Suffolk looks to settle Southwest Sewer District lawsuit for up to $120M, with $11G payouts expected per plaintiff

Suffolk County has agreed to a settlement of up to $120 million in a decade-old lawsuit filed by ratepayers — some expected to receive $11,000 in compensation — of the Southwest Sewer District, alleging they were overcharged by at least $260 million.

The final terms of the settlement remain under negotiation even after Suffolk lawmakers approved a resolution this week authorizing the county attorney to settle, officials said.

“I think we have a settlement at hand that will spare the taxpayers and help the Southwest Sewer District,” Suffolk County Executive Edward P. Romaine told Newsday.

Presiding Officer Kevin McCaffrey (R-Lindenhurst), whose district is in the sewer district, told Newsday an estimated two-thirds of the settlement figure will go back into the sewer district to fund projects. The remaining sum would be distributed to the more than 400 litigants plus the plaintiffs' litigation costs and legal fees.

"The majority of the settlement is to say, 'Hey, we want to guarantee that the county is going to spend the money that they should have on sewers,'"  McCaffrey said.

The ratepayers are expected to receive about $11,000 each for a total of about $5 million, according to sources briefed on the settlement negotiations.

Romaine declined to discuss the specific totals, saying, “When we finalize that, we’ll release the figures."

Fund 405

The lawsuit was first filed in 2015 by two residents and an apartment complex, Harbor Club LLC. The complaint alleged a sewer district reserve fund meant to stabilize taxes, known as Fund 405, continued growing after district debt had been paid off, Newsday previously reported.

“This is money that was diverted to address budgetary concerns but really belonged to the taxpayers of the Southwest Sewer District,” Romaine, who was not county executive at the time the lawsuit was filed, said.

The lawsuit alleged the district's 75,000 taxpayers continued to be taxed to pay off the bonds for the $1.2 billion project, which dates to the 1970s. The county had argued it had to continue taxing people to deplete reserves for other infrastructure projects, Newsday previously reported.

In court filings, the county argued the fund had "accomplished its intended purpose" by providing money to fund capital projects without additional bonding and debt. In 2018, the court denied a motion for class-action certification in the case and also denied a motion for summary judgment, and the parties began discovery in 2019, according to court filings.

The case has since churned through legal channels with the county arguing the plaintiffs were requesting onerous and unnecessary discovery demands.

Romaine, a Republican who took office in 2024, said he had been in “extensive negotiation” for 18 months to reach a settlement on the case known as Brownyard v. The County of Suffolk, a pledge he made when taking office to resolve millions of dollars’ worth of lawsuits the county faced. Newsday reported last year the legal liability faced by the county in lawsuits totaled as much as $1 billion.

The sewer district lawsuit represented the largest case among the outstanding lawsuits. Romaine said the county faced “hundreds of millions of dollars of liability.”

The plaintiffs’ attorney, James M. Catterson, a former deputy Suffolk County attorney, was unavailable for comment. He told Newsday last year he believed if the case went to trial a jury could potentially award $1 billion in his clients’ favor.

In the most recent court filing last month, an attorney representing the county, Joseph E. Macy, wrote to Judge David T. Reilly saying the plaintiffs in June had "circulated an initial confidential draft of a proposed settlement agreement" that the county was reviewing. The attorney requested an adjournment on the next court appearance until August as both sides "are continuing to proceed in good faith" on a settlement that "has proven to be complex."

The parties are due back in court Aug. 13.

'Sense of urgency'

The Suffolk Legislature unanimously approved the resolution at the end of Tuesday's general meeting. The resolution was added as a so-called "certificate of necessity" and not on the published agenda. 

McCaffrey said typically settlements go through the legislature's Ways & Means Committee and the discussions occur in executive session, which is closed to the public. But he said this settlement "came together really quick" and there "was a sense of urgency in getting this done."

Newsday obtained a copy of the resolution Friday, which says a settlement avoids the "cost and uncertainty of protracted litigation, while also benefitting the ratepayers of the District."

The settlement is still subject to court approval and the legislature would separately need to authorize appropriating funding, according to the resolution. McCaffrey said money currently in Fund 405 can be used for the settlement and the county would bond for the remaining money.

Some lawmakers criticized the former administration under Democrat Steve Bellone before voting at the meeting in Riverhead.

Legis. Robert Trotta (R-Fort Salonga) called it “a fraud on the taxpayers of Suffolk County by the prior administration.” And Legis. Anthony Piccirillo (R-Holbrook) said the settlement is “the start of the domino effect,” referencing red-light camera fees that courts have ruled as illegal.

Bellone declined comment.

Legis. Jason Richberg (D-West Babylon), the minority leader, said it’s important that the “taxpayers are going to be made whole.”

By Joe Werkmeister

joe.werkmeister@newsday.com

Joe Werkmeister joined Newsday in 2022 and covers Suffolk County government and politics. He is a graduate of St. Bonaventure University and previously worked as the editor of two North Fork community newspapers.

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