Platt Convenience Inc v. City of Ann Arbor

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

PLATT CONVENIENCE, INC., on Behalf of Itself FOR PUBLICATION

and All Others Similarly Situated, October 04, 2024

2:15 PM

Plaintiff,

v No. 359013

CITY OF ANN ARBOR,

Defendant.

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).

1

Platt Convenience Inc v City of Ann Arbor, unpublished order of the Court of Appeals, entered

April 1, 2022 (Docket No. 359013).

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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.

2

According to defendant, the system “includes 231 miles of pipes and culverts, 7,053 manholes,

212 outfalls, 2 surface detention basins, 783 miles of roadway curb and gutters, and nearly 11,000

inlets and catch basins[.]”

3

According to defendant City, it considers its “street trees” to be a component of the City’s

stormwater drainage system, and, thus, such trees “are maintained as part of the stormwater sewer

which the system funds because they provide significant storm water management benefits to the

system.” Specifically, defendant alleges that, on an annual basis, its “public trees intercept 65

million gallons of stormwater”; “decrease the quantity of stormwater run-off and improve the

quality of run-off that eventually reached local lakes, streams, and reservoirs”; “slow down

stormwater run-off and promote ground water infiltration”; “take up water through their root

systems and release it to the atmosphere through evaporation, facilitating greater water storage

potential in soils and increasing the amount of time before rainfall becomes run-off”; “take up

nutrients and potentially harmful chemicals from stormwater run-off,” in effect filtering out

pollutants; and that the “urban forest canopy, along with tree branches, bark, and mosses, captures

and stores precipitation, delaying the onset of peak flows and reducing the total amount of run-off

that reaches urban waterways via the storm drain system.”

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 “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 [plaintiff’s 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;

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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

4

We also denied defendant’s ensuing motion for reconsideration of that order, Platt Convenience

Inc v City of Ann Arbor, unpublished order of the Court of Appeals, entered July 8, 2022 (Docket

No. 359013), and our Supreme Court denied defendant’s related attempt to seek interlocutory

review in that Court, Platt Convenience, Inc v City of Ann Arbor, ___ Mich ___; 986 NW2d 597

(2023).

5

Indeed, at the hearing that was later held before the Special Master on the parties’ competing

motions for summary disposition, when asked what evidence he would present at trial if the

motions for summary disposition were denied, plaintiff’s counsel responded, in part: “[B]oth sides

are here because both sides don’t think that there are material facts in dispute.”

6

Standing alone, plaintiff’s five-volume appendix in support of its motion for summary disposition

spans nearly 1,200 pages, while defendant’s 29-volume appendix in support of its motion for

summary disposition sprawls across more than 7,500 pages.

7

Platt Convenience Inc v City of Ann Arbor, unpublished order of the Court of Appeals, entered

September 7, 2023 (Docket No. 359013).

8

Platt Convenience Inc v City of Ann Arbor, unpublished order of the Court of Appeals, entered

November 16, 2023 (Docket No. 359013).

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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 NW2d 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 NW2d 738 (2021) (“we affirm the

Court of Appeals’ grant of summary disposition to the state defendants”); Adair v Michigan, 317

Mich App 355, 359; 894 NW2d 665 (2016) (granting a motion for summary disposition in the

context of an original Headlee action filed in this Court).

However, because this Court is most accustomed and acclimated to sitting as an error-

correcting appellate court, it “is poorly suited and equipped for factual development of new

claims[.]” See Okrie v Michigan, 306 Mich App 445, 458; 857 NW2d 254 (2014). For that reason,

in original Headlee actions, if this Court “determines that the issues framed . . . present factual

questions for resolution, the panel must”—as occurred here—“refer the suit to a judicial circuit for

the purposes of holding pretrial proceedings, conducting a hearing to receive evidence and

arguments of law, and issuing a written report for the panel setting forth proposed findings of fact,

and conclusions of law.” See MCR 7.206(E)(3)(d).

In their instant briefs, the parties disagree as to what “standard of review” we ought to

employ in reviewing the Special Master’s proposed findings of fact and conclusions of law. Such

arguments are mostly irrelevant, particularly given the current procedural stance of this case. “A

special master . . . exercises the powers conferred upon him [or her] subject to the judge’s power

to substitute his [or her] own independent judgment at any time for the judgment of the special

master[.]” Rockwell v Bd of Ed of Sch Dist. of Crestwood, 393 Mich 616, 644-645; 227 NW2d

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736 (1975).9 In other words, all recommended “findings” and “conclusions” offered by the Special

Master are merely that—recommendations as to how this Court should rule, not rulings in and of

themselves. And because this Court is exercising original jurisdiction over this action, rather than

appellate jurisdiction, it would be a misnomer to refer to a standard of “review.” See Black’s Law

Dictionary (11th ed) (defining the phrase “standard of review” as “[t]he criterion by which an

appellate court exercising appellate jurisdiction measures the constitutionality of a statute or the

propriety of an order, finding, or judgment entered by a lower court”). Furthermore, even if we

were exercising appellate jurisdiction here, our review of the Special Master’s main disputed

recommendation—i.e., that this Court should grant summary disposition to defendant—would, of

course, be de novo.10 See, e.g., Heaton v Benton Constar Co, 286 Mich App 528, 531; 780 NW2d

618 (2009).

As noted, the Special Master recommended that we rule in defendant’s favor under MCR

2.116(C)(7) or (C)(10). But because we conclude that summary disposition is warranted under

MCR 2.116(C)(10), we limit our discussion to that particular sub rule and neither consider nor

decide whether summary disposition might also be warranted under subrule (C)(7).11

As this Court explained in Zaher v Miotke, 300 Mich App 132, 139-140; 832 NW2d 266

(2013):

A motion under MCR 2.116(C)(10) tests the factual support of a plaintiff’s

claim. Summary disposition is appropriate under MCR 2.116(C)(10) if there is no

genuine issue regarding any material fact and the moving party is entitled to

judgment as a matter of law. In reviewing a motion under MCR 2.116(C)(10), this

Court considers the pleadings, admissions, affidavits, and other relevant

documentary evidence of record in the light most favorable to the nonmoving party

to determine whether any genuine issue of material fact exists to warrant a trial. A

genuine issue of material fact exists when the record, giving the benefit of

reasonable doubt to the opposing party, leaves open an issue upon which reasonable

minds might differ. [Quotation marks and citations omitted.]

The “court is not permitted to assess credibility, weigh the evidence, or resolve factual disputes,

and if material evidence conflicts, it is not appropriate to grant a motion for summary disposition

under MCR 2.116(C)(10).” Pioneer State Mut Ins Co v Dells, 301 Mich App 368, 377; 836 NW2d

257 (2013) (emphasis added). “Circumstantial evidence can be sufficient to establish a genuine

issue of material fact, but mere conjecture or speculation is insufficient.” McNeill-Marks v

MidMichigan Med Ctr-Gratiot, 316 Mich App 1, 16; 891 NW2d 528 (2016). “This Court is liberal

9

Accord Campbell v Evans, 358 Mich 128, 131; 99 NW2d 341 (1959) (“The responsibility for the

ultimate decision and the exercise of judicial discretion in reaching it still rests squarely upon the

trial judge. These grave prerogatives he [or she] may never delegate to others.”).

We note that, at oral argument, plaintiff’s counsel conceded that it would be appropriate for this

10

Court to engage in “complete de novo review” of the competing motions for summary disposition.

11

“This Court generally does not address moot questions or declare legal principles that have no

practical effect in a case.” In re Pollack Trust, 309 Mich App 125, 154; 867 NW2d 884 (2015).

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in finding genuine issues of material fact.” Jimkoski v Shupe, 282 Mich App 1, 5; 763 NW2d 1

(2008).

The moving party bears the initial burden of production, which may be satisfied “in one of

two ways.” Quinto v Cross & Peters Co, 451 Mich 358, 361; 547 NW2d 314 (1996). “First, the

moving party may submit affirmative evidence that negates an essential element of the nonmoving

party’s claim. Second, the moving party may demonstrate to the court that the nonmoving party’s

evidence is insufficient to establish an essential element of the nonmoving party’s claim.” Id. at

362 (quotation marks and citation omitted). Once the moving party satisfies its burden in one of

those two ways, “[t]he burden then shifts to the opposing party to establish that a genuine issue of

disputed fact exists.” Id.

Our “review is limited to . . . the evidence properly presented[.]” Barnard Mfg Co, Inc v

Gates Performance Engineering, Inc, 285 Mich App 362, 380; 775 NW2d 618 (2009) (Barnard).

That is, this Court may only consider the “substantively admissible evidence actually proffered”

by the parties. Maiden v Rozwood, 461 Mich 109, 121; 597 NW2d 817 (1999). “Trial courts are

not the research assistants of the litigants; the parties have a duty to fully present their legal

arguments to the court for its resolution of their dispute.” Walters v Nadell, 481 Mich 377, 388;

751 NW2d 431 (2008). As such, this Court will not “scour the record to determine whether there

exists a genuine issue of fact,” instead focusing only on those “specific facts” that have been duly

“set forth” by the parties. Barnard, 285 Mich App at 381 (quotation marks and citations omitted).

See also MCR 2.116(G)(4) (“an adverse party may not rest upon the mere allegations or denials

of his or her pleading, but must, by affidavits or as otherwise provided in this rule, set forth specific

facts showing that there is a genuine issue for trial”).

B. CLASS CERTIFICATION

Before addressing the merits of the parties’ competing motions for summary disposition,

we first consider plaintiff’s motion for class certification. We deny that motion in light of

plaintiff’s failure to demonstrate that it will adequately represent the diverse—and sometimes

conflicting—interests of all of the distinct subclasses within the proposed class.

The ordinary court rules governing class certification apply with equal force in this original

action. See Bolt (On Remand), 238 Mich App at 59. As particularly relevant here, MCR 3.501(A)

provides:

(1) One or more members of a class may sue or be sued as representative

parties on behalf of all members in a class action only if:

(a) the class is so numerous that joinder of all members is impracticable;

(b) there are questions of law or fact common to the members of the class

that predominate over questions affecting only individual members;

(c) the claims or defenses of the representative parties are typical of the

claims or defenses of the class;

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(d) the representative parties will fairly and adequately assert and protect

the interests of the class; and

(e) the maintenance of the action as a class action will be superior to other

available methods of adjudication in promoting the convenient administration of

justice. [Emphases added.]

For a class to be certified, “the action must meet all the requirements in MCR 3.501(A)(1); a case

cannot proceed as a class action when it satisfies only some, or even most, of these factors.” A &

M Supply Co v Microsoft Corp, 252 Mich App 580, 597; 654 NW2d 572 (2002). “The burden of

establishing that the requirements for a certifiable class are satisfied is on the party seeking to

maintain the certification.” Hanton v Hantz Fin Servs, Inc, 306 Mich App 654, 661; 858 NW2d

481 (2014).

Plaintiff asks us to certify “a 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 . . . .” In our estimation, that request is fatally flawed

because, far from carrying their burden regarding the “adequacy” requirement under MCR

3.501(A)(1)(d), plaintiff and its counsel have affirmatively demonstrated that they will not

adequately safeguard the interests of all members of the proposed class.

“To show adequacy, the proponents must show that (1) counsel is qualified to pursue the

proposed class action, and (2) the members of the class do not have antagonistic or conflicting

interests.” Duskin v Dep’t of Human Servs, 304 Mich App 645, 657; 848 NW2d 455 (2014). In

analyzing that latter “adequacy” question, the Special Master wrote:

Plaintiff’s claims, if successful, will serve to damage most of the proposed

class, who will end up paying more through taxes for the same service than they

are paying now through user fees. (Praschan Aff., Appx. C, ¶¶ 14-16.) The owners

of residential homes—an estimated 21,344 customers, or about 84% of all the

properties that receive and pay for stormwater utility services—will pay more,

while Plaintiff will pay less going forward. (Id.; see also, Wingle Aff., Appx. E, p.

172, ¶¶ 10-11.) Yet other members of the class—namely, the huge numbers of tax-

exempt property owners and tenants—will pay nothing. (Id.) Plaintiff has not

sufficiently established how it can adequately represent the interests of a majority

of the proposed class who will end up damaged through having to pay more through

taxes for the same services now paid for by fees. The evidence demonstrates that

Plaintiff’s interests in the outcome of this case are different than, and are in fact

inapposite to, the interests of most of its proposed class members. Because of this,

Plaintiff is an inadequate class representative. [Record citations in original.]

In its objections to the Special Master’s proposed opinion in that regard, plaintiff does not

cite any record evidence to rebut the Special Master’s pertinent proposed findings, instead arguing

in a conclusory fashion:

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Finally, there is no conflict of interest between Plaintiff and the members of

the proposed class. Plaintiff’s claims and the claims of the class arise from the

City’s imposing the improper Stormwater Charges which is an unlawful collection

of a tax in violation of the Headlee Amendment. The Stormwater Charges are of

the same type for each member of the proposed class, and each class member

suffered injury as a result of the City’s collection of the illicit tax. There is no

conflict that goes to the subject matter of the lawsuit, and, therefore, the class should

be certified.

If anything, that argument serves to confirm that plaintiff and its counsel will not

adequately protect the interests of all—or even most—of the proposed class members. Plaintiff

does not dispute that different subgroups within the proposed class have markedly different

economic interests in the outcome of this case. To focus on the most obvious example, the myriad

tax-exempt entities in defendant City stand to gain considerably while facing no downside risk; if

the charges in this case are found to be unlawful disguised taxes under Headlee § 31, then the tax-

exempt entities will, by virtue of their tax-exempt status, no longer be forced to pay the disputed

storm-sewer charges and will nevertheless continue to reap the related benefits.12 On the other

hand, the majority of the proposed class (i.e., the residential ratepayers) face the risk of an increase

in their real-world, out-of-pocket costs as a result of the disputed charges—including the portion

formerly paid for by tax-exempt entities—being shifted over to the municipal property-tax rolls.

And as explained at greater length infra, because funding the disputed storm-sewer services is

compulsory under federal law, that risk is not one that the residential ratepayers would necessarily

be able to avert by popular vote.13

Despite the existence of such clear potential conflicts of interest between readily

identifiable subgroups in the proposed class, plaintiff rejects at such concerns, tacitly suggesting

that, real-world fiscal impacts aside, the adequacy requirement is satisfied here because all of the

12

As explained in more detail infra, given that the disputed storm-sewer services must be provided

under the National Pollutant Discharge Elimination System (NPDES) established by the Clean

Water Act, 33 USC 1281 et seq., whether the economic burden is ultimately borne by municipal

ratepayers, municipal taxpayers, or state taxpayers, there is no question that it will be borne. See

33 USC 1319(e) (“Whenever a municipality is a party to a civil action brought by the United States

under this section, the State in which such municipality is located shall be joined as a party. Such

State shall be liable for payment of any judgment, or any expenses incurred as a result of

complying with any judgment, entered against the municipality in such action to the extent that

the laws of that State prevent the municipality from raising revenues needed to comply with such

judgment.”) (emphasis added); 33 USC 1319(b) (granting the EPA Administrator the power “to

commence a civil action for appropriate relief, including a permanent or temporary injunction, for

any violation for which he is authorized to issue a compliance order under subsection (a),”

including violations of NPDES-permit requirements); American Axle & Mfg, Inc v City of

Hamtramck, 461 Mich 352; 604 NW2d 330 (2000) (holding that judgment levies added to the tax

rolls pursuant to MCL 600.6093 are not subject to Headlee voter-approval requirements because

the imposition of such levies was authorized by law when the Headlee amendment was ratified).

13

See footnote 12, supra.

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class members have been subjected to a constitutional “injury” in the form of an unlawful tax

exaction. Perhaps some of the residential ratepayers in the proposed class would share plaintiff’s

view that it is better for them to risk paying considerably more for the same services if doing so

ensures that Headlee § 31 is being duly enforced. But others might, perhaps, take the more

practical view of valuing cash in hand above victories in legal claims. On that basis alone, we are

obliged to deny the motion for class certification. See Duskin, 304 Mich App at 658 (holding that

a trial court had clearly erred in finding that the “adequacy” requirement was satisfied based on

the proposed class representatives’ “bare allegations” regarding “a lack of conflicting interests

among the representative parties and class members”); A & M Supply, 252 Mich App at 597 (“the

action must meet all the requirements in MCR 3.501(A)(1); a case cannot proceed as a class action

when it satisfies only some, or even most, of these factors.”). Accord Amchem Products, Inc v

Windsor, 521 US 591, 626; 117 S Ct 2231; 138 L Ed 2d 689 (1997) (“[N]amed parties with diverse

medical conditions sought to act on behalf of a single giant class rather than on behalf of discrete

subclasses. In significant respects, the interests of those within the single class are not aligned.

Most saliently, for the currently injured, the critical goal is generous immediate payments. That

goal tugs against the interest of exposure-only plaintiffs in ensuring an ample, inflation-protected

fund for the future.”).

C. EXPERT-OPINION EVIDENCE

Given that our review under MCR 2.116(C)(10) is limited to the substantively admissible

evidence proffered by the parties, before delving into the merits, we must consider and decide

certain challenges that plaintiff has raised to some of defendant’s expert-opinion evidence.

Plaintiff raises two distinct varieties of objection in that regard. We address each in turn.

First, plaintiff argues that several of the defense experts offered improper opinions

regarding questions of law—in particular, the ultimate legal question of whether the disputed

charges in this case qualify as proper user fees, rather than unlawful taxes, under the test

enumerated in Bolt v City of Lansing, 459 Mich 152; 587 NW2d 264 (1998). We agree with

plaintiff that, to the extent that defendant’s experts offered testimony or reports directly opining

on legal questions, such as whether the disputed charges are disguised taxes under Headlee § 31

or what a municipality must do to satisfy the demands of Bolt, such evidence must be disregarded

as substantively inadmissible. See Bolt, 459 Mich at 158 (“Whether the storm water service charge

. . . is a ‘tax’ or a ‘user fee’ is a question of law”); Lenawee Co v Wagley, 301 Mich App 134, 160-

161; 836 NW2d 193 (2013) (“The opinion of an expert may not extend to the creation of new legal

definitions and standards and to legal conclusions. Additionally, an expert witness may not give

testimony regarding a question of law, because it is the exclusive responsibility of the trial court

to find and interpret the law.”) (quotation marks, citations, brackets, and ellipsis omitted).

Second, plaintiff argues that some of the opinions proffered by defendant’s proposed

experts “must be . . . excluded” from consideration as inadmissible under MRE 70214 and MRE

14

MRE 702 provides:

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70315 because the experts in question are “not qualified” to render the disputed opinions and the

underlying “facts and data” on which the experts relied are not “in evidence.” Plaintiff also raises

a Daubert16 challenge, arguing that one proposed defense expert’s opinion concerning the value

of the municipal roadways, when considered as a part of the storm-sewer infrastructure, is “based

upon an unreliable and untested methodology[.]” We agree with plaintiff that the Special Master

did not properly address these challenges when they were raised before her. And in many cases,

we would likely find it necessary to refer this matter back to her for further factual development

before we ruled. Under the unique circumstances at bar, however, we find it is unnecessary to

refer this matter back to the Special Master for a Daubert hearing because, assuming that the

disputed expert opinions are not substantively admissible for purposes of summary disposition,

that would not alter our ultimate conclusion that defendant is entitled to summary disposition under

MCR 2.116(C)(10).

As a general rule, “there is no requirement that an expert’s qualifications and methods be

incorporated into an affidavit submitted in support of, or opposition to, a motion for summary

disposition. Rather, the content of the affidavits must be admissible in substance, not form.”

Dextrom v Wexford Co, 287 Mich App 406, 428; 789 NW2d 211 (2010). However, trial courts

have a “gatekeeping obligation” under MRE 702, which obliges them “to review all expert opinion

testimony” for admissibility under that rule. Craig v Oakwood Hosp, 471 Mich 67, 82; 684 NW2d

296 (2004). “This gatekeeper role applies to all stages of expert analysis. MRE 702 mandates a

searching inquiry, not just of the data underlying expert testimony, but also of the manner in which

the expert interprets and extrapolates from those data.” Gilbert v DaimlerChrysler Corp, 470 Mich

749, 782; 685 NW2d 391 (2004). “While a party may waive any claim of error by failing to call

this gatekeeping obligation to the court’s attention, the court must evaluate expert testimony under

MRE 702 once that issue is raised.” Craig, 471 Mich at 82. Moreover, a party need not wait until

A witness who is qualified as an expert by knowledge, skill, experience,

training, or education may testify in the form of an opinion or otherwise if the

proponent demonstrates to the court that it is more likely than not that:

(a) the expert’s scientific, technical, or other specialized knowledge will

help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert’s opinion reflects a reliable application of the principles and

methods to the facts of the case.

15

MRE 703 provides: “An expert may base an opinion on facts or data in the case that the expert

has been made aware of or personally observed. The facts or data must be in evidence--or, in the

court’s discretion, be admitted in evidence later.”

16

Daubert v Merrell Dow Pharm, Inc, 509 US 579; 113 S Ct 2786; 125 L Ed 2d 469 (1993).

-11-

trial to raise such a challenge; rather, the issue is properly raised at summary disposition. See, e.g.,

Elher v Misra, 499 Mich 11, 14; 878 NW2d 790 (2016); Amorello v Monsanto Corp, 186 Mich

App 324, 331-332; 463 NW2d 487 (1990).17

“Under MRE 702, it is generally not sufficient to simply point to an expert’s experience

and background to argue that the expert’s opinion is reliable and, therefore, admissible.” Edry v

Adelman, 486 Mich 634, 642; 786 NW2d 567 (2010). “[T]he whole point of Daubert is that

experts can’t speculate. They need analytically sound bases for their opinions, and it is axiomatic

that an expert, no matter how good his credentials, is not permitted to speculate.” Id. at 642 n 6

(quotation marks, citations, and brackets omitted).

In analyzing plaintiff’s motion to strike the disputed expert-opinion evidence, the Special

Master opined that plaintiff was not entitled to a Daubert hearing, reasoning (in pertinent part) as

follows:

4. Gatekeeper Role.

The “gatekeeper” doctrine envisioned by Daubert, supra, for analyzing

expert testimony was designed to protect juries and is largely irrelevant in the

context of a non-jury case like this one. People v Taylor, 245 Mich App 293, 305;

628 NW2d 55 (2001). Moreover, in a non-jury case, probing the experts’

methodologies under Daubert, supra, to avoid misleading this Court is not an

efficient use of judicial or party resources, because the Court can simply receive

the testimony and give it the weight it deserves. People v Wofford, 196 Mich App

275, 282; 492 NW2d 747 (1992); People v Lanzo Constr. Co., 272 Mich App 470,

484; 726 NW2d 746 (2006).

Given the flexible nature of MRE 702, and given the fact that the triers of

fact in this case are Circuit and Court of Appeals judges, the Court finds that there

is little or no risk that the expert testimony in this case will be given undue weight.

This Court and the Court of Appeals are presumed capable of weighing evidence

to sift the important from the unimportant, and even the admissible from the

inadmissible when those are intertwined in a way that might counsel excluding the

same evidence from consideration by a lay jury. Wofford, 196 Mich App at 282;

Lanzo Constr. Co., 272 Mich App at 484. This Court and the Court of Appeals are

fully capable of receiving, considering, and giving the appropriate weight to the

City’s expert reports and its supporting evidence.

However, none of the decisions cited by the Special Master—i.e., Wofford, Lanzo Construction,

and Taylor—supports the proposition that the Daubert “gatekeeper” duty need only be observed

in cases that will be tried before a jury. Instead, the cited cases stand for the proposition that

because judges are presumed to know the law, including what evidence is admissible and for what

17

Because Amorello was issued after November 1, 1990, and it has never been reversed or

modified by our Supreme Court or a special panel of this Court, it is binding under MCR

7.215(J)(1). See In re Medina, 317 Mich App 219, 230; 894 NW2d 653 (2016).

-12-

particular purposes, evidentiary errors that might ordinarily warrant reversal are generally

harmless when they occur in the context of a bench trial. Thus, we respectfully disagree with the

Special Master’s suggestion that decisions such as Wofford might justify disregarding our Supreme

Court’s admonition in Craig, 471 Mich at 82, that a “court must evaluate expert testimony under

MRE 702 once that issue is raised.” See In re AGD, 327 Mich App 332, 339-340; 933 NW2d 751

(2019) (noting that, under the doctrine of vertical stare decisis, only our Supreme Court has

authority to overrule one of its prior decisions, and until that Court does so, its former decisions

remain binding on all lower courts).

Notwithstanding this however, under the circumstances at bar, we decline to refer this

matter back to the Special Master for a Daubert hearing at this juncture. Put simply, assuming

that plaintiff’s Daubert challenge is meritorious—i.e., that the disputed expert opinions are not

substantively admissible for purposes of summary disposition—that would not impact our holding

that defendant is entitled to summary disposition under MCR 2.116(C)(10). This is because

plaintiff, not defendant, bears the burden of production here with regard to the few material points

of disputed fact. See MRE 301 (“In a civil case, unless a statute or these rules provide otherwise,

the party against whom a presumption is directed has the burden of producing evidence to rebut

the presumption.”); Quinto, 451 Mich at 362 (“Where the burden of proof at trial on a dispositive

issue rests on a nonmoving party, the nonmoving party may not rely on mere allegations or denials

in pleadings, but must go beyond the pleadings to set forth specific facts showing that a genuine

issue of material fact exists.”); Youmans v Charter Twp of Bloomfield, 336 Mich App 161, 226;

969 NW2d 570 (2021) (observing that “the party challenging a given municipal utility charge

under § 31 bears the burden of establishing the unconstitutionality of the charge at issue” and that

“the presumption of reasonableness regarding municipal utility rates is a ‘pertinent’ consideration

when considering the second Bolt factor”) (quotation marks and citations omitted); Isabella Co

Dep’t of Social Servs v Thompson, 210 Mich App 612, 616; 534 NW2d 132 (1995) (“an unrebutted

presumption can form the basis for . . . summary disposition”). In other words, even if plaintiff is

correct that defendant’s disputed expert-opinion evidence is all inadmissible, that would not alter

our conclusion (explained fully in the next section of this opinion) that defendant is entitled to

summary disposition under MCR 2.116(C)(10) based on plaintiff’s failure to produce sufficient

substantively admissible evidence to yield a genuine issue with regard to the material disputed

facts in this case.

D. SUMMARY DISPOSITION UNDER MCR 2.116(C)(10)

Turning to the true heart of the analysis, as this Court explained in Youmans, 336 Mich

App at 225-226:

The Headlee Amendment was adopted by referendum effective December

23, 1978. It was proposed as part of a nationwide ‘taxpayer revolt’ in which

taxpayers were attempting to limit legislative expansion of requirements placed on

local government, to put a freeze on what they perceived was excessive government

spending, and to lower their taxes both at the local and the state level. These

purposes would be thwarted if a local authority could charge higher utility rates to

raise revenue and then use some of the excess funds to finance a public-works

project. As adopted, the Headlee Amendment imposes on state and local

government a fairly complex system of revenue and tax limits.

-13-

* * *

. . . Section 31 prohibits units of local government from levying any new tax or

increasing any existing tax above authorized rates without the approval of the unit’s

electorate. Although the levying of a new tax without voter approval violates the

Headlee Amendment, a charge that constitutes a user fee does not, and the party

challenging a given municipal utility charge under § 31 bears the burden of

establishing the unconstitutionality of the charge at issue. [Quotation marks and

citations omitted.]

In “determining whether a municipal charge represents a permissible ‘user fee’ or an

impermissible ‘tax’ under Headlee § 31,” this Court generally applies the three-prong test set forth

by our Supreme Court in Bolt. Youmans, 336 Mich App at 226.

As explained by our Supreme Court, “There is no bright-line test for

distinguishing between a valid user fee and a tax that violates the Headlee

Amendment.” Bolt, 459 Mich at 160. In general, “a fee is exchanged for a service

rendered or a benefit conferred, and some reasonable relationship exists between

the amount of the fee and the value of the service or benefit. A tax, on the other

hand, is designed to raise revenue.” Id. at 161 (cleaned up). Under Bolt, courts

apply three key criteria when distinguishing between a user fee and a tax: (1) “a

user fee must serve a regulatory purpose rather than a revenue-raising purpose”; (2)

“user fees must be proportionate to the necessary costs of the service”; and (3) a

user fee is voluntary in that users are “able to refuse or limit their use of the

commodity or service.” Id. at 161-162. “These criteria are not to be considered in

isolation, but rather in their totality, such that a weakness in one area would not

necessarily mandate a finding that the charge is not a fee.” Wheeler v Shelby

Charter Twp, 265 Mich App 657, 665, 697 NW2d 180 (2005) (cleaned up). [Shaw

v City of Dearborn, 329 Mich App 640, 653; 944 NW2d 153 (2019).]

In her report, the Special Master recommended that we hold that the first prong of the

instant inquiry favors defendant’s position—i.e., that the disputed charges primarily serve a valid

regulatory purpose, rather than a revenue-raising purpose. Among other things, the Special Master

focused on the fact that the disputed storm-sewer system is subject to mandatory federal

regulations under the National Pollutant Discharge Elimination System (NPDES). The Special

Master also opined that, as a matter of law, she was required to focus on whether the rates as a

whole primarily served a valid regulatory purpose and should not “engage in second-guessing and

piecemeal evaluation of individual costs for segregated aspects of the system that constitute just a

small portion of the overall uses of revenue generated from the fees.”

Based on the undisputed facts at issue in this case, we tend to agree with the Special

Master’s overarching reasoning concerning the first Bolt factor. As this Court recently noted in

Mackinaw Area Tourist Bureau, Inc v Village of Mackinaw City, ___ Mich App ___, ___; ___

NW3d ___ (2024) (Docket No. 361625), slip op at 15:

Generally speaking, “it is beyond dispute” that water and sewer rates serve

the regulatory purpose of providing water and sewer services to ratepayers. Shaw,

-14-

329 Mich App at 666. Such rates “fund the operational and capital expenses” of

the water and sewer systems, which likewise “serves the primary function of

providing water and sewer services” to ratepayers. Youmans, 336 Mich App at 228.

In addition, “[c]ategorically, obligations arising out of administrative-agency regulations serve a

regulatory purpose.” Youmans, 336 Mich App at 228-229. And as the Special Master correctly

noted, the proper focus of the instant inquiry is on the primary purpose served by the rates “as a

whole[.]” See id. at 229 (“viewing the disputed rates as a whole, we are persuaded that they

primarily serve valid regulatory purposes under the first Bolt factor, which favors the

determination that they are user fees rather than taxes”). See also Merrelli v St Clair Shores, 355

Mich 575, 583; 96 NW2d 144 (1959) (“[W]e have considered 2 sources of municipal funds,

differing in governmental theory, each having inherent limitations resulting therefrom. One

involves an exercise of the municipal power of taxation. Its purpose is to raise money. The other

is an exercise of the police power of the community. Its purpose is the protection of the public

health, safety, and welfare. True, certain moneys may be obtained in connection therewith, but

such moneys are incidental to the accomplishment of the primary purpose of guarding the public.”)

(emphasis added).

Storm-sewer systems like the one at issue here are subject to significant federal regulation

and oversight. In 1972 amendments to the Clean Water Act, 33 USC 1281 et seq., Congress

established the NPDES, “a federal permit program designed to regulate the discharge of polluting

effluents” into navigable waterways. Int’l Paper Co v Ouellette, 479 US 481, 489; 107 S Ct 805;

93 L Ed 2d 883 (1987). “Storm sewers are established point sources subject to NPDES permitting

requirements,” Environmental Defense Ctr, Inc v US EPA, 344 F3d 832, 841 (CA 9, 2003), and it

is undisputed that, as the operator of “a ‘municipal separate storm sewer system’ (MS4)” serving

“a population of at least 100,000,” defendant City is required to hold a NPDES permit “before

discharging storm water into navigable waters,” see Los Angeles Co Flood Control Dist v Natural

Resource Defense Council, Inc, 568 US 78, 80-81; 133 S Ct 710; 184 L Ed 2d 547 (2013).18

Indeed, § 301(a) of the Clean Water Act, 33 USC 1311(a), “generally prohibits the discharge of

any effluent into a navigable body of water unless the point source has obtained a NPDES permit

from the Environmental Protection Agency (EPA).” Int’l Paper, 479 US at 489 (emphasis added).

Through the Department of Environment, Great Lakes, and Energy (EGLE), “Michigan

administers the NPDES within this state pursuant to the Clean Water Act and” the Natural

18

See also Mich Admin Code R 323.2103(o) (“ ‘Municipal separate storm sewer system’ or ‘MS4’

means all separate storm sewers that are owned or operated by the United States, a state, city,

village, township, county, district, association, or other public body created by or pursuant to state

law, having jurisdiction over disposal of sewage, industrial wastes, storm water, or other wastes,

including special districts under state law, such as a sewer district, flood control district, or

drainage district, or similar entity, or a designated or approved management agency under section

208 of the federal act that discharges to waters of the state. This term includes systems similar to

separate storm sewer systems in municipalities, such as systems at military bases, large hospital

or prison complexes, and highways and other thoroughfares. The term does not include separate

storm sewers in very discrete areas, such as individual buildings.”).

-15-

Resources and Environmental Protection Act (NREPA), MCL 324.101 et seq. Mich Farm Bureau

v Dep’t of Environment, Great Lakes, & Energy, 343 Mich App 293, 297; 997 NW2d 467 (2022),

vacated in part on other grounds ___ Mich ___ (2024) (Supreme Court Docket No. 165166).

Nevertheless, under 33 USC 1342(d), the EPA retains authority to block this state’s proposed

issuance of any particular NPDES permit. See Int’l Paper, 479 US at 489.

Violation of NPDES requirements can carry both criminal and civil penalties. See 33 USC

1319(c) and (d); Maui Co, Hawaii v Hawaii Wildlife Fund, 590 US 165, 186; 140 S Ct 1462; 206

L Ed 2d 640 (2020) (observing that, under the NPDES “penalty provision,” federal courts are

granted “broad discretion to set a penalty that takes account of many factors”). And the ultimate

responsibility for complying with such federal requirements cannot be avoided via state laws that

prevent a municipality from raising the requisite revenue. See 33 USC 1319(e) (“Whenever a

municipality is a party to a civil action brought by the United States under this section, the State

in which such municipality is located shall be joined as a party. Such State shall be liable for

payment of any judgment, or any expenses incurred as a result of complying with any judgment,

entered against the municipality in such action to the extent that the laws of that State prevent the

municipality from raising revenues needed to comply with such judgment.”) (emphasis added);

United States v Metro St Louis Sewer Dist, 952 F2d 1040, 1043 (CA 8, 1992) (“Because this

section [i.e., 33 USC 1319(e)] declares that the State may be liable for a judgment reached against

a municipality, the normal course of action is for the United States to name the State as a

defendant.”).

It is true that, in Bolt, the parties raised somewhat similar regulatory concerns; to wit, they

raised concerns regarding the possibility that Lansing might, under EPA guidelines that were

merely “proposed” at that time, become subject to NPDES permitting requirements after

implementing a separate sewer system, and thus face the possibility of incurring federal penalties

and enforcement actions for failure to comply. See Bolt, 459 Mich at 155 (noting that the planned

separation of Lansing’s sanitary- and storm-sewer system in that case was an effort to proactively

comply with the Clean Water Act and NPDES requirements); id. at 166 (“[T]he acknowledged

goal of the ordinance is to address environmental concerns regarding water quality. Improved

water quality in the Grand and Red Cedar Rivers and the avoidance of federal penalties for

discharge violations are goals that benefit everyone in the city, not only property owners.”)

(emphasis added); id. at 170-171 & n 2 (BOYLE, J., dissenting) (“Although unclear, the parties

state that, under proposed EPA guidelines, once the city of Lansing implements the separated

storm water/sewer system, it will result in a storm water system that serves more than 100,000

people and the city must request and obtain a specific storm water permit”).

In that respect, however, the situation in Bolt is both legally and factually distinguishable

from the instant case. Unlike Bolt, here the disputed charges are not being used to raise capital

funds to create a separated sewer system; rather, defendant City’s separated storm-sewer system

is already built and paid for, and the disputed charges are being used to fund its continued

operation, both in the form of current operating costs and capital expenses for maintenance and

improvement. Moreover, unlike Bolt, here the concerns regarding the effect of NPDES-MS4

requirements on the municipality are not inchoate fears regarding the impact that potential federal

regulation and enforcement might have on a not-yet-completed sewer system; rather, they seek to

address the comprehensive federal regulatory scheme that does, in fact, apply to the storm-sewer

system at issue here. See Los Angeles Co Flood Control Dist, 568 US at 80-81 (“Petitioner . . .

-16-

operates a ‘municipal separate storm sewer system’ (MS4)—a drainage system that collects,

transports, and discharges storm water. See 40 CFR § 122.26(b)(8) (2012). See also §

122.26(b)(13) (‘Storm water means storm water runoff, snow melt runoff, and surface runoff and

drainage.’). Because storm water is often heavily polluted, see 64 Fed.Reg. 68724–68727 (1999),

the CWA and its implementing regulations require the operator of an MS4 serving a population of

at least 100,000 to obtain a [NPDES] permit before discharging storm water into navigable

waters.”).19

Given that the disputed charges in this case are utilized to comply with mandatory federal

regulations, deeming them to be unlawful taxes under Headlee § 31 would, ultimately at least,

likely lead to the circular result of the same charges being lawfully assessed as property taxes—

again without voter approval—by operation of a judgment against defendant City obtained by the

EPA or EGLE, or possibly a consent judgment agreed to by those entities. See generally 33 USC

1319(b) (granting the EPA Administrator the power “to commence a civil action for appropriate

relief, including a permanent or temporary injunction, for any violation for which he is authorized

to issue a compliance order under subsection (a),” including violations of NPDES-permit

requirements); American Axle & Mfg, Inc v City of Hamtramck, 461 Mich 352; 604 NW2d 330

(2000) (holding that judgment levies added to the tax rolls pursuant to MCL 600.6093 are not

subject to Headlee voter-approval requirements because the imposition of such levies was already

authorized by law at the time the Headlee amendment was ratified). Indeed, because “a court may

not hold a civil defendant liable under state law for conduct federal law requires,” Armstrong v

Exceptional Child Ctr, Inc, 575 US 320, 326; 135 S Ct 1378; 191 L Ed 2d 471 (2015), we have

serious doubts whether it would be appropriate for us to issue the kind of injunction requested by

plaintiff here—i.e., one “[p]ermanently enjoin[ing] the City from imposing or collecting any

Stormwater Charges, unless those Charges receive voter approval in conformance with the

Headlee Amendment[.]”

In any event, given that the charges at issue are primarily used to fund the operational and

capital expenses of defendant City’s federally mandated storm-sewer system, we conclude that

those charges primarily serve valid regulatory purposes, which militates in favor of holding that

they are valid user fees. See Mackinaw Area Tourist Bureau, ___ Mich App at ___, slip op at 15;

accord Shaw, 329 Mich App 666 (“Under the first Bolt factor, it is beyond dispute that the city’s

water and sewer rates comprise a valid user fee because the rates serve the regulatory purpose of

providing water and sewer service to the city’s residents. Although the rates generate funds to pay

for the operation and maintenance of the water and sewer systems in their entirety, this by itself

does not establish that the rates serve primarily a revenue-generating purpose.”); Youmans, 336

Mich App at 228-229 (“Categorically, obligations arising out of administrative-agency regulations

serve a regulatory purpose.

19

With certain limited exceptions, “[i]t is axiomatic that federal law controls the interpretation of

federal statutes and regulations,” Brown v United States, 890 F2d 1329, 1341 (CA 5, 1989), and

“[w]ith regard to issues involving federal law, this Court is bound by decisions of the United States

Supreme Court, but is not bound by decisions of any lower federal courts,” Bienenstock & Assoc,

Inc v Lowry, 314 Mich App 508, 515; 887 NW2d 237 (2016).

-17-

In analyzing the second prong of the Bolt test, the Special Master stated “findings”

supporting an affirmative conclusion that the disputed charges are reasonably proportionate to the

actual costs of providing the associated storm-sewer services. On the record presented here,

however, we neither can nor do reach any such definitive holding on that factual question. Instead,

we hold that plaintiff has failed to carry its burden of producing sufficient substantively admissible

evidence to rebut the applicable presumption of proportionality or yield a genuine issue of material

fact whether the disputed rates are reasonably proportionate to the associated costs.

“Where the charge for . . . storm . . . sewers reflects the actual costs of use, metered with

relative precision in accordance with available technology, including some capital investment

component, sewerage may properly be viewed as a utility service for which usage-based charges

are permissible, and not as a disguised tax.” Bolt, 459 Mich at 164-165 (quotation marks and

citation omitted). In other words, the “[f]ees charged by a municipality must be reasonably

proportionate to the direct and indirect costs of providing the service for which the fee is charged.”

Jackson Co v City of Jackson, 302 Mich App 90, 109; 836 NW2d 903 (2013) (quotation marks

and citation omitted; emphasis added). “[M]athematic precision is not necessary in calculating the

fee,” and “[t]his Court must presume the amount of the fee to be reasonable, unless the contrary

appears upon the face of the law itself, or is established by proper evidence.” Id. (quotation marks

and citation omitted). Accord Kircher v City of Ypsilanti, 269 Mich App 224, 231-232; 712 NW2d

738 (2005), citing Merrelli, 355 Mich at 588 (“The law does not demand a precise correlation

between costs and fees required, but, rather, a reasonable relation.”).

As the party raising this challenge under Headlee § 31, plaintiff bears “the burden of

establishing the unconstitutionality of the city’s storm water management charge.” See id. at 98.

Plaintiff also bears the burden of overcoming two distinct presumptions that apply in cases like

these: (1) the presumption of constitutionality, see Taxpayers United for Mich Constitution, Inc v

City of Detroit, 196 Mich App 463, 466-467; 493 NW2d 463 (1992); and (2) the presumption that

the rates are “reasonable”—i.e., that they “reasonably reflect the actual cost of service,” see

Youmans, 336 Mich App at 216-217, 226-227 (quotation marks and citation omitted); accord

Mackinaw Area Tourist Bureau, ___ Mich App at ___, slip op at 17 (“Plaintiffs bore the burden

of establishing that the Village’s water and sewer rates were not proportionate to the necessary

cost of providing those services, which included overcoming the presumption that the Village’s

utility rates were reasonable.”).

Given that plaintiff carries those burdens, to survive defendant’s motion for summary

disposition under MCR 2.116(C)(10), plaintiff was required to produce sufficient substantively

admissible to yield a genuine issue of material fact with regard to all three prongs of the Bolt

inquiry, including the proportionality prong. See Quinto, 451 Mich at 362 (“Where the burden of

proof at trial on a dispositive issue rests on a nonmoving party, the nonmoving party may not rely

on mere allegations or denials in pleadings, but must go beyond the pleadings to set forth specific

facts showing that a genuine issue of material fact exists.”). And somewhat overlappingly, plaintiff

was also required to produce sufficient evidence to rebut the presumptions of constitutionality and

reasonableness. See MRE 301 (“In a civil case, unless a statute or these rules provide otherwise,

the party against whom a presumption is directed has the burden of producing evidence to rebut

the presumption.”); Isabella Co Dep’t of Social Servs, 210 Mich App at 616 (“an unrebutted

presumption can form the basis for . . . summary disposition”).

-18-

In this instance, plaintiff failed to carry its burden of production in those regards, at least

with regard to the instant proportionality inquiry. From the outset of this action, plaintiff has

maintained that the unconstitutionality of the disputed storm-sewer charges is, in essence, self-

evident, repeatedly indicating that there was no need for discovery or the development of a factual

record to support the Headlee claims in this case. For example, in the caption of its complaint,

plaintiff included the following statement:

PURSUANT TO MCR 7.206(E) AND MCR 2.112(M), PLAINTIFF

STATES THAT IT DOES NOT BELIEVE THERE ARE ANY FACTUAL

QUESTIONS THAT ARE ANTICIPATED TO REQUIRE RESOLUTION BY

THE COURT AND PLAINTIFF DOES NOT ANTICIPATE THE NEED FOR

DISCOVERY AND THE DEVELOPMENT OF A FACTUAL RECORD.

Even so, after reviewing the parties’ initial filings, we reached the opposite conclusion, referring

this matter for further proceedings before a Special Master—including discovery. Nevertheless,

in the ensuing proceedings before the Special Master, plaintiff continued to argue that the

development of any further factual record was largely unnecessary, agreeing to have the matter

resolved on motions for summary disposition. Again, by way of example, at a hearing on the

parties’ respective motions for summary disposition, when the Special Master asked what

witnesses plaintiff might call at trial in the event that summary disposition was denied to both

sides, plaintiff’s counsel replied:

We would have our class representative talk about paying the charges. But

in these types of cases, virtually all of the evidence is going to come from

documents authored by the city or by testimony of the city’s own witnesses that we

would conduct as adverse witnesses.

So as reflected in the Summary Disposition briefing, all of our evidence,

virtually all of our evidence of our evidence of the material facts are based upon

admissions that have been made by the city. A lot of them pre-lawsuit admissions

about the nature of their storm system and the nature of these charges. And

supplemented with deposition testimony that we obtained during the discovery

phase of the case.

So both sides are here because both sides don’t think that there are material

facts in dispute.

Plaintiff’s counsel also suggested that defendant City bore the burden of producing evidence to

establish that the facts of this case were materially distinguishable from those at issue in Jackson

County, arguing as follows:

From our perspective, you’re to be guided -- the good thing for the court is,

there’s a binding public decision on the Court of Appeals, the Jackson case; 30, 40

miles down the road, involving their storm system that is, in our view,

indistinguishable from Ann Arbor’s.

So the crux of the facts here are, what facts were important in the Jackson

case, to a certain extent the Bolt case, and are those same facts present here; or are

-19-

the facts different enough, and this is the city’s task, to say well, our facts are

different, judge, and if you find these facts, it leads intellectively to a different

decision than the Jackson case. [Emphasis added.]

In our estimation, that approach to the evidentiary record and the burdens of proof and

production in this case led to a fatal flaw in plaintiff’s arguments concerning summary disposition

under MCR 2.116(C)(10). As noted, plaintiff raises a Daubert challenge to the admissibility of

certain opinion evidence offered by defendant’s proposed expert witnesses, including certain

opinions regarding the proportionality of the disputed charges to the actual costs of their provision.

But plaintiff fails to recognize that it—not defendant—bears the burden of producing sufficient

substantively admissible evidence to yield a genuine issue of material fact with regard to the

proportionality of the disputed charges, and also to rebut the presumption of reasonableness.

Much of plaintiff’s argument is centered on what it portrays as factual similarities between

this case and Jackson County. Plaintiff is correct that, at first blush, the storm-sewer charges and

systems at issue in the two cases appear to be quite similar in several respects. But plaintiff fails

to recognize one decidedly material distinction between this case and Jackson County. In the

consolidated original actions that were at issue in Jackson County, one of the plaintiffs presented

a report from its retained expert witness, Patrick L. Anderson, “a professional economist and

Principal in the consulting firm of Anderson Economic Group, LLC[.]”20 In that report, Anderson

opined, among other things, that based on his review of the available data, it was “clear that the

actual use of the ‘fee’ revenues collected [we]re wholly out of proportion to any actual costs of

providing a service to individual property owners,” even after considering the “excess revenue”

that was apparently being saved as “working capital” for future expenses.

In contrast, here plaintiff has presented no expert-opinion evidence to support its

allegations that, after due consideration of existing capital reserves, anticipated future capital

expenses, and both the direct and indirect expenses associated with the storm-sewer system, the

disputed charges are disproportionate to the direct and indirect costs of providing the storm-sewer

services. On the contrary, plaintiff effectively begs the question. In plaintiff’s motion for summary

disposition and response to defendant City’s opposing motion, in support of its arguments that the

disputed charges are disproportionate to the underlying costs, plaintiff cites various “financial

statements” issued by defendant City, arguing that those statements demonstrate that, during the

relevant timeframe, the City was annually reaping “a handsome profit” of millions of dollars in

excess of its actual “Stormwater-related operating expenses.”

Plaintiff’s mere citation of such evidence was insufficient to yield a genuine issue of

material fact regarding the instant proportionality inquiry. To reiterate: “Trial courts are not the

research assistants of the litigants; the parties have a duty to fully present their legal arguments to

the court for its resolution of their dispute.” Walters, 481 Mich at 388. We are jurists, not

accountants. Nor are we experts in utility ratemaking, which is a complex, forward-looking

20

Although the Anderson Report is not mentioned overtly in this Court’s opinion in the Jackson

County cases, we take judicial notice of that report, given that it appears in this Court’s files. See

In re Jones, 286 Mich App 126, 129; 777 NW2d 728 (2009) (“a court may take judicial notice of

its own files and records”).

-20-

process, involving significant guesswork and attempts to forecast future expenses that are subject

to fluctuation. See City of Novi v City of Detroit, 433 Mich 414, 429, 432; 446 NW2d 118 (1989)

(“any given formula will employ approximations of the factors used to arrive at an approximation

of the actual cost of service”); Youmans, 336 Mich App at 172-173 (summarizing expert testimony

concerning the utility-ratemaking process generally employed by municipalities). As our Supreme

Court observed in City of Novi, 433 Mich at 430: “Courts of law are ill-equipped to deal with the

complex, technical processes required to evaluate the various cost factors and various methods of

weighing those factors required in rate-making.” Nevertheless, plaintiff effectively asks this Court

to independently review the cited financial documents—without the aid of any expert assistance—

and make unilateral findings regarding proportionality. But “without a comprehensive rate

study—or some similar evidence demonstrating that the disputed rates excessively compensated

the [municipality] for the related utility services—one can at best speculate about whether the

disputed rates were proportional to the underlying costs.” See Youmans, 336 Mich App at 220.

And although “[c]ircumstantial evidence can be sufficient to establish a genuine issue of material

fact, . . . mere conjecture or speculation is insufficient.” McNeill-Marks, 316 Mich App at 16.

In short, as a result of plaintiff’s failure to carry its burden of producing sufficient

substantively admissible evidence to rebut the relevant presumptions or to allow a rational trier of

fact to find that the disputed charges are, in fact, disproportionate to the underlying costs, we

conclude that the second Bolt factor necessarily favors defendant City here. See Youmans, 336

Mich App at 231 (“Because plaintiff did not carry her burden of demonstrating disproportionality,

it necessarily follows that the second Bolt factor militates in favor of the Township’s position.”);

see also Maiden, 461 Mich at 121 (holding that, in the context of a (C)(10) motion, “[a] reviewing

court may not employ a standard citing the mere possibility that the claim might be supported by

evidence produced at trial”).

In analyzing the final Bolt prong, the Special Master stated “findings” suggesting that the

disputed storm-sewer charges are “voluntary,” rather than compulsory. We respectfully disagree.

As this Court explained in Youmans, 336 Mich App at 231-232:

The instant case is distinguishable from Shaw with respect to the third Bolt

factor. In this case, the parties agree that the disputed water and sewer rates each

comprised both a variable rate, which was based on metered water usage, and a

fixed rate. . . . Contrastingly, in Shaw, it was “uncontested that Dearborn

determine[d] its water and sewer rates based on metered-water usage” alone. Id. at

667-668; see also id. at 668 (distinguishing Bolt on the basis that the disputed rates

in Bolt were “flat rates,” not variable rates based on “metered-water usage”).

On this record, we conclude that use of the Township’s water and sewer

services cannot be viewed as “voluntary” for purposes of the Bolt inquiry. If a

charge is “effectively compulsory,” it is not voluntary. Bolt, 459 Mich at 167. With

the exception of those sewer-only customers who have elected not to have a meter

installed to track their actual well-water usage, it is technically true that the

Township’s water and sewer customers can avoid paying the variable portion of the

disputed rates by refusing to use any water. But the fixed portions of those rates

constitute flat-rate charges like those in Bolt, 459 Mich at 156 n 6, and such flat

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rates can only be avoided by not being a utility customer in the first instance. To

the extent that the Township contends that the fixed rates are nevertheless voluntary

because ratepayers can avoid paying them by moving elsewhere, that argument is

unavailing. See id. at 168 (“The dissent suggests that property owners can control

the amount of the fee they pay by building less on their property. However, we do

not find that this is a legitimate method for controlling the amount of the fee because

it is tantamount to requiring property owners to relinquish their rights of ownership

to their property by declining to build on the property.”). In light of Bolt, 459 Mich

at 167-168, we conclude that at least the fixed portion of the disputed rates here—

the most sizable portion—is effectively compulsory. Thus, the third Bolt factor

weighs in favor of plaintiff’s position.

Based on the undisputed facts in this case, the contested storm-sewer charges are

“effectively compulsory,” rather than voluntary. The parties agree that the charges in question are

assessed based on the total square footage of “impervious” surfaces present on a given parcel.

Thus, a landowner could technically avoid the charges by leaving his or her property undeveloped

or removing any existing impervious surfaces. But as recognized in cases like Bolt and Youmans,

that does not render the charges “voluntary” because it effectively forces property owners to

choose between paying the disputed charges or relinquishing their rights of ownership and their

ability to develop and maintain their properties as they wish. See Youmans, 336 Mich App at 231-

232. Also, to the extent that defendant argues that the disputed charges should be deemed

“voluntary” because ratepayers can receive credits by taking certain steps to reduce the amount of

stormwater runoff on their properties, that argument is also directly contravened by binding

precedent. See Jackson County, 302 Mich App at 111-112 (“[T]his system of credits effectively

mandates that property owners pay the charge assessed or spend their own funds on improvements

to their respective properties, as specified by the ordinance and the city, in order to receive the

benefit of any credits. In other words, property owners have no means by which to escape the

financial demands of the ordinance.”).21 Hence, we conclude that the charges at issue here are

effectively compulsory, which militates in favor of deeming them to be an improper tax under

Headlee § 31.

III. CONCLUSION

In sum, for the reasons set forth above, we conclude that the first two Bolt factors favor the

conclusion that the disputed charges are valid user fees, rather than unlawful taxes, while the third

factor favors the opposite conclusion. Even so, on balance, we conclude that defendant City is

entitled to judgment as a matter of law based on binding precedent. See Youmans, 336 Mich App

at 232-233 (“On balance, plaintiff failed to carry her burden of demonstrating that the disputed

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We are cognizant that, if physically capable of doing so and already in possession of the required

tools and know-how, some ratepayers might technically be able to receive some of the available

credits without any expenditure of cash (e.g., by expending their own time and labor to dig a dry

well or to plant a rain garden using cloneable or seed-bearing plants already extant on the property).

But in light of “the ancient maxim that time is money,” Oviedo v Ozierey, 104 Mich App 428, 432;

304 NW2d 596 (1981), we view this as a distinction without a difference.

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rates are impermissible taxes, rather than user fees, for purposes of Headlee § 31. The first and

second Bolt factors clearly favor the conclusion that the disputed charges are proper user fees, and

with regard to the third factor, ‘the lack of volition does not render a charge a tax, particularly

where the other criteria indicate the challenged charge is a user fee and not a tax.’ ”), quoting

Wheeler, 265 Mich App at 666. Accord Westlake Transp, Inc v Pub Serv Comm, 255 Mich App

589, 616; 662 NW2d 784 (2003) (“Even if we were to view the exaction as more compulsory than

voluntary, when the totality of factors are considered, we believe the exactions are most properly

classified as regulatory fees.”).

Accordingly, we grant defendant City summary disposition pursuant to MCR

2.116(C)(10). This opinion constitutes our final judgment in this action. See MCR 7.215(E)(1).

Given the questions of significant public interest involved, no taxable costs are awarded. See MCR

7.219(A).

/s/ Michael J. Kelly

/s/ Jane E. Markey

/s/ James Robert Redford

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