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Judge approves $6.5 million settlement of Sioux City franchise fee lawsuit

Judge approves $6.5 million settlement of Sioux City franchise fee lawsuit

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SIOUX CITY | Gerald Schleis left the Woodbury County Courthouse Friday feeling good that the El Forastero Motorcycle Club would get back at least a small portion of the city fees it had been overcharged on its utility bills.

District Judge Jeffrey Neary approved the settlement of a class action lawsuit in which the City of Sioux City agreed to pay nearly $6.5 million it overcharged in franchise fees to city residents and businesses.

"It sounds fair," Schleis said. "We paid $700-$800 a month all those years for utilities. That's a lot of money."

Schleis was the only member of the public to sit in on Friday's hearing, which brought nearer to closure a 2006 class-action lawsuit filed by Sioux City resident Kathleen Sweisberger on behalf of all households and businesses that paid the 2 percent franchise fees for gas or electricity to MidAmerican Energy Co. or Woodbury County Rural Electric Cooperative from Sept. 5, 2001, to May 25, 2009.

Lawyers say 61,948 individuals and businesses will qualify for a payment.

Iowa courts have ruled that franchise fees added to utility bills were illegal. The Iowa Legislature has since passed a law legalizing franchise taxes of up to 5 percent.

The Sioux City Council approved the $6.475 million settlement in April and will borrow the money to pay it.

City businesses and residents may have noticed an increase in their utility bills this fall after the city raised the franchise tax from 2 percent to 5 percent to pay off the settlement debt. City finance director Donna Forker said the fee hike will raise the city's annual revenue from the fees to $5 million.

Of the total settlement, 33 percent, or $2.158 million, will go Lane & Waterman, the Davenport, Iowa, law firm that represented Sweisberger. The 33 percent share of the settlement is a standard figure many firms receive when winning a jury award or settlement. It was spelled out in the attorney fee contract Sweisberger signed with the firm.

"The attorney fees and settlement fees in this case appear to be reasonable," Neary said.

The firm submitted a billing summary showing that attorneys and paralegals spent 3,371.2 hours on the case, work totaling $907,761.

The firm will also receive $20,411 for reimbursement of out-of-pocket expenses, and Sweisberger will receive a $10,000 incentive reward for representing the class.

A similar lawsuit in Des Moines resulted in a $39 million judgment. Dubuque is currently in the process of settling a similar suit for $2.6 million.

"In each of these settlements, each city has not objected to those expenses," said Terry Giebelstein, one of the lawyers who worked on the case. His firm also was involved in the other franchise fee cases filed in Iowa.

Richard Davidson, who worked with Giebelstein on the case, said the remaining $4.3 million will be divided among businesses and individuals who paid the franchise fees. The payment average is $69.28 per class member, but, Davidson said, larger users will receive higher amounts. For example, St. Luke's Regional Medical Center is estimated to receive $52,000 and Mercy Medical Center $46,500.

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