The Billings City Council has voted unanimously to approve settling the contentious franchise fees lawsuit that has lingered in the courts for nearly five years.
The class action suit, pitting around 35,000 residents against the city over millions collected in utility fees, was settled in January. A judge in the case ruled the fees had been collected illegally and barred the city from ever imposing the fees again.
As part of the settlement, the city agreed to pay $3.6 million to the class. In addition, the city has also paid the private Billings law firm Moulton Bellingham more than $960,000 so far to represent the city in the case.
Of the $3.6 million settlement amount, as much as $925,000 will go to the plaintiffs’ attorneys, and $130,000 will go to a private court administer to notify classmates. The remainder, just over $2.5 million, will be split evenly among the 35,000 or so plaintiffs — around $70 each. For most plaintiffs, the payment will come in the form a reduced utility bill sometime early in 2024.
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The settlement now moves back to the courts in November for a judge’s final approval.
A sore point throughout the case has been that even in winning, city residents lose. Because the settlement will be paid for by taxpayers, city residents are essentially paying themselves.
The cost of paying for the settlement hasn't been budgeted by the city but will come out of the general fund; the settlement cannot be funded by the water, wastewater, or solid waste departments because revenue from those departments must be used for those services.
Another sore point has been the suggestion from plaintiffs’ attorney Matthew Monforton that the case could have been settled in March of 2018 for $20,000.
City officials have bristled at that suggestion, but in another ironic twist in the case have been unable until now to rebut it. Because parties in a lawsuit generally can’t address each other, the city couldn’t talk about it publicly because the public were the plaintiffs.
In a memo sent Monday to the City Council, city attorney Gina Dahl said the $20,000 offer was made before any legal complaint had been filed, and wouldn’t have protected the city from other lawsuits related to the illegal fees.
“There was no class action so the ‘settlement’ would not have been binding upon the vast majority of people and entities who paid the franchise fees,” Dahl wrote the Council.
On May 14, 2018, the City Council at the time voted to halt the fees. Two days later, a group of Billings residents filed a class action lawsuit seeking more than $100 million.
That’s yet another sore point for the city. City officials have complained the suit came after the fees were already eliminated.
“The city actually formally abolished the franchise fees two days before this lawsuit was filed. So, we’ve spent nearly five years litigating something that does not exist,” Moulton Bellingham attorney Doug James told the Council Monday.
The city had been warned over the years, however. State courts had ruled before that the city was beyond its authority in charging some fees, according to the lawsuit.
When Billings Mayor Bill Cole, an attorney, was campaigning in 2017, he said the city “had a bad track record in the Montana Supreme Court on a lot of fees that have been determined to be taxes and that go beyond their statutory authority.” The city has lost “about four different lawsuits on that question over time,” he was quoted in court records as saying. Cole suggested the city may have become overly creative in generating new revenue streams because it had “bucked up against the mill levy cap.”
Former mayor Chuck Tooley served on the City Council from 1988 to 1993 and then as mayor from 1996 to 2005. He insisted in a court affidavit that when the City Council adopted the franchise fees in 1992, “they acted in good faith and believed the fees were legal.
“I would not have supported the adoption of franchise fees if I believed that they were illegal or if I believed that the city did not have authority to adopt the fees,” Tooley testified.
James, the city’s outside counsel, on Monday described the case as extraordinarily complicated. Notifying the thousands of class members and current utility ratepayers has been tricky, partly because many are hard to identify and locate. The city doesn’t have a master list of all utility payers.
“The city has changed a lot since the suit was filed,” James said. “People have died, they’ve married, they've divorced, changed names, moved to the city, moved out, moved within the city.”
That challenge was compounded recently when the private court administrator sent thousands of notifications to the wrong addresses. At its own expense, the administrator has since renotified potential class members.
Residents with questions are encouraged to call the class administrator at 833-513-0862 or by mail at PO Box 25199, Santa Ana, CA 92799; or contact class counsel Matthew Monforton by phone at 406-570-2949, by mail at Monforton Law Offices, P.C., 40 Spanish Peak Drive, Suite 101, Bozeman, Montana 59718, or by e-mail at ClassCounselMonforton@mail.com. The Detailed Notice describing the Settlement and other court documents is available online at www.CityofBillingsFranchiseFeesSettlement.com.
“We’re grateful to get this resolved, there have been formal and informal attempts to settle this by elected officials and administration for more than four years,” said Billings City Administrator Chris Kukulski in a statement. “Now, we can focus our time and attention on opportunities for the community.”