363 F.3d 276 (3rd Cir. 2004), 03-1727, United States v. Government of Virgin Islands

Docket Nº:03-1727
Citation:363 F.3d 276
Party Name:United States v. Government of Virgin Islands
Case Date:April 02, 2004
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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363 F.3d 276 (3rd Cir. 2004)

UNITED STATES of America, Appellee



No. 03-1727.

United States Court of Appeals, Third Circuit

April 2, 2004

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[Copyrighted Material Omitted]

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Howard J. Bashman (Argued), Fort Washington, Iver A. Stridiron, Attorney General, Elliott Davis, Solicitor General, Michael Law, Assistant Attorney General, Virgin Islands Department of Justice, St. Thomas, for Appellant.

Nina Dale, Office of Regional Counsel, United States Environmental Protection Agency, New York, Thomas L. Sansonetti, Assistant Attorney General, David M. Nissman, United States Attorney, Virgin Islands, David Raymond Lewis, Deputy United States Attorney, Virgin Islands, William D. Dillon, Assistant United States Attorney, Virgin Islands, John A. Bryson, Donald G. Frankel, Katherine J. Barton (Argued), United States Department of Justice, Environment & Natural Resources

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Division, Appellate Section, Washington, for Appellee.

Before NYGAARD, BECKER, and STAPLETON, Circuit Judges.

BECKER, Circuit Judge.

This is an appeal by the Government of the Virgin Islands (the "GVI") from an order of the District Court of the Virgin Islands in a Clean Water Act enforcement action brought by the United States pursuant to 33 U.S.C. § 1319(b). The case was commenced two decades ago, and in 1985, the United States and the GVI entered into a consent decree pursuant to which the GVI agreed to make certain improvements to its wastewater systems so as to come into compliance with effluent limitations in its discharge permits. The GVI repeatedly failed to comply with the consent decree's requirements, and in 1991, the United States filed a motion seeking enforcement of the consent decree. This ultimately resulted in the parties entering into an amended decree in 1996 which placed new requirements on the GVI.

The GVI did not meet the requirements set forth in the amended decree, and raw sewage soon was bypassing the treatment plant and running down streets in St. Croix. In February of 2000, in response to the noncompliance, the United States moved the District Court to order the GVI to halt the discharge of raw sewage and to make necessary repairs. Acting on the motion, the District Court entered an order requiring specific repairs and restoration of the wastewater treatment plant, to be completed by deadlines set in the order.

Following a hearing on September 27, 2001, pursuant to an order of the District Court requiring the GVI to show cause why it should not be held in contempt "for its continued and flagrant failure" to comply with the decree and court orders, the Court issued further orders requiring compliance. The Governor of the Virgin Islands responded to these orders by declaring a state of emergency under 31 V.I.Code § 239(a)(1), which allowed the Virgin Islands Department of Public Works ("DPW") to award contracts by negotiation rather than by competitive bidding. During the proclaimed state of emergency, the GVI entered into a negotiated contract with a company called Global Resources Management ("GRM"), which was to provide the services necessary to achieve compliance.

After further hearings the District Court found that the process leading to the GRM contract was likely tainted by political corruption, and that GRM itself was a start-up company with no equipment, assets, or experience in construction. The United States filed a motion to show cause why performance of the GRM contract should not be enjoined, and after still further proceedings, the District Court entered an order in March 2003 enjoining the GVI from proceeding with or reviving the GRM contract; setting deadlines for certain repairs; requiring the GVI to make a net deposit of $7.4 million into a trust fund to assure the repairs; and prescribing procedures for future use of emergency proclamations and contracting.

This appeal, which challenges that order, raises several issues. First, the GVI argues that the District Court lacked jurisdiction-on mootness grounds-to enjoin the contract between the GVI and GRM because the GVI had voluntarily terminated the contract two days before the hearing. We reject this contention because it is well established that the voluntary cessation of a challenged practice will not automatically render a case moot, unless subsequent events make it absolutely clear that the wrongful behavior will not recur, a test not met here.

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Second, the GVI submits that the District Court exceeded its jurisdiction, and in particular the strictures of the Eleventh Amendment, when it entered an injunction requiring the GVI to comply with territorial law in contracting for repairs to the wastewater system in St. Croix. In particular, the GVI relies on Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), in arguing that a federal court lacks jurisdiction to order a sovereign state or territory to conform its conduct to state or territorial law. The United States asserts two broad grounds for rejecting this assault on the District Court's jurisdiction: first, that the Eleventh Amendment does not apply to suits brought by the United States; and second, that the Virgin Islands is not a state for purposes of the Eleventh Amendment and hence lacks sovereign immunity. The United States also advances a narrower ground: that any potential Eleventh Amendment problem is obviated by the fact that the GVI consented to suit-and enforcement-in agreeing to the amended decree.

While these first two arguments have considerable force, we need not reach them, for we can dispose of the case on the narrower grounds stemming from the existence of the consent decree. The order that the District Court enforces is a federal decree implementing a federal statute. The enforcement order, itself entered in the exercise of broad equitable powers, was intended to vindicate an agreement made by territorial officials to comply with federal law. The District Court's construction of territorial law was therefore not the underpinning of its remedial order. More particularly, the Court's ordering the GVI (1) to factually and legally justify its future use of emergency proclamations; (2) to award contracts for projects exempted from the statutory competitive bidding procedures on a competitive basis and via formal advertising where practicable; (3) to solicit written offers from other qualified sources; (4) to consider certain factors in conducting contract negotiations; and (5) otherwise to attempt to ensure that contract prices are favorable and contractors are responsible, was entirely warranted by the Court's findings that the procedures used by the GVI to negotiate contracts for projects required by the December 2001 order were likely to frustrate compliance with that order. Thus, the District Court could require that the GVI follow certain contracting procedures when awarding contracts for projects required pursuant to the amended decree. Under these circumstances, neither Pennhurst nor the Eleventh Amendment are implicated, much less offended.

Concluding that the District Court properly exercised jurisdiction, we reach the merits issues. The GVI asserts that the District Court abused its discretion in issuing an injunction because: (1) the emergency proclamations were valid; (2) the Court failed to defer to Virgin Islands agencies' contracting decisions; and (3) the Court lacked the legal authority to enter the specific injunctive relief granted. We disagree, and conclude that the District court did not abuse its discretion in enjoining the GRM contract or in ordering the GVI to comply with territorial competitive bidding law in future contracts under the amended decree or December 2001 order. In view of the long and sorry history of noncompliance and the seamy circumstances of the GRM contract, the District Court's order was surely within the ambit of its broad discretion. Indeed, the District Court correctly found that the GVI's award of the contract to GRM-a company "with no equipment, no experience, no assets, and no construction performance bond"-was likely to frustrate compliance with the amended decree and the December

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2001 order, and that the "flawed contract" would not "protect the health and safety of the public ... by insuring that the sewer repairs would be done competently, on time, and at a reasonable cost." 248 F.Supp.2d at 439. In view of the foregoing, the order enjoining the GRM contract and requiring the GVI to comply with territorial competitive bidding law in future contracts under the amended decree or December 2001 order was within the scope of the District Court's broad authority and did not constitute an abuse of discretion.

The final merits issue with which we must deal is whether the District Court abused its discretion in requiring the GVI to deposit an additional $7.4 million into the District Court's wastewater repair account. This was not among the relief the United States sought in its motion for an injunction, but the Court, at the behest of the United States Attorney, decided to tack on this additional relief to vindicate an earlier order with which the Court believed the GVI had fallen out of compliance. That order directed the GVI to complete compliance with certain provisions of the December 2001 order, and required the GVI to deposit into the trust fund the amount needed to implement the projects listed in an exhibit attached to the order, an amount subsequently estimated by the GVI to be $16 million. The GVI did not appeal the December 2001 order then, and it does not challenge its validity now, and hence it is bound by the order. However, the $7.4 million consists of $4 million more than had previously been estimated or required (to cover additional...

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