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Motions and attorney fees pile up in lawsuit that could cost Billings taxpayers millions
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Motions and attorney fees pile up in lawsuit that could cost Billings taxpayers millions

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Billings waste water treatment plant

The Billings wastewater treatment plant. Residents are suing the city seeking a refund and the elimination of franchise fees the city used to charge for water, sewer and garbage service.

Make that seven motions now filed in a lingering class action lawsuit that has attorneys on all sides blaming each other for dragging the case out for nearly three years.

Caught in the middle are Billings taxpayers who have sued the city seeking a rebate for some of the estimated $50 million in fees they say were illegally collected over decades.

Taxpayers are in a double bind because win or lose the suit they will have to pay the taxpayer-funded city’s rebate, estimated at $25 million, and all the attorneys’ fees, a nearly $1.5 million bill that continues to rise as the case drags on.

In September, Billings attorney John Heenan; along with Andrew Billstein, a tax attorney; and Jacob Troyer, an area business owner, petitioned the court to take over the residents’ case, saying it had gone on too long. The trio said they would take the case at no charge and conduct a cost benefit analysis of a proposed settlement.

John Heenan

JOHN HEENAN

So far, “the only ones who benefit from this case are the lawyers,” Heenan argued in that brief.

The latest filing comes just after the judge presiding over the case, Gregory Pinski in Great Falls, recently retired. The new judge will be handed the case that has now ballooned beyond 10,000 pages.

In March 2018, plaintiffs say they offered to settle with the city for $20,000. The city declined, the suit says.

Since then, the city has farmed out litigation of the lawsuit to attorney Doug James from the Billings law firm Moulton Bellingham at generally $225 an hour, according to court records. The firm’s bill to the city for June alone totaled $10,231. In September the city paid the law firm $35,529 for work on the case.

Franchise fee, or illegal tax

Beginning in 1992, the city began collecting a 4% franchise fee on water, wastewater and garbage fees. Typically, a franchise fee is charged by a utility or other entity and paid to the city as a sort of rent for using public property to run its pipes, or poles or wires.

But, the franchise fees were “dishonest because no franchise was involved,” said Bozeman attorney Matthew Monforton who represents city taxpayers in the suit. His co-council in the suit has been Kristen Juras of Great Falls, who is Republican Greg Gianforte’s running mate for Montana governor. She has since removed herself from the case.

Matthew Monforton

MONFORTON

“The fees were an illegal sales tax,” the suit says. What’s more, “the city has always known its ‘franchise fees’ were illegal” and when they were imposed in 1992, several City Council members objected to them, the plaintiffs claim.

The city has insisted the fees were legal, but stopped collecting them following the lawsuit.

Among Heenan’s objections in his September motion to intervene is Monforton’s description of some City Council members as “arrogant.” Monforton has also called the suit the “result of staggering incompetence by city officials and years of inexcusable fee churning by its attorneys."

In his response to Heenan’s motion filed Thursday, Monforton doubles down on his claims of arrogance, calling comments made by councilmember Danny Choriki as “the height of arrogance.”

While campaigning in 2019, Choriki said the city should “push back hard and firm” on lawsuits from the “fiscal cheapskate movement” that are challenging the franchise fees, Monforton says in his response.

Immediately after Choriki made that statement, Doug James, the Moulton Bellingham attorney representing the city, made a $100 financial contribution to Choriki’s election campaign, the brief states. Brent Cromley, another Moulton Bellingham attorney and a former City Council member, contributed $180 to Choriki.

They did not contribute to Choriki’s other political campaigns, nor during the first four months of his City Council campaign, the brief says.

The money, and its timing, “sends a toxic message: when a city council candidate exhorts the city to fund litigation being handled by Moulton Bellingham, the firm’s attorneys will in turn fund the candidate.”

James was away from his office Thursday and unable to comment.

In a separate filing, the city supports Heenan’s intervention in the lawsuit, and contends plaintiffs’ attorney have disclosed confidential information from the proposed settlement.

A proposed settlement

Recently, a mediator assigned to the case proffered a settlement, which both parties are still wrangling over. City officials would like to address residents about the settlement, but because of the weird nature of the lawsuit they are barred from speaking to them about it.

Residents are technically both the plaintiffs and the defendants in the case. State law generally prohibits the parties in a lawsuit from directly addressing each other, partly to prevent the possibility or perception of coercion.

The city petitioned the judge for permission to talk to residents, possibly through a press conference, but recently were denied.

“To allow the city to make public comment on the lawsuit to the media would expose all class members to the communication and could undermine the suit itself,” the judge ruled.

The catch

The settlement has an unusual condition that could hold things up. Plaintiffs say they will settle only on the condition the city, or a judge, stipulate that the franchise fees were illegal. Most settlements include a provision allowing the defendant to admit no wrongdoing.

The admission of liability is meant to act as a deterrent to employing such illegal fees in the future, Monforton has said.

In its most recent filing, the city said plaintiffs have presented no evidence to say the class favors “spending additional taxpayer money for a stipulation that is atypical in settlement. Further, the city is no longer collecting the franchise fee at issue, so any declaration or stipulation would not lower the current ratepayers’ future utility bills.”

The city also insists that Monforton’s demand for an acknowledgment of wrongdoing is politically motivated, citing in their brief an earlier comment from the attorney, who in 2015 served as a Republican state legislator.

“Democrats don’t want the city to admit guilt because they want municipalities across Montana to be able to impose these illegal fees,” Monforton said. “ … Democrats want to enact these back-door sales taxes through municipalities so they don’t have to do it though state government.”

Continued litigation “simply makes no sense, but is the path chosen by” Monforton, James concludes for the city in his brief. “For Billings taxpayers and citizens (class members), this is a losing proposition.”

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