Moving forward: Judge sets June hearing date in suit over $18 fee

Friday, February 8, 2019

A class-action lawsuit challenging the $18 assessment being charged to property owners in six north Arkansas counties in connection with a failed landfill will move forward, Carroll County Circuit Judge Scott Jackson ordered at the conclusion of a hearing Wednesday afternoon.

Jackson denied a motion for summary judgment by Fayetteville attorneys Matt Bishop and Wendy Howerton, who represent plaintiff Paul Summers of Berryville. He also denied similar motions for dismissal from defense attorneys Mary-Tipton Thalheimer and W.H. Taylor and set a hearing date for 9 a.m. Wednesday, June 19, 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. Thalheimer represents Geoffrey Treece, a Little Rock attorney who serves as a court-appointed receiver for the solid waste district. Taylor represents Phillips.

The $18 assessment is intended to repay bondholders who purchased $12,340,000 in bonds issued by the Ozark Mountain Solid Waste District in October 2005 to finance the purchase of the North Arkansas Board of Regional Sanitation (NABORS) Landfill in Baxter County. The assessment, which could continue for 30 years or more, also is intended to repay the Arkansas Department of Environmental Quality (ADEQ) for up to $16.5 million in costs related to closing and cleaning up the landfill.

The solid waste district, which was controlled by a 14-person board that included county judges and mayors from each of the counties and cities included in the 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 (now Bank OZK), 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 a 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 recommended the imposition of the $18 assessment, and Pulaski County Circuit Judge Tim Fox agreed.

The assessment was included on 2018 property tax bills in Carroll, Baxter, Boone, Marion, Newton and Searcy counties.

Bishop and Howerton filed the Carroll County lawsuit on Summers’ behalf last May, contending that the $18 assessment is in fact a tax and amounts to an illegal exaction. Bishop and Howerton later filed similar lawsuits in the other five counties affected by Fox’s order. The lawsuits seek to have the $18 assessments halted and for property owners who have already paid the assessment to be reimbursed.

At Wednesday’s hearing, both Thalheimer and Taylor argued that Summers’ lawsuit amounts to a “collateral attack” on Fox’s Pulaski County order — essentially asking one circuit court to overturn the ruling of another circuit court, rather than directly appealing the original order.

Bishop argued that the citizens of Carroll County were not provided with due process in the Pulaski County suit, nor do they have any avenue to appeal Fox’s order since they were not a party in the case. He also pointed to the waste district’s bankruptcy filing, in which the district says it is unable to collect service fees because the landfill was already closed at the time of the filing. Bishop said the $18 assessment thus amounts to an unconstitutional tax levied by the solid waste district to pay the district’s debts.

Taylor suggested that the proper venue for Summers’ lawsuit would be in Pulaski County.

“I’m not sure that Judge Fox did hear all the facts, and I think there may be a valid lawsuit,” Taylor said. “But that lawsuit needs to be taken up and litigated in Pulaski County.”

Later, Taylor predicted the legal battle will reach the highest court in Arkansas.

“This case is going to the Supreme Court of Arkansas, and everybody in this room knows it’s going to the Supreme Court of Arkansas,” he said.

“The quickest way for this case to get to the Supreme Court is for this court to issue an order,” Bishop said.

After both sides completed their arguments, Jackson spent several minutes looking over documents before issuing his order. He said Summers’ lawsuit is not a collateral attack on the Pulaski County ruling.

“I believe this is a suit on a different theory than was presented to Judge Fox,” he said.

Jackson went on to say that an order for summary judgment would be inappropriate.

“There are factual issues that remain that need to be argued before this court can resolve the issue before it,” Jackson said.

Jackson went on to set the June 19 hearing date. He added that if any preliminary issues arise before then, they can be addressed in a telephone conference or by scheduling a preliminary hearing.

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