Patti Amanda's Inc. v. City of Biwabik

• Decision Date: 07 February 2022
• Docket Number: A21-0680
• Parties: Patti Amanda's Inc., Appellant, v. City of Biwabik, et al., Respondents.
• Court: Minnesota Court of Appeals

Patti Amanda's Inc., Appellant,
v.
City of Biwabik, et al., Respondents.

No. A21-0680

Court of Appeals of Minnesota

February 7, 2022

This opinion is nonprecedential except as provided by Minn. R. Civ. App. P. 136.01, subd. 1(c).

St. Louis County District Court File No. 69DU-CV-20-1352

John H. Bray, Bray & Reed, Ltd., Duluth, Minnesota (for appellant)

Shelley M. Ryan, Hoff Barry, P.A., Eden Prairie, Minnesota (for respondents)

Considered and decided by Bjorkman, Presiding Judge; Connolly, Judge; and Cochran, Judge.

OPINION

COCHRAN, JUDGE

This appeal arises from appellant's challenge to rates charged for water and sewer service provided to appellant's rental property in the city of Biwabik. Appellant argues that the district court erred by granting summary judgment to respondents and against appellant on appellant's claim that respondents' decision to charge a separate flat-fee base

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rate for each apartment in appellant's multi-unit building rather than a single flat-fee base rate for the entire building results in rates that are "illegal." We affirm.

FACTS

The following facts are undisputed. Appellant Patti Amanda's Inc. owns a rental property in the city of Biwabik that contains five residential units and one commercial unit. The building receives water and sewer services through a single connection to the main line. Two commercial meters measure the water, sewer, and electrical usage for all six units-the units are not individually metered. In the past, appellant received one utility bill each month that covered all six units. In January 2014, respondent Biwabik Public Utilities Commission (the PUC) changed this practice and began billing appellant separately for each unit. In addition to being separately billed, each unit is now charged a flat-fee base rate along with the metered usage rate for each utility service.

Respondents city of Biwabik and the PUC (collectively, Biwabik) impose these per-unit flat-fee base rates on all residential properties in the city. The per-unit flat-fee base rates are intended to recover fixed costs such as the costs of building maintenance and debt service. The per-unit flat-fee base rates are distinct from metered usage rates, which separately recover the marginal costs of providing water and sewer service, such as the cost of treatment chemicals and electricity. According to the city administrator, the per-unit flat-fee base rates "keep the payment for services in line and in proportion with the service provided."

The per-unit flat-fee base rates imposed by Biwabik for its water and sewer service reflect the rate structure set forth in the City of Biwabik ordinance 122. See Biwabik,

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Minn., Code of Ordinances (BCO) no. 122, § 2, subds. 2-3 (2015). This ordinance governs Biwabik's water service and provides that when multiple customers receive water from one pipe connected to a service main, they will each "be billed separately by flat rate." Id., subd. 2. In addition to imposing a flat-fee base rate on every residential property, the ordinance also specifies that landlords of apartment buildings will be charged the flat-fee base rate for each apartment. Id., subd. 3. In practice, the utility rates charged by Biwabik are periodically set by the PUC and then imposed according to the rate structure adopted by the city council.

In April 2020, appellant initiated an action in district court, claiming that Biwabik had imposed "illegal utility surcharges" on its property. Appellant also brought two tort claims. Appellant sought an order from the district court "[d]eclaring [the] surcharges to be illegal" and damages in excess of $50, 000.

In December 2020, the parties filed cross-motions for summary judgment. Appellant argued that the flat-fee base rates set by the city council and charged to each unit violated the city charter, city ordinance provisions, and a state law that requires utility charges to be proportionate, fair, and equitable. Appellant asserted that the per-unit flat-fee base rates imposed on multi-unit dwellings were unfair because they "subsidiz[ed] the other residential customers of the [c]ity on the backs of its residential landlords and similarly-situated businesses." Biwabik argued, in turn, that the per-unit flat-fee base rates comply with the terms of the city charter, city ordinances, and state law.

The district court granted summary judgment to Biwabik. The district court denied appellant's summary-judgment motion and found that appellant failed to present evidence

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to support any of its claims. With regard to its "illegal surcharges" claim, the district court concluded that appellant failed to provide any evidence that the rates exceeded statutory authority or were unjust, unreasonable, or inequitable. Similarly, the district court also found that appellant failed to provide evidence to support its tort claims.

This appeal follows.

DECISION

Appellant challenges the district court's grant of summary judgment to Biwabik (and denial of summary judgment to appellant) on appellant's claim that utility rates charged by Biwabik are "illegal." Appellant does not challenge the district court's summary-judgment dismissal of the tort claims.

"We review a grant of summary judgment de novo." City of Waconia v. Dock, 961 N.W.2d 220, 229 (Minn. 2021). A district court must grant summary judgment if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.01; Hagen v. Steven Scott Mgmt., Inc., 963 N.W.2d 164, 172 (Minn. 2021). To survive summary judgment, the nonmoving party must present specific, admissible evidence that demonstrates a genuine issue of material fact. Doe v. Archdiocese of St. Paul, 817 N.W.2d 150, 163 (Minn. 2012).

Appellant's challenge to Biwabik's utility rates is limited to the per-unit flat-fee base rates and does not extend to any metered usage rates. Even with regard to the per unit flat-fee base rates at issue, appellant does not argue that any one specific rate is too high. Rather, it challenges the adoption of the per-unit flat-fee rate structure and how the city adopted the flat-fee base rates.

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We generally accord substantial deference to a decision of a government body establishing utility rates where the government body is acting in a legislative capacity. See City of Moorhead v. Minn. Pub. Utils. Comm'n, 343 N.W.2d 843, 846 (Minn. 1984) (discussing deference granted to the Minnesota Public Utilities Commission when acting in a legislative capacity). When a government body sets rates by "allocating costs between utility customers and balancing various factors to achieve a fair and reasonable allocation of these costs," it operates in a legislative capacity. Id.; see also In re Application of Minn. Power for Auth. to Increase Rates for Elec. Serv., 838...