The Connecticut Appellate Court has dismissed the last remaining claim in a class-action lawsuit against the Town of Madison for charging excessively high building fees.
The lawsuit filed in 2004 by Neighborhood Builders Inc. claimed that a 50 percent increase in building fees imposed by the town in 2003 violated the Connecticut Unfair Trade Practices Act. The case has been watched closely by attorneys who represent builders and other municipalities, because it could impact the way building permit fees are set in other municipalities.
"I believe this case is of interest to any lawyer that defends or prosecutes contract disputes with municipalities," said Gary Sheldon, a partner at McElroy, Deutsch, Mulvaney & Carpenter in Hartford. "CUTPA claims are commonly plead in contract disputes, including construction disputes. And municipalities routinely attempt to strike these claims. This decision should add strength to that argument."
Previous decisions have rejected the idea of holding a municipality liable for CUTPA violations, because towns and cities are given direct authority under state law to collect fees. The attorney for the homebuilders, Drew Lichtenfels, however, said he will ask the Connecticut Supreme Court to consider the legal issues behind his claim.
"The town has been hiding behind its municipality status to try and wriggle out of its responsibility for what it did," Lichtenfels said. "It’s been seven years since we filed this lawsuit. It obviously has merit and it obviously has legal importance. We believe the Supreme Court will take this up and we will be heard on this issue."
The lawsuit was filed on behalf of 5,000 people who had acquired building permits in Madison between 2003 and 2008. Lichtenfels, a solo attorney in Guilford, said the CUTPA claim was based on the fact that the $6 million in fees collected in that time period exceeded the amount it costs the town to regulate building activity. "The CUTPA claim exists because the town illegally took money from the building permits and used it for matters other than to cover the costs," Lichtenfels said.
Lichtenfels won a partial victory in 2008, when the Connecticut Supreme Court ruled that the lawsuit should be able to proceed with class action status. The merits of the case were then reviewed by the trial court, which ruled in favor of the town in all but the CUTPA claims. In a separate ruling, in December 2011, Waterbury Superior Court Judge Salvatore C. Agati found the town was exempt from the CUTPA claim, which led to the latest appeal by the homebuilders.
Robert M. Langer, a Wiggin and Dana partner who defended Madison against the homebuilders’ claim, argued to the Appellate Court that CUTPA does not apply to municipalities in lawsuits over excessive fees. The main reason, he said, is that a municipality has the authority to set its own fees as a function of its governance under state law. And so those who buy permits do not have a "commercial" or "business" relationship, which is required for CUTPA to apply.
Lichtenfels, however, argued there is no case law that "provides municipalities with blanket immunity against CUTPA claims."
While the Appellate Court decision wasn’t the first ruling to reject a CUTPA claim against a town or city, it was the first since 1999, Langer said.
In arguing his case, Langer relied on two earlier decisions. In the more relevant of the two, he pointed to a 1999 Supreme Court ruling in favor of the City of Danbury. An investment company had claimed the city violated CUTPA by bringing 111 foreclosure actions against the company for properties it owned, instead of just one action. The result was higher costs and fees for the investment company.
The court held that the city was exempt from a CUTPA claim because "the process of real estate assessment by a municipality is authorized and regulated by statute."•