Platt Convenience, Inc. v. City of Ann Arbor

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PLATT CONVENIENCE, INC., on Behalf of Itself and All Others Similarly Situated, Plaintiff, v. CITY OF ANN ARBOR, Defendant.

No. 359013

Court of Appeals of Michigan

October 4, 2024

Before: M. J. Kelly., P.J., and Markey and Redford, JJ.

Per Curiam.

Pursuant to Const 1963, art 9, § 32, plaintiff commenced this original action in this Court, alleging violations of § 31 of the Headlee Amendment, Const 1963, art 9, § 31. To summarize broadly, plaintiff alleges that the storm-sewer charges imposed by defendant City are an unlawful disguised tax for purposes of Headlee § 31, rather than a valid user fee. Plaintiff's complaint was accompanied by a motion requesting certification of a plaintiff class "consisting of all persons or entities who/which have paid or incurred Stormwater Charges imposed by the City of Ann Arbor . . . at any time between October 21, 2020 and October 21, 2021 and/or who/which pay the City or incur Stormwater Charges during the pendency of this action ." Following initial review, this Court referred the matter to Washtenaw Circuit Court for proceedings before a special master pursuant to MCR 7.206(E)(3)(d).^[1] Following discovery, the parties filed competing motions for summary disposition. For the reasons explained below, we now deny plaintiff's motion for class certification and grant summary disposition in favor of defendant City pursuant to MCR 2.116(C)(10).

I. FACTUAL AND PROCEDURAL BACKGROUND

The material facts are largely undisputed. Defendant City maintains a municipal stormwater drainage system separate from, and in addition to, its sanitary sewer system. Stormwater runoff is created when excess water that cannot be absorbed into the ground or that flows off impervious surfaces enters the City's stormwater drainage system. The drainage system collects stormwater runoff and diverts the stormwater to appropriate points of discharge, which includes waterways within the City, and eventually the Huron River. The system is, in a word, extensive.^[2] Among other things, the system includes nearly 50,000 "street trees" and other "green infrastructure," such as rain gardens.^[3] According to defendant, the separate storm-sewer system has been in operation, in one form or another, since 1980.

The parties agree that defendant City computes a given parcel's stormwater drainage charge on the estimated use of the stormwater system, as measured by the total amount of impervious surface on a property. The administrator has established a four-tiered charging structure for single-family and two-family residential properties. According to plaintiff, as of June 30, 2021, the rates in effect for single- and two-family residential properties were as follows:

• "Tier 1" consists of properties with up to 2,187 square feet of impervious surfaces, all of which are assessed a quarterly charge of $31.55.

• "Tier 2" consists of properties with 2,188 to 4,175 square feet of impervious surfaces, all of which are assessed a quarterly charge of $55.22.

• "Tier 3" consists of properties with 4,176 to 7,110 square feet of impervious surfaces, all of which are assessed an quarterly charge of $94.

• "Tier 4" consists of properties with over 7,110 square feet of impervious surfaces, all of which are assessed a quarterly charge of $165.66.

Plaintiff further represents that commercial and other properties are billed at a quarterly rate of $851.44 per impervious acre. Additionally, all properties incur a $4.15 customer service charge per quarter. The City does not charge properties that have only pervious surfaces, e.g., undeveloped parcels. Additionally, the City does not assess a stormwater charge against itself for its public streets and roads, purportedly in light of the "benefits provided by virtue of the fact that they act as a stormwater conveyance system within the overall system, and therefore not only burden the system, but provide a direct benefit to the overall stormwater system."

By ordinance, payment of the charges is compulsory and any related debt is secured by the realty itself-the City is afforded a lien on the subject property for any unpaid charges and may recoup such charges, if left unpaid for a certain period of time, by rolling them into the property taxes assessed against the parcel. Ratepayers are, however entitled to receive credits against the stormwater-drainage charge for actions taken to reduce stormwater runoff from their respective properties. For example, ratepayers may receive a credit by installing and maintaining "rain barrels, rain gardens, cisterns, dry wells, bioswales, and other water quality controls[.]"

Plaintiff commenced the instant original putative class action in October 2021, filing a single-count complaint alleging that the stormwater charges constitute a disguised tax and, therefore, the imposition of those charges without voter approval was in violation of § 31 of the Headlee Amendment. In a nutshell, plaintiff alleged that the disputed charges possess all the relevant indicia of a tax because they (1) serve a revenue-raising, rather than a regulatory, purpose; (2) are disproportionate to the City's actual cost of providing stormwater disposal services; (3) the ratepayers benefit in no manner distinct from any other taxpayer or the general public; and (4) payment of the charges is not voluntary. In terms of relief, plaintiff asked that this Court:

A. Certify this action to be a proper class action with Plaintiff certified as Class Representative and [plaintiffs counsel] designated Class Counsel;

B. Define the Class to include all persons or entities who/which have paid the City or incurred Stormwater Charges to the City at any time in the one year preceding the filing of this lawsuit and/or who/which pay the City or incur Stormwater Charges during the pendency of this action (the "Class Period");

C. Enter judgment in favor of Plaintiff and the Class and against the City;

D. Order and direct the City to disgorge and refund all Stormwater Charges collected during the Class Period and to pay into a common fund for the benefit of Plaintiff and all other members of the Class the total amount of Stormwater Charges to which Plaintiff and the Class are entitled;

E. Find and declare that the Stormwater Charges are unlawful taxes imposed in violation of the Headlee Amendment; F. Permanently enjoin the City from imposing or collecting any Stormwater Charges, unless those Charges receive voter approval in conformance with the Headlee Amendment;

G. Award Plaintiff and the Class the costs and expenses incurred in this action, including reasonable attorneys', accountants', and experts' fees[.]

After considering the parties' initial filings, we denied defendant's initial requests for summary dismissal under MCR 2.116(C)(6) and (C)(8) and instead ordered further proceedings before the Special Master.^[4] Discovery ensued. According to the Special Master, during a status conference held below, "[t]he parties stipulated . . . that, because the matter is an 'action,' albeit before the Court of Appeals, Motions for Summary Disposition present[ed] an appropriate mechanism by which [the trial court could] fulfill its obligations as special master."^[5] Thus, the parties ultimately filed competing motions for summary disposition, which they supported with voluminous appendices.^[6]

After entertaining oral argument on both the motions for summary disposition and plaintiff's motion for class certification, the Special Master issued her report (the "SM Report") recommending that this Court grant defendant City's motion for summary disposition under MCR 2.116(C)(7) or, in the alternative, MCR 2.116(C)(10). The Special Master also issued a proposed opinion and order recommending denial of plaintiff's motion for class certification.

After the Special Master issued her report, plaintiff sought and was granted additional time to file objections to it in this Court, but we specifically ruled that plaintiff would be "limited to one brief" in support of "its objections to the Special Master's findings and conclusions."^[7] Plaintiff filed a motion to "strike and/or vacate" the SM Report, and a brief in support of its objections to the SM report. We denied plaintiff's motion to strike the SM Report.^[8] In the brief in support of plaintiff's objections to the SM Report, plaintiff attempts to incorporate by reference several arguments that were raised in its already-denied motion to strike the SM Report.

II. ANALYSIS

A. GOVERNING LEGAL PRINCIPLES AND THE STANDARD OF "REVIEW" MCR 1.103 provides:

The Michigan Court Rules govern practice and procedure in all courts established by the constitution and laws of the State of Michigan. Rules stated to be applicable only in a specific court or only to a specific type of proceeding apply only to that court or to that type of proceeding and control over general rules.

When exercising original jurisdiction over an action like the one at bar, this Court is, in effect, sitting as a trial court not an appellate court. Accordingly, in such cases, in addition to the provisions in MCR subchapter 7.200 that ordinarily govern proceedings in this Court, the court rules that usually govern civil actions in trial courts are generally applicable. See Bolt v City of Lansing (On Remand), 238 Mich.App. 37, 59; 604 N.W.2d 745 (1999) ("Clearly, Rule 3.501, along with all other court rules, applies in the Court of Appeals pursuant to MCR 1.103.") (emphasis added). Consequently, in original actions like this one, motions for summary disposition under MCR 2.116 are properly filed in this Court. See, e.g., Taxpayers for Mich. Constitutional Gov't v Dep't of Technology, Mgt & Budget, 508 Mich. 48, 67; 972 N.W.2d 738 (2021) ("we affirm the Court of Appeals' grant of summary...