Judge sides with Duluth in stormwater case – Duluth News Tribune

DULUTH – City officials received welcome news Wednesday when District Court Judge Eric Hylden ruled to dismiss a class action lawsuit against Duluth, claiming stormwater utility fees placed an unfair financial burden on commercial property owners.

The

case was brought by Moline Manufacturing LLC and Glass Merchant Inc.,

doing business as Walsh Windows, in September 2021. Plaintiffs’ attorneys alleged that up to 1,500 companies should receive refunds for claims dating back to 2015. If they prevailed, Duluth could have been on the hook for millions of dollars .

“I am very, very disappointed,” Gary Moline, executive chairman of Moline Manufacturing, told the News Tribune on Wednesday. As for the possibility of appealing the decision, Moline said his team is still considering its options.

City officials declined to comment on the case until the lawsuit was fully resolved.

Even though the city appears to have had the upper hand in this latest legal round,

defending oneself has proven to be an expensive undertaking,

with more than $700,000 spent between a Twin Cities law firm, Greene Espel PLPP, and an accounting consultant, HKA Global LLC.

Hylden granted Duluth’s motion for summary judgment, ruling that the city had not wrongfully enriched itself with its stormwater rate structure.

That rate system is based on an “Equivalent Residential Unit” or ERU calculation, intended to reflect the average amount of impervious surface area of ​​a home in Duluth. In 1998, the ERU was determined to be 1,708 square feet. Businesses were billed based on the comparable number of ERUs located on their properties, as calculated by taking the total number of square meters of impervious surface they have and dividing it by 1,708.

The city’s ERU value was based on single-family homes and rental properties.

In January 2024, the city adjusted its ERU value to 3,099 square meters on the recommendation of an engineering consultancy, SEH. Moline believes this is a small victory, but not one that will help local businesses recover from past over-costs.

In his decision, Hylden wrote: “This is the crux of the matter: whether the City of Duluth’s methodology for calculating the ERU base value is just and equitable.”

Ultimately, Hylden determined that plaintiffs’ claims that the city was guilty of “unjust enrichment” were hollow because stormwater utility rates were simply designed to “break even” rather than attempt to turn a profit .

Moline said he respects the court’s authority, “but it doesn’t solve anything.”

“This is still an extremely expensive place to do business,” he said. “It has the highest stormwater utility rates in the area, and unless you get special favors, you’re paying to play here. I don’t know why companies would set up shop here with something like that looming.”

Peter Passi covers city and county government for the Duluth News Tribune. He joined the newspaper in April 2000, initially as a business reporter, but has worked in various places over the years.