Scranton agrees to $10M lawsuit settlement over delinquent garbage fees

The proposed settlement also calls for the city to forgive all penalties, interest and costs tacked on to municipal liens filed against property owners who did not pay, leaving them responsible for only the accrued fees owed for garbage collection.

The deal, if approved by a judge, would resolve a 2018 lawsuit city residents Mark Schraner and Mari Carr filed against the city and its former collection firm, Northeast Revenue Service, that alleged the penalties, interest and costs were more than state law allows.

Judge James Gibbons will hold a hearing April 10 to review the terms and decide whether to grant preliminary approval to the deal. If approved, a second hearing to grant final approval will be held in August.

The settlement includes all residents who paid penalties, interest and costs issued against delinquent garbage accounts between Sept. 12, 2016, and Dec. 31, 2020, identified as the "damage class" in the settlement.

The city will deposit $2.5 million into a settlement fund, with each person estimated to receive a "pro rata" refund of about 70% of the total penalties, interest and costs they paid, said Horsham attorney Patrick Howard, who filed the suit on behalf of Schraner, Carr and other class members.

The agreement also calls for Schraner and Carr, as lead plaintiffs, to be paid an additional incentive of $2,500 each. Howard and his law firm are seeking attorney's fees of $832,500. Both fees will be deducted from the settlement fund.

The city also will create the "Scranton Lien Forgiveness Program" for a separate class, known as the "declaratory relief" class, who had liens filed because they were in arrears with their garbage fees.

The city will forgive an estimated $7.5 million in penalties, interest and costs assessed on accounts between Sept. 12, 2012, and Dec. 31, 2020. The difference in the date ranges between the two settlement classes is related to the statute of limitations, Howard said.

City colicitor Jessica Eskra said insurance will pay $50,000 toward the $2.5 million earmarked for refunds. The city is considering taking a loan to finance the balance, she said.

The city addressed the anticipated loss of revenue from the lien forgiveness program when it put this year's budget together, said Larry West, business administrator. The 2023 budget estimates the city will receive $1.3 million, down from the $2.2 million it collected in 2022.

The number of affected residents is not known yet, but Howard said the damage class is expected to have several hundred members, while the declaratory relief class will have several thousand members.

Class members will not have to take any action to receive the payment or debt relief, Howard said. If the deal is approved, refunds automatically will be mailed out to damage class members, while liens filed against declaratory relief class members will be credited automatically, Howard said.

Residents have the option to opt out or challenge the terms of the deal. Howard said he believes the settlement is a fair resolution that ensures all affected residents benefit.

"This is really broad relief," Howard said. "Whether you paid or had a lien against you, you are getting something."

The lawsuit was initially filed in Montgomery County Court in 2018, but was transferred to Lackawanna County Court. It challenged how Northeast calculated interest on delinquent accounts, which were charged a 12% penalty if not paid within 30 days.

The Municipal Claims and Tax Lien Law allows municipalities to collect 10% interest in addition to any penalty. Northeast collected the 10% interest not just on the balance owed, but also the 12% penalty, as well as additional costs. The suit alleged that violated the law.

The settlement notes that neither Northeast nor the city admit any wrongdoing or liability and are settling the case to avoid the cost of continued litigation.

The city recently also settled a separate class action lawsuit Adam Guiffrida filed that alleged the $300 annual trash fee in place since 2016 generates more money than required to provide collection services.

A petition seeking preliminary approval of that settlement was filed Thursday. A copy of the petition was not available. Gibbons scheduled a hearing on the matter for April 21.

Contact the writer: tbesecker@timesshamrock.com; 570-348-9137; @tmbeseckerTT on Twitter.

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