Oakland cities settle sewage lawsuit for $11.5M, but homeowners will see little

When Ken Flaherty woke up last summer to find nearly two feet of sewage-tainted stormwater in his Beverly Hills basement — and then heard that hundreds of his neighbors were victims too, as well as others in Birmingham and Royal Oak — he vowed to sue.

The cities involved were at fault along with Oakland County’s drain bosses, he decided.

Flaherty, a semi-retired civil and environmental engineer, quickly made himself an expert on what he says were defects in his neighborhood’s sewers. Then, with a large dollop of humor, he reached out to others with a website he named schittsfoundation.com, adorned with photos of his basement filled with brown water on Aug. 28.

Since then, more than 125 other homeowners have contacted him about their sewage-drenched basements. Yet, as indignant as Flaherty became over the $30,000 in damages to his home, and as determined as he said he is to sue, his website warns about how hard it is to win a lawsuit in Michigan over a basement sewer backup.

His website reviews the law that governs such lawsuits, Public Act 222, calling it an unfair law “that stacks the deck against homeowners affected by defective combined sewage systems.”

A “combined sewage system” is one that mixes sanitary waste with stormwater. That’s the troublesome design that afflicts most of metro Detroit, as well as many of the older communities throughout Michigan and the nation’s East Coast. It works fine when the weather is dry. But it easily backs up in heavy rains, sometimes sending raw or partially treated human waste into rivers and lakes or into basements — or both.

As Flaherty contemplates filing a lawsuit, warned by his own lawyer about the small odds of winning, a huge batch of such lawsuits — joined in a single big class-action case — is headed toward a settlement and payouts for Oakland County residents in 10 communities. The case involves thousands of homes damaged by the momentous rainstorm of August 2014.

That storm left cars submerged on I-75, inundated school buildings and businesses, dumped an estimated 10 billion gallons of sewage-tainted stormwater into the Detroit River, and flooded countless basements throughout southeastern Michigan. Sewage-laced stormwater rose in some basements as much as four feet.

Damage per house was in many cases in the thousands of dollars. But the checks that Oakland County residents receive likely will be in the hundreds of dollars, according to reports of the tentative settlement.

It’s making the rounds of city councils on its way to a court hearing on Jan. 20, when all parties are likely to seek a judge’s consent. The settlement was reached not through a trial that the plaintiff homeowners would’ve had to win. Instead, it was reached through mediation, outside of court. According to several lawyers familiar with such cases, the modest settlement is a sign of how hard it is to win basement sewage cases in Michigan.

The total settlement for property owners in the 10 cities is expected to be $11.5 million, according to officials in Berkley, whose city council was among the first to approve their part of the class-action case. Sound like a windfall? It won’t be, not after a judge awards attorney fees and costs of as much as 35%, after which the cash must be divided among thousands of affected homeowners in Berkley, Birmingham, Clawson, Ferndale, Hazel Park, Huntington Woods, Madison Heights, Pleasant Ridge, Oak Park and Royal Oak.

Berkley will shell out $385,000 to claimants plus commit to spending about $200,000 on future sewer improvements, City Manager Matt Baumgarten said. That’s a lot less than the original $22 million in damages that plaintiffs demanded, Baumgarten said. The Troy City Council is expected to approve its part of the settlement on Jan. 11, Troy City Attorney Lori Grigg Bluhm said. The roughly 150 affected homes are mainly in the area of 14 Mile Road and Stephenson Highway, Grigg Bluhm said.

“The proposed agreement has Troy paying $34,333 and agreeing to make at least $17,348 in future improvements in addition to the regular maintenance and capital the City has continuously expended for our system,” she said.

If Troy's $34,000 payout were divided equally among 150 homeowners, each would get a check for about $226 —except that those checks are expected to be smaller because, before dividing it, lawyers will deduct fees and costs awarded by a judge.

Some cities declined to talk about their proposed settlements, citing attorney-client privilege that they said is in effect until the hearing on Jan. 20 before Oakland Circuit Judge Phyllis McMillen. Similarly, Oakland County Water Resources Commissioner Jim Nash said it was premature to discuss the details.

"I can tell you this. It isn't costing us much more than we would expect to pay just defending this lawsuit, and we would've cost us more if we'd taken it all the way through a jury trial," even assuming that the county won, Nash said.

'A 300-year storm'

"We tried to be as fair as possible. Remember, this was a 300-year storm and declared a national disaster by the president," Nash said.

Improvements to the county's and region's sewer systems are constantly aimed at lowering the risk of future flooding, he said.

"Right now, they're building a tunnel under I-75 between 8 Mile and 12 Mile that's going to hold a lot of the runoff from the freeway" during heavy rains, and "if we'd had that back in 2014, that freeway wouldn't have flooded," he said.

The lawyer representing the plaintiffs in the massive class-action case — Dave Dubin of Liddle & Dubin in Detroit — also said it was premature to talk about the proposed settlement. He said that the case, like many involving sewer damage, has been time-consuming and costly to pursue.

"It's been a long six years, and costs were multiple six figures to research this," Dubin said. To win, lawyers must hire experts who can testify about how sewers operate and what can go wrong in complex systems of giant pumps, miles of piping, pressure and gravity. The total number of claimants in the class-action case was about 19,000 in the 10 cities, Dubin said.

His firm’s website says it has “successfully recovered millions of dollars on behalf of thousands of clients claiming damages as a result of a sewage backup or flooding event” caused by “a governmental entity.”

As promising as that sounds, Michigan’s law sets a high bar for property owners seeking compensation after a sewage backup.

Flint attorney Dean Yeotis owns a shop in Ferndale called Found Sound, which sells new and used vinyl records.

“Ironically, we got flooded in the basement pretty good in August 2014. We lost a lot of records stored down there.” But Yeotis didn’t file a lawsuit.

“I may know all about litigating these cases but I’m like everybody else. I have a million other things to do, and these cases are extremely difficult to prove. I’d have to prove the elements," he said.

By that he meant that he’d have to show a jury exactly how he’d fulfilled five elements required under Michigan Public Act 222 before a property owner can win a sewage backup case. Here's a summary of the five elements:

Identify the government agency in charge of the property owner's sewer system and notify it of the problem within 45 days of the sewage backup. Establish that the sewage system involved had a defect. Prove that the government agency knew or should’ve known about the defect. Show that the agency failed to take reasonable steps in a reasonable time to remedy the defect. Demonstrate that the defect was the “substantial proximate cause” of the basement backup — meaning, it was more than 50% of the cause.

“At the end of the day, this legislation was supposed to make everything streamlined in these cases,” Yeotis said. But it ended up leading to far fewer lawsuits and fewer successful ones, he said.

Still, Yeotis said, he's determined to pursue legal action on behalf of Flaherty and many other homeowners struck by this year's storm on Aug. 28. He has 18 clients signed up in Beverly Hills, five in Birmingham, four in Royal Oak, "and I know there's many more who should be part of this."

Michigan's Public Act 222 was passed during a spate of regulatory change under former Gov. John Engler, at a time when cities asked for protection from liability, Huntington Woods City Commissioner Jules Olsman said.

"Engler knew they couldn't abolish the flooding cases, so they just made the bar higher. It's really a high burden" for plaintiffs to prove, said Olsman, who is an attorney. He said leaders in Huntington Woods were torn in two directions over their part of the class-action lawsuit.

"We realized that people were really angry about this. It put us in a dilemma. You want people to come out of this with something, but we just can't dip into the city treasury for hundreds of thousands of dollars," Olsman said. In the end, the city's entire payout of about $500,000 will be covered by its insurance policy, and "we aren't taking a penny for this from the city treasury," he said.

Sewers aren't perfect

"I think half the houses in the city flooded," Olsman said. "But it was approaching an insurmountable legal hurdle to satisfy the kind of proof you need under that statute. Look, we have a 75-to-100-year-old sewer system. It's not going to be perfect.".

Some residents were able to get insurance to cover their damage, but not many, Olsman added.

"I think a lot of people learned a lot about their homeowners' insurance from this – what it does and doesn't cover." Such policies typically exclude coverage of basement sewage backups unless the policyholder pays considerably more for supplemental coverage.

Flaherty’s website opens with a zinger he aims at the county, city and village sewer bosses that he blames for his damaged home: "Dedicated to preventing Oakland County officials from using our basements as raw sewage retention basins” — (signed) Mrs. Schmidlap O’Schitts, Beverly Hills, MI August 2020.”

There is, of course, no Mrs. O'Schitts. Flaherty's wife is Jennifer Flaherty, shown cleaning up their basement in some of the photos the couple submitted to village and county officials. But apart from its humor, the website is full of serious information about how Flaherty and his wife toted up $30,000 in damage, then spent $10,000 to install high-tech sump pumps with back-up power — in case their electricity goes out in a storm — along with check valves in their basement drains, hoping to prevent another sewage nightmare.

“I’ve lived here 22 years, and we’d never had a backup before. And then I had 8,000 gallons of sewage in my basement,” he said.

As much as by the damage, Flaherty said he's upset that local officials at a Village of Beverly Hills council meeting, about two weeks after the August rain storm, repeatedly told the audience that more backups were inevitable.

"I just think that's unacceptable," Flaherty said.

As an engineer, he said he was sure that the area's sewers were faulty. It didn't take him long to turn up something he considers a serious defect.

By poring over engineering maps of his town’s sewers, Flaherty said he’s turned up several examples of large pipes in his neighborhood that force their sewage to flow into smaller ones.

“Anyone knows, that’s going to cause backups,” he said.

More: Detroit aims to end basement flooding and cut water pollution with sponge-like medians

More: Can you save money and the environment? New plan for metro Detroit sewage has that goal

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This article originally appeared on Detroit Free Press: Oakland cities settle sewage lawsuit for $11.5M, but homeowners will see little

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