Miami-Dade

Expressway Authority Loses Appeal of $61.3 Million In Judgments

Judge in 2018 found MDX acted in bad faith with toll collection contractor and ordered it to pay damages, attorneys' fees and interest

NBCUniversal, Inc.

The Miami-Dade Expressway Authority, already fighting for its life in a Tallahassee court battle with the state, was dealt another blow Thursday when a Miami appeals court largely upheld $61.3 million in judgments against MDX stemming from its botched toll collection system.

Electronic Transaction Consultants Corp. (ETC), hired by MDX to design and operate a new toll-by-plate collection and enforcement system, sued MDX in 2012, claiming the agency breached its contract by missing deadlines and failing to properly review its submissions. After MDX terminated the contract, ETC added a wrongful termination claim.

After a three-week trial in 2017, Miami-Dade Circuit Judge William Thomas sided with ETC, denied all of MDX’s claims, and handed the toll agency a bill of $53.3 million, for damages incurred by ETC and interest through the date of his ruling in January 2018.

Two years later, the interest -- accruing at 5.53 percent per year -- has added millions more to MDX's bill.

The judge also ordered MDX to pay $8 million in ETC's attroneys fees and costs.

The appeals court affirmed both judgments, while asking Thomas to recalculate how interest is accruing, which is not expected to substantially change the amount MDX owes.

READ THE APPELLATE DECISION HERE

In case of a loss in the appeals court, MDX set aside $66.5 million in its current budget as restricted funds, to pay for the judgments and interest, according to its public financial report.

In a statement to NBC 6, MDX executive director Javier Rodriguez said, “Obviously we are disappointed with the court’s determination, but we had set aside the funds knowing this could be a possibility. We are currently researching our legal options and will move forward accordingly. "

Lead attorney for ETC, Mike Piscitelli, told NBC6, "The company is pleased that the appeals court recognizes the court below found it was owed a substantial amount of money and we hope this is the end of the journey."

The latest legal blow comes as MDX is fighting for its life in Tallahassee, where legislators voted last year to dissolve MDX as part of a state takeover of the agency. A state judge in September blocked the takeover, finding the legislature and governor's actions were an unconstitutional infringement on Miami-Dade's home rule authority. The case -- and MDX -- remain in limbo as the state seeks a ruling to prohibit the judge's order from taking effect,.

For years, MDX insisted it was not at fault for the botched open road tolling system that began in 2010, a debacle the authority claims cost it millions in potential revenues.

Instead, it blamed ETC, claiming in court it misled MDX about its abilities and intentionally underbid the contract to design, develop, install and operate the toll enforcement system.

But Judge Thomas found MDX at fault, saying the agency "misled" bidders and "suppressed" key information, acting "in bad faith or dishonestly." On a key issue, the judge ruled, there was "very little presented by the defense witnesses" during the non-jury trial that he "can trust and believe."

"ETC was willing and able to perform its obligations under the contract, but was prevented from doing so by MDX," the judge found, adding MDX failed to follow the very deadlines and schedules it spelled out in the contract with ETC. "MDX did what it wanted to do, when it wanted to do it, without any regard for how its actions would impact ETC or each parties’ contractual obligations."

In addition to now being ordered to pay damages, interest, and both its and ETC’s legal fees and costs, MDX has already suffered a substantial financial impact from problems with the open-road tolling project, according to testimony from an MDX damages expert.

The inability to properly identify and bill non-SunPass transactions – through what’s called the toll-by-plate process – cost the agency more than $9 million in uncollected revenues from tolls and fees, according to the expert, Robert Stone, who testified he has billed MDX nearly $1 million for his work and testimony.

Unable to collect millions, the agency had to book "huge write-offs," of more than $4 million in lost revenues, and impose $4 million in cost reductions, according to trial testimony.

As NBC 6 first reported in 2014, vehicles without SunPass had been using the toll roads, but not paying tolls.

The agency was so late in sending out citations for deadbeat drivers, hearing officers began throwing out the citations because speedy-trial and statute of limitation deadlines had lapsed, testimony revealed.

"We were flying blind. We were in the dark," testified Steve Andriuk, MDX deputy executive director and director of toll operations. "I couldn’t tell if it was working."

But, in the end, the debacle was the fault of MDX and not its contractor, the judge found.

That’s in part because, when it sought bids for what turned out to be a $55 million project, MDX misled bidders by suppressing the number of vehicles that would use the toll roads without SunPass, the judge found.

Documents submitted to potential bidders showed MDX expected non-SunPass transactions would total only 6.4 percent of transactions, but the actual rate ranged from 22 percent to 25 percent, according to Thomas’ order.

"ETC had to process approximately 76 million more apparent violation transactions than stipulated in the contract," the judge stated, noting such a high volume "changed the entire nature of ETC’s operations."

Not only did MDX "mislead" bidders by "suppressing" the actual anticipated violation rate, Judge Thomas wrote, but its actions were "dishonest, capricious, or in bad faith."

"MDX knew that 6.4 percent was an insufficient rate of apparent violations and any argument to the contrary is simply not credible," he wrote in his order.

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