Alliance for Water Efficiency v. Fryer, 14 C 115

• Decision Date: 18 January 2017
• Docket Number: No. 14 C 115,14 C 115
• Parties: ALLIANCE FOR WATER EFFICIENCY, Plaintiff, v. JAMES FRYER, Defendant.
• Court: U.S. District Court — Northern District of Illinois

ALLIANCE FOR WATER EFFICIENCY, Plaintiff, v. JAMES FRYER, Defendant.

No. 14 C 115

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

January 18, 2017

Magistrate Judge Jeffrey Cole

MEMORANDUM OPINION AND ORDER

INTRODUCTION

The history of this case is summarized in Alliance for Water Efficiency v. Fryer, 808 F.3d 1153 (7^th Cir. 2015)[Dkt. #89], which reversed this court's decision in Alliance for Water Efficiency v. Fryer, 2015 WL 102166 (N.D.Ill. 2015)[Dkt. #50]. It is further discussed below and in the companion Memorandum Opinion and Order dealing with Mr. Fryer's motion for attorneys' fees. See Alliance for Water Efficiency v. Fryer, ___ WL___ (N.D.Ill. 2017). [Dkt. #115].¹

The Final Judgment of the Court of Appeals was issued the same day as the Seventh Circuit's Opinion and was docketed as the Mandate on January 13, 2016. [Dkt. #88]. See also Rule 41(a), Federal Rules of Appellate Procedure. The Mandate provided that the Judgment of the District Court was reversed, "with costs [which were specified in the Mandate], in accordance with the decision of [the Seventh Circuit]...." [Dkt. #88]. See also Dkt. #87.

I.PROCEDURAL HISTORY OF THE CASE

Mr. Fryer has filed a "Motion For Restitution Following Reversal On Appeal." [Dkt. #96]. The motion claims that upon reversal of a judgment "the right to restitution is well established." [Dkt. 96 at 3, ¶11]. Indeed, it insists that under established Supreme Court precedent, "restitution may be obtained in the main action itself without filing a new lawsuit." Id. at ¶11. It goes on to say that because of the Seventh Circuit's having vacated this court's injunction - "because it contains terms on which the parties ha[d] not agreed," 808 F.3d at 1157 - the Alliance has been "unjustly enriched" in the amount computed by Mr. Fryer of $133,817.30. [Dkt. #96 at 4, ¶12].

This amount is made up of (1) $26,855.03 which Mr. Fryer says is the claimed value of the so called Santa Rosa data. Mr. Fryer claims he was required to turn over that data to the Alliance - even though the Seventh Circuit made clear that "no such requirement appears in the injunction [that satisfies F.R.C.P. 65(d)(1)] or in any judgment satisfying Fed.R.Civ.P. 58." Alliance for Water Efficiency, 808 F. 3d 1157; (2) $105,807.50 as recompense for the benefit the Alliance supposedly received - according to Mr. Fryer's estimate - by publishing its report first, even though the settlement agreement did not prescribe the order of publication; (3) $1,154.77 in claimed interest for the Alliance's supposed delay in paying Mr. Fryer the settlement amount for his past efforts on the project, and; (4) an injunction ordering the Alliance to destroy all digital and hard copies of its separate report - which Mr. Fryer agreed in the settlement agreement the Alliance could prepare and publish - and to cease any use of any report containing the Santa Rosa data.

The Alliance asserts that Mr. Fryer is attempting to "undo the terms of the settlement agreement," and that under the "guise of restitution after reversal on appeal, [he] is now seeking additional compensation because the Alliance did precisely what Fryer agreed to do in the settlementagreement, namely the publication by the Alliance of its own report and the right to use in that report the data that had been already been collected." The Alliance concludes that because "Fryer did not confer any benefit on [the Alliance] or have his property taken as a result of the judgment reversed on appeal he has no legal basis for restitution damages." [Dkt. #101 at 1].

As the Supreme Court stressed in US Airways, Inc. v. McCutchen, ___U.S.___, 133 S.Ct. 1537, 1546-47 (2013), quoting the Restatement (Third) of Restitution and Unjust Enrichment (2011): "'A valid contract defines the obligations of the parties as to matters within its scope, displacing to that extent any inquiry into unjust enrichment.'" In those circumstances, hewing to the parties' exchange yields "appropriate" as well as "equitable" relief. That observation applies here with singular force.

II.RESTITUTION

A.

The case law concerning claims for restitution following a reversal on appeal is perhaps less than clear despite the long period in which restitution has been an accepted remedy. See Restatement (Third) of Restitution and Unjust Enrichment (2011); Dan B. Dobbs, Remedies, 222 - et seq. (West Publishing Co. 1973)("restoration is a simple word but a difficult subject").² It is a long established principle "that a party against whom an erroneous judgment or decree has been carried into effect is entitled, in the event of a reversal, to be restored by his adversary to that which he has lost thereby." Arkadelphia Milling Co. v. St. Louis Sw. Ry. Co., 249 U.S. 134, 145 (1919); Reed v. Allen,286 U.S. 191, 203 (1932); Wyatt v. Syrian Arab Republic, 800 F.3d 331, 340 (7th Cir. 2015); Gould v. Hiram Walker & Sons, Inc., 266 F.2d 249, 253 (7th Cir. 1959).

It is generally conceded that a restitution claim is not aimed at compensating the plaintiff so much as forcing the defendant to give up benefits that it would be unjust for him to keep. Indeed, "[i]t is now universally recognized that the principle central to all restitution awards is the principle against unjust enrichment...." Dobbs, supra at 229. The American Law Institute notes in Restatement Third, Restitution and Unjust Enrichment § 1(b) (2011): "[u]njust enrichment" is a term of art. The substantive part of the law of restitution is concerned with identifying those forms of enrichment that the law treats as 'unjust' for the purposes of imposing liability .... Unjust[] enrichment is enrichment that lacks an adequate legal basis. Unjust enrichment is a necessary element or precondition of the larger claim of restitution. The restitutionary claim affirmatively seeks the return of the benefit for which it would be unconscionable for the defendant to retain." Roy L. Brooks, Postconflict Justice in the Aftermath of Modern Slavery, 46 Geo. Wash. Int'l L. Rev. 243 (2014). And as used in the Restatement, the terms restitution and unjust enrichment will often be treated as synonymous. Any more particular meaning that the words may carry should be clear from the context.³

But, the proper procedure in restitution cases is, perhaps, not so well established. In Reed,the Supreme Court held that restitution was a remedy and listed more than one possible avenue for a litigant seeking relief to follow:

Two remedies exist, the one by summary motion addressed to the appellate court, the other by a plenary suit. The books show that it has long been the practice to embody in the mandate of reversal a direction that the plaintiff in error 'be restored to all things which he hath lost by occasion of the said judgment. What this was might be ascertained through an order to show cause known as a scire facias quare restitutionem habere non debet. Inquiry was then made whether anything had been taken 'by colour of the judgment,' with an appropriate mandate for the return of anything discovered. On the other hand, the litigant who has prevailed on the appeal is not confined to a motion for summary relief. He may elect to maintain an action, or the court in its discretion may remit him to that remedy. One form of remedy or the other, however, is granted as of right. The remedy in its essence like the one for money had and received is for the recovery of benefits that in good conscience may no longer be retained. 'It is one of the equitable powers, inherent in every court of justice so long as it retains control of the subject-matter and of the parties, to correct that which has been wrongfully done by virtue of its process.'

286 U.S. at 203-04. (Emphasis supplied). See also Mathis v. DCR Mortg. Ill. Sub, I , LLC, 952 F.Supp.2d 828, 834 (W.D.Tex. 2013); United States v. Fleet National Bank, 288 B.R. 167 (D.Mass. 2002).

Mr. Fryer did not directly ask the Seventh Circuit for a restitution order. He asked it to instruct the district court to award him interest due to what he characterizes as the Alliance's late payment of $25,000 under the March 13^th settlement agreement for past work on the project. The Court of Appeals did not grant that request; it simply vacated the injunction and reversed without remand. In the absence of a remand from the Court of Appeals, there is a question whether a district court retains the authority to grant restitution in the same case. In Arkadelphia Milling, the Supreme Court conditioned the power of the district court upon "retain[ing] control of the subject-matter and of the parties . . . ." 249 U.S. at 146; see also Northwestern Fuel Co. v. Brock, 139 U.S. 216, 219 (1891)("the power is inherent in every court, while the subject of controversy is in its custody, andthe parties are before it, to undo what it had no authority to do originally, and in which it, therefore, acted erroneously, and to restore, so far as possible, the parties to their former position. Jurisdiction to correct what had been wrongfully done must remain with the court so long as the parties and the case are properly before it, either in the first instance or when remanded to it by an appellate tribunal.")(emphasis supplied); Wyatt, 800 F.3d at 331(noting that some case law suggested that the proper avenue for a claim for restitution was a new suit in the proper court).

Of course, once Mr. Fryer appealed, the district court was divested of jurisdiction at least for most purposes. See Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982)("The filing of a notice of appeal is an event of jurisdictional significance - it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal."); Wyatt, 800 F.3d at 341. Mr. Fryer does not address the question of whether, after the reversal without a remand, a lower court can grant restitution. But there is authority that a district court...