UPDATE: The Minnesota Supreme Court has just announced it will hear a critical legal dispute concerning stormwater utility fees imposed by the city of Duluth. This urgent case, which originated from a class-action lawsuit filed in September 2021 by Moline Machinery LLC and Glass Merchant Inc. (operating as Walsh Windows), could potentially cost the city upwards of $14.85 million in refunds.
The legal battle centers on claims that Duluth’s fee structure for stormwater runoff is inequitable, with businesses alleging they are overcharged compared to other properties, particularly multifamily housing developments. Moline alleges it faced annual overcharges between $28,818 and $32,569, asserting that the city has unfairly benefited from excessive fees.
In November 2024, Judge Eric Hylden ruled in favor of the city, stating there was no “unjust enrichment” as the utility fees were designed merely to break even. However, the case was revived by the Minnesota Court of Appeals in September, which found sufficient grounds for further review, suggesting that the city may unjustly retain benefits from the contested fees.
The stormwater fee system calculates charges based on the property’s impervious surface area—a formula that has drawn criticism. Businesses argue that the city has provided discounts to certain properties while compensating by overcharging others, creating an unfair financial burden.
The Supreme Court’s decision to take on this case comes as the city attempted to adjust its fee structure in January 2024 following recommendations from an engineering consulting firm. The businesses are now demanding compensation for past overpayments dating back to 2015.
Assistant City Attorney Elizabeth Sellers Tabor has expressed concerns that the appellate court’s decision could set a new precedent that undermines the authority of municipalities to regulate stormwater utilities. She emphasized that the current financial pressures on utilities, exacerbated by climate change and aging infrastructure, make this case especially impactful.
In contrast, attorneys Shawn Raiter and J.D. Feriancek, representing the plaintiffs, argue that the court must protect against limiting equitable remedies for unjust enrichment. They contend that existing legal standards should not require plaintiffs to meet a higher burden simply because the fees are used for municipal reimbursements.
The League of Minnesota Cities has also been permitted to file an amicus brief, highlighting the statewide significance of the case. Attorney Paul Merwin pointed out that cities across Minnesota manage stormwater discharges and rely on utility fees to fund these essential programs.
As the Minnesota Supreme Court prepares to hear arguments, local businesses and city officials alike are bracing for a decision that could reshape stormwater management practices across the state. The court has ordered a series of written briefs and responses to be submitted through May 2025, with oral arguments expected to follow.
This developing situation not only impacts Duluth but could set a precedent for stormwater management across Minnesota, making it a critical issue for municipalities and businesses alike. Stay tuned for updates on this urgent case as it unfolds.
