In a landmark development echoing through municipal corridors and utility billing departments alike, the city of East Lansing has agreed to pay $7.8 million to settle a lawsuit accusing it of illegally imposing a hidden tax on electric bills. The decision comes months after the Michigan Supreme Court determined the so-called "energy franchise fee" was unconstitutional.

The proposed settlement—filed in Ingham County Circuit Court—would establish a reimbursement fund for local electricity customers, pending judicial approval. The move is a direct response to a 4-1 ruling from the state’s highest court, which found the city violated the Michigan Constitution by failing to secure voter approval before implementing what it disguised as a utility fee.

The Hidden Charge That Sparked a Legal Storm

At the heart of the legal battle was a 5% franchise fee added to East Lansing residents’ electric bills. Collected by the Lansing Board of Water and Light (BWL) and remitted to the city, the fee was long considered by officials as a standard cost of doing business—until attorney and city resident James Heos challenged it in 2020.

Heos alleged the fee functioned as an unlawful general revenue generator, not tied to the actual provision of electric services. The Supreme Court agreed, writing that the pass-through nature of the fee did not shield it from constitutional scrutiny.

“Even if routed through another party, the fee still operated as a tax,” the court stated, calling it a “disguised levy” that sidestepped democratic oversight.

Who Gets Paid and When

According to the settlement agreement, the class includes all East Lansing residents who were charged the franchise fee between April 2, 2019, and April 30, 2025. The reimbursement fund—minus attorney fees and costs—will be distributed among these ratepayers.

Law firms Kickham Hanley PLLC and Abood Law Firm, representing the plaintiffs, agreed not to seek legal fees exceeding one-third of the settlement total.

City Concedes But Looks Ahead

East Lansing officials expressed disappointment with the court's conclusion but said they were ready to move forward.

“While disappointed with the decision, the City Council is committed to resolving this fairly and transparently,” said City Manager Robert Belleman, framing the settlement as a step toward civic stability.

Legal Powerhouses on Both Sides

Class Counsel:

• Gregory D. Hanley, Jamie Warrow, Edward F. Kickham Jr. (Kickham Hanley PLLC)

• Andrew Abood (Abood Law Firm)

City Counsel:

• Charles E. Barbieri, Michael Homier, Brandon M.H. Schumacher (Foster Swift Collins & Smith PC)

• Anthony K. Chubb, John C. Clark (Giarmarco Mullins & Horton PC)

While counsel for the plaintiffs did not respond to requests for comment, the legal record paints a picture of a city forced to reconcile modern governance with long-standing fiscal practices.