Missoula’s protracted battle with Carlyle over water system winding down, almost

Attorneys with Boone Karlberg, including Scott Stearns, right, and Tasha Jones, center, briefed the City Council in July. Stearns and Jones were back on Wednesday for another briefing on several ongoing legal issues. (Martin Kidston/Missoula Current file photo)

The city’s protracted battle with The Carlyle Group is winding down, though three outstanding issues remain, including a fight over property taxes and the city’s bad-faith lawsuit against the former owner of the drinking water system.

Attorneys with Boone Karlberg, which has represented the city in the case from Day One, briefed members of the City Council on the issues Wednesday. That includes a settlement over who owes the property taxes on the water system after 2014.

“The legal arguments in favor of our position are very strong and supported by both the Montana Department of Revenue and Missoula County,” said attorney Tasha Jones. “We feel very good about our position on that case.”

That case began nearly two years ago when Mountain Water Co. sued the state revenue department seeking a tax refund of $5.2 million. The sum amounted to the property taxes Mountain Water paid on the utility after 2014 and before the city took possession in 2017.

The company filed the case in Helena District Court, a move that didn’t sit well with Helena District Judge Michael McMahon. Missoula – not Helena – was the proper venue, he scolded.

“The judge in Helena ruled that Mountain Water was playing ‘fast and loose’ with the settlement agreement,” said Jones, reciting the language used by McMahon. “That case was sent back to Missoula County.”

It now sits before Missoula District Judge Leslie Halligan. Halligan has already expressed doubt as to how Mountain Water planned to circumvent the settlement agreement it personally signed years ago.

The hearing is set for Jan. 25 at 2 p.m. in Missoula District Court.

The second outstanding issue revolves around the city’s bad faith lawsuit against The Carlyle Group. Carlyle has sought to dismiss itself from the suit, but has been denied by the court.

The city filed the lawsuit this summer, claiming that Carlyle practiced deceit, profiteering and “corporate bullying” during the years-long legal battle over the water system.

“They tried to get themselves out of the case, and (the court) denied their attempt,” said attorney Scott Stearns.

However, Stearns said, the court partially granted Carlyle’s motion for arbitration.

“He has asked that arbitrators be appointed to determine the issues that need to be arbitrated or not,” said Stearns. “No matter who Carlyle appoints as an arbitrator, they’ll be dealing with a Montana law.”

The last issue relates to attorney’s fees. The city won a 25 percent reduction in fees owned to Mountain Water’s attorneys and a 40 percent reduction in fees owed to Carlyle’s attorneys.

The decision was upheld almost in full by the Montana Supreme Court less one small issue, which Carlyle has since sought to exploit, Jones said.

“Carlyle acted as it had all along and tried to expand the scope (of the remand),” she said. “We immediately moved for relief before Judge Townsend and that’s currently pending before her.”