Vaquería Tres Monjitas, Inc. v. Pagan

• Citation: 748 F.3d 21
• Decision Date: 03 April 2014
• Docket Number: No. 13–2517.,13–2517.
• Parties: VAQUERÍA TRES MONJITAS, INC.; Suiza Dairy, Inc., Plaintiffs, Appellees, v. Myrna Comas PAGAN, Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico; Edmundo Rosaly, Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico, Defendants, Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

748 F.3d 21

VAQUERÍA TRES MONJITAS, INC.; Suiza Dairy, Inc., Plaintiffs, Appellees,

v.Myrna Comas PAGAN, Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico; Edmundo Rosaly, Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico, Defendants, Appellants.

No. 13–2517.

United States Court of Appeals, First Circuit.

April 3, 2014.

Edward W. Hill for appellants.

Rafael Escalera Rodríguez, with whom Amelia Caicedo Santiago, Carlos M. Hernández Burgos, and Reichard & Escalera were on brief, for appellees.

Before LYNCH, Chief Judge, SELYA and HOWARD, Circuit Judges.

LYNCH, Chief Judge.

Understandably concerned by language in a district court order which opined that Puerto Rico had waived its Eleventh Amendment immunity by entering into a Settlement Agreement, the Commonwealth's milk regulatory agency (Spanish acronym “ORIL”) appeals. The court's language on that immunity was in no sense necessary to the approval of the Settlement Agreement or to entry of the judgment. In the motion seeking approval, no party raised any Eleventh Amendment issue, nor was such an issue briefed or argued. The statement is contrary to the principle of constitutional avoidance. We conclude that the language at issue is merely a statement of dicta and not a judgment. The statement is wholly gratuitous, does not respond to any argument made in those proceedings, and has the obvious effect of causing confusion. We strongly suggest to the district court that it issue an amended order deleting the language. We otherwise dismiss the appeal for want of appellate jurisdiction.

I.

The facts of this long running case are found in more detail in Puerto Rico Dairy Farmers Association v. Comas Pagan, 748 F.3d 13, 2014 WL 1325750 (1st Cir.2014), and in our court's previous decision, Vaquería Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464 (1st Cir.2009), reh'g en banc denied,600 F.3d 1 (1st Cir.2010), cert. denied,––– U.S. ––––, 131 S.Ct. 2441, 179 L.Ed.2d 1235 (2011). We assume familiarity with those decisions.

On October 29, 2013, the plaintiffs Suiza Dairy, Inc. (“Suiza”) and Vaquería Tres Monjitas, Inc. (“VTM”), and the government defendants, Myrna Comas Pagan, the Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico, and Edmundo Rosaly, the Interim Administrator of ORIL (the Office for the Milk Industry Regulatory Administration), filed with the district court for its approval the Final Settlement Agreement and Memorandum of Understanding Between the Parties (“Agreement”), executed that day.

We briefly describe the substance of the settlement. The Agreement provided for the adoption and implementation of Regulation 12, which governs pricing mechanisms in Puerto Rico's milk industry. In effect, Regulation 12 establishes the price margins for all players in the industry. As part of the implementation of Regulation 12, ORIL pledged to conduct a comprehensive study of the milk industry within twelve months of the effective date of the Agreement.

Under the Agreement, the government of Puerto Rico is also obligated to create a “Special Fund to promote the efficiency of the Milk Market in Puerto Rico.” In addition to the “Special Fund,” the government agreed to contribute funds over four years to Suiza and VTM as part of a regulatory accrual mechanism designed to allow the processors to recoup a fair rate of return on their products.

We turn from this substantive summary to the Agreement's precise language. The Agreement first recited that there was no concession of the validity of the plaintiffs' claims or of any court order entered and that the effect of entry of the order would be dismissal of the case with prejudice. The substance of the Agreement was found in covenants, contained in subparagraphs 3 through 17 of the paragraph. The Agreement included a final paragraph stating the parties' rights moving forward:

The terms and conditions of this settlement will be incorporated into the firm, final and unappealable judgment to be issued by the District Court. That Judgment will be equally binding to and enforceable against all signatories of this Agreement and the Government of Puerto Rico. All such parties hereby waive any defense they may have to the enforcement of this Agreement.

(emphasis added).

At the hearing on whether to enter the Settlement Agreement as a judgment, counsel for Suiza added that although the Agreement did not contain an explicit clause regarding contempt, the plaintiffs waived all attempts to find the government defendants in contempt. Plaintiffs did not assert that the Commonwealth had waived its immunity either in the Agreement or specifically in the Agreement's “waive any defense” clause. At no time did any issue concerning the Commonwealth's Eleventh Amendment immunity come up at that hearing or in the settlement papers before judgment was entered.¹

The district court's order, entered on November 7, 2013, began with a paragraph identifying those who were parties to the Final Settlement Agreement. The second paragraph approved and incorporated all of the covenants with numbered paragraphs, as follows:

1. All the covenants of the Settlement Agreement executed on October 29, 2013 are incorporated herein.

2. The Court has original federal jurisdiction in a federal question civil action, pursuant to 28 U.S.C. § 1331, and retains jurisdiction for compliance purposes, as to the terms and conditions of the Settlement Agreement of October 29, 2013 to ensure proper[ ] and timely implementation. The Court, hence, shall retain federal jurisdiction to enforce the Settlement Agreement until such time as the Commonwealth of Puerto Rico, the Puerto Rico Department of Agriculture and ORIL, as well as all signatory parties have complied fully and effectively with the Settlement Agreement, and have maintained such compliance for no less than four consecutive years, that is, December 31, 2017.

3. The Commonwealth of Puerto Rico through the Secretary of Justice, the Puerto Rico Department of Agriculture and ORIL and its highest executives, shall inform their successors as to the terms and conditions of this Settlement Agreement, particularly those economic terms and covenants that may remain to be fulfilled.

4. The Commonwealth of Puerto Rico, the Puerto Rico Department of Agriculture and ORIL shall require compliance with the Settlement Agreement by all of its agencies, departments, officials, employees, and their respective assigns and successors.

5. The Settlement Agreement of October 29, 2013 does not include the Puerto Rico Dairy Farmers Association (“PRDFA”), hence, the PRDFA may proceed with their litigation filed under Civil No. 08–2191(DRD).

(footnote and internal citation omitted).

After the numbered provisions of the second paragraph, there is a third paragraph, which is the source of Puerto Rico's concern:

The Court is of the opinion that the voluntary signatures of the well represented authorized agents of the Commonwealth of Puerto Rico, the Puerto Rico Department of Agriculture and ORIL, constitutes a pellucid waiver of the Eleventh Amendment, as all the parties clearly stated that “[a]ll such parties hereby waive any defense they may have to the enforcement of this Agreement.” ... See also Watson v. Texas, 261 F.3d 436 (5th Cir.2001); Ellis v. University of Kansas Medical Center, 163 F.3d 1186 (10th Cir.1999).

Unlike the earlier language, which imposes requirements consistent with the covenants of the Agreement, this paragraph signals merely that it states the view of the court.

The final paragraph of the order closes the case for statistical purposes and notes that the court will “retain jurisdiction for compliance purposes of all the covenants of the Settlement Agreement ... or any other related matter and/or remedy related to the full compliance of the Settlement Agreement.”

On December 5, 2013, ORIL filed a motion to alter or amend the judgment pursuant to Fed.R.Civ.P. 59(e), in which it argued that there had been no Eleventh Amendment waiver and sought the elimination of the Eleventh Amendment paragraph in the district court's November 7 Order. ORIL objected to the district court's sua sponte statements of opinion on Eleventh Amendment waiver. ² ORIL stressed that it had asserted its Eleventh Amendment immunity continuously throughout the litigation and never waived it. Not only did ORIL not intend to waive its immunity, it argued, but the language of the Settlement did not contain the “required unequivocal language” to support an Eleventh Amendment waiver finding. In its motion, ORIL characterized the monetary relief included in the Settlement as an Ex parte Young-type remedy, see209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), which did not imply a broader Eleventh Amendment waiver. It cited Frazar v. Gilbert, 300 F.3d 530, 549–50 (5th Cir.2002), rev'd on other grounds, Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004).

The district court issued an Opinion and Order on December 30, 2013, denying ORIL's Rule 59(e) motion and reiterating its view that the Agreement constituted an Eleventh Amendment waiver. The rejection of reconsideration, said the court's statement, was based on the “waive any defense” clause of the Settlement Agreement, along with the fact that the Agreement provided for public funds to be paid to the milk processors as part of the Settlement's regulatory solution.

We stress ORIL disagrees only with the court's statement on Eleventh Amendment waiver in its opinion, and otherwise agrees with the court's approval of the Settlement Agreement.

II.

First, we think it is plain that the Eleventh Amendment waiver statement in the unnumbered third paragraph in the district court's order is pure dicta. See Municipality of San Juan v. Rullan, 318 F.3d 26, 28 n. 3 (1st Cir.2003) (“Dicta comprises observations in a judicial opinion or order that are ‘not essential’ to...