Valley Disposal, Inc. v. Central Vermont Solid Waste Management Dist.

• Decision Date: 08 December 1995
• Docket Number: Nos. 85,D,650,s. 85
• Citation: 71 F.3d 1053
• Parties: VALLEY DISPOSAL, INC., Palisades Landfill and Recycling Corporation and Robert C. Dowdell, Jr., Plaintiffs-Appellees-Cross-Appellants, v. CENTRAL VERMONT SOLID WASTE MANAGEMENT DISTRICT, Defendant-Appellant-Cross-Appellee, v. C.V. LANDFILL INC., Defendant. ockets 95-7074, 95-7078.
• Court: U.S. Court of Appeals — Second Circuit

Page 1053

71 F.3d 1053

33 Fed.R.Serv.3d 808

VALLEY DISPOSAL, INC., Palisades Landfill and Recycling

Corporation and Robert C. Dowdell, Jr., Plaintiffs-Appellees-Cross-Appellants, v. CENTRAL VERMONT SOLID WASTE MANAGEMENT DISTRICT, Defendant-Appellant-Cross-Appellee, v. C.V. LANDFILL INC., Defendant.

Nos. 85, 650, Dockets 95-7074, 95-7078.

United States Court of Appeals Second Circuit.

Submitted Sept. 29, 1995.

Decided Dec. 8, 1995.

Glenn C. Howland, McKee, Giuliani & Cleveland, P.C., Montpelier, Vermont, for Defendant-Appellant-Cross-Appellee.

John L. Franco, Jr., Burlington, Vermont, for Plaintiffs-Appellees-Cross-Appellants.

Before: KEARSE, WALKER, and CALABRESI, Circuit Judges.

CALABRESI, Circuit Judge:

This case involves various questions concerning the award of fees pursuant to 42 U.S.C. Sec. 1988 after the dismissal of a suit as a result of an agreement among the parties. We welcome the opportunity to clarify several aspects of this Circuit's law. And we hold that: (1) our decision in Santiago v. Victim Services Agency, 753 F.2d 219 (2d Cir.1985), was overruled by the Supreme Court's decision in Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990); (2) a district judge has discretion to reject a party's waiver of attorneys' fees only by rejecting the global settlement in which the waiver appears; (3) negotiated fee waivers need not appear expressly within the settlement agreement but, in the absence of an express waiver, there must be some indication that the parties intended to effect a global settlement that encompassed costs as well as the underlying claims; and (4) because a party should normally be awarded the costs of preparing a successful Sec. 1988 application, a district court must set forth reasons whenever it refuses to grant those costs. Accordingly, we affirm in part, and vacate and remand in part.

I. BACKGROUND

In 1992, the Central Vermont Solid Waste Management District (the "District") enacted a "flow control ordinance" and regulations requiring private garbage haulers within its jurisdiction to dump all garbage at a designated private landfill (C.V. Landfill). Valley Disposal (a garbage hauler forced to do business with the designated landfill), Palisades Landfill (a rival landfill that lost business due to the ordinance), and Robert C. Dowdell, Jr. (the principal owner of both Valley Disposal and Palisades Landfill) brought suit against the District in the United States District Court for the District of Vermont (Franklin S. Billings, Jr., Senior Judge ), alleging violations of the dormant Commerce Clause and the antitrust laws. The complaint sought damages, declaratory and injunctive relief, and attorneys' fees under 42 U.S.C. Sec. 1988.

The action was dismissed by Judge Billings, and an appeal was taken. In March 1994, while awaiting the decision of this Court, the parties entered into a contingent settlement agreement. In May 1994, the Supreme Court decided C & A Carbone, Inc. v. Town of Clarkstown, --- U.S. ----, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994), which struck down a flow control ordinance as violative of the dormant Commerce Clause. In August 1994, after we remanded (on other grounds), 31 F.3d 89 (2d Cir.1994), the parties consummated their settlement agreement and the plaintiffs moved, with the consent of the District, to dismiss the complaint. On October 14, 1994, Judge Billings dismissed the action with prejudice pursuant to Fed.R.Civ.P. 41(a)(2).

One week later, the plaintiffs moved for attorneys' fees and costs pursuant to 42 U.S.C. Sec. 1988. The District objected, arguing (1) that the matter was res judicata because the plaintiffs had specifically requested attorneys' fees in their complaint, which had been dismissed with prejudice; (2) that the plaintiffs had waived their right to seek attorneys' fees by entering into the settlement agreement and seeking dismissal of the complaint; and (3) that the district court lacked subject matter jurisdiction over the motion for fees, absent a timely appeal or motion to amend the dismissal order. On December 20, 1994, the district court granted the plaintiffs' motion for attorneys' fees in the main action, but denied plaintiffs the costs of bringing the Sec. 1988 motion. The district court's order was published at 872 F.Supp. 119 (D.Vt.1994). ¹

The District appeals from Judge Billings' grant of attorneys' fees; the plaintiffs cross-appeal from his denial of costs for the Sec. 1988 motion.

II. DISCUSSION

A. Subject Matter Jurisdiction

The district court granted the parties' motions to dismiss the complaint pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure, which provides as follows:

Except as provided in paragraph (1) ² ..., an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper....

The district court subsequently granted the plaintiffs' motion for attorneys' fees, which they filed one week after dismissal.

The District argues that after dismissing the complaint, the district court lacked subject matter jurisdiction to consider any further motions--including those for attorneys' fees under 42 U.S.C. Sec. 1988. The District relies primarily on Santiago v. Victim Services Agency, 753 F.2d 219 (2d Cir.1985), a case that is almost directly on point. In Santiago, this Court overturned a district court's award of attorneys' fees under Sec. 1988 after the plaintiff had voluntarily dismissed his action pursuant to Rule 41(a)(1)(i). The Court wrote that once the plaintiff files a notice of dismissal, "the court loses all jurisdiction over the action. A subsequent order granting attorney's fees is a nullity." Santiago, 753 F.2d at 221 (citation omitted).

The District's reliance on Santiago is misplaced, however, because that case has effectively been overruled by the Supreme Court's decision in Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). In Cooter & Gell, the plaintiff filed a notice of voluntary dismissal of his complaint pursuant to Rule 41(a)(1)(i) of the Federal Rules of Civil Procedure. Subsequently, the district court awarded attorneys' fees to the defendant pursuant to Rule 11. The Supreme Court eventually affirmed explicitly rejecting the Second Circuit's position--unique among the circuits--that "a voluntary dismissal acts as a jurisdictional bar to further Rule 11 proceedings." 496 U.S. at 394-95, 110 S.Ct. at 2455 (citing Johnson Chem. Co. v. Home Care Prods., Inc., 823 F.2d 28, 31 (2d Cir.1987)). The Court held instead that

a federal court may consider collateral issues after an action is no longer pending. For example, district courts may award costs after an action is dismissed for want of jurisdiction. See 28 U.S.C. Sec. 1919. This Court has indicated that motions for costs or attorney's fees are "independent proceeding[s] supplemental to the original proceeding and not a request for a modification of the original decree." Sprague v. Ticonic National Bank, 307 U.S. 161, 170 [59 S.Ct. 777, 781, 83 L.Ed. 1184] (1939). Thus, even "years after the entry of a judgment on the merits" a federal court could consider an award of counsel fees. White v. New Hampshire Dept. of Employment Security, 455 U.S. 445, 451, n. 13 [102 S.Ct. 1162, 1166 n. 13, 71 L.Ed.2d 325] (1982).

Id. at 395-96, 110 S.Ct. at 2455-56. The Court went on to say that "[s]uch a determination may be made after the principal suit has been terminated" because the imposition of a Rule 11 sanction requires "determination of a collateral issue." Id. at 396, 110 S.Ct. at 2456.

The District argues that this Court is still bound by Santiago, despite the Supreme Court's decision in Cooter & Gell. First, it points out that because Cooter & Gell involved only Rule 11 sanctions, its discussion of fee-shifting under other statutes was merely dicta. And Supreme Court dicta does not overrule Second Circuit precedent. Second, the District contends that, in Chemiakin v. Yefimov, 932 F.2d 124 (2d Cir.1991), this Court stated that Santiago might still be good law.

In Chemiakin, we found that Cooter & Gell overruled the Second Circuit's prior decision in Johnson Chemical Co. v. Home Care Products, Inc., 823 F.2d 28, 31 (2d Cir.1987), which prohibited a district court from entertaining a postdismissal motion for Rule 11 sanctions. But in doing so, we said:

We leave for another day any possible revisitation of the Santiago question, narrowly construed, of a district court's power to assess statutory attorney's fees in a case that has been voluntarily dismissed. See State of Conn. v. Insurance Co. of America, 121 F.R.D. 159, 161 (D.Conn.1988) ("[While] Johnson Chem. Co. ... has not received universal acceptance ... most courts have generally agreed with the Santiago reasoning regarding Rule 41(a)(1)(i) and thus would not, for instance, award attorney fees pursuant to 42 U.S.C. Sec. 1988 after a case had been voluntarily dismissed....").

Chemiakin, 932 F.2d at 129.

Today we answer the question left open by Chemiakin, and conclude that Santiago is no longer good law. ³ Santiago's rationale--that a district court's jurisdiction evaporates upon dismissal of the complaint--was completely undermined by the Supreme Court's statement in Cooter & Gell that motions for attorney's fees raise collateral issues that "may be made after the principal suit has been terminated." 496 U.S. at 396, 110 S.Ct. at 2455. Although, strictly speaking, this statement may be dicta, it was nonetheless intimately linked to the Court's central holding: that "a federal court may consider collateral issues after an action is no longer pending," id. at 395, 110 S.Ct. at 2455, and hence it profoundly undermines Santiago. See also Baumgartner v. Harrisburg Housing Auth., 21 F.3d 541, 550 (3d Cir.1994) (asserting that "Santiago has been undercut" by Cooter & Gell ).

In any event, Cooter & Gell is only one nail...