Petition for Writ of Certiorari — Board of County Commissioners v. L. Robert Kimball & Associates

lc |

No. jose"

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1989

BOARD OF COUNTY COMMISSIONERS

OF LAWRENCE COUNTY, OHIO

Petitioner

V.

L. ROBERT KIMBALL & ASSOCIATES

Respondent

PETITION FOR A WRIT OF CERTIORARI

an Supge ive Court, vs |

| cae Coe i b

JAN 29 1990

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Robert J. Hollingsworth*

Terrell B. Snyder

Katharine C. Saunders

Cors & Bassett

1700 Carew Tower

Cincinnati, Ohio 45202

(513) 381-0312

*Counsel of Record

QUESTIONS PRESENTED

1. Should a court defer to a commercial

arbitration award that disposes of rights

asserted under statutory law and public policy

in the absence of any explanation by the

arbitrator of the basis for the decision or the

issues decided?

2. Should a court defer to a commercial

arbitration award where the underlying contract

as well as the award is challenged as violating

statutory law and public policy?

3. Whether a decision of a state's highest

court coupled with an appellate court decision

and a state statute are sufficient to establish

a "well-defined and dominant public policy"?

iii

TABLE OF CONTENTS

Page

Es i

TED ccc ccc ccs oeeeeece v-vi

re 1

EEE EES ee 1

eeeeureeee Pe? PREGUGATIONS 2... ccccccccccccs 1-2

BASIS OF FEDERAL JURISDICTION ............ 2

Es 2

A.

COURSE OF PROCEEDINGS AND

DISPOSITION IN COURT BELOW ......... 2

B.

I PD on tcc ce cee cee sees 5

REASONS FOR GRANTING WRIT ..........eceee% a

-

A REVIEWING COURT SHOULD NOT

DEFER TO AN ARBITRATION AWARD WHERE

(1) THE UNDERLYING CONTRACT IS

CHALLENGED AS VIOLATING

STATUTORY LAW AND PUBLIC POLICY

AND (2) THE ARBITRATORS GIVE

Ee S| 9

II.

THE ARBITRATION AWARD IS NOT

ENTITLED TO ANY DEFERENCE WHERE

THE UNDERLYING CONTRACTS VIOLATE

Ser UE EGE cc pecccevcccecs 18

4a e

THE COURT OF APPEALS

REFUSED TO RECOGNIZE A WELL-

ESTABLISHED PUBLIC POLICY OF THE

ee Uhh ice Ose eb es ees 20

je cere here sents seenscececccese 29

-iv

TABLE OF CONTENTS

(Continued)

APPENDIX A

(Opinion of the United States Court

of Appeals for the Sixth Circuit) ........

APPENDIX B

(Decision of the United States Court

of Appeals for the Sixth Circuit) ........

APPENDIX C

(Opinion of the United States District

Court for the Southern District of

ORic, Western DIVISION) «.cccsccsssccvccns

APPENDIX D

(Order and Judgment Entry of the United

States District Court for the Southern

District of Ohio, Western Division ) .....

APPENDIX E

(Federal Arbitration Act, 9 U.S.C.

Se Be Sep BAP CdS veveseceevens beweeee beeen

APPENDIX F

(40 C.F.R. 35.917-1) ..ccccccccccccccccces

APPENDIX G

(40 C.F.R. 35.937-2, 35.937-3,

I Sn ee ee Cee

APPENDIX H

(40 C.F.R. Part 35, Subpart E,

ft arr rere ary ee ee Cee CET ee eee

APPENDIX I

(Ohio Revised Code §6117.01) ......ccceevee

TABLE OF AUTHORITIES

CASES

Page

Alexander v. Gardner-Denver,

415 U.S. 36 (1974) keer Ss ££ oe S 2 oo ©. 2 a. ee ee 16-17

18

Barrentine v. Arkansas - Best Freight

System, Inc.,

ke Pe ee) te ree eee ee ere eee 17

Board of Commissioners v. Ranck,

9 Ohio C.C. 301 (Franklin Cty. 1895)...... 24

Hubbard v. Hiltz,

31 Ohio Law Abs. 538 (Allen Cty. 1940)....26

Hurd v. Hodge,

Soe Wee BE CRPOEE 66 cs dees avatenesetnsanen 20

McDonald v. City of West Branch,

SOO Walks Se CRE! Fes a cnkeneeseFeccecees 17,18

Mitsubishi Motors Corp. v. Soler-

Chrysler Plymouth, Inc.,

Te. Wee EEE SEE EA Sh cde e den eeseceecres 13,14

Muschany v. United States,

eS ee Be | per rer errr TTT ee 27

Prima Paint Corp. v. Flood & Conklin Mfg.,

i 8 Fe ee Be rr rrr errr & 20

Shearson/American Express, Inc. v. McMahon,

SEG Wiles Bae CAPT 64464 6 eee es qe eeccces 13,14

vi

Page

State ex rel. Allen v. Lutz,

145 N.E. 483 (Oh1O 1924) ...ccccccccccceee 22,23

24

United Paperworkers v. Misco,

BBS UE. 29 (LFET) cecccnccesesecesesesecs 19,27

United Steelworkers v. Enterprise Wheel

& Car Corp.,

eee. ems Se CESEO) ccccvccevecesceneseees 16,18

Wilko v. Swan,

WE Rests SAF CAGSS) cc cece cevcsccesssscenes 15

W.R. Grace & Co. v. Local 759,

461 U.S. 757 (1983) ...ceees SS 19,20

27

STATUTES AND REGULATIONS

Federal Arbitration Act, 9 U.S.C. §9...... E-1

Federal Arbitration Act, 9 U.S.C. §10..... E-2

Federal Arbitration Act, 9 U.S.C. §ll..... E-4

Pe Mean SEMA © Acncvceseceessesecesses ll

De Meek ose SOu OS! — Bevececvvecssesessecnes 12

Be Gaskin SOe Sel 7 Zecccccvecccvvesecsesecs 12

SO CuP.R. BS.9ST — Gavcecvescesvsesessvsces 12

40 C.F.R. Part 35, Subpart E, Section 5...12

Ohio Revised Code §6117.01...............- 22

OPINIONS BELOW

The opinion of the United States Court of

Appeals for the Sixth Circuit is reported at

860 F.2d 683 (6th Cir. 1988) and is reproduced

herein as Appendix A. The subsequent decision

ef the Sixth Circuit denying the petition for a

rehearing was entered on October 31, 1989 and

is reproduced herein as Appendix B.

JURISDICTION

The judgment of the United States Court

of Appeals for the Sixth Circuit was entered on

November 3, 1988. A petition for rehearing was

filed on December 1, 1988 and denied on October

31, 1989. This Court's jurisdiction is invoked

pursuant to 28 U.S.C. §1254(1).

STATUTES AND REGULATIONS

The following statutory and regulatory

o2—

provisions are set forth in Appendices E,F,G,H,

and I, respectively:

Federal Arbitration Act, 9 U.S.C. §§9,

10, 11

40 C.F.R. 35.917-1

40 C.F.R. 35.937-2, 35.937-3, 35.937-4

40 C.F.R. Part 35, Subpart E, Section 5

Ohio Revised Code §6117.01

BASIS OF FEDERAL JURISDICTION

The United States Court of Appeals for

the Sixth Circuit had jurisdiction over this

case by virtue of 28 U.S.C. §1291.

STATEMENT OF THE CASE

A. Course of proceedings and

disposition in court below.

On February 22, 1985, petitioner, the

Board of County Commissioners of Lawrence

County, Ohio ("the County") filed a complaint

in the Common Pleas Court of Lawrence County,

Ohio, alleging a violation of the Ohio

antitrust laws by L. Robert Kimball = and

Associates ("Kimball"). On March 5, 1987,

Kimball removed the case, on the basis of

-3-

diversity jurisdiction, to the United States

District Court for the Southern District of

Ohio, Western Division. Kimball filed a

counterclaim, demanding that the District Court

compel arbitration of Kimball's breach of

contract claims against the County. The

District Court, in an Opinion and Order of May

30, 1985, compelled the parties to arbitrate

the breach of contract claims. On March 20,

1986, an arbitration panel awarded $137,531.00,

over $130,009 of which was lost future profits,

to Kimball based on Kimball's’ breach of

contract claims against the County. The panel

did not set forth the basis of its award, nor

explain its decision in writing.

Thereafter, petitioner filed its Second

Amended Complaint and moved the District Court

to vacate the arbitration award on _ public

policy grounds. The District Court, in an

Opinion and Order of March 18, 1987 and a

Judgment Entry of June 9, 1987, vacated the

~4-

arbitration award’on the ground that the award

and the underlying contracts between Kimball

and the County violated the well-established

public policy of the State of Ohio against a

county entering into indefinite term contracts,

and also were invalid under certain federal

laws and regulations governing federally funded

projects. The Opinion and Order and the

Judgment Entry are reproduced herein as

Appendices C and D, respectively.

The Summary Judgment Order of March 18,

1987 was certified by the District Court on

June 9, 1987 pursuant to F.R.C.P. 54(b) as a

final judgment with no just reason for delay of

appeal. Kimball appealed, and the United

States Court of Appeals for the Sixth Circuit

reversed the judgment and remanded the case for

enforcement of the award on November 3, 1988.

(860 F. 2d 683). On December 1, 1988, the

County petitioned the Sixth Circuit for a

rehearing, which petition was denied on October

31, 1989.

—

-5-

B. Statement of Facts

Kimball is an engineering firm based in

Ebensburg, Pennsylvania, with a branch office

in Huntington, West Virginia, which is directly

across the Ohio River from Lawrence County,

Ohio. Kimball entered into two contracts with

the County in 1971, under which Kimball was to

perform certain engineering services for the

County, including preparation of two

preliminary engineering reports, additional

consulting work, and assistance to the County

in obtaining grants for a proposed county-wide

sewer system. A “life-of-the-project" clause

in both contracts provided that, while the

County was not obligated to pay for the

preliminary reports until funding for the

project was obtained, Kimball was guaranteed

all subsequent engineering services whenever

the County went forward with the sewer

project. /l/

/1/ Section I, B. 6 of each contract reads as

-Continued-

-6-

The 1971 contracts had no term

provisions, and bound the County and future

boards of Commissioners beyond the terms of

office of the Commissioners holding office in

1971. Kimball prepared one preliminary

engineering report in 1971 and a second one in

1972, but after 1973 there was no activity of

any kind on Kimball's part regarding these

reports or any sewer project, nor were the

reports ever the basis for any government

funding. 7

Kimball had no contact with the County

whatsoever withiregard to these contracts from

1973 until 1984, when Kimball learned that the

County was to receive federal funding for a

-~Continued-

follows: "In the event that any or all of the

recommended sewer district Projects proceed

beyond the Preliminary Engineering Report

Phase, the Owner agrees to engage the

Engineer to perform all other phases of the

work of each sewer district in accordance with

this Agreement.”

~

county-wide sewage system. Kimball then sent a

demand letter to the County, insisting that the

County award Kimball the engineering work for

the project pursuant to the 1971 contracts.

Between 1973 and 1984, changes in federal

laws and regulations rendered Kimball's

preliminary engineering reports inadequate as a

basis to obtain federal funding for any sewer

project. In 1972, the Federal Water Pollution

Control Act, 33 U.S.C. § 1251 et seg., was

amended, changing the funding requirements for

sewer projects. Under the new regulations that

became effective on February 11, 1974, the

County was required to produce a much more

comprehensive document, known as a facilities

plan, in order to obtain goverment funding. 40

C.F.R 35.917-1. In February 1976 the Army

Corps of Engineers volunteered to prepare such

a plan, which was later to become the basis for

a government grant for a sewerage project.

-§-

In 1978, in anticipation of imminent

federal funding, the County hired another

engineering firm, Burgess & Niple, Ltd., to do

the design work for the project. In fact,

before the project could be funded,’ the

facilities plan required several revisions,

which Burgess & Niple performed for the County

under a separate contract. In 1984, more than

10 years after Kimball's last work under its

1971 contracts, when the EPA finally declared

the sewer project proposed in the revised

facilities plan to be- fundable, Kimball

re-emerged and demanded that its 1971 contracts

be honored. -

In 1984, when the County refused to award

the engineering work to Kimball or to repudiate

the County's 1978 contract with Burgess & .

Niple, Kimball demanded arbitration of its

breach of contract claims against the County

before the American Arktitration Association, as

provided in the 1971 contracts. Kimball

imate ia iii.

-9-

asserted that the County had breached the 1971

contracts when it hired Burgess & Niple in

1978. The arbitration panel awarded over

$130,000 in lost future profits to Kimball on

March 20, 1986. The panel issued no written

decision to explain the basis of its award, or

to indicate in any way whether the panel even

considered the issue of the validity of the

contracts under state and federal law, or

whether the panel was mereiy interpreting the

contracts.

REASONS FOR GRANTING WRIT

he

A REVIEWING COURT SHOULD NOT DEFER

TO AN ARBITRATION AWARD WHERE (1)

THE UNDERLYING CONTRACT IS

CHALLENGED AS VIOLATING STATUTORY

LAW AND PUBLIC POLICY AND (2)

THE ARBITRATORS GIVE NO BASIS

FOR THE AWARD.

In spite of the County's challenges to

the validity of the Kimball contracts, the

Court of Appeals refused to make an independent

-10-

determination whether or not the Kimball

contracts violated federal law, even though the

arbitration panel made its award without any

explanation. Despite the absence of a written

opinion by the arbitrators, the Sixth Circuit

was willing to "assume" that the arbitrators

had actually considered and decided important-

issues of law:

Although they issued no- written

opinion, one must of necessity assume

that the arbitrators in order to rule

for Kimball, determined that the

contracts were valid, enforceable

contracts between the parties - that

they were neither ultra vires nor

inconsistent with federal statutes

and regulations - and that Lawrence

County had breached the contracts.

860 F.2d at 686. After making this assumption,

the Court was then somehow able to determine

which legal issues had been decided and which

had not:

The arbitrators did not decide

whether the contracts were against

public policy, but rather, inter-

preted and applied the contracts to

determine whether they were

consistent with federal law and

regulations.... Id. at 688.

ne |

-ll-

Finally, the Court deferred to the

"assumed" decision by the arbitrators on the

contracts' validity, concluding that there was

no “manifest disregard" of the law, since "the

contracts could be interpreted in a manner

consistent with federal statutes and

regulations...." Id. (Emphasis added.)

Without explaining this possible

interpretation, the Court of Appeals rejected

the District Court's detailed analysis which

pancintied that the contracts violated federal

law. The District Court, on pages 8 and 9 of

its Opinion and Order of March 18, 1987,

reviewed the changes in federal reguiations

under the 1972 amendments to_- the water

Pollution Control Act, 33 U.S.C. §1251 et seq.

As the District Court pointed out, under these

regulations, a preliminary engineering report

such as the one done by Kimball was no longer

adequate to secure a government grant (40

C.F.R. §§35.917 et seq.). New hiring

-12-

regulations effective in 1976 (40 C.F.R. Part

35 Subpart E) required that certain terms be

included in the contract with the engineers,

including the right of the owner to terminate

for its convenience and the prohibition of any

recovery of lost anticipated profits by the

terminated engineer for work not performed;

these terms were not included in Kimball's

contract, but were included in Burgess &

Niple's contract in 1978.

The District Court also noted the

requirements of competitive negotiation,

evaluation of competing firms, and evaluation

of proposals, under 40 C.F.R. §35.937-2,-3, and

-4, which would have made the Kimball contracts

invalid, since they were not competitively

negotiated. Based upon its recognition of

these changes in federal law, the District

Court concluded that Kimball's contracts were

invalid under applicable federal law _ and

regulations, and that the County would in any

ail

-13-

event have been free to terminate Kimball for

its convenience, with no claim for lost

profits.

The District Court's independent analysis

of these statutory duties is necessitated by

the Supreme Court's recent expansion of the

scope of arbitrable matters. See, Shearson/

American Express, Inc. v. McMahon, 482 U.S. 220

(1987) (claims under RICO and the Securities

Exchange Act); Mitsubishi Motors Corp. vv.

Soler-Chrysler Plymouth, Inc., 473 U.S. 614

(1985) (antitrust claims). Aithough’ the

Supreme Court has not specifically decided what

procedural safeguards will be necessary before

a court will defer to an arbitration award that

touches upon such issues, the Court has

indicated that with this expansion of the

arbitral authority, the courts will have a

corresponding duty to scrutinize arbitration

awards “to ensure that arbitrators comply with

the requirements of the statute" applicable to

-14-

the claim. Shearson/American Express, supra,

482 U.S. at 232.

Where arbitration awards involve issues

of statutory law (in contrast to issues of pure

contract interpretation), the Court has at

least indicated that a written explanation by

the arbitrator will be required. For example,

in Mitsubishi Motors, supra, the Court

emphasized that a reviewing court must be able

to determine, at a minimum, that the statutory

claims were "actually decided" by the

arbitrator. 473 U.S. at 638. The Court further

emphasized that, in the case before it, which

involved antitrust claims and an arbitration

conducted pursuant to the Rules of the Japan

Commercial Arbitration Association, a reviewing

Court would be able to scrutinize a written

decision of the arbitrators, since the

applicable arbitration rules required "a

statement of reasons for the award...." 473

U.S. at 638 n.20.

-15-

Similarly, in Shearson/American Express,

the Court noted that one of the prior

objections to arbitrating matters of statutory

lew had been that "an arbitration award may be

made without explanation of [the arbitrator's]

reasons...", 482 U.S. 220 at 231, [citing Wilko

v. Swan, 346 U.S. 427 at 436 (1953)]. The Court

in Shearson concluded, regarding the

arbitration of claims under the securities

laws, that such objections "do not hold true

today for arbitration procedures subject to the

SEC's oversight authority." 482 U.S. at 232.

Indeed, the code of arbitration developed by

the SEC requires a statement by the arbitrators

of the issues they have resolved. NASD Code of

Arbitration Procedure, §4l(e).

Although courts have certainly been

willing to defer to arbitration awards that

merely interpreted contracts, without requiring

the arbitrators to state the grounds for their

opinions, petitioner can find no reported cases

-16-

where a court deferred to an_ unexplained

arbitration award on questions of external law

that challenged the validity of the underlying

contract. In United Steelworkers v. Enterprise

Wheel & Car Corp., 363 U.S. 593, 599 (1960) the

Court indicated that an arbitrator has no

obligation to give his reasons for an award and

the award was not subject to court review where

"the arbitrator's decision concerns construc-

tion of the contract...." (Emphasis added.)

No such deference has been_- shown,

however, where an arbitrator disposes of

statutory claims. In the context of claims

under Title VII of the Civil Rights Act of

1964, 42 U.S.C §1983, and under the Fair Labor

Standards Act, this Court has not only refused

to allow such claims to be disposed of by

arbitration, but has refused to give any weight

to the arbitration award unless it "gives full

consideration" to and actually "“decide[s]" the

statutory claim. Alexander v. Gardner-Denver

a) F-

Co., 415 U.S. 36, 60 n. 21 (1974); McDonald v.

City of West Branch, 466 U.S. 284, 292 n. 13

(1984); Barrentine v. Arkansas-Best Freight

System, Inc., 450 U.S. 728, 743 n. 22 (1981).

In the absence of a written opinion by

the arbitrators, a court cannot assume that the

arbitrators decided or even considered legal

issues relating to the validity of the

contracts. In fact, an arbitrator may assume

that he lacks jurisdiction to invalidate the

underlying contract based upon external law.

This assumption would reflect the well-

established principle that "[t]he arbitrator...

has no general authority to invoke public laws

that conflict with the bargain between the

parties.... If an arbitral decision is based

‘solely upon the arbitrator's view of the

requirement of enacted legistation', rather

than on an interpretation of the collective-

bargaining agreement, the arbitrator has

‘exceeded the scope of the submission', and

-18-

and the award will not be enforced." McDonald,

supra, 466 U.S. at 290- 291, quoting

Gardner-Denver Co., supra, 415 U.S. at 53,

quoting Enterprise Wheel & Car Corp., supra,

363 U.S. at 597.

In the present case, there is no way to

know whether the arbitrators considered or

decided the issue of whether the contracts

violated federal law. The arbitrators could

have been guided by the _ long-established

principle that they have “no general authority

to invoke public laws that conflict” with the

contract. In the absence of a written opinion,

a reviewing court must independently consider

and decide these issues.

Il.

THE ARBITRATION AWARD IS NOT

ENTITLED TO ANY DEFERENCE WHERE

THE UNDERLYING CONTRACTS VIOLATE

LAW AND PUBLIC POLICY

The Court has repeatedly declared that an

arbitration award may be vacated on public

-19-

policy grounds, relying upon the common law

doctrine "that a court may refuse to enforce

contracts that violate law or public policy.”

United Paperworkers v. Misco, 484 U.S. 29, 42

(1987); W.R. Grace & Co. v. Local 759, 461 U.S.

757, 766 (1983). Although the Court in Misco

did not “sanction a broad judicial power to set

aside arbitration awards as against public

policy,” 484 U.S. at 43, the Court also did not

determine, as Justice Blackmun pointed out in

his concurring opinion, “in what way, if any, a

court's authority to set aside an arbitration

award on public policy grounds differs from its

authority, outside the collective - bargaining

context, to refuse to enforce a contract on

public policy grounds. Those issues are left

for another day.” 484 U.S. at 46 (J. Blackmun,

concurring opinicn.)

The present case involves exactly those

issues. The County challenged both the

contracts and the arbitration award as

-20-

violating both statutory law and public policy.

In such @ case, a court must thoroughly

consider such issues, without deferring to the

arbitration award, particularly an award that

included no explanation of the decison. See

W.R. Grace, supra, 461 U.S. at 766; Hurd v.

Hodge, 334 U.S. 24, 34-35 (1948). /2/ Anything

less would represent a wholesale delegation of

judicial authority to arbitrators, empowering

them to decide important issues of law and

public policy, with no- responsibility to

explain the basis of their decision.

Iil.

THE COURT OF APPEALS REFUSED

TO RECOGNIZE A WELL-ESTABLISHED

PUBLIC POLICY OF THE STATE OF OHIO

/2/ The issue of the illegality of a contract's

terms should be contrasted with a common legal

defense to a contract's enforcement, such as

fraud in the inducement, which can be decided

by an arbitrator. See Prima Paint Corp. v.

Flood & Conklin Mfg., 388 U.S. 395 (1967).

-2l1-

The Court of Appeals ultimately concluded

that the State of Ohio lacked "any clear legal

precedent which establishes a well-defined and

dominant public policy” against indefinite term

contracts signed by a board of county com-

missioners. 860 F.2d at 688. This conclusion

flies in the face of an Ohio Supreme Court

decision, a state court of appeals decision and

a statute, all of which hold or have been

interpreted to hold that indefinite term

contracts, which extend beyond the term of a

board of county commissioners, violate public

policy unless the public good requires such

contracts to be made. The conclusion of the

Court of Appeals also placed an unreasonable

burden on the County to demonstrate the

existence of a public policy to a degree of

absolute clarity and precision never suggested

Or required by any prior decision of the United

States Supreme Court.

-22-

The Supreme Court of Ohio, in State ex

rel. Allen v. Lutz, 145 N.E. 483 (Ohio 1924),

interpreted the predecessor version of Section

6117.01 of the Ohio Revised Code to require

that a county's contract with an engineer have

a specific term. /3/

While the statute, Section 6602-1,

General Code, under which this

employment was made, authorized the

county commissioners to employ a

Sanitary engineer "for such time or

times and on such terms as they

deem best," yet the contract of

employment is silent as to any

fixed time... Not only must the

contract be upon “such terms” as

the commissioners deem best, but it

is equally mandatory as to_ such

"time or times" as they deem best.

In order to bind a subsequent board

of county commissioners and future

Legislatures, the right and power

to do so must clearly appear, and

not be left to inference alone from

the nature of the contract and the

kind of work affected thereby.

x kk

/3/ The operative language of the former

statute that the Court in Lutz focused on is

virtually identical to that of the present

statute, O.R.C. § 6117.01, which requires that

such contracts may be for "such time and on

such terms as it [the board] deems best.”

-23-

(T]his contract ignored the

statutory requirement as to “time

or times," and was so indefinite in

that regard that it transcended the

spirit as well as the letter of the

statute.... Terms of contract

should not be left to inference

when one is contracting with a

public board whose powers” are

prescribed by statute. 145 N.E. at

484-485. (Emphasis added.)

Since the contract in Lutz lacked a

specific term, in violation of the statute, the

Ohio Supreme Court concluded that the contract

was not protected by the state's constitutional

guarantee against impairment of contract

obligations. Ohio Constitution, Art. II, §28.

The Court further determined that such

indefinite term contracts are generally

invalid.

[T]he general rule is that such

contracts, extending beyond the term

of the existing board,... thus tying

the hands of a succeeding board, are

not looked upon with favor unless

the necessity or some special cir-

cumstances show that the public good

requires such contracts to be made.

Id. /4/

/4/ The public policy against long-term contracts

-Continued-

-%4x

Implicitly finding that the engineering

contract was not required for the public good,

the Court held that the contract was

retroactively modified by a later statute that

limited the compensation payable by a county to

an engineer.

Despite the clear reasoning of Lutz that

the engineering contract was void ab initio

and therefore not subject to constitutional

protection, the Sixth Circuit somehow

interpreted Lutz as holding that there was

some validity to the engineering contract,

",.. since [the Ohio Supreme Court] allowed

the [contract] before it to stand, to the

-Continued-

was well established in Ohio prior to Lutz. In

a case involving a one-year contract with a

janitor that would bind a succeeding board, the

Franklin County Circuit Court, in Board of

Commissioners v. Ranck, 9 Ohio C.C. 301, 308

(1895) held that the contract was “against

public policy, and void... in the absence of

some necessity or special circumstances showing

that the public good required it...."

~ 25.

extent that compensation was limited by

statute”. 860 F. 2d at 687. This inter-

pretation not only ignores the Supreme

Court's reasoning that the contract was

invalid ab initio, but also ignores the fact

the County in Lutz was not seeking recovery of

the payments made to the engineer which were

below the amount of the statutory limitation.

It is therefore not suprising that the Ohio

Supreme Court did not suggest that the

engineer return the prior payments, which did

not exceed the statutory limitation.

In contrast to the District Court which

could “surmise no reason why the public good

requires indefinite contracts such as the one

at issue here" (Opinion and Order of March 19,

1987, at p. 8), the Court of Appeals used its

misreading of Lutz to avoid analyzing whether

any public good required the Kimball

contracts. The Court of Appeals concluded

that "“[b]ecause we are unable to discern any

~3E-

telling differences . . . between the contract

for engineering services in Lutz, and the one

entered into by Lawrence County's Board of

Commissioners, we may confidently conclude that

Ohio courts would deem the latter to involve

“necessity or some special circumstances.'"

860 F.2d at 687. The Circuit Court's inability

"to discern any telling differences" in the

several contracts is remarkable since’ the

engineer in Lutz actually performed the work

for which he sought and was denied

compensation, in contrast to Kimball's demand

for lost future profits for work never

performed.

The Court of Appeals then proceeded to

distinguish a state appellate court decision,

Hubbard v. Hiltz, 31 Ohio Law Abs. 538 (Allen

Cty. 1940), on the ground that the language of

Hiltz that indefinite term contracts are

invalid as a matter of law was dicta and was

inconsistent with the Sixth Circuit's analysis

a2%e

of Lutz. The requirement that a statement of

law be a holding and not dicta for a public

policy to exist has never been suggested by

the Supreme Court. The Sixth Circuit's view

that Hiltz is inconsistent with Lutz is based

on the Circuit Court's own erroneous

interpretation of Lutz.

The Court of Appeals' ultimate

conclusion that Ohio lacks a well-defined and

dominant public policy ignores the

overwhelming authority in Ohio demonstrating

such a public policy, as shown in its statutes

and in the pronouncements of its highest

courts. The Court of Appeals failed to follow

the principle articulated in Misco and W. R.

Grace, supra, that the public policy is "to be

ascertained ‘by reference to the laws and

legal precedents and not. from general

considerations of supposed public interests.'"

484 U.S. at 43, 461 U.S. at 766. In

Muschany v. United States, 324 U.S. 49 (1945),

-28-

upon which Misco and W.R. Grace relied, the

Supreme Court only required that there be

"definite indications in the law of the

sovereignty" or a "plain indication" of the

public policy. Id. at 66.

In summary, the Circuit Court refused to

make an analysis of whether Kimball had proven

an exception to the general rule that such

indefinite term contracts are invalid. There

was no evidence, as found by the District

Court, that any public good required Lawrence

County to enter into a contract that forever

bound the County to award the engineering

contract to Kimball if the County ever went

forward with a sewer project. Neither Kimball

nor any one else has suggested a reason why the

public good would require such an onerous and

oppressive contract, one that would deprive

subsequent boards of any discretion to select

an engineer for a multimillion dollar sewer

project. The fact that Ohio law requires a

~29-

court to consider whether there is a public

necessity which would justify an exception te

the public policy prohibiting indefinite term

contracts does not render this public policy

less well-defined. In this case, the District

Court, unlike the Court of Appeals, made a

thorough anaiysis of the contracts and properly

concluded that they were not required for the

public good.

CONCLUSION

For the reasons stated herein, a Writ of

Certiorari should issue to the Court of Appeals

for the Sixth Circuit to review its judgment

herein.

Respectfully submitted,

ROBERT J. HOLLINGSWORTH*

TERRELL B. SNYDER

KATHARINE C. SAUNDERS

CORS & BASSETT

1700 Carew Tower

Cincinnati, Ohio 45202

(513) 381-0312

*Counsel of Record

IN THE

SUPREME COURT OF THE UNITED STATES

€ OCTOBER TERM 1989

BOARD OF COUNTY COMMISSIONERS

OF LAWRENCE COUNTY, OHIO

Petitioner

V «

IL. ROBERT KIMBALL & ASSOCIATES

Respondent

APPENDIX TO PETITION FOR A WRIT OF

CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SIXTH

CIRCUIT

Robert J. Hollingsworth”

Terrell B. Snyder

Katharine C. Saunders

oe : Cors & Bassett

1700 Carew Tower

Cincinnati, Ohio 45202

(513) 381-0312

*Counsel of Record

-Al-

No. 87-3635

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BOARD OF COUNTY

COMMISSIONERS OF

LAWRENCE COUNTY, OHIO,

: ON APPEAL from

Plaintiff-Appellee, : the United States

: District Court

V. : for the Southern

: District of Ohio.

L. ROBERT KIMBALL

AND ASSOCIATES,

Defendant-Appellant.

Decided and Filed November 3, 1988

Before: WELLFORD and NORRIS, Circuit

Judges; and COOK District Judge.*

*The Honorable Julian A. Cook, Jr.,

Judge, United States District Court for the

Eastern District of Michigan, Sitting by

designation.

-A2-

ALAN E. NORRIS, Circuit Judge. L. Robert

Kimball and Associates ("Kimball") appeals the

district court's having granted summary

judgment to the Board of County Commissioners

of Lawrence County, Ohio. The court reasoned

that contracts relied upon by Kimball in its

claim against the county are unenforceable as a

matter of public policy.

-A3-

During 1971, Kimball, an engineering

firm, entered into two contracts with Lawrence

County to provide it with preliminary

engineering services for a proposed county-wide

sewage treatment system and for improvements to

an existing treatment plant. These preliminary

services included Kimball's acting as the

county's representative in the development

phases of the project and producing a

preliminary engineering report to be used in

obtaining government’ funding. Under’ the

contracts, if the project proceeded beyond the

preliminary stage, the county was to compensate

Kimball for the preliminary services and to

hire the company to perform the subsequent

engineering work. The contracts also provided

for arbitration "of all questions in dispute

under this Agreement. . . in accordance with

the rules of the American Arbitration

Association."

|

-A4-

From 1971 until 1973, Kimball acted as

the county's representative in dealing with

health and water authorities and pollution

control agencies, and prepared preliminary q

reports on the proposed system and = on

improvements to the existing system. According

to Kimball, the firm became less involved in

the project in 1973 due to the increasing

involvement of the Army Corps of Engineers, and

the passage of amendments to the Federal Water

Pollution Control Act. After 1973, and until

1984, there was no contact between the county

and Kimball on the projects. However, during

this period there were changes in federal laws

concerning funding and plan requirements; the

Corps of Engineers researched and completed a

facilities plan which was accepted by the

county; and in 1978, the county hired another q

engineering firm to do the engineering work as

contemplated by the Corps plan. The plan was

revised several times, both by the Corps and

=

the new engineering’ firm. It received

tentative approval by the Environmental

Protection Agency in early February 1984.

In April 1984, when Kimball learned that

the sewage project was being funded and was

going forward with new project engineers, it

demanded compensation for the work it completed

in 1971 and 1972, and insisted that it be

retained to perform final design work. When

the county refused, Kimbali demanded

arbitration. Although an arbitration hearing

was scheduled, the county filed a complaint in

the state court of common pleas, asserting a

state law claim for damages and seeking an

injunction against the arbitration proceedings.

On Kimball's motion, the state court

proceedings were removed to district court,

where Kimball filed a counterclaim requesting

a stay of the proceedings pending arbitration

under the provisions of the United States

Arbitration Act.

-A6-

In May 1985, the district court issued

an order granting Kimball's motion for a

preliminary injunction and requiring the county

to arbitrate. Basing its decision on Prima

Paint Corp. v. Flood & Conklin Mfg. Co., 388

U.S. 395 (1967), the district court concluded

that the county's claim that the contracts were

ultra vires because they were for an indefinite

term was a legal defense to the enforceability

of the contract which properly should be

referred to arbitration.

The claims were arbitrated before a

three-member panel appointed under the rules of

the American Arbitration Association, and the

panel entered an award for Kimball.

The county then sought to vacate the

arbitration award, and moved for summary

judgment. Kimball counterclaimed seeking

confirmation of the award, and also moved for

summary judgment. The district court granted

the county's motion for summary judgment and

-A7-

vacated the arbitration award, saying it had

reevaluated its previous order to arbitrate and

concluded that, under AT&T Technologies, Inc. v

Communications Workers, 475 U.S. 643 (1986), it

had the power to determine that the contract

dispute was not subject to arbitration. The

court then addressed the merits of the parties'

claims and declared the contracts invalid as a

matter of public policy, since they contained

no definite term and could extend beyond the

"life" of the board of county commissioners

which agreed to the contract. The court also

concluded that the contracts were contrary to

public policy because they conflicted with

federal law enacted after the contracts were

entered into. The court did not address the

county's state law claims. Its order was

certified pursuant to Fed. R. Civ. P. 54(b),

and this appeal followed.

We conclude that the district court's

initial decision, that the contract dispute and

-A8-

the county's defense that the contract was

ultra vires should be arbitrated, was correct,

and that public policy does not require that

the arbitration award be overturned.

In Prima Paint, the plaintiff's claim

that the contract, which contained an agreement

to arbitrate, was fraudulently induced was held

to have been properly referred to arbitration

for resolution. The Supreme Court determined

that, under the provisions of the United States

Arbitration Act, a federal court is to order

arbitration if the making and performance of

the agreement to arbitrate itself is not in

dispute. 388 U.S. at 403-04. The plaintiff in

Prima Paint did not claim that the agreement to

arbitrate was fraudulently induced, and there

was no indication that the broad language of

the arbitration agreement was not intended to

cover legal issues such as fraudulent

inducement of a contract.

-A9-

Similarly, the question before’ the

district court was not whether the dispute was

subject to arbitration. Instead, the question

involved the validity of contracts which

happened to include provisions for arbitration.

Under Prima Paint, resolution of that question

was for the arbitrators. The county's claim

that the contracts were ultra vires is a legal

defense to the enforceability of the contracts.

Rather than contending that it had not agreed

to the broad arbitration clause in the

contracts, the county instead questioned the

enforceability of the entire contract. Had it

contended that its dispute with Kimball over

reimbursement and hiring was not subject to

arbitration, we would be faced with a different

question, since "[iJt [is] for the court, not

the arbitrator, to decide in the first instance

whether the dispute [is] to be resolved through

arbitration." AT&T Technolségies, Inc., 475 U.S.

at 651.

-A10-

Once it is determined that a dispute

should be referred to arbitration, questions of

contract interpretation are within the province

of the arbitrator. Courts play_only a limited

role in reviewing an arbitration decision.

"The courts are not authorized to reconsider

the merits of an award even though the parties

may allege that the award rests on errors of

fact or on miSinterpretation of the contract."

United Paperworkers Int'l Union v. Misco, 108

S.Ct. 364, 370 (1987).

The county's claims that the contracts

were ultra vires and were inconsistent with

- federal statutes and regulations were presented

and argued to the arbitrators. Aithough they

issued no written opinion, one must of

necessity assume that the arbitrators, in order

to rule for Kimball, determined that’ the

contracts were valid, enforceable contracts

between the parties -- that they were neither

ultra vires nor inconsistent with federal

“Ai i~

statutes and regulations -- and that Lawrence

County had breached the contracts.

The district court also held that,

because the contracts were for an indefinite

term, they violated Ohio's public’ policy

against such contracts, and that the contracts

also violated public policy because they were

inconsistent with subsequently enacted federal

law and regulations.

Whether an arbitration award violates

public policy is a question for the court. W.R.

Grace & Co. v. Local Union 759, Int'l Union of

Rubber Workers, 461 U.S. 757, 766 (1983).

However, a court's refusal to enforce "an

arbitrator's interpretation of such contracts

is limited to situations where the contract as

interpreted would violate 'some explicit public

policy' that is eet defined and dominant, and

is to be ascertained "by reference to the laws

and legal precedents and not from general con-

Siderations of supposed public interests."'"

-Al2-

Misco, 108 S.Ct. at 373 (quoting W.R. Grace,

461 U.S. at 766). A court may refuse to

enforce an award when specific terms in the

contract would violate public policy, but there 4

is no broad power to set aside an arbitration

award against public policy. Id.

The county argues that a different

standard of review applies to a court's review

of an arbitration award challenged on public

policy grounds, than to the court's review of

an arbitration award under the Arbitration Act.

It cites Iowa Elec. Light & Power Co. v. Local

Union 204 of the Int'l Bhd. of Elec. Workers,

834 F.2d 1424 (8th Cir. 1987), for the

proposition that the court should engage in a

de novo review of an arbitration award whenever

@ question of public policy is raised.

Iowa Electric dealt with the question

of whether an arbitration award, which

reinstated an employee who had violated nuclear

safety regulations and whose actions could have

-Al3-

jeopardized the public health and safety, was

against national public policy concerning

strict compliance with safety regulations at

% nuclear facilities. Id., 834 F.2d at 1426.

Here, the contract itself is asserted to be

against public policy, and the arbitration

award is challenged because it is said that it

would enforce an ultra vires contract.

Moreover, properly speaking, the review

given an arbitration award when it is

challenged on public policy grounds is not de

novo. When a court reviews an issue under a de

novo standard of review, the court is

determining questions of fact and law as though

the reviewing court was the original trial

court (or the arbitration panel). An

arbitration award is not to be based on public

% policy considerations, since public. policy

questions are for the court, not the

arbitrator. An arbitrator who bases an award

on sublic licy considerations exceeds his

Pp Y

-Al4-

powers. Accordingly, when an arbitration award

is challenged on public policy grounds, the

court must determine whether the arbitrator's

interpretation of the contract jeopardizes a

well-defined and dominant public policy, taking

the facts as found by the arbitrator.

In addressing the question of whether

the contracts as interpreted by the arbitrators

were contrary to public policy because they

were for an indefinite term, the district court

correctly looked to Ohio law to determine

whether there was a well-defined and dominant

public policy against such contracts. In

concluding that Ohio has such a policy, the

district court relied upon State ex rel. Allen

v. Lutz, 111 Ohio St. 333, 145 N.E. 483 (1924),

and State ex rel. Hubbard v. Hilty, 31 Ohio Law

Abs. 538 (Ct. App. 1940). We are unable to

agree with the district court’s reading of

these cases.

The Ohio Supreme Court's opinion in Lutz

“AiS-

includes this language:

In order to bind a subsequent board of

county commissioners. . . , the right

and power to do so must clearly appear,

and not be left to inference alone from

the nature of the contract and the kind

of work affected thereby.

The policy of the law is rather

against the power of one board of

county commissioners to make contracts

so indefinite in time that the same may

extend beyond the life of the board,

and thus bind another or future board,

although in some cases such a contract

may be valid and binding even though

the performance of some part may be

impossible until after the expiration

of the term of the majority of the

board as it existed when the contract

was made. Yet the general rule is that

such contracts, extending beyond the

term of the existing board, and

employment of agents or servants of the

county for such period, thus tying the

hands of a succeeding board, are not

looked upon with favor unless’ the

necessity or some special circumstances

show that the public good requires such

contracts to be made.

145 N.E. at 484-85, 111 Ohio St. at 338-39.

In Lutz, a sanitary engineer contracted

with the county to provide planning’ and

supervisory services in exchange for

compensation to be based upon a percentage of

-Al6-

the cost of the public works with which he was

involved. After the contract was entered into,

the state legislature enacted a statute which

limited the compensation paid to a sanitary

engineer to no more than that received by the

county auditor. The engineer filed a mandamus

action to require the county to pay

compensation he had earned under the contract

in excess of the county auditor's salary. The

Ohio Supreme Court, after noting that a statute

specifically authorized county commissioners to

contract with a sanitary engineer "for such

time . . . as they deem best,” so long as the

length of the term was specified, held that,

Since the contract before it was for an

indefinite term, it did not come within the

protection of the state's constitutional

guarantee against impairment of contract, and

its compensation provision would not _ be

enforceable beyond the statutory limitation.

Id. at 483, 111 Ohio St. at 338-39.

-Al7-

Because the rule of law the district

court drew from the opinion's quoted language

does not appear in the Ohio Supreme Court's

official syllabus to its opinion, under the

unique Ohio rule, the quoted language does not

state the point of law decided in that case.

Ohio Supreme Court Rules for the Reporting of

Opinions, Rule 1(B) (eff. Mar. 1, 1983). But,

even putting the syllabus rule aside, the Ohio

Supreme Court’ did not say that county

commissioners are without the power to enter

into any contracts extending beyond the current

terms of incumbent commissioners, not did it

say that all such contracts are contrary to

public policy. What the court pointed out in

the quoted language was that some contracts of

this nature may be ultra vires, and that, as a

matter of public policy, they are not looked

upon with favor in the absence of "necessity or

some special circumstances.”

-A18-

The Ohio Supreme Court did not leave us

with any specific guidance as to what Ohio

courts should view as "necessity or some

special circumstances.” However, we may at

least be certain that the Ohio Supreme Court

viewed some contracts for engineering services

which extend beyond the elected terms of county

commissioners as involving “necessity or some

special circumstances," since it allowed the

one before it to stand, to the extent that

compensation was limited by statute. Because

we are unable to discern any telling

differences in that regard between the contract

for engineering services in Lutz, and the one

entered into by Lawrence County's Board of

Commissioners, we may confidently conclude that

Ohio courts would deem the latter to involve

"necessity or some special circumstances.”

Nor do we think the opinion of the Ohio

Court of Appeals in Hubbard Vv. Hilty

establishes a well-defined and dominant public

-A19-

policy. In that case, pursuant to an informal

arrangement with a local women's club, county

commissioners had employed a female attendant

for a courthouse ladiés' restroom, after the

club had provided furnishings for the room.

Some years later, citing economic reasons, the

commissioners abolished the position. In an

opinion holding that the attendant's civil

service status was no protection where a

position was abolished, the court of appeals

included this dicta about the arrangement:

[I]f it reached the dignity of an

agreement, [it] had no binding force in

law, as a Board of County Commissioners

is inhibited by law from making any

agreement which has the effect of

restraining it or its successors in

office from exercising any of the

discretionary powers vested in it, or

performing any of the duties imposed

upon it by law.

Hilty, 31 Ohio Law Abs. at 540. We are in no

position to say that the court's gratuitous use

of this broad language, without reconciling it

with the Ohio Supreme Court's opinion in Lutz,

~A20-

can serve as the basis for concluding that Ohio

has a well-defined and dominant public policy

against contracts for an indefinite term.

In the absence of any statute

prohibiting county commissioners from entering

into contracts which may extend beyond the term

of the contracting board, and in the absence of

any clear legal precedent which establishes a

well-defined and dominant public policy, we

conclude that the arbitration award is not

against public policy and must be enforced.

The district court also held that the

contracts violated public policy because they

were inconsistent with the federal law and

regulations. As we pointed out earlier, the

question of inconsistency was presented to and

decided by the arbitrators. The arbitrators

did not decide whether the contracts were

against public policy, but rather, interpreted

and applied the contracts to determine whether

they were consistent with federal law and

-Azli-

regulations, which was an integral part of

resolving the dispute between the parties.

Courts normally must enforce an arbitrator's

resolution of these issues even if there is an

erroneous finding of fact or misinterpretation

of law, and an arbitrator's conclusions on

legal issues are entitled to deference.

Northrop Corp. v. Triad Int'l Mktg. S.A., 81l

F.2d 1265, 1269 (9th Cir.), cert. denied, 108

S.Ct. Be. Ca9er) Deference is not due to the

arbitrator's award if there is a “manifest

disregard" of the law, see, e.g., Wilko v.

Swan, 346 U.S. 427, 436-37 (1953), but that

does not appear to be the case here. Because

we conclude that the contracts could. be

interpreted in a manner consistent with federal

statutes and regulations, the district court

erred in holding that the arbitration award

should be vacated as being contract to public

policy.

-AZ2~

Accordingly, the judgment appealed from

is reversed and this cause is remanded to the

district court for enforcement of the arbitra-

tion award, and for other proceedings consis-

tent with this opinion and according to law.

APPENDIX B

Decision of the United States

Court of Appeals for the

Sixth Circuit

-Bl-

No. 87-3635

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

ORDER

BOARD OF COUNTY COMMISSIONERS OF

LAWRENCE COUNTY, OHIO,

Plaintiff - Appellee,

Vv.

L. ROBERT KIMBALL and ASSOCIATES,

Defendant - Appellant

BEFORE: WELLFORD and NORRIS, Circuit Judges;

and COOK, District Judge.*

Upon consideration of the petition for

rehearing filed by the appellee, the court

concludes that the issues’ raised therein

were fully considered upon the original oral

argument decision of this case.

-B2-

[t is therefore ORDERED that the

petition for rehearing be and it hereby is

DENIED.

ENTERED BY ORDER OF THE COURT

Leonard Green, Clerk

*The Honorable Julian A. Cook, | oe

Judge, United States District Court for the

Fastern District of Michigan, sitting by

designation.

-Cl-

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

BOARD OF COUNTY

COMMISSIONERS OF No: C-1-85-0667

LAWRENCE COUNTY, OHIO,

Plaintiff, OPINION AND ORDER

GRANTING SUMMARY

vs. JUDGMENT TO PLAINTIFF

ON COUNT III AND

L. ROBERT KIMBALL DENYING CROSS-MOTION

AND ASSOCIATES, FOR SUMMARY JUDGMENT

ON COUNT III AND THE

Defendant. COUNTERCLAIM TO COUNT

III BY DEFENDANT

This matter is before the Court on

plaintiff's motion for summary judgment of

Count III of the second amended complaint (doc.

32), defendant's c¢ross-motion for summary

judgment on Count III and the counterclaim to

Count III (doc. 36) and plaintiff's reply in

Support of its motion for summary judgment on

Count III (doc. 38).

Defendant characterizes this as_ an

action based upon the efforts of defendant to

-C2-

enforce its rights under certain agreements

between it and the Board of County

Commissioners of Lawrence County, Ohio, which

were executed on June 19 and June 25, 1971.

Under the agreements, L. Robert Kimball and

Associates (hereinafter "Kimball") saves to

provide certain preliminary engineering services

tc Lawrence County in connection with the

preliminary studies of a proposed county-wide

sewage treatment system. Lawrence County

agreed to compensate Kimball for these

preliminary services if the sewage project

proceeded beyond the preliminary engineering

report phase, and also agreed to hire Kimball

to perform engineering work for subsequent

stages of the project.

Defendant points out that during 1984 it

became aware that funding for the county-wide

sewage project of Lawrence County had been

received, that the project was to proceed, and

that the county had hired another engineering

-C3-

firm to perform engineering services for the

project. Kimball made a demand for arbitration

under the American Arbitration Association

Construction Industry Arbitration Rules in

accordance with the arbitration clause

contained in the 1971 agreements providing for

binding arbitration of all questions in

dispute.

Previously, this Court issued an Opinion

and Order requiring plaintiff to arbitrate the

contractual issues (see doc. 15)? We entered

our Order in spite of our misgivings that the

1971 agreements may be ultra vires and against

public policy because there were no _ term

provisions in the agreements. Obviously, such

agreements extended beyond the terms of office

of the County Commissioners holding office in

1971.7

This Court concluded that we were

obligated to order arbitration under’ the

authority of Prima Paint Corp. v. Flood &

Conklin Manufacturing Co., 388 U.S. 395 (1967).

-C4 -

We now reconsider our decision in light of AT&T

Technologies, Inc. v. Communication Workers of

America, Inc., 54 U.S.L.W. 4339 (April 7,

1986), in which the Court held that it is for

the Court, in the first instance, to determine

whether a dispute is subject to arbitration.

Admittedly, AT&T Technologies, Inc., is

a labor case, but the reasoning is equally

appropriate in the commercial context. In the

instant case, and in AT&T Technologies, Inc.,

the district court referred to the arbitrator

the issue of whether the dispute was arbitrable

because one of the party's interpretation of

the agreement was at least arguable. The

Supreme Court has now held that even in such

Situation, the issue of whether a dispute is

subject to arbitration is for the Court to

decide in the first instance. Indeed, in

deciding whether the parties have agreed to

submit a particular grievance, or in this case,

a particular agreement to arbitration, a court

-C5-

is not to rule on the potential merits of the

underlying claim. Id. The sole issue resolved

in our previous ruling was that of

arbitrability. We now endeavor to address the

merits of the parties' claims and the issue of

public policy, in light of the arbitrator's

decision, holding that the contracts’ in

question are enforceable.

We recognize the narrow scope of review

that this Court has in limited instances in

which it may vacate an arbitration award under

9 U.S.C. §9. The statute provides in pertinent

part that an award may be vacated only "[w]here

the arbitrators were guilty of misconduct.

in refusing to hear evidence pertinent and

material to the controversy; or of any other

misbehavior by which the rights of any party

have been prejudiced"; or [w] here the

arbitrators exceeded their powers, or_ so

imperfectly executed them that a material,

final, and definite award upon the subject

-C6-

matter was not made: 9 U.S.C. §10(c), (d).

Generally, an arbitrator's decision is entitled

to great deference and should be upheld absent

irrationality oor | disregard of plain-= and

unambiguous language in the agreement. See

National Post Office v. U.S. Postal Service,

751 F.2d 834 (6th Cir. 1985). However, a court

may not enforce a contract that is contrary to

public policy. See Hurd v. Hodge, 334 U.S. 24,

34-35 (1948). Moreover, a claim arising out of

an illegal contract is not a legitimate subject

of arbitration, and an award based thereon is

void and unenforceable. See 5 Am. Jur. 2d 560,

Arbitration and Award. The question of public

policy is ultimately one for resolution by the

courts. W.R. Grace & Co. v. Local Union 759,

461 U.S. 757, 766 (1982). When public policy

is asserted as the basis for vacating an

arbitration award, the court is required to

make its own, independent evaluation.

Transmarine Corporation v. Marc Rich & Co., 480

wf'F x

F.Supp. 352, 358 (S.D. N.Y. 1979). If the

contract violates some explicit public policy,

the Court is obliged to refrain from enforcing

it. The fact that an invalid contract has been

arbitrated does not validate it. "Such a

public policy, however, must be well éetined

and dominant, and is to be ascertained 'by

reference to the: laws and legal precedents and

not from general considerations of supposed

public interests.'" W.R. Grace & Co., 461 U.S.

at 766 (quoting Muschany v. United States, 324

U.S. 49, 66 (1945)).

When we reviewed this case originally,

we were troubled because of the hiatus which

existed between 1971 when the parties made

their agreement in which Kimball was to perform

certain engineering services and was to act as

the County's professional representative in all

phases of the proposed. county-wide sanitary

sewage system and 1984, when Kimball came

forward to assert its rights under the

-C8-

contracts. Kimball originally agreed to defer

payment by the County for the preliminary

engineering report until "completion of

financing arrangements prior to the beginning

of the final design. . ." See Ex. A, doc. 31,

copies of contract attached to second amended

complaint, Section V, A. The contracts

provided the following clause:

In the event that any or all of the

recommended sewer district projects

proceed beyond the Preliminary

Engineering Report Phase, the Owner

agrees to engage the Engineer to

perform all other phases of the work

of each sewer district in accordance

with this Agreement.

See Ex. A., doc. 31, contract, Section I, A.

In the latter part of 1971 and 1972,

Kimball prepared a Preliminary Engineering

Report regarding a proposed county-wide sewer

system and the proposed improvements of a.

treatment plant in West Chesapeake, Ohio.

However, after 1973, there was no

correspondence, discussion, contact, Or

-C9-

activity of any kind on the part of Kimball

regarding these reports, and although the

reports were to be used as the basis for

application for state and federal construction

grant loans, no such applications were filed.

Nor were the reports a basis for any government

funding. In addition, Kimball never attempted

to revise or update the reports despite their

alleged inadequacies. The hiatus existed from

1973 until 1984 when Kimball sent a demand

letter to the county, after reading about the

hiring of another firm in the newspaper.

During this period there were changes in

the federal laws and regulations concerning the

funding of such sewer projects. The Army Corps

of Engineers were involved with the County in

the preparation of the facilities plan required

by the new federal law and in 1978 the County

hired an engineering firm, Burgess and Niple,

Ltd., to perform the necessary engineering work

required of the project, after having

“€¢i0-

interviewed several] engineering firms in

October 1977. Plaintiff points out that there

was considerable publicity about the

activities, including the hiring of the new %

consultant in 1978 and about activities with

the Corps of Engineers regarding the sewer

project for Eastern Lawrence County. Yet

Kimball did not contact plaintiff until 1984.

For the following reasons, we conclude

that the agreements entered into by Lawrence

County with Kimball in 1971 are ultra vires and

contrary to public policy under Ohio law,

because they were so indefinite in time that

they extend beyond the life of the Board of

~ County Commissioners.

We reach our conclusion based on the

authority of State ex rel Allen v. Lutz, 111

Ohio St. 333 (1924). In this remarkably

Similar case, the Supreme Court noted:

The policy of the law is~ rather

against the power of one board of

county commissioners to make

~—si-

contracts so indefinite in time that

the same may extend beyond the life

of the board, and thus bind another

or future board, although in some

cases such a contract may be valid

and binding even though the

performance of some part may _ be

impossible until after the expiration

of the term of the majority of the

Board as it existed when the contract

was made. Yet the general rule is

that such contracts, extending beyond

the term of the existing board, and

employment of agents or servants of

the County for such period, thus

tying the hands of a_= succeeding

board, are not looked upon with favor

unless the necessity or some special

Circumstances show that the public

good requires such contracts to be

made.

In Lutz, Id. at 338-39, the Supreme

Court refused to issue a writ of mandamus to

require the Board of County Commissioners to

make the payment to the sanitary engineer

provided for in the contract. Likewise, the

Court of Appeals in State ex. Hubbard v. Hilty,

31 Ohio L. Abs. 538, 540 (Allan County 1940)

emphasized that contracts are invalid which

restrain future commissions from exercisinc

their discretionary power or "performing any of

,

ry

>

‘ 4

‘ 2%

~

4

ror

,

’

roe

Cc

rr

, ‘

ror

/

m6

mar

,

me

‘ ‘

4

;

/

;

tract a

, J J

“* ot (\

y ;

a). / ——

; ‘ re

vit

, i A

; ¥ ‘ :

or

3¢ ‘ ,* ‘

* >} ; :

‘ reqer z

/ ‘

. . ; & ;

. , ee ‘

44 c ad

, » s

‘ 4

" ’ mre

4\4 i. ¢ : :

;

y ne

; 4‘

‘ 4

T;

. “?

" ; cr .rv\e

. : | .

" ’ , |

4 « ’ . 4 ’

fimt<s y* ’

Aa y ;

c f{ante« 4

ior ;

iV J

‘ ’ ’

4 ; b<

‘4 ners

re, 4 :

ve

ad

-Cl4-

termination by the owner based on default or

“for its convenience” and the prohibition of

any recovery of lost anticipated profits by the

terminated engineer for work not performed.

These regulations, as pointed out by plaintiff,

reflect the policy of the federal government

since World War I, that a public agency should

not be exposed to lost future profit claims.

See G.L. Christian & Associates

United

States, 312 F.2d 418, 426 (Court of Claims,

1963). In addition, the new federal reg-

ulations require a competitive negotiation

process consisting of public notice of the

requirement for engineering services, 40 C.F.R.

§35.937-2, evaluation of qualifications of the

interested engineering firms, 40 C.F.R.

§35.937-3, and the solicitation and evaluation

of proposals, 40 C.F.R. 535.937-4. Therefore,

it appears that the contract which i1s_ the

subject of this litigation would not have

passed muster under applicable federal law and

-Ci5-

reaulations because there was no competitive

negotiation process before awarding the

contract to Kimball, the life of the project

clause was invalid as a matter of federal law,

and, even if the County had awarded a contract

to Kimball in 1978, it would have had the right

to terminate Kimball for defadlt or for its

convenience. Furthermore, upon termination,

Kimball could not have asserted a claim for

lost profits, as it has done in this

proceeding.

For the foregoing reasons, plaintiff's

motion for summary judgment on Count III of the

second amended complaint (doc. 32) is granted,

the contracts are declared invalid as a matter

of public policy, and the arbitration award is

hereby vacated. Defendant's cross-motion for

summary judgment on Count III (doc. 36) is

denied. A status conference is scheduled for

May 27, 1987, at 10:00 a.m., to discuss any

remaining issues in the case.

-C1l6-

SO ORDERED.

S. Arthur Spiegel ©

United States District Judge

LAL though our Opinion and Order (doc.

15) was entered in response to defendant's

motion for a preliminary injunction, the Court

treated the motion as if it were styled as 4

motion to compel arbitration under 9 U.S.C. $4.

Therefore, we never addressed or analyzed this

case in terms of the defendant's success on the

merits, which is one of the traditional four

factors that determine whether injunctive relief

ought to be granted. See e.g., Warner v.

Central Trust Co., 715 F.2d Ligi, ike2s (6th

Cir. 1983).

“county Commissioners in Ohio are

elected to serve four year terms. Ohio Rev.

Code §305.0l(c). As the disputed contract

contains no term provision, on its face, the

agreement presents an issue regarding whether

the members who executed the agreement in 1971,

did so in such a manner as to bind successor

boards of county commissioners.

3we recognize that in some

circumstances, the Ohio courts have enforced

contracts which exceed the term of office of

the county commissioners who executed certain

contracts if there were special circumstances

and performance was within 4a reasonable time.

However, in this case, there was a hiatus of

almost ten years while the county was making

arrangements with the federal government and

-C17-

others to put in the sewer system and the

Original contracting party did nothing to

protect or assert its rights. Moreover, we

find the cases cited by Kimball inapposite. In

Moor v. United States, 243 F.2d 913 (6th Cir.

1957), the county did not raise the ultra vires

defense in its pleadings. In Rowt Linger _ v. City

of Cincinnati, 49 O.App. 42 (1934), the issue

was whether the consideration under a lease

agreement was adequate. The lease agreement

was for a period of five years and, therefore,

was for a definite time, unlike the contract in

this case. From our reading of the case, the

public good requirement was never discussed.

em

the

APPENDIX D

Order and Judgment Entry of

United States District Court for

the Southern District-of

Ohio, Western Division

-pl-

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

BOARD OF COUNTY :

COMMISSIONERS OF : No. C-1-85-667

LAWRENCE COUNTY, OHIO

Plaintiff, >: ORDER CERTIFYING

>: THAT SUMMARY

vs. : JUDGMENT ORDER OF

>: MARCH 18, 1987 IS

L. ROBERT KIMBALL >: FINAL AND THERE IS

& ASSOCIATES, : NO JUST REASON FOR

DELAY OF APPEAL

Defendant.

This matter came on for consideration of

defendant L. Robert Kimball & Associates'

Motion (doc. 41) for certification by this

Court that its summary judgment order of March

18, 1987 is final and that there is no just

reason for delay of appeal. We conclude that

defendant's motion is well-taken.

Certification of Rule 54(b), Fed. R. Civ.

P. of this Court's summary judgment order of

March 18, 1987 will advance the interests of

sound judicial administration and justice to

-D2-

the litigants in this case. We find that the

claims decided as final and on the merits by

the summary judgment motion are separate from

the remaining claims in the case and an

immediate appeal of the order would not cause

plaintiff to suffer significant hardships,

economic or otherwise and may well facilitate

the resolution of the remaining claims in this

case thereby offsetting any costs incurred by

plaintiff's participation in the appeal.

Accordingly, pursuant to Rule 54(b), Fed. R.

Civ. P. we hereby direct the entry oft final

judgment on the summary judgment order entered

March 18, 1987 in favor of plaintiff on count 3

of its second amended complaint and against the

defendant on defendant's cross-motion for

Summary judgment on its counterclaim to count

Bs Said entry of final judgment in favor of

plaintiff aforesaid in count 3 of the second

amended complaint and on defendant's

counterclaim thereto being made on the express

-D3-

determination by the Court that there is no

just reason for delay of appeal of said

judgment mn favor of plaintiff on count 3 of

the second amended complaint and on defendant's

counterclaim thereto.

SO ORDERED.

S. Arthur Spiegel

United States District Judge

-D4-

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

BOARD OF COUNTY :

COMMISSIONERS OF ; CASE NO. C-1-85-667

LAWRENCE COUNTY, OHIO

Vv. |

JUDGMENT IN A

L. ROBERT KIMBALL ; CIVIL CASE

& ASSOCIATES :

Jury Verdict. This action came before

the Court for a trial by jury. - The

issues have been tried and the jury has

rendered its verdict.

X Decision by Court. This action came to

trial or hearing before the Court. The

issues have been tried or heard and a

decision has been rendered.

IT 4S ORDERED AND ADJUDGED

ORDER entered by Judge Spiegel that

Accordingly, we hereby direct the entry of

final judgment on the summary judgment order

entered March 18, 1987 in favor of plaintiff on

count 3 of its second amended complaint and

against the defendant on defendant's

cross-motion for summary judgment on its

counterclaim to count 3. Said entry of final

judgment in favor of plaintiff aforesaid in

count 3 of the second amended complaint and on

defendant's counterclaim thereto being made on

the express determination by the Court that

there 1S no just reason for delay of appeal of

ETE DEBS BEG oh OE oe are

-D5-

said judgment in favor of plaintiff on count 3

of the second amended complaint and on

defendant's counterclaim thereto.

June 9, 1987 Kenneth J. Murphy

Date Clerk

Arthur W. Hill

(By) Deputy Clerk

Federal]

APPENDIX E

Arbitration Act, 9 U.S.C.

-Fl-

9 U.S.C §9. AWARD OF ARBITRATORS;

CONFIRMATION; JURISDICTION; PROCEDURE

If the parties in their agreement have

agreed that a judgment of the court shall be

entered upon the award made pursuant to the

arbitration, and shall specify the court, then

at any time within one year after the award is

made any party to the arbitration may apply to

the court so specified for an order confirming

the award, and thereupon the court must grant

such an order unless the award is vacated,

modified, Or corrected as_- prescribed in

sections 10 and 11 of this title [9 U.S.C.S.

§§10,11]). If no court is specified in the

agreement of the parties, then such application

may be made to the United States court in and

for the district within which such award was

made. Notice of the application shall be

served upon the adverse party, and thereupon

the court shall have jurisdiction of such party

as though he had appeared generally in the

-F2- _

proceeding. If the adverse party is a resident

of the district within which the award was

made, such service snall be made upon the

adverse party or his attorney as prescribed by

law for service of notice of motion in an

action in the same court. If the adverse party

shall be a nonresident, then the notice of the

application shall be served by the marshall of

any district within which the adverse party may

be found in like manner as other process cf the

court.

(July 30, 1947, ch 392 §1, 61 Stat. 672.)

9 U.S.C. §10. SAME; VACATION;

GROUNDS; REHEARING

In either of the following cases the

Unitec States court in and for the district

wherein the award was made may make an order

vacating the award upon the application of any

party to the arbitration --

-F3-

(a) Where the award was procured by

corruption, fraud, or undue = ?2ans.

(b) Where there was evident partiality

Or corruption in the arbitrators, or

either of them.

(c) Where the arbitrators were guilty

of misconduct in refusing to postpone

the hearing, upon sufficient cause

shown, or in refusing to hear evidence

pertinent and material to the

controversy; or of any other misbehavior

by which the rights of any party have

been prejudiced.

(d) Where the arbitrators exceeded

their powers, or so imperfectly executed

them that a mutual, final, and definite

award upon the subject matter submitted

was not made.

(e) Where an award is vacated and the

time within which the agreement required

the award to be made has not expired the

-F4-

court may, in its discretion, direct a

rehearing by the arbitrators.

(July 30, 1947 ch 392, §1, 61 Stat. 672).

9 U.S.C. §11. SAME; MODIFICATION OR

CORRECTION; GROUNDS; ORDER

In either of the following cases the

United States court in and for the district

wherein the award was made may make an order

modifying or correcting the award upon the

application of any party to the arbitration --

(a) Where there was an evident material

miscalculation of figures or an evident

material mistake in the description of

any person, thing, or property referred

to in the award.

(b) Where the arbitrators have awarded

upon a matter not submitted to them,

unless it is a matter not affecting the

merits of the decision upon the matter

submitted.

award,

-E5S-

(c) Where the award is imperfect in

matter of form not affecting the merits

of the controversy.

The order may modify and correct the

so as to effect the intent thereof and

promote justice between the parties.

(July 30, 1947, ch 392, §1, 61 Stat. 673.)

-Fli-

40 C.F.R. §$35.917-1

CONTENT OF FACILITIES PLAN

Facilities planning must address each of

the following to the extent considered

appropriate by the Regional Administrator:

(a) A description of the treatment works |

for which construction drawings and

specifications are to be prepared. This

description shall include preliminary

engineering data, cost estimates for design and

construction of the treatment works, and a

schedule for completion of design and

construction. The preliminary engineering data

may include, to the extent appropriate,

information such as a schematic flow diagram,

unit processes, design data regarding detention

times, flow rates, sizing of units, etc.

(b) A description of the selected

complete waste treatment system(s) of which the

proposed treatment works iS a part. The

description shall cover all elements of the

-F2-

system, from the service area and collection

sewers, through treatment, to the ultimate

discharge of treated wastewaters and management

and disposal of sludge. Planning area maps

must include major components of existing and

propesed treatment works. For individual

systems, planning area maps must include those

individual systems which are proposed for

funding under §35.918.

(c) Infiltration/inflow documentation in

accordance with §35.927 et seq.

(d) A cost-effectiveness analysis of

alternatives for the treatment works and for

the complete waste treatment system(s) of which

the treatment works is a part. The selection

of the system(s) and the choice of the

treatment works for which construction drawings

and specifications are to be prepared shall be

based on the results of the cost-effectiveness

analysis. (See Appendix A to this subpart.)

This analysis shall include:

-F3-

(1) The relationship of the size

and capacity of alternative works io the needs

to be served, including reserve capacity;

(2) An evaluation of alternative

flow and waste reduction measures, including

nonstructural methods;

(3) An evaluation of improved

effluent quality attainable by upgrading the

operation and maintenance and efficiency of

existing facilities as an alternative or

Supplement to construction of new facilities;

(4) An evaluation of the capability

of each alternative to meet applicable effluent

limitations. (All step 2, step 3, or step 2 + 3

projects shall be based on application of best

practicable waste treatment technology (BPWTT),

aS a minimum. Where application of BPWTT would

not meet water quality standards, the facilities

plan shall provide for attaining such standards.

Such provision shall consider the alternative of

treating combined sewer overflows. );

-F4-

(5) An identification of, and

provision for, applying BPWTT as defined by the

Administrator, based on an evaluation of

technologies included under each of the

following waste treatment management

techniques;

(i) Biological or physical-

chemical treatment and discharge to receiving

waters;

wert Systems employing the

reuse of wastewater and recycling of

pollutants;

. (iii) Land application’ tech-

niques;

(iv) Systems including revenue

generating applications; and

(v) Onsite and nonconven-

tional systems;

(6) An evaluation of the alter-

native methods for the ultimate disposal of

treated wastewater and sludge materials re-

-FS-

sulting from the treatment process, and a

justification for the method(s) chosen;

(7) An adequate assessment of the

expected environmental impact of alternatives

(including sites) under Part 6 of this chapter.

This assessment shall be revised as necessary

to include information developed during

subsequent project steps;

(8) For facilities planning begun

after September 30, 1978, whether or not

prepared under a step 1 grant, an analysis of

innovative and alternative treatment processes

and techniques that reclaim and reuse water,

productively recycle wastewater constituents,

eliminate the discharge of pollutants, recover

energy or otherwise achieve the benefits

described in Appendix E. The provisions of

this paragraph are encouraged in all cases.

They are required in facilities planning for

new treatment works and for treatment works

which are being acquired, altered, modified,

-F6-

improved, or extended either to handle a

Significant increase in the volume of treated

waste or to reduce significantly the pollutant

discharges from the system. Where certain

categories of alternative technologies may not

be generally applicable because of prevailing

climatic or geological conditions, a detailed

analysis of these categories of alternative

technologies is not required. However, the

reason for such a rejection must be fully

substantiated in the facilities plan;

\.9) For facilities planning begun

after September 30, 1978, whether or not

prepared under a step 1 grant, an analysis of

the primary energy requirements (operational

energy inputs) for each system considered. The

alternative selected shall propose adoption of

measures to reduce energy consumption or to

increase recovery as long as such measures are

cost-effective. Where processes or techniques

are claimed to be innovative technology on the

“¥7-

basis of energy reduction criterion contained

in paragraph 6e(2) of Appendix 3 to this

subpart, a detailed energy analysis shall be

included to substantiate the claim to _ the

satisfaction of the Regional Administrator.

(e) An identification of effluent

discharge limitations or, where a permit has

been issued, the NPDES permit number, and a

brief description of how the proposed

project(s) will result in compliance with the

enforceable requirements of the Act.

(f£) Required comments or approvals of

relevant State, interstate, regional, and local

agencies (see §30.305-8). =

(g) A final responsiveness summary,

consistent with 40 CFR 25.8 and §35.917-5.

(nh) A brief statement demonstrating that

the authorities who will be implementing the

plan have the necessary iegal, financial,

institutional, and managerial resources

available to “ensure the construction,

-F8-

operation, and maintenance of the proposed

treatment works.

(i) A statement specifying that the

requirements of the Civil Rights Act of 1964

and of Part 7 of this chapter have been met.

(j) For facilities planning begun after

September 30, 1978, whether or not prepared

under a step 1 grant, a description of

potential opportunities for recreation, open

space, and access to bodies of water analyzed

in planning the proposed treatment works and

the recommended actions. The facilities plan

shall also describe measures taken to

coordinate with Federal, State, and _ local

recreational programs and the recreational

elements of applicable approved areawide WOM

plans.

(kK) A municipal pretreatment program in

accordance with §35.907.

(1) An estimate of total project costs

and charges to customers, in accordance with

guidance issued by the Administrator.

-F9-

(m) A statement concerning the

availability and estimated cost of proposed

Sites.

[43 FR 44049, Sept. 27, 1978, as amended at 44

FR 10302, Feb. 16, 1979].

APPENDIX G

-Gl-

40 C.F.R. §35.937-2 PUBLIC NOTICE

(a) Requirement. Adequate public notice

as paragraph (a)(1) or (2) of this section

provide, must be given of the requirement for

architectural or engineering services for all

subagreements with an anticipated price in

excess of $25,000 except as paragraph (b) of

this section provides. In providing public

notice under paragraphs (a)(1) and (2) of this

section, grantees must comply with the policies

in $$35.936-2(c), 35.936-3, @nG@ 33.920" 7.

ae Public announcement. A notice

of request for qualifications should be

published in professional journals, newspapers,

Or publications of general circulation over a

reasonable area and, in addition, if desired,

through posted public notices oor _ written

notification directed to interested person,

firms, or professional organizations inviting

the submission of statements of qualifications.

The announcement must clearly state the

deadline and place for submission

paragraph (b) of this section, the grantee may

secure or maintain 4 list +) gualified

5 , +

~ vane. +o rj ~ M 4 — -

Canqadidqaates. LNne LiSt must:

> ) Ré¢ ‘el= c Amon - 5 r Ky ] -

s a — ~ ¥ .. i € . vv — -

lOrice nNrocend a =~ ac ,r ry - Cc ~~} { =

notice f edures as paragrapl a | of

+hHaiec ~ + °

tcnhis sec 1Oon

~ 5 c

, } rmcyt } 1-2 gdetae rt r lati

A ru. = 4 A - —/ I = = i A

| + 4 mM.

Updating; and

111i) Be naintained t the

Grantee or secured from the State r from a

Pe

®

rs

2

O

C

—t

2)

m

$))

o

O

W)

O

a

i aa =

Ty

*

QD

D

Ae)

ict

-

~

W)

-

D

Ze)

Cc

'@)

{

=

cT

requirement of this section and the related

requirements of §§3

applicable, but may be followed, in the cases

described in paragraphs (b)(1) through (3) of

-G3-

this section. All other appropriate provisions

of this section, including cost review and

negotiation of price, apply:

(1) Where the population of the

grantee municipality is 25,000 or less

according to the latest U.S. census.

(2) For step 2 or step 3 of a

(1) the grantee is satisfied

with the qualifications and performance of an

engineer who performed all or any part of the

step 1 or step 2 work;

: (11) The engineer has the

Capacity to perform the subsequent steps; and

(111) The grantee desires the

same engineer to provide architectural or

engineering services for the subsequent steps.

(3) For subsequent segments of

design work under one grant if:

(1) A single treatment works

is segmented into two or more step 3 projects;

-G5S-

with technical skills).

(c) Criteria which should be considered

in the evaluation of candidates for submission

of proposals should include:

(1) Specialized experience and

technical competence of the candidate Or firm

and its personnel (including a joint venture,

association or professional subcontract),

considering the type of services required and

the complexity of the project;

(2) Past record of performance on

contracts with the grantee, other government

agencies or public bodies, and with private

industry, including such factors as contro] of

costs, quality of work, and ability to meet

schedules;

(3) The candidate's capacity to

perform the work (including any specialized

services) within the time limitations,

considering the firm's current and planned

workload;

_-G6-

(4) The candidate's familiarity

with types of problems applicable to the

project; and

(5) Avoidance of personal and

organizational conflicts of interest prohibited

under State and local law and §35.936 16.

40 C.F.R. §35.937-4 SOLICITATION AND

EVALUATION OF PROPOSALS

(a) Requests for professional services

proposals must be sent to no fewer than three

candidates who either responded to the

announcement or who were selected from the

prequalified list. If, after good faith effort

to solicit qualifications in accordance with

§35.937-2, fewer than three qualified

candidates respond, all qualified candidates

must be provided requests for proposals.

. (b) Requests for professional services

proposals must be in writing and must contain

the information necessary to enable a

«GF

prospective offeror to prepare a_e proposal

properly. The request for proposals must

include the solicitation statement in

§35.937-9(a) and must inform offerors of the

evaluation criteria, including all those in

paragraph (c) of this section, and of the

relative importance attached to each criterion

(a numerical weighted formula need not be

utilized).

(c) All proposals submitted in response

to the request for professional services pro-

posals must be uniformly evaluated. Evaluation

criteria shall _ include, as a minimum, all

criteria stated in §35.937-3(c) of this

subpart. The grantee shall also evaluate the

candidate's proposed method to accomplish the

work required, including, where appropriate,

demonstrated capability to explore and develop

innovative or advanced techniques and designs.

The grantee's evaluation shall comply with

§$35.936-7.

-G8-

(d) Proposals shall be evaluated through

an objective process (e.g., the appointment of

a board or committee which, to the extent

practicable, should include persons with

technical skills. Oral (including telephone)

or written interviews should be conducted with

top rated proposers, and information derived

therefrom shall be treated on a confidential

basis, except as required to be disclosed under

State or local law or to EPA under §35.937-6.

(e) At no point during the procurement

process shali information be conveyed to any

candidate which would’ provide an_ unfair

competitive advantage.

APPENDIX H

40 C.F.R. Part 35, Subpart E, Section 5

-Hl-

40 C.F.R. Part 35 Subpart E,

Section 5

TERMINATION

(a) Either party may terminate’ this

agreement, in whole or in part, in writing, if

the other party substantially fails to fulfill

its obligations under this agreement through no

fault of the terminating party. However, no

such termination may be effected unless the

other party is given (1) not less than ten (10)

calendar days written notice (delivered by

certified mail, return receipt requested) of

intent to terminate, and (2) an opportunity for

consultation with the terminating party before

termination.

(b) The owner may terminate this

agreement, in whole or in part, in writing for

its convenience if the termination is for good

cause (such as for legal or financial reasons,

major changes in the work or program

requirements, initiation of a new step) and the

-H2-

engineer is given (1) not less than ten (10)

calendar days written notice (delivered by

certified mail, return receipt requested) of

intent to terminate, and (2) an opportunity for

consultation with the terminating party before

termination.

(c) If the owner terminates for default,

an equitable adjustment in the price provided

for in this agreement shall be made, but (1) no

amount shall be allowed for anticipated profit

on unperformed services or other work, and (2)

any payment due to the engineer at the time of

termination may be adjusted to the extent of

any additional costs the owner incurs because

of the engineer's default. If the engineer

terminates for default or if the owner

terminates for convenience, the equitable

adjustment shall include a reasonable profit

for services or other work performed. The

equitable adjustment for any termination shall

provide for payment to the engineer’ for

-H3-

services rendered and expenses incurred before

the termination, in addition to termination

settlement costs the engineer reasonably incurs

relating to commitments which had become firm

before the termination.

(d) Upon receipt of a termination action

under paragraphs (a) or (b) above, the engineer

Shall (1) promptly discontinue all services

affected (unless the notice directs otherwise),

and (2) deliver or otherwise make available to

the owner all data, drawings, specifications,

reports, estimates, summaries, and such other

information and materials as the engineer may

have accumulated in performing this agreement,

whether completed or in process.

(e) Upon termination under paragraphs (a)

or (b) above, the owner may take over the work

and prosecute the same to completion by

agreement with another party or otherwise. Any

work the owner takes over for completion will

be completed at the owner's risk, and the owner

—-H4-

will hold harmless the engineer from all claims

and damages arising out of improper use of the

engineer's work.

(f) If, after termination for failure of

the engineer to fulfill contractual

obligations, it is determined that the engineer

had not sc failed, the termination shall be

deemed to have been effected for the

convenience of the owner. In such event,

adjustment of the price provided for in this

agreement shall be made as paragraph (c) that

this clause provides.

APPENDIX I

Ohio Revised Code §6117.01

-[l-

O.R.C. §6117.01 SEWER DISTRICTS.

For the purpose of preserving and

promoting the public health and welfare, boards

of county commissioners may by resolution lay

out, establish and maintain one or more sewer

districts within their respective counties,

outside of municipal corporations, and may have

a registered professional engineer make such

SurveyS aS are necessary for the determination

of the proper boundaries of such district.

Fach district shail be designated by an

appropriate name or number. Any board may

acquire, construct, maintain, and operate such

main, branch, intercepting, or local sever, or

ditch, channel, Or interceptor for the

temporary retention of storm water, within any

Such district, and such outlet sewer and sewage

treatment or disposal works within or without

such district, as are necessary to care for and

conduct the sewage or surface water from any

part of such district to a proper outlet, so as

to properly treat or dispose of same. Any such

board may employ ae registered professional

engineer to employ necessary assistants upon

such terms as are fixed by said board. The

board may create and maintain a= sanitary

engineering department, to be under its

Supervision and in charge of a registered

professional engineer, to be appointed by such

board, for the purpose of aiding it in the

performance of its duties under section 6117.01

to 6117.45 of the Revised Code, or its other

duties regarding sanitation provided by law.

Said board shall provide suitable rooms for the

use of such department and shall provide for

and pay the compensation of such registered

professional engineer and all necessary

expenses of such registered professional

engineer and department which are authorized by

such board. Any such registered professional

engineer in charge of such department, with the

approval of the board, may appoint necessary

16,

rY

~[4-

Sanitary engineer. Any person, firm, or

corporation proposing or constructing’ such

improvements shall pay to the county all

expenses incurred by the board in “connection

therewith. The county sanitary engineer may

enter upon any public or private property for

the purpose of making surveys or examinations

necessary for the laying out of sewer districts

or designing sewers or treatment works, and may

make such surveys and examinations. No person,

firm or corporation shall forbid or interfere

with the county sanitary engineer or his

authorized assistants entering upon such

property for such purpose or [of] making such

surveys or examinations. If actual damage is

done to property by the making of such surveys

and examinations, the board shall pay the

reasonable value of such damage to the owner of

the property damaged, and such cost shall be

included in the assessment upon the property

benefited by the improvement for which such

surveys and examinations are made.