Bebchick v. Washington Metropolitan Area Transit Com'n

• Decision Date: 07 November 1986
• Docket Number: 23747 and 74-2056,Nos. 23720,s. 23720
• Parties: Leonard N. BEBCHICK, et al., Petitioners, v. WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent, D.C. Transit System, Inc., Intervenor. D.C. TRANSIT SYSTEM, INC., Petitioner, v. WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent, Leonard N. Bebchick, et al., Intervenors. D.C. TRANSIT SYSTEM, INC., Petitioner, v. WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 396

805 F.2d 396

256 U.S.App.D.C. 296

Leonard N. BEBCHICK, et al., Petitioners, v. WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent, D.C. Transit System, Inc., Intervenor.

D.C. TRANSIT SYSTEM, INC., Petitioner, v. WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent, Leonard N. Bebchick, et al., Intervenors.

D.C. TRANSIT SYSTEM, INC., Petitioner, v. WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent.

Nos. 23720, 23747 and 74-2056.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 15, 1984.

Decided Nov. 7, 1986.

On Supplementary Review Proceedings.

Leonard N. Bebchick, Washington, D.C., for petitioners, Leonard N. Bebchick, et al. in No. 23720.

Donald J. Balsley, Jr., Washington, D.C., for respondent, Washington Metropolitan Area Transit Commission, in No. 23720, and intervenor in No. 23720.

Harvey M. Spear, New York City, for D.C. Transit System, Inc., intervenor in No. 23720.

Gilbert Hahn, Jr. and Mary Kathleen Hite, Washington, D.C., were on the brief of intervenors, Black United Front, et al. in support of brief of petitioners Leonard N. Bebchick, et al.

Before ROBINSON, Circuit Judge, MacKINNON, Senior Circuit Judge, and DAVIS, ^* Circuit Judge, United States Court of Appeals for the Federal Circuit.

Opinion for the Court filed by Circuit Judge DAVIS.

DAVIS, Circuit Judge:

This old case is before us, once more, ¹ this time for disposition of issues arising from the respondent Washington Metropolitan Area Transit Commission's (Commission or WMATC) Report of Findings and Recommendations Bebchick III, Phase One, ² on remand from this court's decision in Bebchick v. Washington Metropolitan Area Transit Comm'n, 645 F.2d 1086 (D.C.Cir.1981) (Bebchick III ). We have also to determine an attorneys' fee award for counsel for the Bebchick group (Bebchick). ³

I.

The facts surrounding this litigation have been discussed in detail in prior decisions of this court, ⁴ and will not be restated here, except as relevant to this opinion. This latest round of litigation involving D.C. Transit System, Inc. (Transit) stems from this court's remand in Bebchick III to the Commission of four tasks:

(1) Recalculation of the tax expense to be deducted from the value increase on six properties put below the line;

(2) Computation of the precise amount of restitution due, including interest;

(3) Determination of attorneys' fees for counsel for the Bebchick group; and

(4) Recommendations for the suitable disposition of the balance of the restitutionary fund.

On remand from Bebchick III, the Commission divided its assignment into two parts. In its Phase One Report, the Commission addressed the issues related to the calculation of the total restitution due farepayers. ⁵ Although the Commission at one point believed that a "Phase Two Report"--calculating attorneys' fees and determining the distribution of the balance of the restitution fund--would be forthcoming, the Commission in its Phase One Report, troubled

by what it considered a defective fee application by the Bebchick group, requested (by motion) this court to clarify and elaborate on its Bebchick III instructions ⁶ pertaining to attorneys' fees. Consequently, the Phase Two Report has not been issued.

II.

The first task before the Commission on remand was the recalculation of the tax expense to be deducted from the value increase on the six Bebchick III properties put below the line (taken out of operation). ⁷ Using the "general methodology" employed in the "Banks Study," ⁸ the Commission determined that the net gain after taxes of the properties (land and buildings) should be $2,937,892. ⁹ This determination which is in accord with our directive in Bebchick III has not been challenged by any of the parties, and is adopted by this court.

Next, the Commission, on remand, was ordered by the court to compute the precise amount, including interest, of the total restitution due from Transit in the Bebchick litigation. In so doing, the court specifically ordered that "[n]o offsets should be made from this amount [total restitution]...." Bebchick III, 645 F.2d at 1096. Moreover, the court specified the precise starting date for the interest accrual as well as the applicable rate of interest to be applied. ¹⁰

Because the net gain on the sale of the six properties did not fall below $1,058,856, the amount of the depreciation deficiency, the Commission correctly determined that $806,168, the total amount taken out of the riders' fund by Transit to apply to the deficiency, should be included as part of the restitution principal. The Commission also properly included as part of the total restitution principal $765 of non-attorney expenses incurred by Bebchick on the remand from Bebchick II. ¹¹ Thus, the pre-interest restitutionary fund consisted of the following:

Subsequently, the Commission calculated the amount of compensatory interest due on the depreciation deficiency principal component as well as that portion of the principal consisting of the $1,461,756 of excess earnings already deposited in the court-ordered account. No dispute exists as to computational methodology or calculations used by the Commission to compute the interest accrual on the restitution. The Bebchick group has updated, as of December 20, 1984, the Commission's calculation First, Transit argues that the court in Bebchick III did not award compensatory interest on the excess earnings component of the restitution award. We must reject this argument. This court said in Bebchick that

                of the interest. 12   In accordance with the calculations submitted by the Bebchick group, the precise amount of the total restitution due, as of December 20, 1984, was $5,827,254 including principal and interest; 13  $3,798,198 of this total was on deposit at American Security Bank with the difference of $2,029,056 owing from Transit.  The Commission has agreed with this computation.  However, Transit argues that this amount is excessive on two grounds
                

[t]here is no doubt that interest is allowable on funds which are required to be repaid as restitution. In this instance, Bebchick et al. never waived their demand for interest on the funds ultimately required to be restored to the riders' fund, but insisted on it at the proper times.

645 F.2d at 1093 (citations omitted). We understand this statement, together with other portions of Bebchick III, as unequivocally granting petitioner's request for compensatory interest on any and all funds required to be paid by Transit to the riders' fund and not merely on the depreciation component of the restitution. Further, in view of the position taken by this court in Bebchick III, we do not now think, as Transit contends, that the equities in this case preclude an award of interest on the excess earning component of the restitution or that the Bebchick group has waived its claim for interest on that amount.

Another argument presented by Transit to support its contention that the $2,029,056 restitution balance (as of December 20, 1984) is excessive, is that it is entitled to offsets for the amounts of the bus maintenance award ¹⁴ and the cost-of-living award. ¹⁵ This court recognized in its Bebchick III opinion that Transit is entitled to recover bus maintenance and cost-of-living expenses only after it has been "authoritatively determined (a) what is the full restitution owing on account of the claims of the Bebchick group, and (b) the resources available to pay that amount." 645 F.2d at 1095. Moreover, the court cautioned that

the various equities and offsets asserted by Transit have no application to the limited claims we are now considering, those of the Bebchick group. Those restricted claims, centering in the riders' fund established in 1963, are set apart from the other claims as to which the equities or offsets may be relevant. Bebchick II was very specific in its holdings and did not contemplate that any of these equities should be considered in connection with this distinct restitutionary sum.

Id. Finally, as we have said earlier, this court admonished the Commission on remand that "[n]o offsets should be made from this amount [total restitution to the Bebchick group]...." Id. at 1096.

In the present circumstances, we believe that any offset by Transit of cost-of-living expenses from the total restitution award is wholly foreclosed by this court's opinion in Bebchick III. Respecting the bus maintenance expenses, the Bebchick

                group has conceded Transit's entitlement to such an offset in the amount of $701,514 (as of December 20, 1984), composed of $273,060 in principal and $428,454 of accrued interest. 16   Accordingly, this offset is properly to be taken.  Nevertheless, we make it clear that Transit's offset claims are last in time and priority.  The riders are first entitled to full restitution (principal plus interest) of the unlawful fares paid by them under Order No. 245 during the period April 14, 1963--January 26, 1966.  The riders are next entitled to full reimbursement for $806,168 (plus interest) ordered withdrawn from the riders' fund on January 26, 1966 to cover the non-existent depreciation deficiency.  Under this scheme of priority, Transit is required first to pay into the court-ordered account the difference between the amount of restitution due and the amount of the bus maintenance allowance.  This permits Transit to recoup its shortfall from the riders' fund without depriving the petitioners of any monies due them.
                

III.

A.

As we have already said, we also directed the Commission to determine an appropriate award of attorneys' fees for counsel for the Bebchick group. In turn, the Commission requested the Bebchick group to submit a fee application. A comprehensive and thorough fee application was submitted on December 3, 1982. It requested fees pertinent to the involvement of the Bebchick group in twelve prior proceedings involving Transit. The Commission, however, was of the view that the...