Youmans v. Charter Twp. of Bloomfield
| Decision Date | 07 January 2021 |
| Docket Number | No. 348614,348614 |
| Citation | 969 N.W.2d 570,336 Mich.App. 161 |
| Parties | Jamila YOUMANS, and all others similarly situated, Plaintiff-Appellee/Cross-Appellant, v. CHARTER TOWNSHIP OF BLOOMFIELD, Defendant-Appellant/Cross-Appellee. |
| Court | Court of Appeal of Michigan — District of US |
Kickham Hanley PLLC, Royal Oak (by Gregory D. Hanley and Edward F. Kickham, Jr. ) for plaintiff and all others similarly situated.
Young & Associates, PC (by Rodger D. Young, Southfield, Henry W. Saad, Bloomfield Hills, and Joshua D. Apel), and Secrest Wardle, Troy (by Mark S. Roberts ) for defendant.
Miller, Canfield, Paddock & Stone, PLC, Ann Arbor (by Sonal Hope Mithani ) for the Michigan Municipal League and the Michigan Townships Association, Amici Curiae.
Before: Stephens, P.J., and Murray, C.J., and Servitto, JJ.
In this certified class action, plaintiff Jamila Youmans, who is the sole class representative, challenged certain municipal utility rates and ratemaking practices of defendant, Charter Township of Bloomfield (the Township). Defendant appeals as of right the trial court's amended judgment, entered after a bench trial, that awarded plaintiff and the plaintiff class permanent injunctive relief and more than $9 million in restitution. Plaintiff has filed a cross-appeal, challenging the trial court's refusal to award what she characterized as "damages" for certain components of the Township's water and sewer rates.1 We affirm the trial court's ruling concerning plaintiff's claims based on a violation of § 31 of the Headlee Amendment, Const. 1963, art. 9, § 31 ; reverse its judgment awarding monetary and equitable relief to plaintiff and the plaintiff class; and remand for entry of a judgment of no cause of action in favor of the Township.
This case arises out of plaintiff's challenge to various aspects of the Township's water and sewer rates and the underlying ratemaking methodology during the "class period," which commenced on April 21, 2010, for purposes of plaintiff's assumpsit claims (i.e., six years before plaintiff initiated this action) and on April 21, 2015, for purposes of plaintiff's Headlee claims (i.e., one year before plaintiff initiated this action). In October 2016, the trial court entered an order certifying this case as a class action and appointing plaintiff as the sole class representative. Plaintiff's amended complaint included six counts, the first of which asserted several claims for violation of § 31 of the Headlee Amendment and the remainder of which asserted claims under the heading "ASSUMPSIT/MONEY HAD AND RECEIVED " with regard to both certain specific components of the Township's water and sewer rates and the "arbitrary, capricious, and unreasonable" nature of those rates and the underlying ratemaking processes. After the trial court denied the parties’ competing motions for summary disposition, the matter proceeded to a 10-day bench trial.
Wayne Domine, the director of the Township's engineering and environmental services department from 1991 until his retirement in May 2017, testified that the Township consists of approximately 18,000 parcels of realty, approximately 3,000 of which are not serviced by the Township's water utility. The water system provides treated, potable water to its municipal customers and also provides water to the Township's fire hydrants.
Since 2004, the Township has been subject to an abatement order, which arose out of litigation with the Michigan Department of Environmental Quality (DEQ),2 to "dry out" the sewer system, i.e., prevent water infiltration into the system. After performing a long-term needs study, the Township approved a 20-year capital improvement program, which is funded by the inclusion of a "water debt charge" in the disputed utility rates.
Domine agreed that the Township's sewer system is a separated system, with "one set of pipes for sanitary sewage" and a separate storm-sewer system that is "intended to collect storm water runoff or ... water from the land" and discharge such water directly into a waterway. The Township does not own its storm-sewer system, other than the storm drains that are on the property of the Township. Rather, the storm-sewer system is owned and maintained, in concert, by several county and state entities. Oakland County bills the Township for the "sewer flow" that exits in the Township, as estimated by approximately 30 meters located in various areas, based on the Township's proportional contribution to the entire system. Conversely, the Township does not measure sewer flow in order to determine the rate that it charges its municipal sewage customers; rather, it bases the overarching sewer rate on water usage, which is the common practice throughout Oakland County.
Domine was involved in the Township's annual budgeting (on a limited basis) and water and sewer ratemaking from before the class periods in this case commenced until his May 2017 retirement.3 He also coauthored the "annual rate memorandum," which included an outline of recommended water and sewer rates and was presented to the Township board for approval each year. Domine testified that the "first" consideration in ratemaking was "to gather up all the expenses, and then determine a revenue that would cover those expenses." He explained that the rates were intended to allow the Township to "[b]reak even" and that the process is complex, generally taking place "over several months." By nature, the rates are predictive—intended to cover expenses that will be incurred after the rates are set—and thus they merely estimate the revenue that will be required. Accordingly, to provide a "margin of error," the rates were generally set to generate "a revenue stream slightly above" the projected expenses, but in some years during Domine's tenure, the "water and sewer fund" was operating at a deficit. Even so, and in at least one year, a midyear adjustment to the rates was required to prevent an excessive deficit. The ratemaking process employed by the Township did not focus on individual line items; it employed a holistic approach, focusing on generating sufficient overall annual revenue to cover the overall annual costs.
Jason Theis testified that he served as either the Township's finance director or deputy finance director at all times pertinent to this case, during which time he was also involved in the annual budgeting process for the Township's water and sewer fund. Theis is a certified "public finance officer," which is akin to being a certified public accountant but with an exclusive focus on governmental, rather than private, finance and accounting. He indicated that, in setting the disputed utility rates, it was desirable to budget both revenues and expenses "conservatively," in hopes of ensuring sufficient revenue to cover expenses. As a result, with regard to individual line items in the budget, the actual amounts received or expended often varied considerably from the projections used in setting the rates. Theis testified that over the ratemaking period of six months, the disputed rates would go "through many different iterations."
According to Domine and Theis, the water rate included a "variable rate" for consumption—which was intended to recover the Township's operating expenses, depreciation improvements, sewage treatment costs, and the cost of the water purchased from the Southeastern Oakland County Water Authority—and a "fixed" charge to cover extra operational expenses. The fixed portion of the water rate generally represented about 80% of the utility's required revenue stream, and it was intended to help the Township cover what Domine described as its "steady stream of monthly expenses" despite fluctuating water use and revenue over time. In addition, both the sewer and water rates included debt service charges, which were assessed in amounts intended to pay the debt service on bonds or other obligations issued by the Township related to water and sewer services.
The parties stipulated that some portion of the Township's utility ratepayers were not on the tax rolls that fund the Township's general fund, including tax-exempt entities such as churches. Domine indicated that about 80% of the Township's water customers are also sewer customers, with the remainder using septic-tank systems. A small portion of customers—about 3%—receive sewer services only; they are not water customers. Domine agreed that those "sewer only" customers are billed in one of two ways. The majority pay a fixed annual charge, while the remainder have elected to have a meter installed on their well-water line and are billed for their sewer service on the basis of their actual water usage. Additionally, the water system permits homeowners to install a "secondary" water meter that measures water used outside the home (e.g., for lawn irrigation or swimming pools), and such water usage is not included when calculating the homeowner's sewer charges.
Because the Township has no way of determining the amount of sewer services a sewer-only...
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