UPDATE: The Minnesota Supreme Court is poised to hear a critical legal battle over stormwater utility fees imposed by the city of Duluth. This urgent case, stemming from a class-action lawsuit initiated in September 2021, could potentially impact up to 1,500 businesses and cost the city millions.
The court’s decision comes after a three-judge panel from the Minnesota Court of Appeals revived the case in September, allowing for further review of claims that the city has unfairly overcharged businesses for stormwater runoff. Plaintiffs, including Moline Machinery LLC and Glass Merchant Inc. (doing business as Walsh Windows), argue that Duluth employs an inequitable system for calculating utility fees, which they believe has led to substantial overpayments since 2015.
According to the lawsuit, Moline alleges it was overcharged between $28,818 and $32,569 annually, contributing to a broader claim of $14.85 million in overpayments across the class. The stormwater fees are calculated based on the amount of impervious surface on properties, directly affecting business costs.
The Minnesota Supreme Court granted review to both the city and the plaintiffs following Judge Eric Hylden‘s November 2024 ruling, which had initially sided with the city. The judge found that the utility provider’s rates were merely designed to break even, not to profit.
However, the appellate court’s decision raised questions about the city’s potential unjust retention of funds, prompting further legal scrutiny. The plaintiffs argue that the current fee structure unfairly burdens them compared to other property types, including multifamily housing developments, which allegedly benefit from reduced fees.
“Cities of all sizes across the state engage in regulation and management of stormwater discharges, often as required by state and federal law,” stated attorney Paul Merwin, representing the League of Minnesota Cities, which seeks to file an amicus brief on behalf of municipalities across the state.
As the legal process unfolds, both sides are preparing for a series of written briefs and responses through May 2024, with oral arguments expected shortly thereafter. The outcome of this case may set a significant precedent for how municipalities across Minnesota handle stormwater fees, affecting their ability to fund essential management programs.
The city contends that the appellate court’s decision creates a new legal standard that contradicts past Supreme Court rulings. Assistant City Attorney Elizabeth Sellers Tabor emphasized that legislative authority grants municipalities control over stormwater utilities without a mechanism for refunds through the courts, warning of dire consequences for municipal utilities already struggling with climate change impacts.
The stakes are high as both sides prepare for a fight that could redefine municipal fee structures statewide. Stay tuned for further updates as this important case progresses through the legal system.
