W. Tradition P'ship, Inc. v. Attorney Gen. of State

• Decision Date: 27 November 2012
• Docket Number: No. DA 11–0081.,DA 11–0081.
• Citation: 367 Mont. 112,291 P.3d 545
• Parties: WESTERN TRADITION PARTNERSHIP, INC., a corporation registered in the State of Montana, and Champion Painting, Inc., a Montana corporation, Montana Shooting Sports Association, Inc., a Montana corporation, Plaintiffs, Appellees, and Cross–Appellants, v. ATTORNEY GENERAL OF the STATE of Montana, and Commissioner of the Commission for Political Practices, Defendants, Appellants, and Cross–Appellees.
• Court: Montana Supreme Court

367 Mont. 112

291 P.3d 545

WESTERN TRADITION PARTNERSHIP, INC., a corporation registered in the State of Montana, and Champion Painting, Inc., a Montana corporation, Montana Shooting Sports Association, Inc., a Montana corporation, Plaintiffs, Appellees, and Cross–Appellants,

v.ATTORNEY GENERAL OF the STATE of Montana, and Commissioner of the Commission for Political Practices, Defendants, Appellants, and Cross–Appellees.

No. DA 11–0081.

Supreme Court of Montana.

Submitted on Briefs Aug. 1, 2012.

Decided Nov. 27, 2012.

For Appellants: Steve Bullock, Montana Attorney General; James P. Molloy, Assistant Attorney General; Helena, Montana; Anthony Johnstone; Missoula, Montana.

For Appellees: Margot B. Ogburn; Wittich Law Firm, P.C.; Bozeman, Montana.

Justice BETH BAKER delivered the Opinion of the Court.

[367 Mont. 113]¶ 1 This matter returns to the Court for determination of the Cross–Appellants' appeal from the District Court's rejection of their claim for attorneys' fees. In the previous appeal, we reversed the District Court's grant of summary judgment for the Cross–Appellants and held that their cross-appeal on the attorneys' fee issue was moot. Western Tradition Partn., Inc. v. Atty. Gen., 2011 MT 328, ¶ 48, 363 Mont. 220, 271 P.3d 1. Our decision thereafter was reversed by the United States Supreme Court. American Tradition Partn., Inc. v. Bullock, 567 U.S. ––––, 132 S.Ct. 2490, 183 L.Ed.2d 448 (2012) (per curiam). On motion of the Cross–Appellants, we agreed to consider the attorneys' fee issue based on the briefing previously submitted to this Court. We now affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 The procedural history of this case is set forth in detail in the Court's previous opinion. Western Tradition Partn., ¶¶ 2–33. Briefly stated, Plaintiffs Western Tradition Partnership—now known as American Tradition Partnership—Champion Painting, and Montana Shooting Sports Foundation (collectively referred to as ATP) sought a declaratory ruling that § 13–35–227(1), MCA, violated their rights to free speech guaranteed by the United States and Montana Constitutions by prohibiting political expenditures by corporations on behalf of or opposing candidates for public office. ATP argued that the U.S. Supreme Court's decision in Citizens United v. FEC, 558 U.S. 310, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010), barred Montana from prohibiting independent and indirect corporate expenditures on political speech, and that Montana's century-old ban on independent corporate expenditures therefore was invalid.

¶ 3 The Attorney General defended the law's constitutionality on the grounds that the law invalidated in Citizens United was distinguishable from the Montana statute, that corporate rights could not be asserted against states in the same manner as against Congress, and that Montana has a compelling interest in requiring business corporations to use segregated funds for campaign expenditures. The Attorney General argued that § 13–35–227(1), MCA, is narrowly tailored because it still allows for lobbying, testimony, and other direct contacts and that the Commissioner of Political Practices has interpreted the law to exclude voluntary associations.

¶ 4 The District Court entertained the parties' cross-motions for summary judgment. ATP's motion included a request for attorneys' fees under the Uniform Declaratory Judgments Act (UDJA), §§ 27–8–101 et seq., MCA, and under the private attorney general doctrine, first recognized by this Court in In re Dearborn Drainage Area, 240 Mont. 39, 43, 782 P.2d 898, 900 (1989). The court granted ATP's motion for summary judgment on the merits of its constitutional claim, denied the State's motion for summary judgment, declared § 13–35–227(1), MCA, unconstitutional, enjoined enforcement of the statute, and denied ATP's request for attorneys' fees. The Attorney General appealed the District Court's summary judgment rulings and ATP appealed the denial of its request for attorneys' fees.

¶ 5 On appeal, this Court reversed. A majority of the Court agreed with the Attorney General's position that Citizens United did not foreclose Montana from prohibiting independent corporate expenditures on behalf of candidates. Based on the record developed in the District Court, this Court concluded that the State had a compelling interest that justified the imposition of statutory restrictions that the Court determined were narrowly tailored to meet its objectives. Western Tradition Partn., ¶¶ 47–48. We did not reach ATP's claim for fees, as it was mooted by our reversal of the District Court's summary judgment ruling. Western Tradition Partn., ¶ 48. Two members of the Court dissented on the ground that Montana's statute did not pass constitutional muster under Citizens United.Western Tradition Partn., ¶¶ 49–60 (Baker, J., dissenting), ¶¶ 61–135 (Nelson, J., dissenting). The U.S. Supreme Court summarily reversed, ruling that “[t]here can be no serious doubt” that the holding of Citizens Unitedapplies to the Montana statute. American Tradition Partn., 567 U.S. at ––––, 132 S.Ct. at 2491.

¶ 6 We return now to ATP's cross-appeal and consider whether it is entitled to recover its attorneys' fees from the State of Montana under either the UDJA or the private attorney general doctrine.¹ ATP seeks a total award of $138,403.01.

STANDARD OF REVIEW

¶ 7 We review for abuse of discretion a district court's ruling granting or denying attorneys' fees under either the UDJA or the private attorney general doctrine. Bitterroot River Protective Ass'n v. Bitterroot Conserv. Dist., 2011 MT 51, ¶¶ 9–10, 359 Mont. 393, 251 P.3d 131.

DISCUSSION

¶ 8 Did the District Court abuse its discretion in declining to award attorneys' fees?

¶ 9 Montana follows the American Rule that, absent a specific statutory or contractual provision, a prevailing party generally is not entitled to recovery of its attorneys' fees in prosecuting or defending the action. Trustees of Ind. Univ. v. Buxbaum, 2003 MT 97, ¶ 19, 315 Mont. 210, 69 P.3d 663. We have recognized equitable exceptions to the American Rule, Buxbaum, ¶ 19, but construe these exceptions narrowly “lest they swallow the rule.” Jacobsen v. Allstate Ins. Co., 2009 MT 248, ¶ 23, 351 Mont. 464, 215 P.3d 649. We have rejected the expansion of such equitable exceptions when the effect would “drive a stake into the heart of the American Rule.” Jacobsen, ¶ 22 (quoting Mountain West Farm Bureau Mut. Ins. Co. v. Brewer, 2003 MT 98, ¶ 40, 315 Mont. 231, 69 P.3d 652).

1. Statutory Basis for Fees

¶ 10 Montana law provides that a prevailing party may recover attorneys' fees against the State of Montana only if “the court finds that the claim or defense of the state ... was frivolous or pursued in bad faith.” Section 25–10–711(1)(b), MCA. A claim or defense is frivolous or in bad faith “when it is ‘outside the bounds of legitimate argument on a substantial issue on which there is a bona fide difference of opinion.’ ” Ostergren v. Dept. of Revenue, 2004 MT 30, ¶ 23, 319 Mont. 405, 85 P.3d 738 (quoting Jones v. City of Billings, 279 Mont. 341, 344, 927 P.2d 9, 11 (1996), and Armstrong v. State, Dept. of Justice, 250 Mont. 468, 469–70, 820 P.2d 1273, 1274 (1991)). In this case, the District Court did not find the Attorney General's position to be frivolous or in bad faith. To the contrary, the court determined that the State's arguments “were made in good faith and were supported by briefs that were meticulously researched, well written, and well argued.”

¶ 11 ATP argues that, despite its finding of good faith, the District Court erred by failing to award fees under § 27–8–313, MCA, which serves as statutory authority for an award of fees in this case. That section does not specifically provide for an award of attorneys' fees to a prevailing party, but does give a court the ability to grant “supplemental relief” in a case brought under the Uniform Declaratory Judgments Act when the court determines such relief to be “necessary or proper.” Wagner v. Woodward, 2012 MT 19, ¶ 31, 363 Mont. 403, 270 P.3d 21 (citing Buxbaum, ¶ 42). While § 27–8–313, MCA, may provide a statutory basis for awarding fees, its reach is narrow. In order to avoid “eviscerat[ing]” the American Rule, we have determined that an award of fees to the prevailing party is not warranted “in every garden variety declaratory judgment action[.]” Mungas v. Great Falls Clinic, LLP, 2009 MT 426, ¶ 44, 354 Mont. 50, 221 P.3d 1230.

¶ 12 Accordingly, we have required courts analyzing a claim for fees in a declaratory judgment proceeding to make a threshold determination that equitable considerations support an award of attorneys' fees. Mungas, ¶ 45;Hughes v. Ahlgren, 2011 MT 189, ¶¶ 13, 21, 361 Mont. 319, 258 P.3d 439;United Nat'l Ins. Co. v. St. Paul Fire & Marine Ins. Co., 2009 MT 269, ¶ 39, 352 Mont. 105, 214 P.3d 1260. If that threshold determination is met, we apply a three-part “tangible parameters test” to determine whether an award of fees is necessary or proper as required by § 27–8–313, MCA. Renville v. Farmers Ins. Exch., 2004 MT 366, ¶ 27, 324 Mont. 509, 105 P.3d 280.² The District Court concluded that, although the Uniform Declaratory Judgments Act provided authority for an award of fees, the court did not find it “necessary and proper to do so in this case.” Because equitable considerations also inform the analysis of ATP's claim for fees under the private attorney general doctrine, we will consider these arguments together.

2. Private Attorney General Doctrine

¶ 13 The private attorney general doctrine is one of a handful of equitable exceptions this Court has recognized to the American Rule. Buxbaum, ¶ 19. This doctrine “is normally utilized when the government, for some reason, fails to properly enforce interests which are significant to its citizens.” Montanans for the Responsible Use of the Sch. Trust v. State ex rel. Bd. of Land Comm'rs ( Montrust ), 1999 MT 263, ¶ 64, 296 Mont. 402, 989 P.2d 800 (quoting Dearborn...