City did not breach contract


The State Supreme Court reaffirmed Chancery Judge M. Ronald Doleac’s decision that the City of Hattiesburg did not breach its 2014 contract with the company hired to deal with the city’s land-application system for sewage and wastewater.

Groundworx, Inc. sued the city for $6 million in damages after city officials said the company failed to obtain adequate financing of $147 million for the treatment system. The Hattiesburg City Council voted to raise sewer rates for the financing, but the decision was vetoed by then-Mayor Johnny DuPree.

According to the decision by the State Supreme Court, Hattiesburg’s wastewater system was found to be noncompliant with federal pollution laws in 2010. In 2013, Groundworx presented a proposal to construct, operate, and maintain a land-application system.

Hattiesburg and Groundworx agreed to a contract in January 2014 that Groundworx would “design, build, construct, own, operate and maintain the System for the purpose of collecting, treating, storing, transporting, and disposal of the City’s Wastewater.”

While the City agreed to make payments to service the debt, Groundworx had to obtain the $147 million to finance the project. The contract contained a termination provision that said, “In the event that Groundworx has not closed its financing for the acquisition and construction of the System by June 2, 2014, either party shall have the right to terminate this Agreement by written notice to the other delivered on or after June 2, 2014, and before the date such financing is closed.”

During its Feb. 18, 2014, meeting, the City Council adopted a resolution to raise sewer rates. But nine days later, the mayor vetoed the resolution. So sewer rates were never raised. The June 2, 2014, financing deadline passed without Groundworx having closed on its financing.

On Aug. 5, 2014, the City exercised its contractual right to walk away from the agreement.

In the State Supreme Court ruling affirming Doleac’s decision, Associate Justice James D. Maxwell II wrote, “Unfortunately for Groundworx, even accepting its allegations are true, it simply has no legal avenue to recover its investment in the project before financing fell through and the contract was terminated. We therefore affirm the judgment dismissing Groundworx’s claims.”

Agreeing with the decision were Chief Justice William L. “Bill” Waller Jr., Presiding Justices Jess H. Dickinson and Michael K. Randolph and Associate Justice James W. Kitchens, Leslie D. King, Josiah D. Coleman and Robert P. Chamberlin. Associate Justice Dawn H. Beam did not participate.