Water rates case against City of Flint heads back to Circuit Court

Flint, MI– The Michigan Supreme Court has denied the City of Flint’s appeal to dismiss an 8-year-old lawsuit that claims the City illegally raised water rates. 

Former City Council President Scott Kincaid originally sued the City of Flint in 2012, claiming that the City’s Finance Director Michael Townsend improperly raised water and sewer rates twice under the direction of then-Mayor Dayne Walling.

“This case dates back to decisions made by a prior administration and leading into the time when the City was placed into emergency management,” said City Attorney Angela Wheeler.  “The Supreme Court’s decision simply remands the case back to Circuit Court for consideration. The City is prepared to continue defending itself in Court to seek a just resolution of the case.”

Over the course of eight years the case has bounced from court to court, and judge to judge, with dismissals, reversals, and adjustments along the way.

Following the State Court of Appeals’ decision in April that the case would get a new trial in a lower court, the City made a summary judgment motion–a motion for the Court to decide the case without a hearing. 

On Dec. 22, the Supreme Court denied this motion and said that they were “not persuaded that the questions presented should be reviewed by this Court.”

The City has 21 days from Dec. 23 to appeal the Supreme Court’s decision, if they so choose. If not, the case will go back to Genesee County Circuit Court to Judge Mark Latchana.

The lawsuit was first filed in the Court of Appeals in May 2012, and claimed the City violated the Headlee Amendment, which requires voter approval for local tax increases.

In July 2012, the Court found that the tax increases were “revisions of existing user fees that do not implicate the Headlee Amendment,” and dismissed the case.

Kincaid’s Attorney Valdemar Washington refiled the lawsuit, this time in the Circuit Court, where it was dismissed again, on the basis that the Emergency Manager Michael Brown had the power to ratify the city’s increase, which he did in 2012.

During this time, Washington began working on a second lawsuit filed by residents Larry Shears and Margaret Fralick. It was a class-action lawsuit that claimed the City didn’t have a right to collect money made off of increased water rates, and that $15 million from the water and sewer funds were wrongfully used to settle another lawsuit. They argued the money should be refunded. 

In August 2015, the judge in the Shears case ordered Flint to roll back rates by 35% and repay the money to the water and sewer funds, although he said they did not have to be immediately paid back, understanding the financial burden the city would be under. The judge also ordered that there was a certified class of people harmed by the city’s practices. 

Two years later, Washington and the City each appealed the Court to make a summary motion, to decide the case without going to trial. The judge denied both motions, which Washington said did not give him the opportunity to change his pleading. He raised an appeal based on government immunity which he said should halt everything, but that didn’t happen. Instead the judge sided with the City and the case was taken out of court.

Washington then filed for leave to appeal the Shears case in the Supreme Court. The Supreme Court then vacated the orders of the Court of Appeals.

So, on Dec. 13, 2019, the Supreme Court ordered both of the cases to be remanded to lower courts for reconsideration of the plaintiffs’ “unjust enrichment” claims in light of the Genesee County Drain Commissioner v. Genesee County Case, which was decided earlier that year.

In that case, which used an unjust enrichment claim, Genesee County will have to pay back nearly $1 million to the office of the Drain Commissioner. 

An unjust enrichment claim does not seek compensation for an injury, only to correct “one party’s retention of a benefit at another’s expense,” according to a report from the Drain Commissioner case. 

Washington said that is what they’re looking for. He said there are about 33,000 water customers that deserve to be refunded. 

“We’re not asking for damages, we’re not seeking to harm the city,” Washington said. “We just want the City to pay back the money it took.”

Now that the Kincaid case is going back to Circuit Court, Washington said one of the next steps is to request the Shears case be consolidated with the Kincaid case, so there will be just one hearing and one judgment. 

From there, the consolidated case would go to Judge Latchana. Washington said the case still might not go to trial because “there’s not a lot for a jury to determine.”

Instead, he said they could file a summary disposition, where the parties agree about what happened and the judge could immediately decide on a firm judgment for the City.

If Washington were to win the case, he said a resolution would probably consist of people who paid water bills getting a refund of the money they were improperly charged for due to the illegal rate increases. He said if a person was unable to pay those water bills resulting in the City putting a lien on their house, that money would be paid back to the City. 

Washington said he would have to find the exact numbers, and that amount would be put into a judgment that the City would have to come up with. 

There is no exact number for how much the judgment would potentially be yet, but Governor Rick Snyder released emails from 2015 in which the Michigan Department of Treasury valued the two cases combined at $40 million.

But the City has stated that even repaying the $15 million to the water and sewer funds would have a devastating financial impact and could bankrupt the city. If the City is charged with an amount they can’t afford, it would need to be paid for by Flint taxpayers through a tax increase.

“None of us wanted that,” Washington said. “But the City refuses to talk realistically with us. We’ve been sitting patiently by, while they run us up and down the appellate ladder for eight years.”

In response to Washington’s statement, City Attorney Angela Wheeler said: “The City engaged in good faith mediation efforts as ordered by the Court of Appeals in 2017 and several times since. The biggest stumbling blocks have been Attorney Washington’s demands for millions of dollars of attorneys’ fees to be paid by Flint residents and Mr. Kincaid wanting more money than any other resident would get.”

These cases are not included in the $641.25 million water crisis lawsuit settlement, because although they have to deal with water, they were filed pre-water crisis. The Shears case was erroneously added to the settlement document, but Washington has since worked to get the case removed from the settlement document.