Minnesota Supreme Court to Hear Urgent Stormwater Fee Case

BREAKING: The Minnesota Supreme Court is set to hear an urgent legal dispute regarding stormwater utility fees imposed by the city of Duluth. The court’s decision to review this significant class-action lawsuit could impact up to 1,500 businesses seeking refunds dating back to 2015, potentially costing the city up to $14.85 million.

The lawsuit, initiated in September 2021 by Moline Machinery LLC and Glass Merchant Inc., which operates as Walsh Windows, alleges that Duluth has imposed excessive and inequitable fees for stormwater runoff. The plaintiffs claim they are unfairly overcharged compared to other properties, particularly multifamily housing developments, which could severely affect their financial stability.

In November 2024, Judge Eric Hylden ruled in favor of the city, stating that the utility fees were simply designed to break even and did not result in “unjust enrichment.” However, the Minnesota Court of Appeals revived the case last month, stating that there are substantial questions of fact that could lead to a jury or judge concluding that the city unjustly retains funds from these fees.

The stormwater fees are calculated based on the amount of impervious surface on properties, leading to varied charges among businesses. Moline Machinery claims it was overcharged between $28,818 and $32,569 annually, contributing to the overall alleged overpayment of $14.85 million for the entire class involved in the lawsuit.

Assistant City Attorney Elizabeth Sellers Tabor argues that the appellate court’s decision undermines past Supreme Court rulings and threatens municipal stormwater utility operations. Tabor stated, “Utilities are already struggling to meet financial demands from climate change and aging infrastructure,” emphasizing the potential for this case to have “detrimental consequences for Minnesota municipal utilities.”

In contrast, attorneys Shawn Raiter and J.D. Feriancek, representing the businesses, assert that the city’s billing practices lack fairness and transparency. They argue for a review to ensure equitable treatment across all property types, stating, “This court should grant review to protect against restricting the broad scope of the equitable unjust enrichment remedy.”

The League of Minnesota Cities has also been granted permission to file an amicus brief, highlighting the case’s potential statewide implications. Attorney Paul Merwin noted that “Cities of all sizes across the state engage in regulation and management of stormwater discharges,” and the court’s decision could significantly impact municipal funding for stormwater management programs.

As the Supreme Court prepares to hear this case, attorneys have filed a joint motion requesting the submission of written briefs through May 2024, following which oral arguments are expected to be scheduled. The outcome of this case could reshape how stormwater fees are assessed and the financial responsibilities of municipalities across Minnesota.

Stay tuned for further updates as this critical case unfolds, impacting the financial landscape for businesses and municipalities alike.