Federal judge dismisses $31M judgment against DPS

Detroit — A federal judge won’t need to enforce a $31 million judgment against Detroit Public Schools after the district and its contractor reached a slightly smaller settlement agreement.

Instead, DPS will pay $28 million to Sodexo Management, a company hired in 2011 for physical plant operations, after attorneys for both sides agreed to the settlement. As result, U.S. District Judge Mark Goldsmith dismissed the larger judgment on Thursday, closing the case.

According to the district’s proposal, it will make payments to Sodexo of $16 million in August, $2 million in February and in April and $8 million in August 2018, for a total of $28 million.

According to board documents, the settlement will eliminate more than $3 million in interest in the case, which stood as a $31 million judgment.

Goldsmith and an arbitrator had both ordered DPS to pay Sodexo, but the district fought making the payment since August 2016.

The district hired Sodexo on a five-year, $43.5 million contract to provide custodial, building repair, maintenance, engineering and grounds services through seven subcontractors. By late 2011, the district had fallen behind on payments, court records show.

DPS originally owed $23 million in outstanding invoices to Sodexo and owed an additional $8 million in contractual interest.

In 2015, an arbitrator ordered the district to pay Sodexo. The delay in the case cost taxpayers more than $7,500 per day in interest.

Sodexo attorney Timothy J. Fazio was not immediately available for comment Friday.

According to attorneys for Sodexo, DPS was supposed to spend $24 million authorized and earmarked by Michigan lawmakers on the court debt but instead used it to pay other bills when the district changed to the Detroit Public Schools Community District, or DPSCD. DPS remains to pay off the district’s debt. The original lawsuit was against DPS and does not involve DPSCD.

Attorneys for Sodexo said in court Aug. 2 that Michigan Department of Treasury emails show that at least $24 million of the $150 million emergency loan authorized by Michigan lawmakers for Detroit’s school district in 2016 was specifically allocated to satisfy the court judgment.

jchambers@detroitnews.com