Judgment Given: Citizens Challenging a Municipal Utility Ordinance Must Seek Administrative Remedies Before Turning to Civil Court “Municipal/Utility Law – Graham v Brownsburg (May 21, 2019)”

In July 2018, the town of Brownsburg passed an ordinance introducing a new fee to certain water customers outside the town limits. The fee, pursuant to I.C. § 8-1-2-103(d), helped fund the town’s fire hydrants and had been imposed on all Brownsburg residents since 2010. Shortly after the ordinance’s enactment, Sabrina Graham and Kurt Disser (“Graham/Disser”), who live outside the town’s limits, filed a suit in Hendricks Circuit Court. Their complaint alleged that, among other things, the new ordinance charged for a service they were already paying and was implemented to harass those who recently protested an on-going annexation action. In an amended complaint, Graham/Disser also alleged that I.C. § 8-1-2-103(d) was unconstitutional as applied, based on its unequal applicability to individuals living outside of town.

Although the town was late in serving its discovery answers and its answers to the amended complaint, the trial court granted its motion for summary judgment. The town argued Graham/Disser had not exhausted their administrative remedies before filing the complaint with the court. Specifically, I.C. § 8-1.5-3.8.2 states home owners objecting to the operation of municipally-owned utilities may file a written petition with the county clerk’s office and give the municipality an opportunity to modify the ordinance. The trial court agreed, and Graham/Disser appealed.

The Indiana Court of Appeals affirmed the lower court’s decision. In its opinion, the court states the well-established rule that claimants with administrative remedies must exhaust the available remedies before accessing the courts. This rule remains even if the statute or agency rule lacks specific language requiring the remedy’s exhaustion. Graham/Disser argued one of the exceptions to the exhaustion requirement: futility. They contended that exhausting the available administrative remedies would have been futile because the town of Brownsburg could not declare I.C. § 8-1-2-103(d) unconstitutional. The court disagreed and held “established administrative procedures may not be bypassed simply because a party raises a constitutional issue; otherwise they could be circumvented by the mere allegation of a constitutional deprivation.” Barnette v. U.S. Architects, LLP, 15 N.E.3d 1, 10 (Ind. Ct. App. 2014). The administrative remedy would have also afforded Brownsburg an opportunity to alter the law in a way that avoided the constitutionality question entirely. Because Graham/Disser were required to exhaust the available administrative remedies before filing a complaint and failed to do so, the case was correctly decided in favor of the town.

This holding offers towns some peace of mind when establishing rate ordinances for public utilities. The ordinances cannot be examined in a court of law before the town has an opportunity to address citizens’ objections. It follows that municipalities should emphasize tackling these objections during administrative review, thus limiting the number of unresolved complaints that could make their way to the courts.

Jeremy Fetty is a partner in the law firm of Parr Richey with offices in Indianapolis and Lebanon. Mr. Fetty is current Chair of the Firm Utility and Business Section and often advises businesses and utilities (for profit, non-profit and cooperative) on regulatory, compliance, and transactional matters.

The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.