Dearborn Co. Judge Denies DAC's Motion To Dismiss City Complaint

The City of Lawrenceburg filed a complaint against the DAC and its directors in April, claiming "suspicious spending" of DAC funds.

(Lawrenceburg, Ind.) – A Dearborn County judge has denied the Dearborn Adult Center's motion to dismiss a complaint filed by the City of Lawrenceburg. 

The City of Lawrenceburg filed a complaint against the Dearborn Adult Center, executive director Marie Edwards and assistant director Aaron Cook on April 21, claiming "suspicious spending" of DAC funds by Edwards and/or Cook that is seen as inconsistent with the organization's public-benefit operations and allegedly in breach of funding agreements that date back to 2016. 

The defendants filed a motion to dismiss the complaint on July 1, which led to a hearing in Dearborn County Superior Court on August 31.

After a month and a half of deliberations, Judge Sally McLaughlin denied the motion to dismiss following standards set by BloomBank v. United Fid. Bank F.S.B., which states:

"A motion to dismiss for failure to state a claim tests the legal sufficiency of the plaintiff's claim, not the facts supporting that claim." 

According to court documents, the City claims breach of contract and unjust enrichment against the DAC, Edwards, and Cook. 

Examples include payment of Edward's husband's phone bill and Cook's personal flights to Las Vegas, unpaid credit card balances, past-due bills and other questionable claims submitted by the DAC for payment or reimbursement. 

The City says it has paid claims submitted by the DAC on a claim-to-claim basis in 2020 and needs guidance on whether it must continue to do so. 

Therefore, the City requested declaratory judgement from the court declaring that the spending by the DAC, Edwards, and/or Cook constitutes a breach of its 2020 verbal agreement to provide payment of claims, and that the City is not obligated to continue paying claims for payment submitted by the DAC. 

The City is also asking the Court to enter judgement in its favor and award damages from the DAC's alleged breaches. 

The defendants argue that the City has failed to state a claim for relief under the Indiana Declaratory Judgement Act because it "does not seek a judgement to 'guide and protect' it with regard to some future acts. However, the Court noted that the City requested guidance as to whether it must provide any additional funding under its verbal agreement with the DAC for 2020. 

The Court added that its too early to tell if declaratory relief "will effectively solve the problem, whether it will serve a useful purpose, and whether or not another remedy is more effective or efficient." 

"Simply determining whether the City can recover breach of contract damages may not "more effectively" resolve the parties' dispute - especially considering the Defendants' claim that unjust enrichment damages are not available." 

The Defendants argue that the City has failed to state a claim for breach of contract against the DAC because the City did not allege that the DAC failed to provide activities and maintain an information center for senior citizens - which the Defendants claim is their only obligation under the Agreements - and any allegation that spending DAC money for the personal gain of directors, officers, and other private individuals constituting breach is "contradicted" by the Agreements. The Defendants argument was deemed misguided by the Court. 

The DAC also argued that the City cannot state a claim for breach of contract against Edwards or Cook because they were not parties to the Agreements except as corporate officers, and corporate officers are not generally personally liable for the obligations of the corporation. The Court found the Defendants to be correct, but the City alleged that Edwards and Cook used non-profit corporate funds to pay for personal expenses, which could entitle the City to recover misappropriated funds. 

“The factual allegations set out in the City’s Complaint are deemed true at this stage for purposes of deciding a motion to dismiss. For all the foregoing reasons, Defendants' Motion is denied in its entirety,” reads the order denying the motion to dismiss.

"On behalf of Dearborn Adult Center we would like to comment that both Judge McLaughlin and her decision have our highest respect. Having said that we will now continue to move forward," said Marie Edwards. 

City attorney Del Weldon provided the following comment:

"We are pleased that their motion to dismiss was denied.  We will continue to work to force Marie Edwards and Aaron Cook to provide records to explain the seemingly improper spending that made this lawsuit necessary.  A flight to Las Vegas and a cell phone for a family member is not what this money is for.  It should go to providing our local seniors with the very best services possible In order to enrich their lives.  That has always been our goal and that remains our goal moving forward."

A protective order was filed in Dearborn Superior Court on Wednesday. 

All parties have moved for the entry of a protective order governing the disclosure of certain specified documents and other information of confidential, financial or commercial nature in order to facilitate and expedite discovery and bring the proceedings to a just, speedy and efficient conclusion while protecting the confidentiality of information obtained from the parties. 

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UPDATE: City Of Lawrenceburg Files Complaint Against Dearborn Adult Center