Opinion
NO. 2014-CA-001288-MR
04-15-2016
CHARLIE COLEMAN, AND OTHERS SIMILARLY SITUATED APPELLANTS v. SANITATION DISTRICT NO. 1 OF NORTHERN KENTUCKY; GARY MOORE, BOONE COUNTY JUDGE EXECUTIVE; AND STEVE PENDERY, CAMPBELL COUNTY JUDGE EXECUTIVE APPELLEES
BRIEF FOR APPELLANTS: Jack S. Gatlin Thomas B. Bruns Ft. Mitchell, Kentucky Brandon N. Voelker Cold Spring, Kentucky BRIEF FOR APPELLEES: Jeffrey C. Mando Jennifer L. Langen Covington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM CAMPBELL CIRCUIT COURT
HONORABLE FRED A. STINE, V, JUDGE
ACTION NO. 12-CI-01460 OPINION
AFFIRMING
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BEFORE: MAZE, STUMBO, AND TAYLOR, JUDGES. MAZE, JUDGE: Charles Coleman, and others similarly situated (the Appellants) appeal from a summary judgment by the Campbell Circuit Court which dismissed their complaint and declaratory judgment action against Sanitation District No. 1 of Northern Kentucky (SD1). The Appellants challenged SD1's imposition of a multiyear increase to rates and user fees, arguing that the increases did not comply with the 2011 amendments to Kentucky Revised Statutes (KRS) 220.035 and 220.542. The trial court found that SD1 properly adopted those increases prior to the effective date of those amendments, and that the new requirements could not be applied retroactively. The trial court also found that the Appellants were barred from challenging the increase adopted for the second year because they had unreasonably delayed in bringing this action. Finding no error in the trial court's analysis, we affirm.
The facts of this action are not in dispute. SD1 is a multi-county sanitation district formed pursuant to KRS 220.135 by the Fiscal Courts of Boone, Campbell, and Kenton Counties. SD1 is governed by an eight-member Board of Directors (Board), which is appointed jointly by the County Judges/Executive of those counties. KRS 220.140. Among its duties, the Board makes proposals about service charges and user fees for upcoming fiscal years. Prior to June 8, 2011, KRS 220.035 granted the County Judges/Executive in multi-county sanitation districts the authority to review and approve, amend or disapprove, by majority vote, service charges and user fee proposals recommended by the Board. KRS 220.035(4).
During its 2011 session, the General Assembly modified this process through the passage of House Bill (H.B.) 26, which was signed by the Governor and became effective on June 8, 2011. H.B. 26 amended KRS 220.035 to provide that the fiscal court may consider proposed service charges and user fees "not more than once in a twelve (12) month period;...." H.B. 26 also enacted KRS 220.542, which provides, in pertinent part, as follows:
(1) If the rate increase in a service charge, rate, or user fee is greater than five percent (5%) of the previous charge, rate, or user fee, then the increase shall be subject to the provisions of subsections (2) and (3) of this section.
....
(3) In a district governed by the provisions of KRS 220.135, or otherwise having jurisdiction in two (2) or more counties, before a proposed service charge, rate, or user fee may be adopted by the district board of directors, it shall receive the approval of a majority of the fiscal courts or legislative bodies of the counties having jurisdiction over a part of the district. Each approval of a fiscal court shall be equally weighted.
(4) A service charge, rate, or user fee shall not be increased more than once in a twelve (12) month period.
On January 19, 2011, the Board passed a resolution that proposed three options for service charge increases. Between that date and February 19, 2011, SD1 provided a public comment period and held public hearings on the proposals in Boone, Kenton, and Campbell Counties. On March 22, 2011, the Board voted to adopt a 15% rate increase for Fiscal Year (FY) 2012 and FY 2013. On March 29, two of the three Judges/Executive voted to approve the increase in the rates. Although the fiscal year begins on July 1, the FY 2012 increase became effective on April 1, 2011, and the FY 2013 increase became effective on April 1, 2012.
In November of 2012, the Appellants brought this action seeking a declaration of rights, class-action certification, and a determination that the FY 2012 and FY 2013 service charge and rate increases were unauthorized because they were not approved by a majority of the fiscal courts of the counties comprising SD1. The lead Appellant, Charles Coleman, is a resident of Campbell County and a user of and rate-payer to SD1. He brought this action on behalf of himself and other similarly situated rate-payers to SD1. In relevant part, the Appellants challenged the increases on three particular grounds. First, the Appellants argued that KRS 220.542 is a remedial statute and applied retroactively to both the FY 2012 and FY 2013 increases. Second, they argued that both increases were subject to the new approval procedures set out in KRS 220.035 and 220.542 because they were implemented after the effective date of those statutes. And third, the Appellants argued that SD1 was not authorized to approve rate increases for multiple years.
Initially, SD1 sought to remove the action to federal court because the Appellants asserted claims under 42 U.S.C. § 1983. Eventually, the federal court dismissed that claim and remanded the remaining state-law claims back to the trial court.
After considering the briefs and arguments of counsel, the trial court entered an order on July 9, 2014, finding in favor of SD1. The court found that KRS 220.542 is not remedial and therefore does not apply retroactively. The court also concluded that the multiyear rate increases were not subject to the requirements of H.B. 26 because they were adopted prior to the law's effective date. In addition, the court found that SD1 had shown a rational relationship between the increases and the benefit received by SD1 customers. And finally, the court found that the Appellants were barred from challenging the multiyear increases because they had unreasonably delayed bringing this action. This appeal followed.
As this matter concerns matters of statutory interpretation and application, our review is de novo and without deference to the trial court's conclusions. Workforce Dev. Cabinet v. Gaines, 276 S.W.3d 789, 792 (Ky. 2008). As an initial matter, we agree with the circuit court that the provisions of H.B. 26 do not apply retroactively. KRS 446.080(3) provides that "no statute shall be construed to be retroactive, unless expressly so declared." This fundamental principle of statutory construction in Kentucky creates a strong presumption that statutes operate prospectively and that retroactive application of statutes will be approved only if it is absolutely certain the legislature intended such a result. Commonwealth Dept. of Agriculture v. Vinson, 30 S.W.3d 162, 168 (Ky. 2000). Although no "magic words" are required, "[w]hat is required is that the enactment make it apparent that retroactivity was the intended result." Baker v. Fletcher, 204 S.W.3d 589, 597 (Ky. 2006). Retroactive effect or retrospective application of an act will not be given or made "unless the intent that it should be is clearly expressed or necessarily implied." Taylor v. Asher, 317 S.W.2d 895, 897 (Ky. 1957).
H.B. 26 contains no express or implied statement of retroactivity. To the contrary, it specifies an effective date of June 8, 2011. We find no basis to conclude that the General Assembly intended the law to apply to actions taken before that date.
The Appellants note that "remedial" statutes do not come within the scope of the rule requiring express language to be retroactively applied. Vinson, 30 S.W.3d at 169. They argue that KRS 220.542 is remedial in nature because it simply changes the procedure by which a sanitation district may increase its service charges or rates. We disagree. The exception for remedial statutes only applies to statutes which relate to the expansion of an existing remedy without affecting the substantive basis, prerequisites, or circumstances giving rise to the remedy. Kentucky Ins. Guar. Ass'n v. Jeffers ex rel Jeffers, 13 S.W.3d 606, 609 (Ky. 2000).
As a creature of statute, SD1's authority to adopt increases to rates or service charges arises from its enabling legislation. See Fisher v. Com., Pub. Prot. Cabinet, Dep't of Hous., Bldgs. & Const., Div. of Plumbing, 403 S.W.3d 69, 78 (Ky. App. 2013). While the General Assembly remains free to modify that authority, the provisions relating to the adoption of a rate or service charge increase relate to the means by which a sanitation district may exercise that authority. Since the provisions of H.B. 26 redefined the authority of SD1 to enact service charge and rate increases, we must conclude that those provisions are substantive in nature and cannot be applied retroactively. Snyder v. City of Owensboro, 555 S.W.2d 246, 249 (Ky. 1977).
The Appellants primarily argue that the FY 2013 increases were subject to the new approval process because they were imposed after the effective date of H.B. 26. The Appellants note that KRS 220.542(3) requires that "before a proposed service charge, rate, or user fee may be adopted by the district board of directors, it shall receive the approval of a majority of the fiscal courts or legislative bodies of the counties having jurisdiction over a part of the district." The Appellants contend that the term "adopted" refers to the date that a sanitation district implements the new service charge increase, rather than the date when the increase is approved. Since the FY 2013 increases were implemented after June 8, 2011, the Appellants argue that those increases required the approval of the fiscal courts of each of the counties which SD1 covers.
The focus of this argument concerns the meaning of the term "adopted" as used in KRS 220.542. The trial court concluded that the increases were adopted as of March 29, 2011, which was the date that a majority of the County Judges/Executives voted to approve the proposed increases. Since H.B. 26 did not become effective until June 8, 2011, the trial court found that the increases were not subject to the new requirements of KRS 220.542(3). The Appellants concede that the FY 2012 increases became effective on April 1, 2011, which was before the effective date of H.B. 26. But since the FY 2013 increases were not imposed until April 1, 2012, the Appellants argue that KRS 220.542 applied, and SD1 was required to obtain approval of the fiscal courts before it could be implemented.
Unless otherwise defined, we must interpret words in a statute in light of their common and approved usage. KRS 446.080(4). See also Johnson v. Branch Banking & Trust Co., 313 S.W.3d 557, 559 (Ky. 2010). Furthermore, we may determine the legislature's intent from the language the General Assembly chose, either as defined by the General Assembly or as generally understood in the context of the matter under consideration. Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 551 (Ky. 2011). In this case, the meaning of the term "adopted" must be construed in light of the statutory scheme in which it is used.
The term "adopted" refers to the completion of the statutory process for the approval of proposed service charges or user fees. Under both the current and prior version of KRS 220.035, the fiscal court has the authority to approve, amend, or disapprove a single or dual-county sanitation district's proposed service charges or user fees. KRS 220.035(1)(c). In order to exercise this authority, the fiscal court must adopt the proposed service charge or user fees through enactment of an ordinance. KRS 220.035(2). The requirements for a fiscal court's passage of an ordinance are set out in KRS 67.077 and 67.078. Once the statutory prerequisites for passage of an ordinance are satisfied, an ordinance is "adopted" upon its approval by a majority of the members of the fiscal court. While the ordinance must provide for an effective date, KRS 67.078(3), no further steps are necessary before the new service charges or user fees may be implemented.
Prior to June 8, 2011, the authority to approve, amend, or disapprove proposed service charges or user fees in a multi-county sanitation district was vested with a majority of the County Judges/Executive of the counties comprising the district. While the prior version of KRS 220.035(4) necessarily dispensed with the requirement for the enactment of an ordinance, a similar reading of the word "adopted" is appropriate. KRS 220.035(4) specifically provided that, "[I]n the case of review and approval of proposed service charges or user fees, a majority of the votes of the county judges/executives shall be required to override the recommendation of the district board of directors." Since no further steps were necessary for approval of the service charges and user fees, we agree with the trial court that they were adopted as of the date the Judges/Executive voted to approve SD1's recommendation. Therefore, the amended and additional requirements for approval of service charges and user fees, as set out in H.B. 26, did not apply to the charges adopted prior to June 8, 2011.
The current procedure for approval of a service charge or user fee is different, but the same analysis applies. Under KRS 220.542(3), the proposed charge or fee must be first submitted to the fiscal courts of each county comprising the district. However, that statute does not require passage of an ordinance to approve the proposed service charge or user fee. Upon approval by a majority of the fiscal courts or legislative bodies, the proposal returns to the Board, and then the Board's recommendation is submitted to the Judges/Executive. KRS 220.035(4). The statutory process is still complete upon the vote of the Judges/Executive to approve the service charge or user fees. --------
Finally, the Appellants argue that neither the Board nor the Judges/Executive were authorized to enact new service charges or user fees for more than one year. They point out that the prior version of KRS 220.035 did not expressly permit multiyear increases, and the current versions of both KRS 220.035 and 220.542 state that proposed service charges and user fees may be reviewed "not more than once in a twelve (12) month period...." The Appellants also note that, under the prior version of KRS 220.035(4), the County Judges/Executive "shall meet jointly at least once each fiscal year to exercise these powers." The Appellants contend that these provisions preclude the approval of an increase to service charges or user fees covering more than one year.
The trial court declined to reach the merits of this issue, concluding that the issue is barred by the doctrine of laches. The doctrine of laches serves to bar claims in circumstances where a party engages in unreasonable delay to the prejudice of others, rendering it inequitable to allow that party to reverse a previous course of action. Plaza Condo. Ass'n, Inc. v. Wellington Corp., 920 S.W.2d 51, 54 (Ky. 1996). What constitutes an unreasonable delay is always dependent on the facts in the particular case. Where the resulting harm or disadvantage is great, a relatively brief period of delay may constitute a defense while a similar period under other circumstances may not. Id., citing Denison v. McCann, 303 Ky. 195, 197 S.W.2d 248, 249 (1946), and City of Paducah v. Gillispie, 273 Ky. 101, 115 S.W.2d 574, 575 (1938).
The trial court noted that the Appellants knew of the multiyear increases as early as March 29, 2011, and perhaps earlier since SD1 held a public commentary period to discuss the proposals. The FY 2012 increase became effective on April 1, 2011, and was reflected on the customers' May bills. Those bills also included a notice advising customers of the upcoming increase scheduled to take effect in April of 2012. The second increase became effective on April 1, 2012, and was likewise reflected on customers' May bills. SD1 collected those increased charges and fees without objection until the Appellants filed this action in November 2012. By that point, SD1 had already spent most of the additional fees on the capital improvements which were the basis for the increases. As a result, the circuit court concluded that the Appellants' delay in bringing this action was unreasonable and that SD1 had been prejudiced as a result.
The Appellants take issue with these findings, first arguing that they could not have challenged the FY 2013 until they were actually implemented in April of 2012. But as noted above, after the Judges/Executive approved the increases to the service charges and user fees on March 29, 2011, and no additional steps were necessary for those new rates to be imposed. The Appellants clearly had notice that the new rates were imposed for FY 2012 and were planned for FY 2013. Even if the Appellants were required to wait until the FY 2013 rates were implemented on April 1, 2012, they waited more than seven additional months before bringing this action. The Appellants offer no explanation for this additional delay.
The more significant question concerns whether SD1 has shown that it was prejudiced by the Appellants' delay in bringing this action. To sustain a defense of laches, there must be a showing that the party knew his rights and did not attempt to enforce them until the condition of the party who set up the defense had been so changed that he could not be restored to his former state. The delay must have caused an additional injury. Fergerson v. Utilities Elkhorn Coal Co., 313 S.W.2d 395, 400 (Ky. 1958).
In this case, we agree with the trial court that SD1 made the necessary showing of prejudice. For FY 2012 and FY 2013, SD1 was required to comply with a federal consent decree issued by the United States Environmental Protection Agency, and with the terms of a Regional Facility Plan mandated by the Kentucky Division of Water. As a result of those mandates, SD1 was required to raise significant funds to pay the cost of those capital improvements. To raise those funds, SD1 opted to submit the multiyear increases which are at issue in this case. By the time the Appellants brought this action, SD1 had already spent or committed those funds for the capital improvements. We conclude that this evidence was more than sufficient to show that SD1 was prejudiced by the Appellants' delay in bringing this action. Consequently, the trial court properly applied the doctrine of laches to bar the Appellants' challenge to the multiyear rate increase.
Accordingly, we affirm the order of the Campbell Circuit Court dismissing the Appellants' complaint.
ALL CONCUR. BRIEF FOR APPELLANTS: Jack S. Gatlin
Thomas B. Bruns
Ft. Mitchell, Kentucky Brandon N. Voelker
Cold Spring, Kentucky BRIEF FOR APPELLEES: Jeffrey C. Mando
Jennifer L. Langen
Covington, Kentucky