BREAKING: The Minnesota Supreme Court has just agreed to hear a crucial case regarding the city of Duluth’s stormwater utility fees, an issue deeply affecting local businesses. The court’s decision, announced earlier today, follows a class-action lawsuit initiated in September 2021 by Moline Machinery LLC and Glass Merchant Inc., which operates as Walsh Windows.
This legal battle centers on allegations that Duluth imposes excessive and inequitable fees for stormwater runoff, potentially impacting up to 1,500 businesses and costing the city millions. The plaintiffs assert that they have been overcharged since 2015, claiming damages could reach an astounding $14.85 million.
In a prior ruling, Judge Eric Hylden sided with the city in November 2024, stating the utility fees are structured to merely break even, not generate profit. However, the Minnesota Court of Appeals revived the case in September, suggesting that a jury might find the city unjustly benefits from these allegedly excessive fees.
The controversy revolves around how fees are calculated based on the amount of impervious surface on properties. Business owners argue they are unfairly burdened compared to other property types, including multifamily housing units. Moline claims its annual overcharge amounts to between $28,818 and $32,569, highlighting discrepancies in how stormwater fees are assessed.
Duluth adjusted its stormwater fee structure in January 2024, following recommendations from an engineering firm, but the businesses are demanding compensation for past overpayments. The Supreme Court’s decision to review the matter comes amidst concerns from both sides regarding the implications of the appellate court’s findings.
Assistant City Attorney Elizabeth Sellers Tabor expressed that the appellate court’s ruling could set a concerning precedent, threatening municipal utilities statewide. She emphasized the financial strain on utilities due to climate change and aging infrastructure, warning that the decision could lead to a surge in unjust enrichment claims against municipalities across Minnesota.
Conversely, attorneys Shawn Raiter and J.D. Feriancek, representing the businesses, argue that the ruling misapplies ratemaking principles to municipal utility charges. They contend the courts should not impose a higher burden on plaintiffs simply due to the nature of the fees, which are intended to reimburse the city.
A significant development in this case is the court’s approval for the League of Minnesota Cities to file an amicus brief, indicating the statewide significance of the outcome. Attorney Paul Merwin noted that cities across Minnesota manage stormwater discharges as mandated by state and federal laws, and the court’s decision will affect their ability to fund these essential programs.
As the Supreme Court prepares for this pivotal review, a joint motion has been filed requesting a series of written briefs and responses to be submitted through May. Following this, oral arguments are expected to be scheduled, promising to shed light on this urgent issue affecting Duluth and potentially cities across the state.
Stay tuned for updates on this developing story as it unfolds, and share your thoughts on the implications for local businesses and municipal management.
