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Carolina Beach agrees to $850,000 settlement in class action lawsuit for unlawful collection of ‘facility fees’

Updated: Oct. 28, 2020 at 6:38 AM EDT
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WILMINGTON, N.C. (WECT) - The Town of Carolina Beach has finally come to an agreement to settle a lawsuit brought against it for allegedly collected unlawful ‘Facility Fees’ from developers between August 2016 and June 2018, and has agreed to pay up to $850,000 in the class action suit.

“The case alleges that the Town unlawfully collected Facility Fees on or between August 9, 2016 and June 30, 2018. “Facility Fee” means any fee charged by the Town to any Claimant or Plaintiffs as a mandatory condition to the Town providing a new or upsized connection to the Town’s water and/or wastewater system from August 9, 2016 through and until June 30, 2018,” according to a notice from the North Carolina General Court of Justice.

Despite the settlement agreement, the Town of Carolina Beach denies any wrongdoing and denies liability to the plaintiffs.

The lawsuit began after the Stier Construction Company, Inc claimed the town had wrongfully charged developers for the impact of new development on water and sewage systems. However, because there could have been more than one company or individual affected by the fees, the lawsuit became a class action.

“In a class action, one or more people, called “Class Representatives” (in this case Stier Construction Company, Inc. and Bryan Humphrey Design Build, Inc) sue on behalf of people who have similar claims. Together, all these people with similar claims (except for those who exclude themselves) are members of the Settlement Class,” according to the court notice.

The lawsuit is similar to one seen just across the Cape Fear River in Leland, and others seen across the state after a Supreme Court case in 2016 set the precedence for how local governments can charge development fees.

"In 2016, the North Carolina Supreme Court held that municipalities (and by analogy counties) lack the statutory authority to impose certain upfront charges for water and sewer services. Upfront charges are charges imposed on new or existing development before a property parcel is actually connected (or under contract to connect) to a local government’s water or sewer system, according to the North Carolina School of Government.

Then, in 2017 the state legislature passed §162A Article 8 which establishes guidelines for municipalities and how they can charge and calculate system development fees.

The settlement was an agreement made in mediation, discussed in a closed session on Aug. 20 by the Town of Carolina Beach’s Town Council, and subsequently approved on Aug. 25 after returning from another closed session. The motion to approve the settlement was made during a public meeting, however, the Town Council does not appear to have explained what that settlement meant for taxpayers or the town.

Although it is going to cost the town to settle the lawsuit, the agreement was reached by both parties in the hopes of avoiding an even further drawn out legal process.

“The Parties agreed to a settlement to avoid the costs and risks of further litigation and provide benefits to Settlement Class Members. The Class Representative and the lawyers representing him (called “Class Counsel”) believe that the Settlement is in the best interests of all Settlement Class Members,” according to the court notice.

Though both parties have agreed to the settlement, ultimately, a judge will have to make the final decision approving the agreement.

“If the Settlement is approved, the Town will provide payments to Settlement Class Members who file a complete and timely claim form, for paid Facility Fees. The Town will establish a Settlement Fund equal to eight hundred and fifty thousand dollars ($850,000.00),” according to the notice.

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