Lawsuit over $18 fee moves forward: Judge denies motions for summary judgment, dismissal

Tuesday, December 3, 2019

By Scott Loftis

The class-action lawsuit challenging an annual $18 fee being collected from property owners in Carroll and five other north Arkansas counties will move forward, Carroll County Circuit Judge Scott Jackson ruled Tuesday.

Jackson denied motions for summary judgment filed by attorneys on both sides of the case and also denied defense motions to dismiss the case.

After making his ruling, Jackson told attorneys to consider three possible trial dates in early 2020: Feb. 21, March 6 or March 13. He said the parties would schedule a conference call late next week to determine a trial date.

The $18 fee, which is being charged to property owners in the six counties included in the Ozark Mountain Solid Waste District, is intended to repay 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 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.Fayetteville attorneys Matt Bishop and Wendy Howerton filed the class action lawsuit on Summers’ behalf in Carroll County Circuit Court in May 2018. They later filed similar lawsuits in the other five counties — Baxter, Boone, Marion, Newton and Searcy — where the $18 fee is being levied. The lawsuits seek to have collection of the fee halted and for property owners who have already paid the fee to be reimbursed.

Bishop and Howerton filed an amended complaint in Carroll County in July 2019. Defendants in the case are the Ozark Mountain Solid Waste District and Carroll County tax collector Kay Phillips.

The $18 fee is being collected under an order from Pulaski County Circuit Judge Tim Fox, who presided over a case in which Bank of the Ozarks (now Bank OZK) sued the solid waste district on behalf of the bondholders. Fox’s order followed the recommendation of Geoffrey Treece, a Little Rock attorney whom the judge appointed to serve as a receiver for the solid waste district.

At Tuesday’s hearing, Bishop argued that the fee is essentially a tax — which, according to Arkansas law, cannot be levied by a court. He also argued that special language in the 2014 ADEQ appropriations bill, which he says created a mechanism for the Pulaski County suit that resulted in the $18 fee, violates the state constitution.

Deputy state attorney general Olan Reeves appeared at Tuesday’s hearing to defend the 2014 bill, arguing that the state Supreme Court has upheld the constitutionality of similar special language in other legislation.

In his ruling, Jackson said that he was declining to declare the special language in the 2014 bill unconstitutional “on its face,” but would allow Bishop to continue the argument that it is being applied in an unconstitutional manner in regard to the $18 fee.

The solid waste district issued $12,340,000 in bonds in October 2005 to finance the purchase of the North Arkansas Board of Regional Sanitation (NABORS) Landfill in Baxter County. 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.

Defense attorney Mary-Tipton Thalheimer, representing the solid waste district on behalf of Treece, argued at Tuesday’s hearing that the solid waste district is authorized to collect a fee for services under Section 8-6-701. Bishop argued that the district does not offer collection services and pointed to the district’s own statement, in its bankruptcy petition, that it could not legally levy a fee in order to repay the bondholders.

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