsideration cannot “be employed as a vehicle to introduce new evidence that could
10

have been adduced during the pendency of the…motion”). The evidence that Plaintiffs rely upon
– media reports about different sources of income to fund the City’s obligations, and minutes from
Board of Sanitary Commissioners’ meetings relating to the same issue – could have been submitted
with, or referred to in, the Amended Complaint. Plaintiffs chose not to discuss that evidence until
now, and it is well-settled that basing a Rule 59 motion on evidence that is not “newly discovered”
is improper. See, e.g., Oto, 224 F.3d at 606.
Second, even if it were proper for the Court to consider evidence that Plaintiffs could have
submitted or referred to, but did not, that evidence does not alter the Court’s analysis. Plaintiffs
miss the point of Ind. Code § 36-4-8-12, which is to protect the public by preventing public
officials from entering into contracts which obligate the city to pay amounts without a prior
appropriation. Ind. Code § 36-4-8-12(b) (“a city department, officer, or employee may not obligate
the city to any extent beyond the amount of money appropriated for that department, officer, or
employee”). It is the obligation of the City which causes the issue – an obligation which the
legislative branch must approve, and which was not approved here. Whether or not the City had
other revenue sources which could have funded its obligations under the Agreement is irrelevant.
There must have been an appropriation to approve expenditure of that revenue on the City’s
obligations under the Agreement. Additionally, as the Court discussed in its May 17, 2016 Order,
a private party contracting with a municipality has a duty to ensure that the municipality has taken
the necessary steps to enter into the contract. [See Filing No. 81 at 11 (citing Cablevision of
Chicago v. Colby Cable Corp., 417 N.E.2d 349, 355-56 (Ind. Ct. App. 1981); Lohrig v. Rochat,
169 N.E. 77, 81 (Ind. Ct. App. 1929)).] Plaintiffs discuss representations from the City’s
corporation counsel stating that the Agreement was binding and that all statutory requirements
were followed. [See Filing No. 84 at 7.] But Plaintiffs do not point to any legal authority
11

supporting the proposition that such a representation is enough to ensure that the City took the
necessary steps to the enter into the Agreement. Any appropriation would be a matter of public
record, and Plaintiffs neither allege that they did their own investigation nor, tellingly, that such
an appropriation took place. 3 Indeed, the additional evidence that Plaintiffs submit underscores
that there was no such appropriation.
Finally, Plaintiffs completely ignore the Court’s finding in its May 17, 2016 Order that the
Agreement is an investment contract that the City is prohibited from entering into under Indiana
statute. [See Filing No. 81 at 12-14 (discussing Ind. Code § 36-1-3-5, which provides that “a unit
may exercise any power it has to the extent that the power: (1) is not expressly denied by the
Indiana Constitution or by statute; and (2) is not expressly granted to another entity,” and Ind.
Code § 36-1-3-8, which enumerates certain powers that are exceptions to the general grants of
power, including “[t]he power to invest money, except as expressly granted by statute”).] This
was an independent basis for the Court’s finding that the Agreement was invalid, and even if
Plaintiffs have shown that the Agreement was not invalid for lack of an appropriation – which they
have not – they fail to address why the Court should reconsider its decision that the Agreement is
an invalid investment contract.
In sum, the Court denies Plaintiffs’ request to alter or amend the judgment on their breach
of contract claim because Plaintiffs rely on evidence that they could have relied upon in their
Amended Complaint and arguments that they could have presented in response to the Terre Haute

3

Plaintiffs also argue that “the City’s outside legal counsel…stated during a meeting of the Board
of Sanitary Commissioners that contracts involving the Waste Water Treatment Plant require only
the approval of the Sanitary Board.” [Filing No. 84 at 7.] This argument is unavailing because it
was raised for the first time in connection with the pending motion and, again, it does not indicate
that there was an appropriation as required by Ind. Code § 36-4-8-12.
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Defendants’ Motion to Dismiss and, even if the Court were to consider the new evidence and
arguments, they do not change the Court’s analysis.
B. Quantum Meruit Claim
The Court found in its May 17, 2016 Order that Plaintiffs’ quantum meruit claim failed,
stating “[Indiana] courts have been particularly unsolicitous of estoppel and laches arguments in
cases where the unauthorized acts of public officials on some level implicate government spending
powers.” [Filing No. 81 at 15 (quoting Peoples State Bank v. Benton Tp. of Monroe County, 28
N.E.3d 317, 326 (Ind. Ct. App. 2015)).] It found that although a quantum meruit claim can succeed
when a public entity is involved if the unauthorized expenditure of taxpayers’ money is not at
issue, the Agreement here implicated taxpayer funds. [Filing No. 81 at 15-16.]
In support of their motion, Plaintiffs rely on evidence that the City was receiving revenue
from a contract with Powerdyne and from certain sludge hauling contracts to argue that the
Agreement did not implicate taxpayer funds and, accordingly, their quantum meruit claim should
not have been dismissed. [Filing No. 84 at 7-8.]
In response, the Terre Haute Defendants argue that Plaintiffs do not address the fact that
the Agreement put public funds at risk, and that even revenue implicates public funds because
Indiana statute provides that “‘[p]ublic funds’ means all fees and funds of whatever kind or
character coming into the possession of any public officer by virtue of that office.” [Filing No. 86
at 18 (quoting Ind. Code § 5-13-4-20 and Ind. Code § 36-9-25-33(b)).] The Terre Haute
Defendants again note that the funds Plaintiffs are referring to are Sanitary District funds, and
cannot be used to satisfy the City’s obligations under the Agreement. [Filing No. 86 at 18.]
Finally, the Terre Haute Defendants contend that Highland seeks a “double recovery” through its
quantum meruit claim because “[i]t seeks the difference between the price the City paid for the
13

equipment and the invoice price in the arbitration, and it seeks that same amount under its quantum
meruit claim in this case,” and “since such a recovery in this case would come from the City’s
taxpayers, Highland must assert that claim in the arbitration, which is exactly what it is doing.”
[Filing No. 86 at 19.]
On reply, Plaintiffs argue that Defendants and the Court confuse “taxpayer funds” with
“public funds,” that the Court found quantum meruit claims are barred when “taxpayer funds” are
implicated, and that this case involves “public funds.” [Filing No. 88 at 2-3.] Plaintiffs assert that
they could not have raised this argument in response to the Terre Haute Defendants’ Motion to
Dismiss because Defendants did not make that argument in connection with their motion.
Plaintiffs contend that the Court can consider other sources of non-tax revenue since they are
responding to the Court’s finding that the Agreement implicated taxpayer funds. [Filing No. 88 at
4.] Plaintiffs do not address the Terre Haute Defendants’ argument that Sanitary District funds
cannot be used to satisfy the City’s obligations under the Agreement, but rather state that
“Defendants do not explain how the de-watering project is moving forward unless [the City is]
using that money.” [Filing No. 88 at 4.] Finally, Plaintiffs assert that any argument regarding a
double recovery due to the arbitration “can be decided only upon a factual record, not a motion to
dismiss.” [Filing No. 88 at 4.]
Similar to the breach of contract claim, Plaintiffs base their arguments on evidence not
presented with or referred to in the Amended Complaint, which was available at that time. The
Court rejects the argument that Plaintiffs did not discuss evidence of other “public funds” because
the Terre Haute Defendants did not raise that argument. The issue of how the City planned to
satisfy its obligations under the Agreement has always been central to this lawsuit, and the Terre

14

Haute Defendants specifically argued in their Motion to Dismiss that the quantum meruit claim
should be dismissed because the Agreement “puts public funds at risk.” [Filing No. 33 at 16.]
In any event, the evidence Plaintiffs rely on does not indicate that there was another source
for the City’s obligations, such that even “public” funds were not implicated. The Court notes that
the other revenue sources Plaintiffs primarily rely upon were amounts received by the Sanitary
District for sludge processing, but that revenue belongs to the Sanitary District – who is not a party
to the Agreement – and cannot be used by the City to fund its obligations under the Agreement.
See Ind. Code § 36-9-25-33(b) (“money collected for or belonging to the sanitary district belongs
to the sanitary district, and not to any city or town in the sanitary district”); Ind. Code § 36-9-2537 (the Sanitary Board “has complete and exclusive authority to expend the money for the purposes
provided”). Plaintiffs essentially argue that the City must be using that money to continue with
the de-watering project with THDC, but this speculation is not enough to show that the Agreement
does not implicate public funds. 4
As with Plaintiffs’ breach of contract claim, the Court denies Plaintiffs’ Motion to Alter or
Amend the Judgment as it relates to the quantum meruit claim because Plaintiffs submit evidence
that they could have submitted with their Amended Complaint and rely upon arguments that they
could have made in response to the Terre Haute Defendants’ Motion to Dismiss, and because that
evidence does not change the Court’s analysis in any event.

4

Because it has found that altering or amending the judgment as to Plaintiffs’ quantum meruit
claim is not warranted, the Court need not consider the Terre Haute Defendants’ additional
argument that Plaintiffs seek double recovery through their quantum meruit claim due to the
pending arbitration. [See Filing No. 86 at 19.]
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C. Claims Against Plocher
In its May 17, 2016 Order, the Court found that Plaintiffs’ claims against Plocher – for
tortious interference with contract and tortious interference with business relationships – fell
within the arbitration provision contained in the Plocher Contract because the claims “arise from,
or are in connection with, the Plocher Contract.” [Filing No. 81 at 28-32.] The Court dismissed
the claims with prejudice, noting that Plaintiffs had already amended their Complaint once in
response to the Terre Haute Defendants’ first Motion to Dismiss, chose not to exercise their right
to amend again as a matter of course in response to the subsequent Motions to Dismiss, and had
not given any indication that they could successfully amend their complaint to cure the defects the
Court had identified. [Filing No. 81 at 32-33.]
Plaintiffs argue that the Court’s dismissal of their claims against Plocher should have been
without prejudice, and note that “the Court’s intent in dismissing Plaintiffs’ claims against Plocher
is to require Plaintiffs to pursue their claims against Plocher in arbitration” and that they “have
recently again scrutinized the Agreement in which they and Plocher allegedly agreed to arbitrate”
and “may move the arbitral panel to dismiss the arbitration in full.” [Filing No. 84 at 8.]
Plocher responds that the cases Plaintiffs rely upon for their argument that dismissal of the
claims subject to arbitration should have been without prejudice do not stand for that proposition.
[Filing No. 85 at 3-4.] Plocher also notes that “[OLG] would still be able to file an action to
enforce an arbitration award because that claim is not part of this case (the only claims alleged
against Plocher were for tortious interference), and of course, a dismissal with prejudice appl[i]es
only to existing claims and those claims which could be asserted at this time.

An action

challenging any arbitration award does not and could not exist at this time as the arbitration is
ongoing.” [Filing No. 85 at 4-5.]
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Plaintiffs reply that because a motion to dismiss based on the argument that the claim is
subject to arbitration is treated as a motion to dismiss for improper venue, dismissal should be
without prejudice. [Filing No. 87 at 2-3.]
As the Court stated in its May 17, 2016 Order, a motion to dismiss based on an existing
arbitration agreement is considered a motion to dismiss under Fed. R. Civ. P. 12(b)(3) for improper
venue. [Filing No. 81 at 29.] Plaintiffs are correct that claims dismissed for improper venue should
be dismissed without prejudice. See, e.g., Johnson v. Western & Southern Life Ins. Co., 598 Fed.
Appx. 454, 456 (7th Cir. 2015) (where defendant moved to compel arbitration and to dismiss for
improper venue under Fed. R. Civ. P. 12(b)(3), dismissal was without prejudice because there was
no “adjudication on the merits”); In re IFC Credit Corp., 663 F.3d 315, 320 (7th Cir. 2011)
(“dismissal for want of jurisdiction, not being an adjudication on the merits, is without prejudice”).
Accordingly, the Court grants Plaintiffs’ Motion to Alter or Amend the Judgment to the extent that
Plaintiffs’ claims against Plocher are dismissed without prejudice, rather than with prejudice. 5
IV.
CONCLUSION
For the foregoing reasons, the Court DENIES IN PART Plaintiffs’ Motion to Alter or
Amend the Judgment, [Filing No. 83], to the extent that it declines to alter or amend its findings
or judgment regarding Plaintiffs’ breach of contract and quantum meruit claims against the Terre
Haute Defendants. However, the Court GRANTS IN PART Plaintiffs’ Motion to Alter or Amend
the Judgment, [Filing No. 83], to the extent that it alters the judgment such that the dismissal of

5

As Plocher concedes, even if the dismissal of OLG’s claims against Plocher was with prejudice,
OLG would have been free to file an action to enforce any arbitration award. [See Filing No. 85
at 4-5.]
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Plaintiffs’ claims against Plocher is WITHOUT PREJUDICE. An Amended Judgment shall
issue accordingly.

Date: August 10, 2016

_______________________________
Hon. Jane Magnus-Stinson, Judge
United States District Court
Southern District of Indiana

Distribution via ECF only to all counsel of record

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