Minnesota Lawyer
District Court can properly rule on city-county dispute
The city of Oak Park Heights acted as a business when it refused to grant a refund to a county to which it had supplied water and sewer service — thus giving a Minnesota District Court the right to rule on disputes arising from a city’s decisions made in the context of proprietary conduct.
That was the finding in an opinion published last week when the Minnesota Court of Appeals ruled in an unjust-enrichment case between Oak Park Heights and Washington County.
Oak Park Heights provides water and sewer services to Washington County’s law enforcement center and bills the county for those services based on regular meter readings. In 2009, the county concluded that the city had overcharged it for water and sewer services between 2004 and 2008 and asked for a refund.
In keeping with a procedure established by the city, the county first presented its refund request to the city’s finance director, who denied it, and then to the city council, which did likewise. The county subsequently initiated an unjust-enrichment action in District Court. (Unjust enrichment occurs when one party is unjustly enriched at the expense of another, leading to an obligation to make restitution, regardless of liability for wrongdoing.)
The city and county filed cross-motions for summary judgment, with the county arguing that it was entitled to compensation based on undisputed material facts, and the city saying the District Court lacked jurisdiction because the county’s claim implicates a quasi-judicial decision of the city council that is reviewable only by writ of certiorari. The District Court denied both motions. Oak Park Heights appealed, claiming that the court did not have authority to hear the case because the city’s decision to deny the refund request to the county was its right as a governmental entity.
The appellate court was asked to decide whether the lower court had subject-matter jurisdiction over the county’s unjust enrichment claim.
City didn’t act as a governmental body
Oak Park Heights argued that the District Court lacked subject-matter jurisdiction because the county’s claim implicates the city’s quasi-judicial decision to deny the county’s refund request. While the higher court didn’t dispute that the city is an executive body, it also agreed with the District Court’s conclusion that it has jurisdiction over the county’s claim because the city’s denial of the county’s refund request was a proprietary action rather than a quasi-judicial governmental action.
The appellate court found that previous cases determining jurisdiction solely on the distinction between quasi-judicial decision-making and quasi-legislative decision making (the latter being subject to interpretation by District Court) were premised on decision-making in the context of governmental conduct — something it found missing from the Oak Park Heights case.
Pointing to two Minnesota precedents, the appellate court wrote, “When executive bodies make decisions in the context of proprietary conduct, such as the refund denial involved here, they act as any other business, with the same rights and responsibilities, and cannot reasonably be viewed as engaged in governmental conduct.”
“This ruling is especially important in light of cities’ increasing involvement in private sector activities,” said Minneapolis business and commercial attorney Aaron Hall. “These days, cities are more involved in areas traditionally occupied by the private sector — skate parks, art centers, swimming pools, health centers and other operations that enhance community life. This ruling preserves the right of citizens and businesses to sue cities in activities normally conducted by the private sector.”
Crucial to the ruling was a precedent that said District Court is a court of general jurisdiction, with the power “to determine justiciable controversies regarding claims of statutory or common-law rights.” (Anderson v. Cnty. of Lyon, 784 N.W.2d 77, 80 (Minn. App. 2010), review denied.)
Edina business litigator Clarence J. Kuhn remarked that when executive bodies make decisions in the context of proprietary conduct, such as the refund denial involved in the Oak Park Heights case, they act as any other business, with the same rights and responsibilities, and cannot reasonably be viewed as engaged in governmental conduct.
“Because these nongovernmental decisions do not implicate separation-of-powers concerns, there is no reason to exclude them from the District Court’s jurisdiction,” Kuhn said. “To do so would infringe on the rights of parties that conduct business with a city.”
The appellate court said that the District Court decision arises out of wholly proprietary conduct by the city and that nothing in the city’s ordinances indicates that the city’s refund decisions constitute the kind of legal adjudication that bars District Court review. Rather, the court said, the city’s decision simply reflects how it chose to do business with the county.
“The critical language in this case is that cities ‘should have the same rights and be subject to the same liabilities as private corporations or individuals,’” Hall said.
