Appeals Court rejects Raleigh’s plea to review development fee dispute

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  • The N.C. Court of Appeals has rejected Raleigh's request to take up a lawsuit challenging city water and sewer fees.
  • Plaintiffs want the capital city to refund millions of dollars of fees collected from 2016 to 2018.

The N.C. Court of Appeals has denied Raleigh’s request to take up a dispute involving city water and sewer fees. At stake are millions of dollars in fees charged from 2016 to 2018.

The state’s second-highest court issued an order without comment Wednesday. The denial of Raleigh’s requested review means the lawsuit can proceed in Superior Court.

A trial judge decided on April 12 to reject the city’s motion to have the case thrown out.

“This case … is a putative class-action in which developers challenged fees that a city charged to new users of its water and sewer services,” according to Raleigh’s brief to the Appeals Court. “The two Plaintiffs here are developers who seek to represent a class of hundreds of putative class members who claim that the City of Raleigh lacked statutory authority for those fees.”

“After paying those fees years ago, the Plaintiffs now seek a refund, plus interest,” the brief added. “The Plaintiffs’ claims, however, are premised on a flawed legal theory: They assert that when Raleigh charged the fees at issue, ‘Raleigh had no … charter provision … to impose [fees] … for future expansion of its water systems and sewer systems.’ As a matter of law, however, that assertion is incorrect.”

Raleigh contends it has had legislative authority since 1949 to “impose ‘charges’ for the ‘extension’ and ‘enlargement’ of its water and sewer system,” according to the brief.

The plaintiffs, Wardson Construction and Homequest Builders, challenge fees charged from February 2016 through January 2018. During that time period, the city charged fees based on city ordinances that are no longer in effect. Since July 2018, the city has charged fees based on the General Assembly’s 2017 Public Water and Sewer System Development Fee Act.

“[T]his case is a putative class action challenging fees charged by North Carolina’s second largest city,” according to Raleigh’s brief. “By the Plaintiffs’ own allegations, there are ‘at least hundreds’ of putative class members, … and the stakes here are exceptionally high. … [T]he Plaintiffs here have alleged that they are entitled to millions of dollars from the City of Raleigh — indeed, they seek $16 million for 2017 alone.”

Lawyers representing the developers argued against an Appeals Court review at this stage of the case.

“Defendant City of Raleigh seeks piecemeal review of the proceedings below by asking this Court to grant extraordinary relief and review the trial court’s denial of the City’s motion to dismiss … for failure to state a claim,” according to the developers’ Appeals Court brief. “The City does not cite, and Plaintiffs are likewise unaware of, any precedent where this Court has granted certiorari review of an order denying a motion to dismiss for failure to state a claim … without a contention that the order affects a substantial right, which the City does not allege here.”

“Review of the trial court’s order will only serve to further delay proceedings in this case and will unduly prejudice Plaintiffs,” the developers argued. “Plaintiffs commenced this action on 12 August 2019 — over two and half years ago — and have just now been able to proceed with discovery due to the trial court’s order staying discovery while the motion to dismiss was pending. Allowing review of the denial of the motion to dismiss will only further delay proceedings for likely another year or more.”

The Appeals Court took no stance on the merits of the developers’ arguments.