Valley Disposal Inc. v. Central Vermont Solid Waste Management Dist.
| Decision Date | 14 May 1997 |
| Docket Number | No. 967,D,967 |
| Citation | 113 F.3d 357 |
| Parties | VALLEY DISPOSAL INC., Palisades Landfill and Recycling Corporation and Robert C. Dowdell, Jr., Plaintiffs-Appellants, v. CENTRAL VERMONT SOLID WASTE MANAGEMENT DISTRICT, Defendant-Appellee. ocket 96-7726. |
| Court | U.S. Court of Appeals — Second Circuit |
John L. Franco, Jr., Burlington, VT, for Plaintiffs-Appellants.
Glenn Cornelius Howland, Montpelier, VT (McKee, Giuliani & Cleveland, Montpelier, Vermont, on the brief), for Defendant-Appellee.
Before: VAN GRAAFEILAND, MESKILL, and KEARSE, Circuit Judges.
This case returns to us yet again, following appeals in which plaintiffs Valley Disposal Inc. ("Valley Disposal"), et al., first succeeded in obtaining a partial reversal of the dismissal of their complaint and a remand for further proceedings, see Valley Disposal, Inc. v. Central Vermont Solid Waste Management District, 31 F.3d 89 (2d Cir.1994) ("Valley Disposal I "), and then successfully defended an award of $36,971.90 in attorneys' fees pursuant to 42 U.S.C. § 1988 (1994) in connection with the action and obtained a remand with respect to the denial of fees in connection with their fee application, see Valley Disposal, Inc. v. Central Vermont Solid Waste Management District, 71 F.3d 1053 (2d Cir.1995) ("Valley Disposal II "). Having obtained, on the second remand, an increase in the attorneys' fee award to $42,974.71, plaintiffs now appeal from so much of a judgment of the United States District Court for the District of Vermont, Franklin S. Billings, Jr., Judge, as allows defendant Central Vermont Solid Waste Management District (the "District") to use part of a $200,000 state-court judgment against plaintiffs as a setoff against the $42,974.71 fee award. Plaintiffs contend that the district court erred in allowing the setoff (1) because as to the fee recovery in this suit their attorneys have a lien that has priority over any counterclaim or setoff, or (2) because the District waived its claim for a setoff by failing to raise it in timely fashion. Although there are questions as to the first contention, we agree with the second, and we accordingly reverse.
The history of this litigation is set out more fully in Valley Disposal I and Valley Disposal II, familiarity with which is assumed. Briefly, plaintiff Robert C. Dowdell, Jr., is the president and a principal owner of Valley Disposal, a solid waste hauler, and of plaintiff Palisades Landfill and Recycling Corp. ("Palisades Landfill"), a landfill operator. The District is a municipal entity. Beginning In the meantime, in 1992, the District enacted a flow control ordinance and regulations prohibiting private waste haulers from hauling waste outside of the District and requiring them to dump their waste at a landfill owned by C.V. Landfill, Inc. ("C.V."). In 1993, plaintiffs brought the present action against the District and C.V. pursuant to 42 U.S.C. § 1983 (1994) alleging, inter alia, that the District's flow control ordinance violated the dormant Commerce Clause of the Constitution. The district court dismissed the complaint on various procedural grounds; in August 1994, this Court largely reversed and remanded for further proceedings. See Valley Disposal I, 31 F.3d at 105.
in 1990, the District and another Dowdell corporation, Palisades Recycling Corp. ("Palisades Recycling"), became embroiled in litigation in Vermont state court with respect to municipal taxes and surcharges. In August 1993, the state court awarded the District a total of $487,823.13, including interest, on its counterclaims. Palisades Recycling appealed.
While the various appeals were pending, the United States Supreme Court decided C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994), striking down a flow control ordinance as violative of the dormant Commerce Clause, and the parties here entered into a contingent agreement to settle both the state-court litigation and the present case. Under the settlement agreement, the two actions were to be dismissed with prejudice; Dowdell was to pay "the sum of $200,000 in full settlement of all claims of [the] District against Dowdell"; and the District was to cease its efforts to enforce the flow control ordinance against plaintiffs.
Following the remand in Valley Disposal I, the parties' contingent settlement was somewhat revised and was finalized. On September 30, 1994, plaintiffs in the present action filed their notice of appearance in the state-court action, along with the parties' stipulation requesting that judgment be entered therein in favor of the District against Dowdell and his three corporations in the amount of $200,000. A state-court judgment was entered in accordance with the stipulation on October 24. On October 14, 1994, the present action was dismissed with prejudice, on consent of the parties. On October 21, plaintiffs filed their application, dated October 19, 1994, in the present action for an award of attorneys' fees and costs pursuant to 42 U.S.C. § 1988.
On November 2, the District filed its opposition to the fee application,
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.
Valley Disposal II, 71 F.3d at 1055. The District also argued that plaintiffs were not prevailing parties, and that the fee request was unreasonable because they had enjoyed only limited success. The District's opposition made no suggestion that its $200,000 state-court judgment, entered a week earlier, should be set off against any award of attorneys' fees. In an order dated December 20, 1994, the district court rejected the District's arguments and awarded plaintiffs $36,971.90 in fees, though it denied, without explanation, any award for the cost of making the fee application.
The District appealed the award of attorneys' fees, pursuing the arguments it had made in the district court; plaintiffs cross-appealed the denial of fees for the expense of making the fee application. In Valley Disposal II, we ruled in favor of plaintiffs on all points, upholding the fees that had been awarded and remanding for an explanation of the denial of an award for the cost of making the application. See 71 F.3d at 1060. Following that remand, the district court granted, without opposition from the District, plaintiff's request for additional fees of $6,002.81 for the expense of preparing the § 1988 fee petition, bringing the total attorneys' fee award to $42,974.71. Judgment was entered accordingly.
Thereafter, the District refused to comply with the judgment ordering it to pay the attorneys' fee award. Plaintiffs moved for an order to show cause why the District should not be held in contempt. In opposition to plaintiffs' contempt motion, the District submitted a "motion for an order allowing equitable setoff of its judgment against plaintiffs' § 1988 award of attorneys [sic ] fees and costs" ("District's Postjudgment Motion for Setoff"), arguing for the first time that it should not have to pay the § 1988 award because it was entitled to set off part of its $200,000 state-court consent judgment, which had not yet been paid, against the judgment for attorneys' fees.
After a hearing, the district court initially ruled that the District had waived its right to assert a setoff. Having noted that "it wasn't until the Plaintiffs brought in effect a motion for sanctions and contempt in the attempt to execute on the judgment that [the District] first raised this issue," (Hearing Transcript, March 11, 1996, ("Tr."), 5), the court stated its
opinion that there could have been a setoff at one time, but in view of the fact that it was never raised ... it was waived in connection with this fee motion[;] it could have been raised innumerous times before ...
(Tr. 19). However, on reconsideration, the court ruled that the District's setoff claim had not been waived:
The motion for attorneys' fees under § 1988 was made pursuant to Fed.R.Civ.P. 54(d)(2). At that time, there was no requirement under the Federal Rules of Civil Procedure that the defendant assert the state court judgment as a setoff either mandatory or permissive.
....
Assuming that, pursuant to a 54(d)[ (2) ] motion, Fed.R.Civ.P. 13 is applicable, defendants' entitlement to a setoff arose only after October 19 [sic ], 1994, when plaintiffs filed the § 1988 fee petition. [S]ince the stipulated judgment for defendant entered in the Washington Superior Court was not made until October 24, 1994, there is no waiver, since at the time of plaintiffs' motion, defendants had no entitlement to setoff whether it be mandatory or permissive.
Opinion and Order dated May 16, 1996, at 3-4. Having decided that there had been no waiver, the court ruled that the District was entitled to have its state-court judgment set off against the fee award because such an award (a) is made to the party rather than to the attorneys, and (b) involves merely the manner in which the attorneys may be paid, not their entitlement to receive payment. See id. at 4.
Judgment was entered "order[ing] that the[ awarded attorneys'] fees shall be set off against Defendants' [sic ] stipulated judgment in the amount of Two Hundred Thousand dollars ($200,000) entered in Washington Superior Court, State of Vermont." This appeal followed.
On appeal, plaintiffs contend that the judgment allowing setoff was error because (1) the nature of an award of attorneys' fees under § 1988 gives attorneys an equitable priority that...
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