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Middletown first hired lawyer to look into Suez lease in 2017, didn't OK it publicly until 2018

By Dan Miller


Posted 5/16/18

Middletown Borough Council concerns over the 50-year lease of the borough’s water and sewer systems to Suez and Middletown Water Joint Venture LLC date to at least March 2017, when council …

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Middletown first hired lawyer to look into Suez lease in 2017, didn't OK it publicly until 2018

staff photo by dan miller

Middletown Borough Council concerns over the 50-year lease of the borough’s water and sewer systems to Suez and Middletown Water Joint Venture LLC date to at least March 2017, when council hired a Chicago-based law firm to provide “advice” on the lease.

But it wasn’t until council’s April 17, 2018 meeting — nearly 13 months later — when the borough disclosed that council had hired Katten Muchin Rosenman LLP, even though by that time the firm had not worked for the borough for nearly a year.

Borough Manager Ken Klinepeter disclosed during the April 17 meeting that council had previously approved an invoice from Katten, and that according to the borough solicitor this met the legal requirement of council ratifying hiring the firm.

According to an April 19 email from Klinepeter to the Press & Journal, the solicitor advised council ratify the hiring a “second” time through the public vote that was taken April 17.

Earlier on April 17, before the council meeting, the Press & Journal submitted a Right-to-Know request to the borough for information regarding the borough’s engagement of Katten Muchin Rosenman, after the Press & Journal had learned of the borough’s involvement with the firm.

Council’s April 17 vote to ratify hiring Katten was approved 4-0, with councilors Jenny Miller and Angela Lloyd abstaining as neither were in office when Katten worked for the borough in 2017.

According to the April 19 email from Klinepeter, council authorized hiring Katten during a March 13, 2017 executive session “in response to a potential litigation issue.”

Klinepeter referred to another email saying council had planned to publicly ratify hiring Katten at its next regular meeting on March 21, but “we cannot find documentation to support that this happened,” Klinepeter told the Press & Journal.

According to a March 16, 2017, engagement letter from Katten to the borough obtained through the Right-to-Know request, Katten attorney Lewis Greenbaum “participated as the lead attorney in the City of Allentown water and sewer system concession transaction.”

The water and sewer lease proposal that Middletown Borough Council and the borough’s former water authority approved in 2014 was modeled on the Allentown transaction.

Klinepeter immediately after the April 17 vote said that council hired the Katten firm “to look at what we were doing and give us a second opinion” regarding the lease.

According to the Katten engagement letter, Greenbaum’s hourly rate was $815 per hour. However, the firm said its “total fee under this engagement will not exceed $15,000.”

The borough received an invoice from Katten for $11,915.74 for legal services rendered through April 30, 2017. Borough council subsequently approved the invoice.

Also during the April 17, 2018 meeting, council publicly ratified hiring Dilworth Paxson, another law firm related to the water and sewer lease issue. Council had “unanimously concurred” to hire the firm during a March 6 closed-door executive session, according to Klinepeter.

On March 8 council President Damon Suglia — who was not present at the March 6 executive session — signed an engagement letter to hire Dilworth Paxson.

On April 16, Dilworth Paxson on behalf of the borough filed a lawsuit in Dauphin County Court seeking to block Suez from imposing an 11.5 percent surcharge being added to Middletown water and sewer bills.

According to Melissa Melewsky, media law counsel for the Pennsylvania NewsMedia Association, council’s failure to publicly vote on hiring Dilworth Paxson might run afoul of the Sunshine Act, the state law governing open meetings.

However, council by publicly approving hiring Dilworth Paxson during its April 17 meeting “cured” that potential violation, according to Melewsky.

“It’s a do-over, basically,” she said of the April 17 vote, absolving council and the borough of wrongdoing.

Asked on April 17 why council did not vote in public immediately after the March 6 executive session to hire Dilworth Paxson, Suglia responded, “I wasn’t here for that.”

Klinepeter took responsibility, saying he was at the March 6 executive session and intended council ratify hiring Dilworth Paxson at its next public meeting.

But Klinepeter said that didn’t happen because he had to be out of the office on a personal matter.

Typically, council does not ratify hiring decisions “after the fact” but felt it had to this time because the borough had received “a demand for arbitration” from Suez and the joint venture regarding the lease dispute, according to Klinepeter.

“We were in a crunch — we had to get somebody on board. We had like three or four weeks to answer the statement,” he said. “We had to get this group up to speed fast, so the engagement preceded the vote. It isn’t normally how you would do it.”

According to the March 8 engagement letter from Dilworth Paxson attorney Marc A. Feller, the borough is paying Dilworth Paxson “a blended hourly rate of $400 for our attorneys.”

“This blended rate represents a substantial discount of our regular rate for partners” of up to $605 an hour, the letter says.

Council during its May 1 meeting approved the first invoice received from Dilworth Paxson, for $27,448.50 to cover legal services provided to the borough in March.

Council also during the April 17 meeting hired cb3 Solutions LLC of Bellefonte, as a consulting engineering firm related to the lease lawsuit.

The borough will pay cb3 Solutions $105 an hour for consulting, and $180 an hour for expert witness testimony, Klinepeter told the Press & Journal.