Skip to main content

Ohio Supreme Court: Developer may be entitled to prejudgment interest from port authority

Dan Trevas, Court News Ohio

A Cincinnati area port authority is subject to a state law that directs a party who breached a contract to pay an additional sum for delaying payment while the matter is disputed in court, the Supreme Court of Ohio ruled.

In a 5-2 decision, the Supreme Court determined that the Port of Greater Cincinnati Development Authority may be required to pay nearly $350,000 in “prejudgment interest” to a developer working with the port authority on upgrading Cincinnati’s downtown convention center.

The Hamilton County Common Pleas Court ruled in 2021 that the Port breached its contract with development company Vandercar regarding the purchase and demolition of the Millennium Hotel in Cincinnati. As part of the legal dispute, Vandercar sought prejudgment interest as it awaited payment from the Port. The trial court and the First District Court of Appeals ruled that the Port was immune from such penalties as prejudgment interest.

Writing for the Court majority, Justice Patrick F. Fischer stated the law that created the Port states that “no port authority is immune from liability” derived from the exercise of its duties. And the state law that provides a party prejudgment interest for breach of contract provides no exception for a port authority, he wrote. The Court reversed the First District and remanded the case to the trial court for further proceedings.

Chief Justice Sharon L. Kennedy and Justices R. Patrick DeWine, Michael P. Donnelly, and Jennifer Brunner joined Justice Fischer’s opinion.

In a dissenting opinion, Justice Melody Stewart wrote that the majority opinion overstates the meaning of the phrase “no port authority is immune from liability” because a 1985 state law dealing with tort actions provides a significant amount of immunity to all political subdivisions in Ohio, including port authorities. She concluded that the lower courts correctly ruled that Vandercar was not entitled to prejudgment interest based on the absence of a statutory or contractual provision allowing it.

Twelfth District Court of Appeals Judge Mike Powell, sitting for Justice Joseph T. Deters, joined Justice Stewart’s dissent.

Vandercar agreed to purchase the blighted Millennium Hotel for $36 million. The developer then agreed to assign the ownership rights to the hotel to the Port. Under an agreement between the Port and Vandercar, the developer would receive a $5 million development fee if the Port issued bonds to redevelop the hotel site. The Port acquired the hotel and issued bonds but claimed the bonds were not for redevelopment but for a separate phase of developing the convention center area.

Vandercar filed a breach of contract lawsuit in early 2020 against the Port for failing to pay the redevelopment fee. Both sides requested summary judgment in their favor. In addition to requesting its $5 million fee, Vandercar asked the trial court to provide prejudgment interest, arguing it was entitled to the extra award under R.C. 1343.03.

More than a year later, the trial court ruled in November 2021 that Vandercar was entitled to the redevelopment fee. The court denied the $348,528 in prejudgment interest Vandercar sought to account for the time between filing the lawsuit and the date of the trial court’s judgment in its favor. The trial court ruled that the Port was an “arm/instrumentality of the state” and was exempt from paying prejudgment interest.

Both parties appealed to the First District, which affirmed the trial court’s breach of contract ruling in favor of Vandercar while also upholding the denial of prejudgment interest. Vandercar appealed to the Supreme Court, which agreed to hear the case.

Justice Fischer explained the dispute was resolved by interpreting the state law that created port authorities and another law that governs interest payments when lawsuits delay the resolution of disputes.

R.C. Chapter 4582 permits local governments to create port authorities as separate governmental bodies, and the law grants these authorities the power to “sue and be sued.” The provision under which the Port was established, R.C. 4582.22(A), recognizes the powers of port authorities as “essential government functions of this state” but adds, “no port authority is immune from liability by reason thereof.” The opinion explained that port authority directors and members of its governing board are personally immune from lawsuits for performing their official port authority duties, but the law does not provide any exceptions that would make the port authority itself immune from any type of lawsuit.

Under R.C. 1343.03, parties are entitled to prejudgment interest in certain situations, such as Vandercar’s, when a creditor receives a judgment for the payment due under an unpaid contract. The opinion noted that R.C. 1343.03 contains two exceptions, including one that exempts state government from paying prejudgment interest in lawsuits brought against it in the Court of Claims. Political subdivisions, like the port authority, are not considered state government under this law, and it does not grant immunity to a port authority being sued in common pleas court, the Court stated.

The opinion noted that had state lawmakers intended to give the same protection that the state receives when it is sued, the legislature could have specified that in R.C. 1343.03. The Court stated that it interprets statutes under a rule that when one or more items are expressed in a law, then those not identified in the law are excluded.

When the law creating the port authority is read together with the law governing the payment of interest, there is no provision that protects the Port against an order to pay prejudgment interest, the opinion concluded.

The Port asked the Court to apply the 1988 Supreme Court decision in Beifuss v. Westerville Bd. of Edn. In that case, the Court held that the board of education did not have to pay prejudgment interest on an award of back pay to a school employee. The Port argued that in Beifuss, the board was deemed to be a government body with the capability to sue and be sued and to perform essential governmental functions. Port authorities and school boards should be treated the same under Beifuss and should be exempt from paying interest, the Port argued.

The Court noted that the Beifuss rule has only been applied two times in Supreme Court cases since 1988, and both pertained to the narrow area of lawsuits regarding backpay awards to school employees. The Court rejected the Port’s argument, noting one key difference between port authorities and school boards. The port authority law states that port authorities do not have any immunity related to their essential government functions, the opinion noted, but the law establishing school boards, R.C. 3313.17, does not have any provision similarly waiving board immunity.

The Court ruled that the Court should return to its position before the Beifuss decision and consider government bodies to be the same as private parties in civil lawsuits unless a state law explicitly provides the government body with an exemption.

In her dissent, Justice Stewart noted that, after a series of Supreme Court cases questioning the rights of local government to claim the same immunity from lawsuits as state government, the General Assembly responded in 1985 by enacting R.C. Chapter 2744 to provide local governments and other public entities, including port authorities, with immunity from tort lawsuits. If port authorities have immunity from some lawsuits, then the Court majority misrepresents the provision of the port authority law in R.C. 4582.22(A), which addresses immunity.

The dissent also maintained that the majority failed to present any compelling reason why the Beifuss decision should not apply to the port authorities, which are defined as political subdivisions similar to other local government branches or why, if Beifuss does not apply to this case as the majority maintained, a separate decision that predated Beifuss that also addressed school boards should apply instead.

Justice Stewart wrote that in the Beifuss decision, the Court recognized it was well established that absent a statute or a promise to pay it, interest could not be charged against the state for the delay of payment, and that rule should extend to other entities that acted as state entities. The dissent clarified that the port authority was not immune from liability for the breach of contract lawsuit Vandercar filed. However, the Beifuss decision limited the ability of the developer to collect prejudgment interest here, given that a port authority is an entity created and limited by the General Assembly for the welfare of the state, the dissent concluded.

Publisher's note: A free press is critical to having well-informed voters and citizens. While some news organizations opt for paid websites or costly paywalls, The Highland County Press has maintained a free newspaper and website for the last 25 years for our community. If you would like to contribute to this service, it would be greatly appreciated. Donations may be made to: The Highland County Press, P.O. Box 849, Hillsboro, Ohio 45133. Please include "for website" on the memo line.