Town of St. John v. State Board Tax Commissioners, 49T10-9309-TA-70

• Decision Date: 16 June 2000
• Docket Number: 49T10-9309-TA-70
• Parties: TOWN OF ST. JOHN, et al., Petitioners, v. STATE BOARD OF TAX COMMISSIONERS, Respondent
• Court: Tax Court of Indiana

TOWN OF ST. JOHN, et al., Petitioners,
v.
STATE BOARD OF TAX COMMISSIONERS, Respondent

No. 49T10-9309-TA-70

Tax Court of Indiana

June 16, 2000

Representing Petitioners: Thomas M. Atherton KATZ & KORIN, P.C. Richard A. Waples Attorney at Law, Peter H. Donahoe HILL FULWIDER McDOWELL FUNK & MATTHEWS, P.C., James K. Gilday WOOD TUOHY GLEASON MERCER & HERRIN, Kenneth J. Falk Legal Director Indiana Civil Liberties Union

Representing Respondent: Karen M. Freeman-Wilson Attorney General of Indiana By: Jon Laramore Deputy Attorney General Indiana Government Center South, Fifth Floor

ORDER AND JUDGMENT ENTRY

Thomas G. Fisher, Judge

Petitioners present one issue for consideration: whether the Court should adopt and apply the private attorney general exception to the American rule regarding litigation expenses and order the State Board of Tax Commissioners (State Board) to pay Petitioners’ attorneys’ fees and costs in this matter.^[1]

FACTS AND PROCEDURAL HISTORY

Proceedings in this matter now approach the seven-year mark. For an overview of this case’s procedural history, see State Board of Tax Commissioners v. Town of St. John, 702 N.E.2d 1034, 1035-36 (Ind. 1998). In an order dated April 23, 1999, the Court asked the parties to submit briefs on the issue of payment of attorneys’ fees and costs. Both parties, represented by counsel, responded accordingly. Having received their submissions, the Court heard oral argument on the attorneys’ fees issue on February 28, 2000 and took the matter under advisement.^[2]

Additional facts will be supplied as needed.

ANALYSIS, OPINION & ORDER

The issue presented by Petitioners is one of first impression in this Court. The Court first will review the United States Supreme Court’s view of the private attorney general exception. Second, the Court will consider Indiana decisions recognizing the exception. Third, the Court will examine the opinions of jurisdictions that have adopted and applied the exception. Fourth, the Court will discuss the decisions of jurisdictions declining to adopt the exception. Finally, the Court will explain why the exception should be recognized and applied in the present case to award Petitioners reasonable attorneys’ fees and costs.

I. United States Supreme Court

The United States Supreme Court, in Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 269-71, 95 S.Ct. 1612, 1627-28, 44 L.Ed.2d 141 (1975), ruled that federal courts could not award attorneys’ fees using the private attorney general exception. Alyeska Pipeline involved a dispute over the anticipated issuance of rights-of-way and special land-use permits by the Secretary of the Interior for a proposed pipeline that would transport oil from the North Slope of Alaska. Following an Act of Congress, the merits of the litigation before the Court of Appeals for the District of Columbia were effectively terminated. However, the Court of Appeals considered and granted the request by respondent environmental groups for attorneys’ fees, applying the private attorney general exception to the American rule. See id., 421 U.S. at 245-46, 95 S.Ct. at 1616.

The Supreme Court explained that, under the American rule, the “prevailing litigant is ordinarily not entitled to collect a reasonable attorneys’ fee from the loser.” Id., 421 U.S. at 247, 95 S.Ct. at 1616. The Court noted that in English courts, pursuant to statutory authorization, counsel fees are regularly allowed to the prevailing party. See id., 421 U.S. at 247, 95 S.Ct. at 1616. The Court then proceeded to review the development of limitations imposed by it and Congress as regards attorneys’ fees awards. See id., 421 U.S. at 247-59, 95 S.Ct. at 1617-22. In particular, the Court focused upon an 1853 costs statute, as enacted and in its subsequent amended and recodified forms, which specified in detail the nature and amount of taxable items of cost in federal courts. See id. at 1618-23.The Supreme Court observed that Congress has made specific provisions for attorneys’ fees under certain federal statutes but has not “changed the general statutory rule that allowances for counsel fees are limited to the sums specified by the costs statute.” Id., 421 U.S. at 255, 95 S.Ct. at 1620. Furthermore, the Supreme Court pointed out that in recent cases it had “reaffirmed the general rule that, absent statute or enforceable contract, litigants pay their own attorneys’ fees.” Id., 421 U.S. at 257, 95 S.Ct. at 1621 (citations omitted). However, the Court did acknowledge certain exceptions, which are permissible as “assertions of inherent power in the courts to allow attorneys’ fees in particular situations, unless forbidden by Congress.”^[3] Id., 421 U.S. at 1259, 95 S.Ct. at 1622. The Supreme Court summarized as follows:

Congress has not repudiated the judicially fashioned exceptions to the general rule against allowing substantial attorneys’ fees; but neither has it retracted repealed, or modified the limitations on taxable fees contained in the 1853 statute and its successors. Nor has it extended any roving authority to the Judiciary to allow counsel fees as costs or otherwise whenever the courts might deem them warranted. What Congress has done, however, while fully recognizing and accepting the general rule, is to make specific and explicit provisions for the allowance of attorneys’ fees under selected statutes granting or protecting various federal rights.... Under this scheme of things, it is apparent that the circumstances under which attorneys are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine

Id., 421 U.S. at 260-62, 95 S.Ct. at 1623-24. See also id. nn.33-35 (listing various federal statutes allowing award of attorneys’ fees).

In reversing the Court of Appeals’ award of fees, the Supreme Court also focused on whether the federal courts provide a proper arena for determining what polices are more important than others. See id., 241 U.S. at 263-64, 95 S.Ct. at 1625. The Supreme Court opined that “it would be difficult, indeed, for the courts, without legislative guidance, to consider some statutes important and others unimportant and allow attorneys’ fees only in connection with the former.” Id. Moreover, the Supreme Court elaborated that a wide range of statutes arguably satisfies the criterion of public importance. See id., 421 U.S. at 264, 95 S.Ct. at 1625. If that is so, the Court questioned, “how could a court deny attorneys’ fees to private litigants in actions under 42 U.S.C. § 1983 seeking to vindicate constitutional rights?” Id. (emphasis in original). The Supreme Court finally concluded that:

[Federal courts] are not free to fashion drastic new rules with respect to the allowance of attorneys’ fees to the prevailing party in federal litigation or to pick and choose among plaintiffs and the statutes under which they sue and to award fees in some cases but not in others, depending upon the courts’ assessment of the importance of the public policies involved in particular cases

Id., 421 U.S. at 269, 95 S.Ct. at 1627.

In discussing the private attorney general exception, state courts often refer to and rely upon the Supreme Court’s Alyeska Pipeline opinion. Therefore, it is important to keep in mind the basis for the Supreme Court’s ruling. In short, the Supreme Court’s rejection of the private attorney general exception can be explained as follows: (1) Congress has reserved the right to allow attorneys’ fees only under certain circumstances; (2) specific exceptions to the American rule are expressly identified in statute; and (3) without legislative guidance, federal courts may not selectively create new exceptions to the American rule based upon the alleged importance of the public policies at issue. See id.

II. Indiana Cases

Indiana courts generally apply the American rule when deciding whether to award attorneys’ fees. The Indiana Supreme Court has observed that the “right to recover attorney’s fees from one’s opponent does not exist in the absence of a statute or some agreement, though a court of equity may, under some circumstances, allow attorneys’ fees to be paid out of a fund brought under its control.” See Gavin v. Miller, 222 Ind. 459, 54 N.E.2d 277, 280 (1944) (citing State ex rel. Reilly v. United States Fidelity & Guar. Co., 218 Ind. 89, 31 N.E.2d 58, 60 (1941)). See also Trotcky v. Van Sickle, 227 Ind. 441, 85 N.E.2d 638, 640 (1949) (stating that American rule applies equally in courts of law and courts of equity) (citations omitted); Kikkert v. Krumm, 474 N.E.2d 503, 504-05 (Ind. 1985) (noting American rule). The Indiana Court of Appeals on numerous occasions has acknowledged Indiana’s adherence to the American rule. See, e.g., Courter v. Fugitt, 714 N.E.2d 1129, 1132 (Ind.Ct.App. 1999); Barrington Mgmt. Co. v. Paul E. Draper Family Ltd. Partnership, 695 N.E.2d 135, 142 (Ind.Ct.App. 1998) (citation omitted); and Shumate v. Lycan, 675 N.E.2d 749, 754 (Ind.Ct.App. 1997), trans. denied.

This Court must decide whether to recognize one particular exception to the American rule—the private attorney general exception. The private attorney general exception has been recognized by the Indiana Court of Appeals, which first noted the exception in Saint Joseph’s College v. Morrison, 158 Ind.App. 272, 302 N.E.2d 865, 870 (1973). In Saint Joseph’s College, the Court of Appeals first concluded that a sub-contractor did not have a valid mechanic’s lien for certain work performed under an oral contract, so that the sub-contractor could not recover attorneys’ fees pursuant to the Mechanics’ Lien Statute. See id. at 869 (citing Ind. Code Ann. § 32-8-3-14 (Burns Repl. 1965)). The Court then stated that certain limited exceptions to the American rule exists and quoted the following summarization of exceptions from La Raza Unida v. Volpe, 57 F.R.D. 94 (N.D. Cal. 1972) (citing Sims v. Amos...