Interest payments are mounting as the city continues a 20-year legal dispute with the Dedeaux family, most recently shelling out 71 percent of its BP oil-settlement fund — $2.7 million — to satisfy the latest jury verdict in the case.
“It was cash that was readily available to us,” said John Kelly, Gulfport’s chief administrative officer. “There’s no regulation on how you spend your settlement dollars. That is tied to quality of life in general. The city was hurt financially as a result of the oil spill — our sales taxes went down, all of that.”
Court records show the city still owes $3.7 million in interest on the payment for Dedeaux Utility Co. because the case dates back so far. The city is appealing the interest rate to the Mississippi Supreme Court. Meanwhile, interest on the $3.7 million in interest is running at a court-set rate of $787 a day.
The two sides were unable to settle on a value for the utility back in 1996, when the city filed a lawsuit to take the water and sewer company after annexation of the Orange Grove area. When the case went to trial in 2004, legal records show, the city valued the utility at $2.1 million. The Dedeauxs felt it was worth $9 million.
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To date, the city has paid more than $11.4 million for the company, which includes interest. If the interest rate on the current payment stands on appeal, the total paid for Dedeaux will be almost $15.2 million, excluding legal fees, court costs and fees to experts who have testified at trials.
Until recently, a private attorney was working on the case for the city. In-house counsel Jeff Bruni is handling the appeal.
“What we considered was the risk of the appeal was better for us than paying the actual judgment now,” Kelly said. “All of us went into this with our eyes wide open.”
‘The hardest part’
Both the city and the Dedeauxs say they want to settle the long-running dispute, but they can’t agree on an amount.
Matriarch Christine Dedeaux, who is 83 years old, wonders if she will live to see the case resolved. She has suffered two heart attacks, one during the third trial in 2013 and another recently. She has a pacemaker now.
She believes her family made a real contribution to what she calls “Gulfport city” by extending water and sewer service north of Interstate 10, eventually serving thousands of customers in the subdivisions that sprang up in the Orange Grove area. Dedeaux said her husband, Ike Dedeaux, extended utilities to the area back when government was unwilling to do so.
“They never said thank you,” she told the Sun Herald. “I think that’s the hardest part for me to swallow.”
The Dedeauxs appealed the first two jury verdicts in the eminent-domain case because they felt the values set were too low. Each time a jury considered the case, it placed a higher value on the utility. The third jury set the value at $8 million, an amount the Dedeauxs said they were willing to accept.
The city appealed the third verdict, but lost the appeal regarding the utility’s value. The Supreme Court did return the case to the special eminent-domain judge to set an interest rate.
Ike Dedeaux died in 2007 without seeing the case resolved. His widow thought the end was finally in sight. She said a council member even assured her that, after the judge set the interest rate, the case would be over.
“There’s not many cases that have been tried three times, and there’s certainly not many cases that have been appealed four times,” said the attorney for the Dedeauxs, Peter Abide of Biloxi. Abide noted the original attorney for the Dedeauxs, Harry Allen, has died, as has their expert appraiser.
Christine Dedeaux’s grandson, Gulfport real estate broker Warren Dedeaux, said in a written statement: “Gulfport chose to ignore our numerous attempts to discuss settlement over the past 20 years and instead pursued litigation.
“Gulfport’s strategy has only hurt us and the taxpayers because it cost the taxpayers 20 years of interest and legal fees, and it has cost us millions of dollars in unnecessary legal fees and federal tax consequences, which could have been avoided if we had been treated fairly from the beginning.”
Kelly said city leaders feel the interest rate the judge set — 8.14 percent on the original utility — is simply too high. The city paid 8 percent on two previous verdicts.
He said the City Council has been fully apprised of where the litigation stands and what the costs of the case have been. The administration and council discuss the case, including costs to the city, behind closed doors under the litigation exemption to the state Public Records Act.
Kelly said the council also has been informed of legal and expert fees. He said he would find out the total fees and get them to the Sun Herald by Monday afternoon.
Instead, he sent an email Tuesday, after the Sun Herald asked again for the information.
In the email, Kelly said: “After giving it more thought, I would much rather give you more information on our justification for fighting this case based on another utility case we settled. I really think this information will tell the story in its entirety. I am traveling the rest of the week but can have all this over to you by Monday or Tuesday of next week.”