Judge allows U of Iowa to defer debt payment to children's hospital contractor until appeal is settled

A U.S. District judge has ruled that Iowa City-based University of Iowa doesn't have to pay any portion of the millions it owes the contractor of its Stead Family Children's Hospital until a higher court settles its appeal, The Gazette reports.

On Aug. 29, a judge ordered Iowa City-based University of Iowa to pay Modern Piping, the contractor of its new children's hospital and Hancher Auditorium, $21.5 million, plus hundreds of thousands of dollars in interest.

The dispute was over the construction of the university's 14-story children's hospital, which was plagued with design changes, budget overruns, miscommunication and missed deadlines that pushed the project's budget from $270.8 million to more than $360 million and delayed its opening by months.

In March, an arbitration panel awarded Modern Piping $21.5 million, $4.6 million of which was owed for the Hancher Auditorium, but the university appealed the decision because it lumped together awards for two separate projects. The university claimed the arbitration panel didn't have jurisdiction over the children's hospital project and sought to get out of paying award. It asked the court for extensions to negotiate with Modern Piping over the amount owed, but those talks failed. 

The Aug. 29 ruling, by District Judge Ian Thornhill, validated the award and dismissed the university's lawsuit seeking to toss it. The University of Iowa promptly appealed Mr. Thornhill's order, further delaying its payment. The award is accruing  interest at a rate of $2,321.81 per day. 

"The court is mindful of the fact that Modern Piping has waited years to be paid in full for the work it performed on the Hancher and UICH projects," Mr. Thornhill wrote, according to The Gazette. "However, this is not a situation in which Modern Piping has obtained a judgment against an entity that may, for example, cease to exist or be at risk of being unable to pay the judgment."

According to Mr. Thornhill, if an appellate court rules in favor of Modern Piping, the State of Iowa will have enough money to pay the award. As a result, "the court is persuaded that good cause exists to grant Iowa's motions," the judge said.

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