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Hrezo v. City of Lawrenceburg

Court of Appeals of Indiana

August 22, 2017

Robert Hrezo and Hrezo Engineering, Inc., Appellants-Plaintiffs,
City of Lawrenceburg, Appellee-Defendant.

         Appeal from the Dearborn/Ohio Circuit Court No. 15C01-0607-CT-23 The Honorable Jon W. Webster, Special Judge

          Attorney for Appellants Corinne R. Finnerty McConnell Finnerty PC North Vernon, Indiana

          Attorney for Appellee Susan M. Salyer Patsfall, Yeager & Pflum Cincinnati, Ohio

          Bradford, Judge.

         Case Summary

         [¶1] Appellants-Plaintiffs Hrezo Engineering, Inc. ("HEI"), and Robert Hrezo (collectively, "Appellants") appeal from the judgment entered in favor of Appellee-Defendant the City of Lawrenceburg ("the City"). Robert established HEI in 1983 and, from at least 1997 until 2005, HEI worked on several construction projects for the City and/or its agencies, billing several million dollars over that period. In 2003, Tom Steidel began his tenure as City Manager, charged with assisting the mayor and the City's government.

         [¶2] Over the next couple of years, issues developed with HEI's work for the City, and several projects were terminated or suspended. Among the issues were concerns about possible overbilling and overstaffing and substandard work. In March of 2005, City Manager Steidel prepared a memorandum summarizing his concerns about HEI's work and distributed it to the Mayor, the City Council, the City's Clerk-Treasurer, and the City's Board of Works. Later in 2005, the decision was made to stop using HEI for City projects.

         [¶3] In 2006, Appellants sued the City, alleging tortious interference, defamation, interference with prospective business advantage, and violations of Indiana's RICO statutes. Ultimately, the trial court granted summary judgment in favor of the City on the tortious interference, interference with prospective business advantage, RICO, and defamation per se claims, leaving defamation per quod the only claim remining for trial. Following trial, the jury returned a verdict in favor of the City, and the trial court denied Appellants' motion to correct error.

         [¶4] Appellants contend that the trial court erred in (1) granting summary judgment in favor of the City on Appellants' defamation per se claim, (2) granting summary judgment in favor of the City on Appellants' tortious interference claim, (3) excluding proffered testimony regarding Appellants' alleged damages, (4)refusing to deliver Appellants' proposed jury instruction on publication, and (5)refusing to include several allegedly defamatory statements on a verdict form given to the jury. Because we conclude that Appellants' claims are without merit, we affirm.

         Facts and Procedural History

         [¶5] Robert is the sole owner of HEI, which he established in 1983 and whose operations he oversees. In 1997, Robert was appointed City Engineer for the City, and HEI worked on approximately ninety-five projects for the City from 1997 to 2005, including such projects as the Lawrenceburg Police Station, three swimming pools, and work on the Lawrenceburg levy system. Altogether, HEI billed the City over $3.5 million from 1997 to 2005. During this time, Appellants also worked with Mel Davis, the City's utilities director.

         [¶6] On January 1 or 2, 2003, City Manager Steidel began his tenure. City Manager Steidel's job was to bring a "professional management process as a proponent to the City [and] assist the Mayor, and the Council[.]" Tr. Vol. II p. 136. City Manager Steidel was supposed to "manage contracts that the City was engaged in and in some cases develop contracts that the City would enter into." Tr. Vol. II p. 136. In November of 2003, William Cunningham was elected Mayor of the City and took office on January 1, 2004. On the first day of Mayor Cunningham's tenure, City Manager Steidel decided that he was terminating or putting on hold fifteen of HEI's thirty-three to thirty-five ongoing projects.

         [¶7] Among the projects HEI worked on for the City was Todd-Creech Park, which was a drainage basin that was to be converted into a recreational area. At the time, Mario Todd was an independent contractor working with HEI. Todd served as an inspector on the Todd-Creech project along with another inspector from HEI. City Manager Steidel told Robert that he only wanted one inspector on the Todd-Creech jobsite, because, in City Manager Steidel's view, the park was not large enough to require two inspectors and there were "a lot of days I went over there, there was very little going on." Tr. Vol. II p. 142. City Manager Steidel also told Hrezo to begin bringing one representative to Todd-Creech construction meetings when he had been bringing up to five. Director of engineering for the City Michael Clark noted later that there had been problems with HEI's work on the Todd-Creech project, including "major de-watering issues" caused by a breached aquifer and baseball field that would not drain properly because it had been designed "table top flat[.]" Tr. Vol. II p. 119.

         [¶8] In 2004, Todd was working with HEI performing inspections on City building projects, including those worked on by a company called Fortune Management, which was working with the City's redevelopment commission to rehabilitate and sell older structures. In early 2004, it came to Todd's attention that there were questions about one particular project that HEI had approved. HEI had issued an American Institute of Architects ("AIA") document for a house on 19 Williams Street in the City indicating that new windows and cabinets had been installed. The address, however, was an empty lot. When Todd confronted Robert and his son Mike about the AIA document, Robert told him that City Manager Steidel had told him to sign it. Todd resigned from HEI that day and was later hired by the City to perform in-house inspections.

         [¶9] On March 3, 2005, in anticipation of an executive session meeting at which Robert was expected to complain about his mounting issues with the City, City Manager Steidel issued a memorandum to Mayor Cunningham, the City Council, the City's Clerk-Treasurer, and the Board of Works ("the Steidel Memo"), which provides, in relevant part, as follows:

To: Mayor & City Council, Clerk-Treasurer, Bd. Of Works
From: Tom Steidel, City Manager
Date: March 3, 2005
Subject: Hrezo Engineering Billing Issues
I must apologize for being absent for Tuesday night's X-session but the beaches call. Mr. Hrezo is appearing before Council & The Board of Works to protest what he says is my refusal to pay his firm for services rendered. That is not exactly the case. I have called in to question several of his bills to the city while promptly paying others. I have asked him to consider amending some of his billings to reflect problems on the job that his firm has some responsibility for. So far he has failed to do so.
Mr. Hrezo and I have been having discussions for quite some time about his billing tendencies. First he bills quarterly instead of monthly and only recently has submitted time cards.
Unfortunately, the review of the time cards only reinforces my view that he deploys way more employees to our jobs than is warranted. Todd[-]Creech Park is a classic example where he has insisted on deploying two inspectors day after day after day. The park just isn't big enough to warrant that level of coverage nor was a lot of work being done. Sometimes there was none at all but the inspectors were there.
Mr. Hrezo bills out his inspectors at $55 per hour I believe and pays approximately $25 per hour. For two inspectors at those rates Hrezo Engineering would collect $60 for every hour the two inspectors were deployed. In addition, he has continued to bring as many as five (5) persons to our construction meetings. I have discussed these issues with Mr. Hrezo on numerous occasions and I guess his most common response is that he needs these resources to get his work done.

         We have paid Hrezo engineering a total of $335, 029 during 2004 including a December bill for $86, 141 for work on Todd-Creech Park. We now have a February bill for $51, 577. The make up of those bills is as follows:

December Billing
Principal Engineer
179.50 hrs
@ $85 Hr.
$15, 257.50
Chief Engineer
397.50 hrs.
@$75 Hr.
$29, 812.50
Engineer 2
150 hrs.
@$65 Hr.
Senior Field Tech
477.5 hrs.
@355 Hr.
Technician 2
51 hrs.
@$50 Hr.
Structural Consult
22.50 hrs.
@5595 HI.
$2, 137.50
Structural Consult
3 hrs.
@$113 Hr.
UPS Charges
$86, 141.40

         As I analyze this I have to wonder why we are still paying these huge engineering and design charges ($57, 295) when the design was done a year ago. This billing period was for 82 days.

The February bill for Todd-Creech, covering only 64 days is $51, 577. This bill contains 420 hours of Senior Field Inspection and 40.75 hours of Technician 2 time. Engineering services appear to cost $26, 439. I remind [you] that this is a project that was basically designed in 2003 and supposed to be constructed in 2004. Here we are in 2005 still paying for engineering services. I suspect that many of these engineering hours are to re-engineer, correct, add to, or amend his original plan. If that is true, Hrezo Engineering should take some responsibility for these expenses.
In addition to the above bills Hrezo Engineering also billed the contractor for an additional $8000 for capping the w[e]lls at Todd-Creech Park. The contractor has refused to pay the bill and I assume it will fall to us if it is not paid. There were engineers with the well-capping companies and H.C. Nutting was the engineer in charge. I'm not exactly sure what Hrezo Engineering was doing for $8000.
The Fire Station is another project that I asked Mr. Hrezo for clarification. Our bill for the December billing was $7141.75 of which $6333 was for engineering services and $440 for inspection. The February bill was for $2462 all of which appear to be engineering services. I had returned the December bill and asked Mr. Hrezo to critically review it. As you know we have some construction issues at this location. Problems such as the truss welds which I believe we are being charged to have Hrezo inspect when we have previously paid his inspector to been the site, and inspecting, the truss installation. We should not have to pay again.
There were several other December bills that I questioned which have since been paid.
Recently I received a bill for $18, 492.94 for the Ivy Tech Retaining Wall. This invoice covers the period from 1/5/04 thru 2/10/05. This billing is unusually [sic] since it covers 13 months as opposed to the normal quarterly billing cycle. This project was finished as of 12/31/03 when I told both the contractor Roy A. Miller and Mr. Hrezo that work must stop as the project appeared to be finished.
Since that time you may know that there are problems with the wall. I did not authorize Hrezo Engineering to do $18, 492 worth of work on this project and have no clue what they accomplished except to throw the blame for the wall problems on others. It is a fact that the wall is failing to some degree and Hrezo Engineering was the principle [sic] representative of the City of Lawrenceburg. For him to fail to accept some measure of responsibility for this problem seems odd.
Lately what I have asked Mr. Hrezo is to try to explain to me what work he has done that actually accomplishes objectives for the city. On all three of these projects, there is difficulty seeing any real production for the amount of money we are paying. The Fire Station continues to be a problem. Todd-Creech Park speaks for itself and the Ivy Tech wall problem could dwarf the other two issues in financial impact.
Finally, I am ending our association with Hrezo Engineering on the Rte. 50 Gateway project. A review of the plans indicate that the project scope has gotten larger than what is appropriate. Therefore, after in-house discussion with Mike Clark, Mario Todd and Mel Davis, we have decided to handle the project in-house. Hrezo Engineering will be paid for the work they have done up to this point.
I would suggest that any further work with Hrezo Engineering be assigned in writing and be very task and objective oriented. I would also put "not to exceed numbers" into the contract to guard against the kind of problems we are having on the three jobs outlined above. I have asked for additional, subjective information regarding these three projects and as of yet I haven't been ...

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