UPDATE: The Minnesota Supreme Court has just announced it will hear a high-stakes legal battle over stormwater utility fees imposed by Duluth. This urgent case, which could cost the city up to $14.85 million, stems from a class-action lawsuit initiated in September 2021 by Moline Machinery LLC and Glass Merchant Inc., doing business as Walsh Windows.
The businesses claim Duluth’s fee structure is inequitable, alleging they have been overcharged for years. They seek refunds for up to 1,500 businesses dating back to 2015. The matter is critical for local companies that assert they bear an unfair burden compared to other property types, including multifamily housing.
In November 2024, Judge Eric Hylden ruled in favor of the city, stating the utility provider’s rates were designed merely to break even. However, the Minnesota Court of Appeals revived the case in September, indicating significant questions remain that could lead to a jury’s evaluation of potential “unjust enrichment” by the city.
The controversy centers on how businesses are charged for stormwater runoff based on the amount of impervious surfaces on their properties. Moline alleges it was overcharged between $28,818 and $32,569 annually, contributing to the overall $14.85 million in claimed overpayments.
In response to the lawsuit, Duluth adjusted its stormwater fee calculation in January 2024, following recommendations from an engineering firm. However, businesses are pushing for compensation for what they view as excessive charges prior to this adjustment.
Assistant City Attorney Elizabeth Sellers Tabor argues that the appellate court’s ruling contradicts established legal precedents and jeopardizes municipal utilities statewide. She maintains that legislative authority allows cities to regulate stormwater without refund mechanisms, stressing the financial strains municipalities face due to climate change and aging infrastructure.
Meanwhile, attorneys Shawn Raiter and J.D. Feriancek, representing the plaintiffs, assert the appellate court’s decision misapplies legal standards governing municipal utility charges. They contend that the Supreme Court must clarify the scope of equitable unjust enrichment claims in this instance.
In addition, the League of Minnesota Cities has been granted permission to submit an amicus brief, emphasizing the broader implications for stormwater management across the state. Attorney Paul Merwin highlighted the essential role of utility fees in funding mandatory stormwater programs, stating that a ruling could significantly affect cities’ financial capabilities.
The Supreme Court has ordered a series of written briefs and responses to be submitted through May, with oral arguments expected to follow. This case is poised to set a significant precedent for how municipalities across Minnesota handle stormwater utility charges, making it a crucial moment for both local governments and businesses.
Stay tuned as this developing story unfolds, with implications that may resonate throughout the state and beyond.
