Catawba Indian Tribe, Sc v. City of Rock Hill, Sc

• Citation: 501 F.3d 368
• Decision Date: 20 September 2007
• Docket Number: No. 05-2050.,05-2050.
• Parties: CATAWBA INDIAN TRIBE OF SOUTH CAROLINA, Plaintiff-Appellant, v. CITY OF ROCK HILL, SOUTH CAROLINA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

501 F.3d 368

CATAWBA INDIAN TRIBE OF SOUTH CAROLINA, Plaintiff-Appellant, v. CITY OF ROCK HILL, SOUTH CAROLINA, Defendant-Appellee.

No. 05-2050.

United States Court of Appeals, Fourth Circuit.

Argued: October 25, 2006.

Decided: September 20, 2007.

ARGUED: Jerry Jay Bender, Baker, Ravenel & Bender, L.L.P., Columbia, South Carolina, for Appellant. W. Mark White, Spencer & Spencer, P.A., Rock Hill, South Carolina, for Appellee. ON BRIEF: W. Chaplin Spencer, Jr., Spencer & Spencer, P.A., Rock Hill, South Carolina, for Appellee.

Before WILLIAMS, Chief Judge, TRAXLER, Circuit Judge, and WIDENER, Senior Circuit Judge.¹

Affirmed by published per curiam opinion.

OPINION

PER CURIAM:

Appellant Catawba Indian Tribe (the Tribe) filed suit against the City of Rock Hill (the City), alleging that a recently enacted City Ordinance impaired contracts previously entered into by the parties for the construction of water infrastructure to serve the Tribe's reservation. Because the Ordinance did not impair the contracts entered into between the Tribe and the City, we conclude that the Contracts Clause of the United States Constitution was not violated.

I.

In 1999, the parties entered into a "WATER AND/OR SEWER SERVICE AGREEMENT AND RESTRICTIVE COVENANT." (J.A. at 114.)² The agreement was essentially a promise from the City to provide water services in the future so long as the Tribe entered into a restrictive covenant for future annexation of the Reservation. (J.A. at 115 ("Owner acknowledges that a purpose of this Agreement is to ensure . . . Owner's full and complete cooperation with any effort to annex the subject property.").)

Approximately three years later, during the summer and fall of 2002, the Tribe entered into four separate Extension Agreements with the City for the construction of water mains and sewer facilities to serve the Tribe's reservation, which is located outside the City's municipal limits. Under the contracts, the Tribe agreed to pay a total of $260,464.00 for the construction of sewer mains and accessories, $125,934.00 for the construction of water mains and accessories, and $3,630.00 for the installation of sixty-six water meters. Clause 4 of the contracts concerned the amount to be paid for water meter installations, with each water meter costing $55.00. Clause 4 also stated that "[t]he water meters will be installed by the City, on request by the Developer, when water service is needed." (J.A. at 26.) The Tribe quickly made all payments and fully performed under the contracts, although it did not immediately request service.

On March 17, 2003, the City adopted an Ordinance imposing water and wastewater impact fees "for all water and/or wastewater service requests," including requests for "new service, water and/or waste-water extension requests and agreements, additional meters, or upgrades of existing services that will create any new or additional demand on the City's water and/or wastewater systems." (J.A. at 35.) Although it adopted the Ordinance on March 17, the City gave all interested parties until June 30, 2003 to request service without imposition of impact fees.

The Tribe did not request service and installation of the meters until August 2003. At that time, the City imposed an impact fee of $100,478.00 in connection with the water meter and service installation. The Tribe paid the sum under protest and initiated this action, complaining that the City's imposition of additional fees violated the Contracts Clause of the United States Constitution.

Both the Tribe and the City agreed that the case was ripe for summary judgment in the district court and filed cross motions for summary judgment. On August 22, 2005, the district court granted the City's motion and denied the Tribe's motion. Although the district court assumed, arguendo, that the contracts were impaired, it found that there was no "substantial" impairment. Alternatively, even if there was substantial impairment, the district court found that any such impairment was reasonable and necessary to serve an important public purpose.

The Tribe timely appealed. We have jurisdiction pursuant to 28 U.S.C.A. § 1291 (West 2006).

II.

A.

We review de novo the district court's grant of summary judgment in favor of the City, applying the same standard as did the district court. See Laber v. Harvey, 438 F.3d 404, 415 (4th Cir.2006) (en banc). Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). We must construe the facts in the light most favorable to the Tribe, and we may not make credibility determinations or weigh the evidence. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Edell & Assocs., P.C. v. Law Offices of Peter G. Angelos, 264 F.3d 424, 435 (4th Cir.2001).

B.

The Contract Clause states that "[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts." U.S. Const. art. I, § 10, cl. 1. Although the Clause is phrased in absolute terms, it is not interpreted "absolutely to prohibit the impairment of either government or private contracts." Balt. Teachers Union v. Mayor and City Council of Balt., 6 F.3d 1012, 1014 (4th Cir.1993); see Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398, 428, 54 S.Ct. 231, 78 L.Ed. 413 (1934) (holding that "the prohibition is not an absolute one and is not to be read with literal exactness like a mathematical formula.").

The Supreme Court has formulated a three-part analysis to determine if the Contract Clause has been violated. First, a court must ask whether there has been an impairment of a contract. See U.S. Trust Co. v. New Jersey, 431 U.S. 1, 17, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977) (holding that "as a preliminary matter, [a] claim requires a determination that the [state action] has the effect of impairing a contractual obligation"). Second, a court must ask "whether the state law has, in fact, operated as a substantial impairment of a contractual relationship." Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978). Third, if the court finds a substantial impairment, it must ask "whether that impairment is nonetheless permissible as a legitimate exercise of the state's sovereign powers." Balt. Teachers, 6 F.3d at 1015. In short, then, a claimant must show (1) contractual impairment, (2) that is substantial, and (3) not a legitimate exercise of state power. See City of Charleston v. Pub. Serv. Comm's of W. Va., 57 F.3d 385, 391 (4th Cir.1995) ("Only if there is a contract, which has been substantially impaired, and there is no legitimate public purpose justifying the impairment, is there a violation of the Contract Clause.").

The Tribe contends that the imposition of an impact fee by the City constituted an unconstitutional impairment of the obligation of the contract that was substantial and not a legitimate exercise of the City's power.³ The City counters that the imposition of impact fees did not impair the contracts, and even if it did, the imposition of water service fees and rates is a legitimate exercise of the City's police power. The City's argument is persuasive.

There is no question that there existed contracts between the City and the Tribe, and that the Tribe fully performed its obligations under the contracts. The central issue in this case, however, is whether the contracts provided merely for the installation of water meters or for the installation of meters and the turning on of water services. Accordingly, the City argues that the impact fees imposed by the Ordinance did "not relate to any term or condition of the [contracts]." (Appellee's Br. at 12.) Under the City's reasoning, it fully performed the terms of the contracts and did nothing to impair that performance.⁴

To answer whether the contracts were impaired, we must interpret the meaning of the contracts and the subsequent Ordinance, applying South Carolina law. South Carolina follows an objective contract interpretation rule, meaning that if the language of a contract "is perfectly plain and capable of legal construction, such language determines the force and effect of the instrument." Blakeley v. Rabon, 266 S.C. 68, 221 S.E.2d 767, 769 (1976). "Words cannot be read into a contract which impart intent wholly unexpressed when the contract was executed." Id.

The contracts' language leads to the conclusion that their purpose was to establish (1) the necessary infrastructure to be constructed to make the connection; (2) the sum to be paid for the construction; (3) the dedication of the infrastructure by the Tribe to the City; (4) the sum to be paid for the installation of the meters; and (5) the allocation of risk and warranty for the work. Thus, while the contracts specified the sum to be paid for installation of the meters, they further stated that "[t]he water meters will be installed by the City, on request by the Developer, when water service is needed." (J.A. at 26.) For the Tribe to prove an impairment, then, it must show that this language also bound the City with respect to impact fees for initiating water service, as opposed to solely infrastructure, or capacity. The Tribe fails to make this showing.

In Martin v. Carolina Water Service, Inc., 280 S.C. 235, 312 S.E.2d 556 (1984), the state court addressed the question of whether a water contract, which prohibited the imposition of any "connection" or "tap" fees, was violated upon the imposition of an "expansion and modification fee," which consisted of "a charge related to the costs of increasing the size and volume of a water or sewer system and of making changes in either such system." Id. at 559. The...