Zaber v. City of Dubuque_Disposition of Unclaimed Funds Copyright 2014
City of Dubuque Consent Items # 9.
ITEM TITLE: Zaberv. City of Dubuque
SUMMARY: City Attorney transmitting the Court ruling from Zaber v. City
of Dubuque ordering the distribution of unclaimed funds
from the settlement account to four charitable organizations
and requesting authorization for the City Attorney's Office to
take such action as may be appropriate to seek review of
the ruling by the Iowa Appellate Courts.
SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Approve
ATTACHMENTS:
Description Type
Staff Memo Staff Memo
August 15, 2016 Court Order Supporting Documentation
THE CU�-W&E
DMEMORANDUM
Masterpiece on the Mississippi
BARRY LINDA
CITY ATTORN Y
To: Mayo Roy D. Buol and
Mem rs of the City Council
DATE: August 22, 2016
RE: Zaber v. City of Dubuque
August 15, 2016 Court Order — Distribution of Remaining Funds
Following disbursement of all claims for refunds and attorneys fees and expenses, there
is $601,985.45 of unclaimed funds in the settlement account.
On July 26, 2016, the Court held a hearing on the issue of the distribution of the
unclaimed funds. The Plaintiff requested that the funds be distributed to four charitable
organizations. The City requested that the funds be distributed to the City. The City
represented that the City Council had committed to using the funds to reduce the
balance of the principle of the bond used to finance the settlement, which would have
resulted in a savings of approximately $343,820 in interest costs.
Attached is the Court's ruling ordering that the remaining funds by distributed to four
charitable organizations.
In light of the significance of this ruling, I am requesting that the City Council authorize
the City Attorney's Office to take such action as may be appropriate to seek review of
the ruling by the Iowa appellate courts.
BAL:tls
Attachment
cc: Michael C. Van Milligen, City Manager
Jenny Larson, Budget Director
Ivan Webber, Esq.
F:\USERS\tsteckle\Lindahl\Zaber,J.Thomas vs.City\MayorCouncil_081516CourtOrder_082216.doc
OFFICE OF THE CITY ATTORNEY DUBUQUE, IOWA
SUITE 330, HARBOR VIEW PLACE, 300 MAIN STREET DUBUQUE, IA 52001-6944
TELEPHONE (563)583-4113/FAx (563)583-1040/EMAIL balesq@cityofdubuque.org
E-FILED 2016 AUG 15 2:40 PM DUBUQUE - CLERK OF DISTRICT COURT
IN THE IOWA DISTRICT COURT FOR DUBUQUE COUNTY
MARY PATRICIA ZABER, as successor )
in interest to J. Thomas Zaber, on behalf
of herself and all others similarly situated, )
Plaintiff, ) Case No. CVCV054663
VS. ) ORDER
CITY OF DUBUQUE, IOWA, )
Defendant. )
The plaintiff class' Motion to distribute remaining funds to Cy Pres recipients
came before the Court for hearing on July 26, 2016. The plaintiff class appeared through
class representative, Mary Patricia Zaber and attorneys Terry Giebelstein and Richard
Davidson. Attorney Ivan Webber appeared on behalf of the defendant. Evidence was
presented and argument made. The Court having considered the evidence, argument,
pleadings and memorandums of law provided by the parties now enters the following
findings and order.
A settlement agreement was reached by the parties in this matter which provided
the defendant would pay two million six hundred thousand dollars ($2,600,000.00) in
settlement of this lawsuit. Settlement agreement was filed with the Court on July 23,
2014, and a final order and judgment approving class action settlement was entered on
August 28, 2015. Pursuant to the agreement, $2,600,000.00 was deposited into an
escrow account with Dubuque Bank and Trust on February 29, 2016, with Rust
Consulting acting as the settlement administrator and escrow agent. By order of the
Court on March 2, 2016, attorney fees and expenses were paid from the escrow account
to plaintiff's class counsel in the amount of$1,031,204.67 with an additional $5,000
distributed to plaintiff Mary Patricia Zaber as class representative. The Court then
entered an order on May 12, 2016, authorizing and directing the settlement administrator
to make payments to the 27,537 class members in the aggregate amount of$966,809.87
as set forth in the final schedule provided with the Court reserving jurisdiction to
determine final distribution of any funds remaining in escrow after payment of all said
claims.
At the time of the hearing, there remained a total of$601,985.46 of unclaimed
funds. There is also an additional unknown amount of uncashed funds which the parties
estimated at the time of hearing to be approximately$64,500.00 The uncashed checks
will go stale if not cashed within 120 days after May 20, 2016. The parties seek direction
as to the distribution of both the unclaimed funds and the uncashed funds which they
have been referred to collectively as the "remaining funds." The plaintiff requests that
the remaining funds be paid to such Cy Pres recipients as directed by the Court or
alternatively, distributed to the City on the condition that the City present a plan to the
E-FILED 2016 AUG 15 2:40 PM DUBUQUE - CLERK OF DISTRICT COURT
Court to reduce its utility franchise fee for a 12-month period by an amount that is
reasonably equivalent to the amount distributed to the City. The defendant objects to the
alternatives proposed by the plaintiff and states that it is the only proper recipient of any
remaining funds.
The plaintiffs argue that the utility franchise fees in question were, to the extent
they exceeded administrative or regulatory costs, unlawful taxes imposed by the
defendant. As such, the plaintiff argues, any remaining funds should not go back to the
defendant who was the wrongdoer in this case.
The defendant argues that the class, in essence, sued itself and the City has now
incurred 3.7 million dollars of debt as a result of this settlement. The defendant
essentially argues that the plaintiff class and property tax payers are essentially the same
persons and as such, the City itself would be the most qualified Cy Pres entity. The
Dubuque City Council has already directed any money received back from the settlement
fund be used to reduce the principle of the judgment bond issued to fund the settlement
fund, which would also benefit the plaintiff class. Moreover,the City argues that the City
residents themselves originally voted to impose this franchise fee on themselves.
Defendant further argues that the franchise fees which were declared illegal pursuant to
Kragnes v. City of Des Moines, 810 N.W.2d 492 (Iowa 2012), are now legal under Iowa
Code Section 364.2(4)(f)(1) subject to the restrictions of that statute. Thus, the City
argues that it was not a wrongdoer within the usual sense of that term given that the fees
collected were legal until the Kragnes decision and are now legal under the terms of the
statute referenced above.
Section 2.3 of the settlement agreement provided in part that"any remaining
funds in the escrow account shall be awarded as cy pres to the Cy Pres recipients,to the
City or to the State of Iowa,as determined by the Court following application by one or
both of the parties, notice of hearing, and hearing." Section 1.7 of the settlement
agreement defines Cy Pres recipients as "such charitable institutions as hereafter
determined by the Court to be appropriate recipients." The Court finds that the express
language of the settlement agreement does supplant the language which would other
apply under Iowa Rule of Civil Procedure 1.274(3). The Court further finds that the
group of persons who paid illegal franchise fees are not one and the same with the
persons who pay property taxes. Therefore, a return of the remaining funds to the City
would not reasonably approximate the interests that were pursued by the class, despite
some overlap.
Further, the Court does not find the City to be an appropriate cy pres recipient as
expressly defined and even assuming arguendo that the City is and could be a cy pres
recipient, the Court finds this would be inappropriate as the City will merely be using the
remaining funds to reduce a debt obligation which benefits property tax payers generally
without advancing the interests specific to the class. The Court also finds that the State
of Iowa is not an appropriate recipient of the remaining funds because while it might .
deter the City, it would not benefit persons other than those who paid the disputed
franchise fees. The Court also finds that the plaintiff's alternative of conditionally
E-FILED 2016 AUG 15 2:40 PM DUBUQUE - CLERK OF DISTRICT COURT
distributing the remaining funds to the City subject to a plan by the City to reduce
franchise fees in an equivalent amount over a 12-month period to be inappropriate as this
would be unnecessarily burdensome to the City and confusing to the persons subject to
the fees.
The Court having considered the Cy Pres recipients proposed by plaintiff Mary
Zaber and as set forth in the plaintiff's motion finds that the proposal set forth in the
plaintiff's motion is most consistent and best represents the interest pursued by the class.
The Court therefore finds that the appropriate Cy Pres recipients in this matter divided
equally are Operation: New View Community Action Agency for the benefit of low
income persons in the City of Dubuque with utility bills assistance; the Iowa Legal Aid
Northeast Iowa Regional Office for ongoing annual assistance to the Dubuque Office of
Iowa Legal Aid for the benefit of Dubuque City residents;the Community Foundation of
Greater Dubuque for ongoing annual assistance to programs or projects benefiting
residents of Dubuque; and United Way of Dubuque Area Tri-States for the benefit of
programs or projects benefiting residents of Dubuque.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the
remaining funds be distributed equally between the following recipients:
1. One-fourth to Operation: New View Community Action Agency for the
benefit of low income persons in the City of Dubuque with utility bills
assistance;
2. One-fourth to Iowa Legal Aid Northeast Iowa Regional Office for ongoing
annual assistance to the Dubuque Office of Iowa Legal Aid for the benefit of
Dubuque City residents;
3. One-fourth to the Community Foundation of Greater Dubuque for ongoing
annual assistance to programs or projects benefiting residents of Dubuque;
and,
4. One-fourth to the United Way of Dubuque Area Tri-States for the benefit of
programs or projects benefiting residents of Dubuque.
E-FILED 2016 AUG 15 2:40 PM DUBUQUE - CLERK OF DISTRICT COURT
3 A jj
State of Iowa Courts
Type: OTHER ORDER
Case Number Case Title
CVCV054663 ZABER ET AL V CITY OF DUBUQUE IA
i
So Ordered
David P_OdeUrk District Court Judge;
First Judicial District of Iowa
Electronically signed on 2016-08-15 14:40:39 page 4 of 4