A23-1050

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A23-1049
A23-1050

Housing First Minnesota,
Appellant,

vs.

City of Corcoran,
Respondent (A23-1049).

Housing First Minnesota,
Appellant,

vs.

City of Dayton,
Respondent (A23-1050).

Filed March 25, 2024
Affirmed in part, reversed in part, and remanded
Segal, Chief Judge

Hennepin County District Court
File Nos. 27-CV-21-9069, 27-CV-21-9070

Bryan J. Huntington, Kyle L. Vick, Larkin Hoffman Daly & Lindgren Ltd., Minneapolis,
Minnesota (for appellant)

Monte A. Mills, Katherine M. Swenson, Anna M. Tobin, Erin R. Emory, Greene Espel
PLLP, Minneapolis, Minnesota (for respondents)

Considered and decided by Johnson, Presiding Judge; Segal , Chief Judge; and
Cochran, Judge.
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NONPRECEDENTIAL OPINION
SEGAL, Chief Judge
Appellant building trade association sued respondent cities in separate suits,
alleging that the schedule of building-permit fees adopted in ordinance by respondents
resulted in the collection of excessive revenues, beyond what is lawfully allowed. The
parties brought cross- motions for summary judgment. The district court granted
respondents’ motions and denied appellant’s motions.
In this consolidated appeal, appellant argues that the district court erred in
determining that appellant lacks standing to challenge the validity of respondents’
building-permit fee ordinances and in dismissing, as a matter of law, appellant’s takings
and procedural due-process claims. Appellant further argues that we should reverse the
denial of appellant’s motions for summary judgment and direct that judgment be entered
in favor of appellant in both cases. Because we conclude that appellant has standing to
seek declaratory and injunctive relief, but that the district court did not err in dismissing
appellant’s takings and due-process claims, we affirm in part, reverse in part, and
remand. We also decline to review the denial of appellant’s motions seeking summary
judgment in its favor.
FACTS
By Minnesota statute, municipalities, such as respondents City of Corcoran and
City of Dayton, can enforce the Minnesota State Building Code. See Minn. Stat.
§ 326B.121, subd. 2 (2022). Municipalities may establish a schedule of fees for issuing
building permits and are required to collect those fees before a permit is issued. Minn.
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Stat. §§ 326B.107, .151-.153 (2022); Minn. R. 1300.0160 (2021). Except for certain
types of minor projects, builders and contractors are required to obtain building permits
before they can commence construction on a project. Minn. R. 1300.0120 (2021).
The Minnesota Department of Labor and Industry—the agency responsible for
establishing and updating the state building code —has promulgated a rule, Minn.
R. 1300.0160, regulating the fees that cities can charge for building permits (the rule ).
Subpart 2 of the rule requires that “[f]ees established by the municipality . . . must be fair,
reasonable, and proportionate to the actual cost of the service for which the fee is
imposed.” Minn. R. 1300.0160, subp. 2. Subpart 4 of the rule requires that, other than in
limited exceptions where a fixed fee can be charged, “[b]uilding permit fees shall be
based on valuation” of the project for which the permit is being sought. Id., subp. 4.
Corcoran and Dayton both set their schedule of building-permit fees annually by
ordinance.
Appellant Housing First Minnesota is a trade association that represents the
interests of businesses “engaged in the development, construction and remodeling of
homes and the supply of materials and services to the housing industry.” In recent years,
both cities experienced a significant increase in permits issued for the construction of
new, single-family homes. And nearly all of the building permits issued in the two cities
for the construction of those homes were issued to members of Housing First.
Housing First commenced lawsuits against the cities alleging that the building-
permit fees charged by the cities were not proportionate to the actual cost of the services
provided and that the cities were thus in violation of subpart 2 of the rule. Housing First
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asserts that the building-permit fees for th e two cities are excessive because, in the years
between 2018 and 2021, Corcoran had a “surplus” of revenue from building-permit fees
in the amount of approximately $2.5 million, and Dayton had a “surplus” of
approximately $2.9 million. The complaints, which mirror each other, contain counts for
declaratory judgment that the cities’ building-permit fee ordinances violate: (1) subpart 2
of the rule; (2) the takings clauses of the Minnesota and United States Constitutions; and
(3) the procedural due -process rights of Housing First’s members under the Minnesota
and United States Constitutions. The complaints also contain a request for an order
requiring the cities to “disgorge” all excess revenue from building-permit fees and
enjoining the cities from enforcing their building-permit fee ordinances.
After the close of discovery, the parties filed cross-motions for summary judgment
in both cases. Housing First maintained that it had established a violation of the rule and
was entitled to judgment in its favor, granting the relief sought in its complaints. T he
cities argued in their summary-judgment motions that the complaints should be dismissed
because Housing First lacked standing to challenge the validity of the building-permit fee
ordinances and failed to establish the necessary elements for its constitutional claims,
among other arguments.
The cities’ standing argument was premised on the fact that, pursuant to a
discovery stipulation, Housing First admitted
that Housing First’s Members that have paid building-permit
fees to [Corcoran and Dayton] for the construction of new
single-family residential houses (since January 1, 2015),
passed on those fees to or were otherwise reimbursed for the
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full amount of those fees by other persons or entities, such as
but not limited to the purchasers of those houses.

The cities argued that, because Housing First’s members were able to pass on the full cost
of the fees, the members lost no money and thus did not suffer an “injury in fact.” And,
because the members lacked an injury in fact, Housing First could not claim associational
standing.
The district court agreed with the cities that Housing First lacked standing based
on Housing First’s admission that all permit fees paid by its members were passed on to
others, and that the members therefore had no economic injury. The district court also
rejected as evidence of economic injury an expert opinion provided by Housing First that
even small increases in the cost of new homes can depress demand. The court
determined that the impact predicted by the expert, which was based on national data,
was too speculative to establish a “concrete economic injury” to Housing First’s members
due to alleged excessive permit fees in the two cities.1
As to the constitutional claims, the district court held that, in addition to the lack
of standing, the claims were subject to dismissal because Housing First failed to present
evidence sufficient to establish the requisite elements for either a takings or procedural
due-process violation. On the takings claims, the district court determined that Housing

1 Housing First asserted that it had statutory standing under the judicial-review provision
of the Minnesota municipal planning act, Minn. Stat. § 462.361 (2022). The district court
rejected this claim, concluding that “the section of the [act] relied upon by [Housing
First] relates to land use and municipal planning, and not building construction or
building permit fees.” The district court also rejected Housing First’s argument that it
has standing as a taxpayer because Housing First did “not demonstrate[] that it pays taxes
to the [cities].” Housing First did not pursue either argument on appeal.
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First failed to show property was taken without just compensation because, in exchange
for the fees paid, Housing First’s members were issued the building permits and thus
received “compensation” in exchange for their payments. As to the due-process claims,
the district court concluded that adequate procedural safeguards were available to
Housing First’s members to challenge the building-permit fees through an administrative
appeal process. See Minn. R. 1300.0230 (2023).
DECISION
On appeal from the grant of summary judgment, we review de novo whether there
are any genuine issues of material fact and whether the district court erred in applying the
law. Ruiz v. 1st Fid. Loan Servicing, LLC, 829 N.W.2d 53, 56 (Minn. 2013). “We view
the evidence in the light most favorable to the party against whom summary judgment
was granted.” STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 76-77
(Minn. 2002).
I. The district court erred in determining that Housing First lacks standing.
“Standing is the requirement that a party has a sufficient stake in a justiciable
controversy to seek relief from a court.” State by Humphrey v. Philip Morris Inc., 551
N.W.2d 490, 493 (Minn. 1996). Generally, “[a] party has standing when (1) the party has
suffered an injury-in- fact, or (2) the party is the beneficiary of a legislative enactment
granting standing.” Webb Golden Valley, LLC v. State, 865 N.W.2d 689, 693 (Minn.
2015). Additionally, “[a]n organization can assert [associational] standing [on behalf of
its members,] if its members’ interests are directly at stake or if its members have
suffered an injury-in-fact.” Builders Ass’n of Minn. v. City of St. Paul, 819 N.W.2d 172,
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177 (Minn. App. 2012). Whether a party has standing presents a jurisdictional issue
reviewed de novo. Webb Golden Valley, 865 N.W.2d at 693.
The cities argue that Housing First lacks standing based on what is called the
“pass-through defense.” The defense is premised on the logic that when “an injured party
‘passes through’ its damages to another entity that is obligated to pay, there is no actual
injury to the first party” and that this lack of injury deprives the first party of standing.
Philip Morris, 551 N.W.2d at 496 (citing Hanover Shoe, Inc. v. United Shoe Mach.
Corp., 392 U.S. 481, 492 (1968)). The defense “usually arises in antitrust cases.” Id.
The cities contend that the pass-through defense applies here because Housing First
admitted that its members “passed on” all fees they paid to the home buyers or others.
The cities argue that Housing First’s members thus suffered no injury-in-fact and that
Housing First therefore lacks associational standing to challenge the building- permit fee
ordinances.
Housing First argues that the district court impermissibly applied the pass-through
defense, which it asserts was “firmly rejected” by the Minnesota Supreme Court in Philip
Morris. In that case, Blue Cross and Blue Shield of Minnesota sued five tobacco
companies “on various theories, all relating to the health of Minnesotans who have
smoked cigarettes over an extended period of time.” Id. at 491-92. The tobacco
companies moved to dismiss for lack of standing, arguing that Blue Cross had suffered
no compensable injury because it passed on its expenditures to its subscriber groups
through increased premiums. Id. at 492.
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In rejecting the application of the pass-through defense in Philip Morris, the
supreme court observed that the defense “has been uniformly rejected in the courts,
primarily on the theory that the injury is sustained as soon as the price, artificially raised
for whatever reason, has been paid.” Id. at 496. The supreme court further stated: “That
the pass through defense is untenable appears equally evident outside of the context of
antitrust and laws relating to regulated industry.” Id. at 497. Ultimately, the supreme
court “conclude[d] that it was the intent of the legislature to abolish the availability of the
pass through defense by specific grants of standing within statutes designed to protect
Minnesota citizens from sharp commercial practices.” Id. The supreme court concluded
that Blue Cross had a grant of statutory standing to assert consumer-protection claims.
Id. at 496-97. The court further ruled that Blue Cross had standing to assert equitable
claims but cautioned “that such standing is limited to pursuit of injunctive relief.”
2 Id. at
498.
The cities dispute Housing First’s characterization of the supreme court’s holding
in Philip Morris. The cities argue that the supreme court’s holding should be read as
rejecting the pass-through defense only in cases involving statutory grants of standing.
The cities contend that, because there is no statutory grant of standing involved in these
cases, the pass-through defense remains a viable defense.
We are skeptical of the cities’ argument. As noted by Housing First, the cities
have not been able to identify a single case in which the pass-through defense has been

2 The supreme court also affirmed the dismissal of a tort claim on standing grounds,
reasoning that the injury suffered by the health-care organization was too remote. Id. at
495.
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applied and upheld by the courts of our state. In addition, the supreme court commented
in a footnote in Philip Morris that, “[e]ven absent the statutory grant of authority,” the
court “believe[s] Blue Cross would have standing on the antitrust claim.” Id. at 497 n.1.
This footnote appears to undermine the cities’ argument on the continuing viability of a
pass-through defense i n Minnesota. But whether or not the cities are correct on that
point, we are not persuaded that Minnesota’s standing doctrine is so narrow as to deprive
Housing First of standing in this case, despite Housing First’s admission that its members
pass on all costs of the fees to others.
The purpose of the standing doctrine is to ensure that a party has “a sufficient
stake in the controversy to seek relief from the court so that the issues before the court
will be vigorously and adequately presented.” Webb Golden Valley, 865 N.W.2d at 693
(quotation omitted). We conclude that Housing First’s members have such a stake.
First, members of Housing First were the ones who directly paid the fees to the cities.
Second, Housing First provided evidence that its members are responsible for an
overwhelming majority of the building permits issued by the cities for the construction of
new, single-family homes in recent years. Finally, the members are required to obtain
building permits and continue paying the fees if they desire to keep building in the cities .
While any one of these reasons may not be sufficient, we are persuaded that, when taken
together, Housing First’s members have a sufficient economic stake in challenging the
allegedly excessive fee schedule to satisfy the requirements of the standing doctrine. We
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therefore conclude that, as the trade association for its members, Housing First has
associational standing.3 See Builders Ass’n of Minn., 819 N.W.2d at 177.
II. The district court did not err in dismissing Housing First’s takings claims.

The constitutions of the United States and Minnesota both prohibit the taking of
private property for public use without just compensation. U.S. Const. amend. V; Minn.
Const. art. 1, § 13. To establish a takings claim, a party “must show that: (1) they have a
property interest protected by the Fifth Amendment; (2) the government took the property
interest; (3) the property interest was taken for public use; and (4) just compensation was
not paid.” Hall v. State, 908 N.W.2d 345, 352 (Minn. 2018). This court presumes
ordinances are constitutional, and Housing First bears the burden of demonstrating that
the ordinance results in an unconstitutional taking. Minn. Voters All. v. City of
Minneapolis, 766 N.W.2d 683, 688 (Minn. 2009).
Housing First argues that the cities took property—money— without just
compensation because the permit fees were in excess of the fees that could be lawfully
charged. We disagree that the takings clause applies in this context. Koontz v. St. Johns
River Water Mgmt. Dist., 570 U.S. 595, 606 (2013), is the only case cited by Housing
First in support of its argument. But this case disclaims the applicability of the takings

3 We caution, however, that our conclusion should not be interpreted as meaning that
Housing First has a right to seek “disgorgement” as a remedy. Housing First’s members
admitted that they have been fully reimbursed for all building-permit fees paid. There is
even a suggestion in the record that at least some of Housing First’s members may have
profited from the fees by adding a profit percentage to their invoices. In this opinion, we
hold only that Housing First has standing to challenge the building-permit fee ordinances.
Cf. Philip Morris, 551 N.W.2d at 498 (noting the limitation in the supreme court’s
holding to the pursuit of injunctive relief on Blue Cross’s claim in equity).
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clause to a challenge to fees set by a governmental unit for a service. In Koontz, the
Supreme Court stated:
It is beyond dispute that “[t]axes and user fees . . . are not
‘takings.’” We said as much in County of Mobile v. Kimball, 102 U.S. 691, 703 (1881), and our cases have been clear on
that point ever since.

570 U.S. at 615 (citation omitted). The takings clause was applicable in Koontz because
the governmental authority conditioned the issuance of a land-use permit on a grant by
the landowner of an easement—an interest in the landowner’s real property. Id. at 601.
By contrast, the cases on appeal here involve only the payment of fees for a service, the
review of plans and issuance of permit s. Under Koontz, user fees do not exact a “taking”
under the constitution.
Additionally, we note that the Minnesota Supreme Court has explained that
“[w]hen it [appears] that a city’s true motivation was to raise revenue—and not merely to
recover the costs of regulation—we have disregarded the fee label attached by a
municipality and held that the charge in question was in fact a tax.” Country Joe, Inc. v.
City of Eagan, 560 N.W.2d 681, 686 (Minn. 1997) (involving a city’s imposition of a
road-connection charge, in addition to payment of the permit fee, as a condition of
issuance of a building permit). In First Baptist Church of St. Paul v. City of St. Paul, the
supreme court reiterated that a regulatory fee is properly treated as a tax when its primary
purpose is to raise revenue, rather than recover costs associated with regulation. 884
N.W.2d 355, 359 (Minn. 2016). Thus, to the extent that the challenged fees may be
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characterized as an unauthorized tax, such claims are also outside the protections of the
takings clause. We therefore affirm dismissal of Housing First’s takings claims.
III. The district court did not err in determining that Housing First’s due-process
claims fail on the merits.

Housing First next argues that the district court erred in dismissing its due-process
claims. In its complaints, Housing First alleged that the cities have failed to satisfy
procedural due-process requirements because the cities have provided “no process to
refund excess building permit fee revenues.”
The United States and Minnesota Constitutions protect the right to procedural due
process. U.S. Const. amend. XIV, § 1; Minn. Const. art. I, § 7. To assert a viable
procedural due-process claim, a party must allege facts sufficient to demonstrate that it
(1) has been deprived of a protected life, liberty, or property interest (2) without
“constitutionally sufficient” procedural protections. Hall, 908 N.W.2d at 358. In
evaluating the sufficiency of procedural pr otections, courts consider (1) the private
interest affected, (2) the risk of erroneous deprivation of that interest through the
procedures used, and (3) the government ’s interest. Mathews v. Eldridge, 424 U.S. 319,
335 (1976).
The first step in analyzing a procedural due-process claim is to assess whether the
challenged governmental action is legislative or judicial in nature. Barton Contracting
Co. v. City of Afton, 268 N.W.2d 712, 715 (Minn. 1978). The permit fee schedules
challenged here are set out in the ordinances of the cities and affect an “open class.” Id.
As such, the cities were acting in a legislative capacity as opposed to a quasi-judicial
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capacity. Id. at 716. When a governmental authority is acting in a legislative capacity,
“[a]ny rights of procedural due process in such proceedings are minimal.” Id.
With this framework in mind, we fail to discern any error in the dismissal of
Housing First’s due-process claims. In its brief to this court on its procedural due-
process claims, Housing First makes a very limited argument and cites to only a single
case, McKesson Corporation v. Division of Alcoholic Beverages & Tobacco. 496 U.S. 18
(1990). That case involved the rights of a wholesale distributor of alcoholic beverages to
obtain a refund of liquor excise taxes paid when the tax was declared unconstitutional.
Id. at 22. The Supreme Court held that the distributor was entitled under the due-process
clause to a postdeprivation remedy of being able to sue to obtain a refund. Id. at 36-41.
Housing First relies on McKesson to argue that the due-process clause requires that it
must be allowed to seek a refund of any excessive fees paid by its members.
The tax at issue in McKesson was declared unconstitutional because it provided
preferences for certain distributors of in-state products in violation of the Commerce
Clause. Id. at 22-23, 47. The distributors of out-of-state products were required to pay
higher excise taxes. Id. at 22-23. The Supreme Court rejected the state’s arguments that
a refund should not be available because the distributors of out-of-state prod ucts were
likely able to pass on the extra cost to their customers. Id. at 46-49. The Supreme Court
reasoned, first, that this argument was based on nothing more than “sheer speculation,”
not evidence in the record. Id. at 46. Second, the Court explained that, even if the
affected distributors were able to pass on the extra cost, the distributors were placed at a
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competitive disadvantage because their products would cost more compared to the
distributors of local products. Id. at 48-49.
By contrast here, there is not just evidence, but an admission by Housing First,
that its members passed on the cost of the fees to others and, because the same schedule
of fees applies to all building permits issued in the cities, Housing First’s members were
not placed at any competitive disadvantage in the cities’ construction markets. Simply
stated, Housing First’s members are not in the same position as the distributors of out-of-
state products in McKesson. Accordingly, Housing First’s reliance on McKesson is
misguided and does not support Housing First’s as-applied challenge to the fee
ordinances on procedural due-process grounds.
Moreover, we conclude that adequate procedures are available to satisfy the
requirements of procedural due process. First, as the district court stated, the rule
provides an administrative appeal process. See Minn. R. 1300.0230; Centra Homes, LLC
v. City of Norwood Young America, 834 N.W.2d 581, 587 (Minn. App. 2013). Second, a
challenge to the building-permit fee ordinances can be brought in court, as Housing First
has done here. The fact that Housing First may not be entitled to pursue a refund of any
allegedly excessive fees because its members have been fully reimbursed by the home
buyers or others does not rise to the level of a constitutional violation. We th erefore
affirm the district court’s dismissal of Housing First’s due-process claims.

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IV. We decline to review the district court’s denial of Housing First’s motion for
summary judgment.

Housing First asks us to exercise our discretion to reverse and remand with a
direction that summary judgment be entered in Housing First’s favor because “there is no
genuine dispute that the Cities have exacted building permit funds in excess of what is
allowed under Minn. R. 1300.0160 Subp. 2.” We decline Housing First’s request for two
reasons.
First, the district court did not address the merits of Housing First’s claims for
declaratory and injunctive relief, other than its takings and due-process claims. “This
court generally does not address issues presented in but not decided by the district court.”
Singelman v. St. Francis Med. Ctr., 777 N.W.2d 540, 543 (Minn. App. 2010) (quotation
omitted).
Second, even if we were to entertain Housing First’s request, we disagree with
Housing First’s apparent suggestion that the cities have conceded the building-permit
fees are unlawful. The cities have defended their building-permit fee schedules and the
processes by which those schedules were adopted. Housing First emphasizes that the
cities’ arguments on appeal focus on technical defenses rather than the merits. But we do
not take this as a concession that the fees are unlawful but rather the result of the cities’
focus on the district court’s reasons for granting summary judgment.
As a final matter, we note that the cities dispute whether the Minnesota
Declaratory Judgments Act, Minn. Stat. §§ 555.01-.16 (2022), provides an independent
cause of action. But again, this issue has not been decided by the district court, and we
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express no opinion on the merits of that question in this appeal.4 Accordingly, we reverse
the district court’s determination that Housing First lacks standing to assert claims for
declaratory and injunctive relief, but we affirm the district court’s dismissal of Housing
First’s takings and due -process claims. We therefore remand this matter to the district
court for further proceedings not inconsistent with this opinion.
Affirmed in part, reversed in part, and remanded.

4 For this same reason, we decline to rule on the viability of the defenses asserted by the
cities regarding the separation-of-powers and political-question doctrines. Housing First
argues that we should reject the cities’ arguments because they are unpled affirmative
defenses and they lack merit. The district court did not address these matters because it
dismissed Housing First’s complaints for lack of standing. And, consequently, we
decline to address them for the first time on appeal.