Greenwich Citizens Committee, Inc. v. Counties of Warren and Washington Indus. Development Agency

• Decision Date: 16 February 1996
• Docket Number: Nos. 70,71 and 154,D,s. 70
• Citation: 77 F.3d 26
• Parties: GREENWICH CITIZENS COMMITTEE, INC., Concerned Citizens of Hudson Falls/Kingsbury, Melody Mackenzie-Brown, Bruce Barthel, Stephanie Wenk, Sandra Hewitt, Lionel Sharp, and Robert Daly, individually and on behalf of all others similarly situated, Plaintiffs-Appellees-Cross-Appellants, v. COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT AGENCY, and Board of Supervisors of the County of Warren, Defendants-Appellants-Cross-Appellees. ocket 94-9258, 94-9288, and 94-9290.
• Court: U.S. Court of Appeals — Second Circuit

Page 26

77 F.3d 26

GREENWICH CITIZENS COMMITTEE, INC., Concerned Citizens of

Hudson Falls/Kingsbury, Melody Mackenzie-Brown, Bruce

Barthel, Stephanie Wenk, Sandra Hewitt, Lionel Sharp, and

Robert Daly, individually and on behalf of all others

similarly situated, Plaintiffs-Appellees-Cross-Appellants, v. COUNTIES OF WARREN AND WASHINGTON INDUSTRIAL DEVELOPMENT

AGENCY, and Board of Supervisors of the County of

Warren, Defendants-Appellants-Cross-Appellees.

Nos. 70, 71 and 154, Docket 94-9258, 94-9288, and 94-9290.

United States Court of Appeals,

Second Circuit.

Argued Oct. 11, 1995.

Decided Feb. 16, 1996.

James B. Tuttle, Dreyer, Boyajian & Tuttle, Albany, N.Y., for defendant-appellant-cross-appellee Board of Supervisors of the County of Warren.

James A. Resila, Carter, Conboy, Case, Blackmore, Napierski & Maloney, Albany, N.Y., for defendant-appellant-cross-appellee Counties of Warren and Washington Industrial Development Agency.

Robert B. Remar, Kirwan, Goger, Chesin & Parks, Atlanta, Ga.; (Salvatore D. Ferlazzo, Ruberti, Girvin & Ferlazzo, Albany, N.Y., on the brief), for plaintiffs-appellees-cross-appellants.

Before: NEWMAN, Chief Judge, LUMBARD and CABRANES, Circuit Judges.

JON O. NEWMAN, Chief Judge:

This appeal primarily concerns the state-of-mind requirement for governmental liability under 42 U.S.C. § 1983 for alleged violations of the First Amendment arising out of retaliatory state action. The principal issue is whether a governmental defendant in an underlying state court lawsuit must be shown to have acted with retaliatory intent in filing counterclaims before it may be held liable for chilling the First Amendment rights of the plaintiffs who brought the lawsuit. This issue arises on an appeal by Appellants-Cross-Appellees Counties of Warren and Washington Industrial Development Agency ("IDA") and Board of Supervisors of the County of Warren ("Warren County") from the November 10, 1994, and November 16, 1994, judgments of the District Court for the Northern District of New York (Thomas J. McAvoy, Chief Judge). These judgments, entered after a jury trial, awarded damages and attorney's fees to Appellees-Cross-Appellants Greenwich Citizens Committee, Inc. and other plaintiffs in an underlying state court lawsuit (the "Greenwich plaintiffs"). IDA and Warren County contend that the District Court erred in omitting from its jury instructions the need for a finding that they filed their counterclaims with retaliatory intent. The Greenwich plaintiffs cross-appeal to challenge the amount of attorney's fees awarded. We agree that the jury instructions were erroneous, and therefore reverse and remand for a new trial.

Background

I. The Underlying State Court Lawsuit

IDA is a municipal government agency whose goal is to promote and support certain industrial projects that it believes will benefit the Counties of Warren and Washington in upstate New York. In the late 1980s, IDA, Warren County, Washington County, and Essex County jointly approved plans for the construction of a solid waste incinerator to be located in Hudson Falls, New York. IDA entered into a contract with Adirondack Resource Recovery Associates ("ARRA") to develop the project. ARRA is a limited partnership consisting of Foster Wheeler Hudson Falls, Inc., as its general partner, and Adirondack Resource Recovery Corporation, as its limited partner. In January 1989, in order to finance the project, IDA entered into a bond purchase agreement with Smith Barney Harris Upham & Company ("Smith Barney"). The agreement called for the purchase and sale of revenue bonds worth $74,050,000. The closing of the bond sale was scheduled for February 14, 1989.

In the meantime, numerous community groups and local residents, including the Greenwich plaintiffs, actively opposed the construction of the solid waste incinerator. On February 9, 1989, five days before the scheduled date of the bond closing, the Greenwich plaintiffs filed a lawsuit in New York Supreme Court (Washington County), seeking a declaratory judgment against IDA, Warren County, and Washington County for failing to hold adequate public hearings on the project, for failing to conduct proper environmental impact studies in approving the financing and construction of the project, and for failing to comply with applicable environmental guidelines. This litigation was based, in part, on the fact that Essex County, one of the three original county participants, had dropped out of the project after the initial environmental impact studies had been prepared. In conjunction with the filing of their lawsuit, the Greenwich plaintiffs also held two press conferences. One of the Greenwich plaintiffs, Stephanie Wenk, telephoned Moody's Investor Services specifically to apprise the bond rating company of the pending litigation.

The commencement of the Greenwich plaintiffs' state court lawsuit caused the market for IDA's municipal bonds to deteriorate. Prospective bond purchasers demanded a discount from their original commitment in order to proceed with the closing. As a result, Smith Barney was forced to request a concession from Foster Wheeler Power Systems, Inc. ("Foster Wheeler"), the parent company of Foster Wheeler Hudson Falls, Inc., IDA's general partner in the project. Smith Barney agreed to sell the municipal bonds at a two percent discount, provided that Foster Wheeler would agree to pay the difference of $1,841,000 to Smith Barney. Foster Wheeler accepted the terms of the agreement and paid the difference; however, Foster Wheeler later informed IDA that it was holding IDA responsible for paying those funds. Subsequently, in litigation, Foster Wheeler asserted a claim against IDA for the $1,841,000 as part of the project cost. ¹

The following month, IDA, Warren County, and Washington County filed their joint answer to the Greenwich plaintiffs' state court complaint. In their answer, they asserted three counterclaims against the Greenwich plaintiffs for prima facie tort, interference with contract, and frivolous litigation. ² The Greenwich plaintiffs moved to dismiss the counterclaims, and the trial court denied the motion. On appeal, however, the Appellate Division reversed and dismissed the counterclaims. See Schulz v. Washington County, 157 A.D.2d 948, 550 N.Y.S.2d 446 (3d Dep't 1990). Subsequently, the Greenwich plaintiffs' underlying state court lawsuit was also dismissed. See Greenwich Citizens Committee, Inc. v. Counties of Warren and Washington Industrial Development Agency, 164 A.D.2d 469, 565 N.Y.S.2d 239 (3d Dep't 1990), appeal denied, 77 N.Y.2d 810, 571 N.Y.S.2d 912, 913, 575 N.E.2d 399 (1991), and cert. denied, 502 U.S. 1076, 112 S.Ct. 976, 117 L.Ed.2d 140 (1992).

II. The Federal Lawsuit

In March 1992, the Greenwich plaintiffs filed the pending federal lawsuit in the Northern District of New York, alleging that IDA and Warren County had filed their state court counterclaims in violation of 42 U.S.C. § 1983. The Greenwich plaintiffs claimed that their First Amendment rights had been chilled by the filing of the counterclaims. In essence, they alleged that IDA and Warren County had engaged in what has been labeled "SLAPP" litigation. See generally George W. Pring & Penelope Canan, "Strategic Lawsuits Against Public Participation" ("SLAPPs"): An Introduction for Bench, Bar and Bystanders, 12 U.Bridgeport L.Rev. 937 (1992). ³ IDA and Warren County responded by claiming that they had filed their counterclaims solely for the legitimate purpose of recovering any monetary damages caused by the Greenwich plaintiffs' tortious interference with the bond closing.

On cross-motions for summary judgment, the District Court held that, in order to establish a prima facie case, the Greenwich plaintiffs must show that "(1) their actions are protected by the First Amendment; (2) defendants' actions have the effect of chilling plaintiffs' First Amendment rights; and (3) defendants' actions are motivated by or substantially caused by plaintiffs' decision to exercise these rights." The District Court rejected the contention by IDA and Warren County that the Greenwich plaintiffs must also prove that IDA and Warren County filed their state court counterclaims with retaliatory intent.

The District Court then found as a matter of law that (1) the Greenwich plaintiffs' actions in filing their state court lawsuit and in communicating with the news media were constitutionally protected activities, and (2) under Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977), the Greenwich plaintiffs' protected conduct was a "but for" cause of the adverse state action committed by IDA and Warren County. The District Court therefore concluded that the sole issue remaining for trial was whether or not the Greenwich plaintiffs had suffered any chilling effect. At trial, the jury was presented with only two questions: (1) whether the filing of the state court counterclaims had any chilling effect on the Greenwich plaintiffs' First Amendment rights, and (2) what amount of damages, if any, should be awarded. The jury found in favor of the Greenwich plaintiffs and awarded compensatory damages of $62,980. The District Court subsequently awarded attorney's fees, although it did so in an amount less than that requested.

Discussion

In order to recover damages under 42 U.S.C. § 1983, a plaintiff must show that (1) "the conduct complained of was committed by a person acting under color of state law," and (2) "this conduct deprived a person of rights, privileges or immunities secured by the Constitution or laws of the United States." Parratt v. Taylor, 451 U.S. 527, 535, 101 S.Ct. 1908, 1913, 68 L.Ed.2d 420 (1981). The statute does not require that a defendant have acted with any particular state of mind beyond that required to establish a violation of the underlying constitutional right. Id. at 532-35, 101 S.Ct. at 1911-13; see Daniels v. Williams, 474 U.S. 327,...