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Missouri Supreme Court examines third-party beneficiary standing

The Missouri Supreme Court is probing a $10.2 million judgment against the city of Kansas City stemming from the city’s decision to end a trash-rebate program that had been in place since the 1970s.

The case raises questions of whether people who are not the original parties to an agreement or litigation may file contempt or breach-of-contract actions as third-party beneficiaries.

The city is appealing the award, arguing that the class of plaintiffs — a group of 500 to 600 property owners and managers in Kansas City — lacked standing to bring contempt and breach-of-contract actions against the city.

The court took up the case in oral arguments on Sept. 4.

The plaintiffs are Sophian Plaza Association, Townsend Place Condominium and Stadium View Apartments. They represent a class of people who have owned and managed trailer parks, condos, apartments and buildings containing seven or more units in Kansas City from 2010 to the present.

The trash rebates stem from the 1970s, when the city first passed an earnings tax. As part of its campaign for the tax, the city represented to voters that it would provide free trash pickup to residents.

After the tax passed, the city passed an ordinance in 1971 providing trash collection for residents but exempting collection from trailer parks or buildings with more than seven units. The ordinance prompted litigation by owners of affected properties.

A Platte County judge found the ordinance to be unconstitutional in 1976. Plaintiffs of the litigation and the city filed a stipulation and agreement in which the city agreed to either provide trash service or pay a cash equivalent to those affected by the exemption.

The stipulation and agreement were incorporated into a modified judgment. The modified judgment also included a mandatory injunction directing the city to either provide trash services or the cash equivalent.

The trash-rebate program began in 1977 and continued until 2010, when the city ended it as a cost-savings measure. The class sued in 2015 in Platte County Circuit Court, alleging the city violated the 1976 agreement.

In February 2017, following a bench trial, Platte County Circuit Judge James W. Van Amburg found the city willfully violated the 1976 judgment and awarded the plaintiffs $10.2 million in damages.

The city appealed the decision to the Western District, which upheld the ruling. The city then sought transfer to the Supreme Court, which the court sustained.

Tara Kelly, associate city attorney, represented the city during arguments.

She argued that the class lacked standing to bring a contempt action because that is a remedy available only to the original parties of the litigation in the 1970s. She also said the class lacked standing to bring a breach-of-contract suit because the plaintiffs were not parties to the stipulation and agreement.

Judge Laura Denvir Stith asked Kelly whether there can be a third-party beneficiary to a judgment.

“We would argue that no, when a party is not a party to the litigation as a third-party donee would not be a party to the litigation, then they would not have standing to sue for the judgment, either,” Kelly said. “So neither for the contempt and judgment, nor for the contract of the 1976 stipulation and agreement.”

Edward D. “Chip” Robertson Jr. of Bartimus Frickleton Robertson Rader in Jefferson City represented the class members.

During Robertson’s arguments, Stith said there is no case law to support his position that non-parties can enforce judgments.

“I guess the question is should the city come in and tell the court, ‘Do this for us, please’ and then be able to walk away 40 years later from what they had followed all of this time?” Robertson said in response to that line of questioning.

Stith said that assumes no one may enforce the judgment, which isn’t true — the original parties can.

Judge Patricia Breckenridge noted that the class could have sued and claimed the 2010 ordinance was unconstitutional.  She asked why that wasn’t the mechanism for relief sought by the class.

“We’re looking for the damages. We have a judgment that already handles this in the way that Kansas City wanted it handled,” Robertson said.

The case is Sophian Plaza Association et al. v. City of Kansas City, Missouri, SC97626.