The Iowa Supreme Court sided with the University of Iowa Stead Family Children’s
Hospital Friday in its decision to reverse a $12.7 million judgment to Modern Piping for its claim the hospital violated its contract with the company.

Based in Cedar Rapids, Modern Piping was contracted in 2013 as the mechanical contractor for work on the fourteen-story Children’s Hospital near Kinnick Stadium. Modern Piping was also contracted for an $11 million contract to do replacements on the Hancher Auditorium following the 2008 flood.

“We believe Modern Piping led the district court astray when it convinced the court that its claim for wrongful injunction entitled it to recover restitution in the form of a broad-reaching unjust enrichment claim,” Iowa Supreme Court Justice Dana Oxley stated in the opinion. 

After Modern Piping filed for an arbitrator in February 2015, the American Arbitration Association claimed the delays to construction on Hancher Auditorium cost the company $1.6 million. 

The university challenged the association’s decision but was ordered to arbitrate on Feb. 16, 2016, after Modern Piping brought a claim to the Iowa district court. On March 23, 2016, Modern Piping amended its claim with the American Arbitration Association to include disputes with the Children’s Hospital construction. 

The disputes totaled over $8 million stemming from construction delays, according to the opinion filed by the Iowa Supreme Court.

The university filed an injunction with the district court on April 1, 2016, against the American Arbitration Association to prevent adding the Children’s Hospital claims to the Hancher arbitration proceedings. 

The UI claimed adding the Children’s Hospital dispute to the Hancher arbitration would direct resources away from the completion of the Children’s Hospital.

RELATED: UI, Modern Piping legal dispute awaits Iowa Supreme Court ruling

While the injunction was active, the university began preparing and furnishing a portion of the Children’s Hospital in June 2016 while construction was still taking place. This allowed the university to start accepting patients eight months in advance. 

On Jan. 10, 2017, the district court approved a motion by Modern Piping to dissolve the injunction on the basis that the American Arbitration Association, which was the only named defendant in the injunction claim, was protected by arbitral immunity. 

Modern Piping claimed the university owed profits it obtained during the eight months the Children’s Hospital was operating, which totaled over $12 million, because the injunction was found invalid. The American Arbitration Association ruled in Modern Pipings’ favor on March 5, 2018. 

The Iowa Supreme Court found that Modern Piping should not be entitled to the profits of the business occupying the building it is constructing. Instead, Modern Piping was awarded $21,785 for the costs and fees for getting the injunction by the university dissolved in district court.