Hearing scheduled Tuesday in lawsuit over $18 fee

Friday, August 24, 2018

A hearing is scheduled next week in a local man’s lawsuit over an $18 annual fee that is being assessed to residents in six north Arkansas counties in connection with a failed landfill.

Attorneys Matt Bishop and Wendy Howerton filed the suit May 16 in Carroll County Circuit Court, on behalf of Paul Summers of Berryville. A hearing is scheduled for 9 a.m. Tuesday, Aug. 28, at the Carroll County Eastern District Courthouse in Berryville.

Defendants in the lawsuit are the Ozark Mountain Solid Waste District and Carroll County tax collector Kay Phillips.

Carroll County Prosecuting Attorney Tony Rogers filed a motion June 22 asking that the lawsuit be dismissed on the grounds that Phillips was not properly served, that the lawsuit does not include all necessary parties and that the local court is not the proper venue.

On July 6, an attorney for Geoffrey Treece, the court-appointed receiver who recommended the imposition of the $18 fee, filed a motion similar to Rogers’. In that motion, attorney Mary-Tipton Thalheimer argued that the Ozark Mountain Solid Waste District was not properly served and echoed Rogers’ arguments regarding necessary parties and the propriety of venue.

Since the defendants’ motions were filed, Phillips was served personally in her office on July 11, and Baxter County Judge Mickey Pendergrass, chairman of the Ozark Mountain Solid Waste District, was served personally at the Baxter County Courthouse in Mountain Home on July 31.

Attorneys for Summers argue in their response to the defendants’ motions that all the necessary parties are included in the lawsuit.

“As this action seeks to have the tax declared unconstitutional and any payments of said tax refunded, all necessary parties to achieve that end are present,” the response says.

Bishop said there is no reason for Bank of the Ozarks — the trustee for bondholders connected with the solid waste district — or the Arkansas Department of Environmental Quality to be involved in Summers.

“If you and your wife divorce, we don’t bring Visa in there,” he said.

Bishop and Howerton also argue in their response to the motion filed by Treece’s attorney on behalf of the solid waste district that Treece has no standing to represent the district in Summers’ lawsuit and in fact has obligations to the taxpayers that preclude him from acting on the district’s behalf.

“As a receiver, he is an ‘officer of arm of the court’ and a distinct party from Ozark Mountain Solid Waste District,” the plaintiff’s response says. “He has not been authorized to pursue litigation o the District’s behalf. The receiver therefore lacks the authority to act on behalf of the District in this lawsuit.

“… (T)he receiver’s fiduciary duties disqualify him from acting on behalf of the District. A receiver’s fiduciary duty has been described by the Arkansas Supreme Court as ‘the highest kind of fiduciary obligations,’ ‘strict impartiality’ and requiring ‘undivided loyalty’ that cannot be diluted. He cannot meet his fiduciary duties if he acts on the District’s behalf in this lawsuit when he owes a duty to the opposing parties in this lawsuit.”

Summers’ attorneys also reject the argument that Carroll County is the improper venue for the lawsuit.

“This is Carroll County property, and Carroll County taxpayers are paying it,” Bishop said. “It needs to be in Carroll County.”

Summers’ lawsuit alleges that the $18 annual fee constitutes a tax on property owners in Carroll, Baxter, Boone, Marion, Newton and Searcy counties and is an “illegal exaction,” that it violates the separation of powers clause in the Arkansas Constitution, that the solid waste district does not have the authority to impose a fee without providing services and the fee is excessive.

The suit asks the court to enjoin the solid waste district from assessing or collecting the $18 fee and to refund fees already paid by taxpayers, to enjoin the solid waste district from collecting a $2 per ton “tipping fee” and to refund tipping fees already paid by taxpayers as well as award attorneys’ fees and other relief at the court’s discretion.

The fee is included on the 2018 tax statements for property owners in the six counties that composed the Ozark Mountain Solid Waste District. Pulaski County Circuit Judge Tim Fox issued an order imposing the fee on April 21, 2017, following the recommendation of Treece, an attorney with the Little Rock firm of Quattlebaum, Grooms and Tull.

Treece recommended that the fee be imposed to recoup bondholders who purchased $12,340,000 in bonds issued by the solid waste district in October 2005 to finance the purchase of the North Arkansas Board of Regional Sanitation (NABORS) Landfill in Baxter County. The fee, which is likely to continue for 30 years or more, also is intended to repay up to $16.5 million that the Arkansas Department of Environmental Quality (ADEQ) is expected to spend cleaning up the site of the landfill.

The solid waste district defaulted on its bond payments in 2012 and closed the landfill that same year. ADEQ sued the solid waste district in 2013 in Baxter County Circuit Court and was granted an order of summary judgment to take possession of bank accounts and certificates of deposit held by the solid waste district. The order also said that ADEQ was entitled to pursue additional money related to the cleanup and closure of the landfill.

In January 2014, the solid waste district filed a voluntary petition for Chapter 9 bankruptcy. Bank of the Ozarks, acting as a trustee for the bondholders, filed a motion asking the court to dismiss the bankruptcy petition and U.S. Bankruptcy Judge Ben Barry granted the motion in an order issued Aug. 4, 2014. Bank of the Ozarks filed a complaint in Pulaski County Circuit Court in December 2014, seeking Treece’s appointment as the receiver for the solid waste district. The court entered a consent order appointing Treece as the receiver in May 2015. Among his court-ordered duties were to evaluate the solid waste district’s operations and make recommendations to the court regarding alternatives for the solid waste district to generate additional income and revenue that could then be used to repay the bonds. Treece filed his report and recommendations with the court in November 2016 — citing Section 8-6-701 of the Arkansas Annotated Code, the state legislative act that created the solid waste districts.

Attorneys for Bank of the Ozarks, ADEQ and the solid waste district raised no objections to Treece’s recommendations, and Fox issued his order establishing the $18 service fee on April 21, 2017.

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