The Clinton Herald, Clinton, Iowa

October 25, 2013

Franchise fee lawyers will get $7M

DAVID PITT Associated Press
The Clinton Herald

---- — DES MOINES — A judge awarded $7 million in fees to attorneys who represented a woman in a lawsuit against the city of Des Moines for charging improper franchise fees.

Thursday’s ruling by Judge Joel Novak was less than half of the $15 million sought by attorneys Brian Stoltze, Brad Schroeder and Steve Brick. Novak complimented the men and credited them with working in excess of 10,000 hours on the case and risking losing millions of dollars in compensation for that time. However, he concluded since the money comes out of taxpayers’ pockets, he must err on the side of fairness to the citizens.

The men represented Lisa Kragnes, a Des Moines woman who sued the city in 2004 after she questioned the franchise fee on her MidAmerican Energy bill. A Polk County District Court judge ordered the city to refund nearly $40 million in 2009, saying it was overcharging customers and had collected what amounted to an “illegal tax.”

The case twice has been appealed by the city to the Iowa Supreme Court and last year, the U.S. Supreme Court declined Des Moines’ request for a hearing.

The attorneys had requested about 37 percent of the $40 million judgment. Novak awarded them about 18 percent, or $7 million in fees. He also approved expenses of $517,444, and costs of $74,867. Kragnes will receive $7,500.

The city opposed the attorney fees and costs request.

“We’re disappointed that it was as high as it was but we do think that it’s closer to a more fair and equitable fee,” City Attorney Jeff Lester said.

On Monday, the City Council held a hearing to issue up to $42 million in bonds to pay the judgment. The city will later decide how to repay the borrowed money. The city could increase the franchise fee, which would require approval of voters. It also could increase property taxes or cut city services.

Novak said the City Council typically does an exceptional job of governing, but “fell way short of the mark” in this case.

“This case should send a message to all cities that no matter how well-intentioned their conduct or the purpose for which the money taken from its residents is used to benefit the residents, cities in this state must adhere to the rule of law,” he wrote.

Schroeder, one of Kragnes’ attorneys, said the city should have stopped charging the fee when the lawsuit was filed in 2004.

“If you’re going to stick your hands in the pockets of your citizens you darn well better be right about your ability to do it particularly when there’s a lawsuit filed telling you that you don’t have the authority to do it,” he said.

Residents who are due a refund should see notices within eight to 10 weeks, Schroeder said. They’ll have have a 150-day period in which to claim the refund by mail or online