Minnesota Supreme Court to Rule on Duluth Stormwater Fees Case

BREAKING: The Minnesota Supreme Court is set to hear a pivotal case involving stormwater utility fees imposed by the city of Duluth. This urgent legal battle, which began with a class-action lawsuit initiated in September 2021 by Moline Machinery LLC and Glass Merchant Inc. (doing business as Walsh Windows), could have financial implications for as many as 1,500 businesses and cost the city millions.

The court’s decision comes after the Minnesota Court of Appeals revived the case in September 2023, challenging a previous ruling that favored the city. A three-judge panel found that there were significant questions regarding whether the city is unjustly retaining benefits from excessive stormwater fees. The plaintiffs claim they have been overcharged, seeking refunds that could total a staggering $14.85 million dating back to 2015.

At the heart of the dispute is how Duluth assesses its stormwater utility fees based on the amount of impervious surface on properties. Businesses argue that they are unfairly burdened by these fees compared to other property types, including multifamily housing units. They allege that the city has provided special discounts to certain properties, leading to substantial revenue losses that are compensated by overcharging others.

In a previous ruling, Judge Eric Hylden sided with the city in November 2024, stating that the utility’s rates were designed to break even, and not for profit. However, the appellate court disagreed, indicating that the case required further scrutiny due to potential unjust enrichment claims.

As the Supreme Court prepares to review the case, both sides are gearing up for a battle that could redefine municipal utility fee structures across Minnesota. The city argues that such claims could undermine the financial stability of local utilities, which are already grappling with the impacts of climate change and aging infrastructure.

“The Court of Appeals’ decision has detrimental consequences for Minnesota municipal utilities,”

said Assistant City Attorney Elizabeth Sellers Tabor, emphasizing the need for municipalities to manage stormwater effectively.

Conversely, attorneys for the businesses, Shawn Raiter and J.D. Feriancek, contend that the city’s fee system is flawed and that the courts should not impose a higher standard on plaintiffs merely because the fees are purportedly used to service the city.

“This court should grant review to protect against restricting the broad scope of the equitable unjust enrichment remedy,”

they argued.

The League of Minnesota Cities has also expressed interest in the case, filing an amicus brief to assert that the outcome will affect cities statewide in their ability to fund stormwater management programs. Attorney Paul Merwin stated, “A decision of this court will impact the abilities of cities to fund stormwater management programs.”

As the legal proceedings unfold, the Supreme Court has scheduled a series of written briefs and responses to be filed through May 2024, with oral arguments anticipated soon thereafter. The outcome of this case holds significant implications not only for Duluth but for municipalities across Minnesota facing similar challenges with stormwater utility fees.

Stay tuned as this story develops, and share your thoughts on how this ruling could affect local businesses and municipal regulations across the state.