UPDATE: The Minnesota Supreme Court has just announced it will hear a pivotal legal case concerning stormwater utility fees imposed by the city of Duluth. This urgent review follows a class-action lawsuit initiated in September 2021 by Moline Machinery LLC and Glass Merchant Inc., operating as Walsh Windows, that claims the city has overcharged up to 1,500 businesses since 2015.
The stakes are high: the businesses are seeking refunds that could total up to $14.85 million, a figure that could significantly impact the city’s finances. Judge Eric Hylden had previously ruled in November 2024, stating that Duluth’s utility rates were designed to break even, not to generate profit. However, the Minnesota Court of Appeals revived the case in September, suggesting that a jury may find merit in claims of “unjust enrichment” due to excessive fees.
The dispute centers on how stormwater fees are calculated based on the amount of impervious surfaces—like buildings and pavement—that shed runoff into Duluth’s storm sewer system. Plaintiffs argue that the fee system is inequitable, disproportionately burdening businesses compared to other property types, such as multifamily housing developments. They claim that the city has granted discounts to certain properties, which results in higher charges for others.
For instance, Moline asserts it was overcharged between $28,818 and $32,569 annually. The lawsuit alleges widespread overbilling, with a combined figure of $14.85 million in potential refunds for the affected businesses.
In January 2024, the city adjusted its stormwater fee calculations, but businesses are adamant they deserve compensation for previous overpayments. The Supreme Court’s acceptance of petitions from both sides indicates a critical legal battle ahead.
Assistant City Attorney Elizabeth Sellers Tabor argues that the appellate court’s decision sets a dangerous precedent, compromising the financial viability of municipal utilities already strained by climate change and aging infrastructure. “The Court of Appeals’ decision will have detrimental consequences for Minnesota municipal utilities,” Tabor stated, emphasizing the lack of mechanisms for refunding these fees.
On the other side, attorneys Shawn Raiter and J.D. Feriancek assert that the court must protect against unjust enrichment claims that could disrupt municipal operations. They urge the Supreme Court to clarify the standards for utility charges and prevent excessive legal burdens on plaintiffs.
Additionally, the League of Minnesota Cities has been granted permission to file an amicus brief, highlighting that the outcome of this case could influence stormwater management across the state. Attorney Paul Merwin noted, “A decision of this court will impact the abilities of cities to fund stormwater management programs.”
Written briefs are expected to be submitted through May, and the Supreme Court is anticipated to schedule oral arguments shortly thereafter. As this case unfolds, it will be crucial for businesses and city officials alike to closely monitor developments that could reshape stormwater fee structures across Minnesota.
Stay tuned for updates as this significant legal battle progresses, impacting not only Duluth but potentially municipalities statewide.
