The city of Blytheville could be facing another $1 million liability.
On Wednesday, the Arkansas Court of Appeals affirmed in part, reversed and remanded in part Mississippi County Circuit Court Judge David Laser's decision to dismiss Blytheville resident Kenyghatta Davis' class-action lawsuit against the city and its water department.
The Court of Appeals remanded the part of the suit that claimed "the city's late fees and penalties imposed for overdue payments were usurious, unreasonable and unconscionable."
It affirmed the dismissal of the counts that alleged residents were entitled to interest on their security deposits and the city's mosquito-control fees were illegal.
Davis' attorney, Jim Harris of Hoskins and Harris PA, plans to refile the class-action suit in Circuit Court, seeking to recoup some of the late fees for those who have paid them. That could add up to about $1 million by the attorney's estimation.
"We'll file a motion to get back in the Circuit Court of Mississippi County to have the class certified, to proceed with the litigation as to whether or not it's an excessive penalty or deemed to be usurious," Harris said. "The class will be substantially smaller than the class we originally (sought)."
Had the Court of Appeals ruled in Davis' favor on all three counts, there would have been three class-action lawsuits -- one for the mosquito control that would have included everyone with a water meter, another for those who have placed deposits with the water company and the one for the late fees, which will move forward.
"It will be limited to people who have actually paid a late penalty," Harris said.
If the suit is successful, those citizens will get a percentage of that back, based on what the court ultimately ordered the city to refund, he noted.
"If we go back five years from the date of the lawsuit plus from the date of the lawsuit forward, we're somewhere in the ballpark of $1 million plus prejudgement interest," Harris added. "I don't think they will be able to keep that money, nor do I think they will be able to continue to charge that kind of money."
Those citizens would get a notice allowing them to opt out. If not, they will be a part of the suit, by default.
In reversing Laser's decision, Court of Appeals Judge John Mauzy Pittman wrote: "We offer no comment on whether her (Davis) claim will prove successful or unsuccessful when subjected to further legal scrutiny."
Friday afternoon, Blytheville Mayor James Sanders deferred comment to the Arkansas Municipal League. Municipal League attorney John Wilkerson was unavailable for comment.
The late fee count says the water department imposes a 10-percent late fee on customers whose payments are at least one day past due.
"The city initiates no independent efforts to collect late payments until the 15th day mark and therefore incurs no collection costs until that time," Pittman's opinion reads. "The late fees and penalties collected total over $320,000 between August 2008 and July 2010. That amount exceeds the city's actual collection costs and has been used for the water department's day-to-day operations."
The opinion noted no ordinance authorized the late fees and penalties until March 17, 2009, and no state statute authorizes the fees an penalties.
"Further, the late fees and penalties constitute interest because they are used as part of the water department's operating budget rather than to offset the cost of collecting delinquent accounts," the opinion reads. "As such, the 10 percent late fee, which may be imposed even if a customer's payment is only one day late, is usurious in that it exceeds the maximum interest rate allowed by the Arkansas Constitution. The late fees and penalties are also unreasonable and unconscionable because they bear no rational relationship to the city's costs and expenses incurred in collection delinquent accounts."
According to Harris, the maximum interest rate allowed by the state is 10 percent.
City of Blytheville Ordinance 1687, Section C reads: "Bills are to be rendered monthly for residential, commercial, industrial and municipal accounts. Customers paying by the due date shall pay the net amount as shown on the bill. Payments received after the due date shall be charged a 10 percent late fee. After 15 days, the payment due shall be delinquent and service may be discontinued. A $20 penalty charge will be assessed on all delinquent accounts."
Earlier this year, Blytheville Waterworks began enforcing the $20 charge on delinquent accounts, even if the individual's water has not been disconnected.
mbrasfield@blythevillecourier.com