Van Emmerik v. Montana Dakota Utilities Co.

• Decision Date: 13 April 1983
• Docket Number: Nos. 13614,13615,s. 13614
• Citation: 332 N.W.2d 279
• Parties: Larry VAN EMMERIK, for Himself, and All Others Similarly Situated, Plaintiff and Appellant, v. MONTANA DAKOTA UTILITIES CO., a Corporation, et al., Defendants and Appellees, and Larry VAN EMMERIK, for Himself and All Others Similarly Situated, Plaintiff and Appellant, v. BLACK HILLS POWER AND LIGHT COMPANY, et al., Defendants and Appellees.
• Court: South Dakota Supreme Court

Page 279

332 N.W.2d 279

Larry VAN EMMERIK, for Himself, and All Others Similarly

Situated, Plaintiff and Appellant, v. MONTANA DAKOTA UTILITIES CO., a Corporation, et al., Defendants and Appellees, and Larry VAN EMMERIK, for Himself and All Others Similarly

Situated, Plaintiff and Appellant, v. BLACK HILLS POWER AND LIGHT COMPANY, et al., Defendants and Appellees.

Nos. 13614, 13615.

Supreme Court of South Dakota.

Argued Sept. 10, 1982.

Decided April 13, 1983.

Brent A. Wilbur of May, Adam, Gerdes & Thompson, Pierre, for defendants and appellees Investor Owned Utilities.

Robert B. Frieberg of Frieberg, Frieberg & Peterson, Beresford, for defendants and appellees Municipal Corporations.

Alan F. Glover, Brookings, for defendants and appellees Rural Elec. Cooperatives; Vince J. Protsch, Howard, Leo P. Flynn, Milbank, on brief.

George A. Bangs of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, Gale A. Fisher, P.C., Sioux Falls, for plaintiff and appellant.

WOLLMAN, Justice.

This is a consolidated appeal from orders denying attorneys' fees and summary judgments dismissing appellant's actions upon the merits with prejudice. We affirm.

In March of 1979, appellant commenced a class action (Van Emmerik I ) seeking a refund of sales taxes from the State and retailers of utility services for the collection of taxes in excess of the rate imposed by SDCL 10-45-6. In June of 1979, several investor-owned utilities brought administrative proceedings seeking a refund of excess sales taxes paid. In February of 1980, appellant commenced a separate action (Van Emmerik II ) against all investor-owned utility corporations, all municipal corporations, and all rural electric cooperatives, seeking a declaration that the legal rate of the tax was three percent and asking for a refund or credit for sums illegally collected.

The circuit court, determining that the State had not collected a sales tax in excess of that imposed by statute, rendered judgment denying the relief sought in the investor-owned utilities case and subsequently entered an order dismissing appellant's complaint in Van Emmerik I. Both appellant and the investor-owned utilities appealed to this court. In Matter of Sales Tax Refund Applications, 298 N.W.2d 799 (S.D.1980), we held that the sales tax rate imposed by SDCL 10-45-6 was three percent and that since 1969 the State had collected a sales tax in excess of the amount imposed by statute. We accordingly reversed and remanded for a determination of a refund or credit in favor of the utilities. In Van Emmerik v. State, 298 N.W.2d 804 (S.D.1980), we concluded that the doctrine of sovereign immunity prevented appellant, either as a representative of his class or in his individual capacity, from having standing to seek a refund from the State; we also held that appellant was entitled to proceed against the utilities for derivative relief. In January of 1981, appellant filed a petition for interim attorney fees in both Van Emmerik I and Van Emmerik II. The circuit court allowed appellant to file an amended complaint in Van Emmerik II. This amended complaint alleged that the utilities, acting under color of state law, had deprived appellant of property without due process of law in violation of 42 U.S.C. Sec. 1983 and that appellant was entitled to attorney fees under the provisions of 42 U.S.C. Sec. 1988.

Senate Bill 40 was enacted by the 1981 Legislature and signed by the Governor on January 30, 1981, as an emergency act in effect as of that date. Senate Bill 40 raised the tax rate on utility services to four percent retroactively from May 1, 1980, to July 1, 1969, and to five percent retroactively from the effective date of the act to May 1, 1980. Senate Bill 40 specifically validated and ratified collection of taxes at these rates prior to the adoption of the bill. We granted an alternative writ of prohibition ordering the State to desist and refrain from acting pursuant to the bill until further order of this court. In April of 1981, we upheld the constitutionality of Senate Bill 40. State ex rel. Van Emmerik v. Janklow, 304 N.W.2d 700 (1981) (appeal dismissed, 454 U.S. 1131, 102 S.Ct. 986, 71 L.Ed.2d 285 (1982)).

The circuit court subsequently entered summary judgment against appellant in his action to obtain a sales tax refund from the utility companies and on his motion for interim attorneys' fees. The only issue presented in this appeal is whether appellant's efforts in Van Emmerik I and Van Emmerik II entitle him to an award of attorneys' fees.

The general rule in the United States is that absent statute or enforceable contract, litigants pay their own attorneys' fees. Alyeska Pipeline Service Co. v. Wilderness Soc., 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). We have consistently followed this rule. See, e.g., Noll v. Brende, 318 N.W.2d 319 (S.D.1982); Matter of Estate of Weickum, 317 N.W.2d 142 (S.D.1982); Boland v. City of Rapid City, 315 N.W.2d 496 (S.D.1982); Scherf v. Myers, 258 N.W.2d 831 (S.D.1977); Shaffer v. Honeywell, Inc., 249 N.W.2d 251 (S.D.1976); Tracy v. T & B Construction Co., 85 S.D. 337, 182 N.W.2d 320 (1970); DuPratt v. Black Hills Land and Abstract Co., 81 S.D. 637, 140 N.W.2d 386 (1966); Dodds v. Bickle, 77 S.D. 54, 85 N.W.2d 284 (1957); Carlson v. City of Faith, 75 S.D. 432, 67 N.W.2d 149 (1954); Calmenson Clothing Co. v. Kruger, 66 S.D. 224, 281 N.W. 203 (1938). This principle is incorporated into our statutory law. See SDCL 15-17-6; SDCL 15-17-7. ¹ Appellant contends, however, that his case falls within one of the exceptions to this principle and also falls within the Federal Civil Rights Act.

One exception to the rule against awarding attorneys' fees is the common fund doctrine. See, e.g., Boeing Co. v. Van Gemert, 444 U.S. 472, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980); Sprague v. Ticonic National Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939); Trustees v. Greenough, 105 U.S. 527, 26 L.Ed. 1157 (1882). This exception allows an award of attorneys' fees from a common fund when a plaintiff, usually on behalf of a class, has successfully maintained an action that benefits a group of others in the manner that it benefits himself. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970). This exception prevents unjust enrichment by requiring those who obtained benefit from the plaintiff's efforts to contribute equally to the litigation expenses. Mills, supra.

Application of the common fund exception is appropriate when the classes of persons benefited by the lawsuit are small in number easily identifiable and the benefits can be traced with some accuracy. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. at 265, 95 S.Ct. at 1625, 44 L.Ed.2d at 157, n. 39. "[T]he criteria are satisfied when each member of a certified class has an undisputed and mathematically ascertainable claim to part of a lump-sum judgment recovered on his behalf." Boeing Co. v. Van Gemert, supra 444 U.S. at 479, 100 S.Ct. at 749, 62 L.Ed.2d at 682.

Appellant contends that his commencement of Van Emmerik I was the catalyst for the utilities to commence their refund case and that his efforts in Van Emmerik I and Van Emmerik II created two funds. ² "Fund I" represents approximately fifteen million dollars, the amount that appellant claims was to be refunded or credited as a result of Matter of Sales Tax Refund, supra, and Van Emmerik v. State, supra. "Fund II" represents approximately $2,226,000, the amount appellant estimates was saved by the utilities' reducing their rates from five percent to three percent from December of 1980 to May of 1981.

In its order denying attorneys' fees, the trial court stated that appellant "neither prevailed on the merits nor established a fund from which a reward can be made." Although we believe that appellant prevailed on the merits in Van Emmerik I, at least in the sense of obtaining judicial vindication of his claim, we agree that Senate Bill 40 precluded the establishment of what appellant has characterized as Fund I.

Likewise, we can hardly characterize what appellant refers to as "Fund II," the amount of which is disputed by the utility companies, as a "lump-sum judgment." Boeing, supra. In short, there is in existence no such fund. Accordingly, we cannot award attorneys' fees under the common fund exception. See generally, Annot., 89 A.L.R.3d 690 (1979).

Appellant urges us to apply another exception to the American rule, the so-called substantial benefit rule, which, as summarized by the United States Supreme Court in the Mills case, supra, permits:

reimbursement in cases where the litigation has conferred a substantial benefit on the members of an ascertainable class, and where the court's jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them. This development has been most pronounced, in shareholders' derivative actions, where the courts increasingly have recognized that the expenses incurred by one shareholder in the vindication of a corporate right of action can be spread among all shareholders through an award against the corporation, regardless of whether an actual money recovery has been obtained in the corporation's favor.

396 U.S. at 394, 90 S.Ct. at 626, 24 L.Ed.2d at 607 (footnote omitted).

This rule has been applied by the California courts to award attorneys' fees against public entities. See, e.g., Mandel v. Hodges, 54 Cal.App.3d 596, 127 Cal.Rptr. 244 (1976); Knoff v. City and County of San Francisco, 1 Cal.App.3d 184, 81 Cal.Rptr. 683 (1969). Inasmuch as we have already held that the State was immune from suit for a refund of the alleged overpayment of taxes, Van Emmerik v. State, supra, we are not disposed to hold the State liable for attorneys' fees. In Carlson v. City of Faith, supra, the Court noted that the purpose of the statute (now SDCL 15-17-18) that authorizes the award of attorneys' fees in suits by...