Judge refuses to toss lawsuit over water underbilling issue - KSLA News 12 Shreveport, Louisiana News Weather & Sports

Judge refuses to toss lawsuit over water underbilling issue

A lawsuit is now proceeding against the city of Shreveport for an alleged breach of contract while discovering information showing the city underbilling its water customers. (Source: Nick Lawton/KSLA News 12) A lawsuit is now proceeding against the city of Shreveport for an alleged breach of contract while discovering information showing the city underbilling its water customers. (Source: Nick Lawton/KSLA News 12)
SHREVEPORT, LA (KSLA) -

Shreveport leaders, citing a breach of contract in a case alleging the city underbilled water customers, were hoping a lawsuit over the matter would be dismissed the morning of Jan. 10.

That didn't happen. Instead, a Caddo District Court judge upheld the petition.

The lawsuit alleges that Shreveport businessman Scott Pernici discovered the underbilling issue when he started gathering up all his water bills when the city introduced a tier-system of billing in 2015 to offset rising water costs.

Pernici found out the new system did not charge customers enough.

Now he's suing the city based on what he claims the city did with that information.

The lawsuit's lastest petition for damages lists Sand Beach Properties LLC as the plaintiff representing Pernici. The defendants include the city, city attorney William Bradford, city Chief Administrative Officer Brian Crawford and city Water & Sewerage Director Barbara Featherston.

The lawsuit alleges that water customers were divided into four tiers based on their monthly usage. The less usage a customer had, the less they would pay for water.

Tier 1 customers paid $1.32 per 1,000 gallons inside the city, $2.64 per 1,000 gallons outside the city.

Tier 2 customers paid $2.63 per 1,000 gallons inside the city, $5.26 per 1,000 gallons outside the city.

Tier 3 customers paid $3.95 per 1,000 gallons inside the city, $7.90 per 1,000 gallons outside the city.

Tier 4 customers paid $4.47 per 1,000 gallons inside the city, $8.94 per 1,000 gallons outside the city.

Pernici's lawsuit states that he contacted attorney Michael Wainwright to analyze the Ordinance 164, the legislation that created the tier billing system, and discovered that Tier 1 and Tier 2 water bills consistently matched up but Tier 3 and 4 water bills consistently were lower than they should be.

Based on the city's 60,000 residential customers, the lawsuit reads, Pernici estimated the city would lose $1 million every year in underbilling.

In exchange for bringing this discrepancy to the city's attention, Pernici and Wainwright wanted 25 percent the money the city would get back after fixing the problem.

To do so, the lawsuit continues, Pernici and Wainwright contracted the water consulting group Manchac, which drew up a contingency fee contract "whereby the city of Shreveport would obligate itself to pay a percentage of any enhanced or additional revenues the city realized through the implementation or adoption of any information and/or recommendations provided through Manchac Consulting Group Inc. to the City of Shreveport as a result of Wainwright's and Pernici's research."

Manchac also drew up an agreement with the city containing a non-disclosure clause, meaning details of the underbilling could not be revealed to anyone else.

The lawsuit alleges that Bradford agreed to the deal and signed it on behalf of the city.

Pernici's lawsuit accuses the city of violating that confidentiality clause by taking the underbilling information to its own billing specialist and a third party, Systems and Software, which fixed the billing problem in August.

Pernici's now suing the city for an alleged breach of contract.

The city tried to get the case dismissed the morning of Jan. 10.

"It's a very high hurdle for us to clear to get it dismissed outright right now,"  Bradford told KSLA News 12 outside the Caddo Courthouse in downtown Shreveport. "But, again, as the evidence and facts develop, I'm very confident that the city will emerge victorious from this."

Another attorney for the city, Julie Lafargue, brought forward the following 5 exceptions to Pernici's lawsuit during the hearing Jan. 10:

1) The plaintiff's petition failed to allege facts sufficient to state a cause of action against Brian Crawford, William Bradford and/or Barbara Featherston for personal liability to the plaintiff.

2) The non-disclosure agreement was an illegal "pay up or shut up" scheme hatched by Pernici. The purpose of the scheme was to force the city to choose between paying Pernici $1 million or staying quiet about a water billing error, which was a violation of a city ordinance, a bond agreement, a federal court consent decree and the Clean Water Act. An agreement with an illegal purpose is unenforceable and is absolutely null under Louisiana law.

3) Pernici sat on the information, did not report the error as required, held the information for one year and hatched a scheme to make money for himself and his friends at the expense of the city and its water customers.

4) The non-disclosure agreement never was signed by Shreveport Mayor Ollie Tyler, the one with executive authority to approve such an agreement.

5a) Plaintiff's petitions fail to allege facts sufficient to state a cause of action against any of the defendants for unjust enrichment, a general equitable principle that no person should be allowed to profit at another's expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained.

5b) Plaintiff's petitions fail to allege facts sufficient to state a cause of action against any of the defendants for quantum merit, which determines the amount to be paid for services when no contract exists or when there is doubt as to the amount due for the work performed but done under circumstances when payment could be expected.

After hearing from both sides, Caddo District Judge Ramon Lafitte upheld the lawsuit. That allows the case to move forward.

But city leaders said it will have very little impact, if any, on customers' water bills.

"They're not paying any more," Bradford said. "It has not affected them in any form or fashion other than the fact they're paying what is due and owing under previous administrations."

What Lafitte did change about this lawsuit is taking away the individual liability of Bradford and other city leaders named in the lawsuit and naming the city itself as the lone defendant.

The lawsuit does not ask for a specific amount of money. So the amount, if any, would be up to a jury to decide if it see case goes to trial.

Pernici and his attorney, Jerry Harper, told KSLA News 12 they hope for a court date someday between February and April.

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