Thousands of Billings residents set to get rebate on ‘franchise fees’ charged by city

Court said the fees amounted to an illegal sales tax in class-action suit

By: - November 16, 2023 4:03 pm

Doug James, attorney for the City of Billings, speaks before Yellowstone County District Court Judge Mike Salvagni on Nov. 16, 2023 in a final settlement hearing for the franchise fees case (Photo by Darrell Ehrlick of the Daily Montanan).

More than six years of litigating “franchise fees” charged by Montana’s largest city to its residents resulted in nearly 90,000 pages of documents during the lengthy and complex court case.

It has also resulted in a judgment that could see more than 30,000 residents get rebates or checks — yet to be calculated — for the fees that the city charged, which a court later agreed amounted to an illegal sales tax scheme.

Terry Odegard told Yellowstone County Court Judge Mike Salvagni that he had boxes of documents at his home stacked up, the accumulation of years of literally fighting city hall.

“I am not a lawyer, but when I heard one city council member who wouldn’t support the city’s budget because of it, I looked into and read the (Montana Supreme Court) Mondak decision. It looked like to me what the city was doing was illegal,” Odegard told the court.

He and the others began fighting the city on franchise fees even before they found a lawyer. The group was one day shy of the case being settled on the sixth anniversary of the group coming together — Nov. 17, 2017.

During the six-year journey that included a group of Billings residents, three of the original class-action representatives have died. Odegard told Salvagni the case has been ongoing for 2,180 days by his calculation.

“For some of our class representatives,” said class attorney Matthew Monforton, “it was the last thing they did before they died.”

“There’s an old adage that you don’t fight city hall,” he said. “For them, they fought and fought for this decision and there are thousands of Billings residents who will be better off for it.”

On Thursday, a final hearing was held to finalize the details of the settlement, which includes a $3.6 million award spread among thousands of residents, after the class’ attorneys’ fees are subtracted. That figure totals $917,000 in attorneys’ fees and awards.

Because the number of households the large class-action suit involves, it won’t be clear for several months the exact dollar amount some should see, but for many who have the City of Billings provide water, wastewater and garbage disposal, they could see either a rebate check or a credit of around $90 total, the lawyers told the court on Thursday.

Attorneys for both sides agreed that the original sum that was floated for a settlement was much higher, ranging in the tens of millions of dollars because the city had been charging franchise fees for more than a decade. But during the lengthy court process, that number was winnowed down covering the previous three years from the time the City of Billings stopped charging the fee, on May 14, 2018 — two days before the class-action suit was filed in district court. That means only Billings residents who were paying for city services during that three-year period between 2015 and 2018 are eligible for the reimbursement or credit. And, a credit will be applied for residents who are still rate-paying customers in Billings, while those who are no longer customers or have moved will receive a check reimbursement.

The order, which will officially mark the end of litigation and the beginning of the settlement process, will be signed before the end of this week, Salvagni told the court.

The City of Billings has been represented by Doug James and Bryce Burke of Moulton Bellingham. The City of Billings told the Daily Montanan that through October 2023, the city has paid $985,881 in attorneys’ fees to the law firm to defend itself in the class-action case.

Meanwhile, class attorney Matthew Monforton will receive $892,000 for his work on the six-year case. However, Kristen Juras began the class-action case with him as co-counsel. She left the case to campaign alongside Greg Gianforte as they ran on the Republican ticket and eventually won the governor’s office in 2020. Juras currently serves as the lieutenant governor. How the proceeds will split between the two lawyers isn’t clear; Juras dropped the case early on during its litigation.

Originally, the City of Billings argued franchise fees were a fair charge to customers in order to use the public’s right-of-way for utilities, and to offset costs associated with delivering utility services to residents. The charge on bills usually represented 3% to 5% of the total, and the class representatives argued the fee was nothing more than a sales tax meant to cushion city coffers.

As part of the monetary settlement, the agreement also includes a permanent agreement that Billings will never charge franchise fees again. The City of Billings estimates that it took in roughly $2.5 million per year in franchise fees, according to court documents.

“It was important for the class representatives that they not be in a situation where they’re right back here again,” Monforton said.

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Darrell Ehrlick
Darrell Ehrlick

Darrell Ehrlick is the editor-in-chief of the Daily Montanan, after leading his native state’s largest paper, The Billings Gazette. He is an award-winning journalist, author, historian and teacher, whose career has taken him to North Dakota, Minnesota, Wisconsin, Utah, and Wyoming.