Village of Westfield v. Welch's
| Decision Date | 26 February 1999 |
| Docket Number | Docket No. 98-7456 |
| Parties | 29 Envtl. L. Rep. 21,016 VILLAGE OF WESTFIELD, N.Y., Plaintiff-Counter-Defendant-Appellee, v. WELCH'S, Defendant-Counter-Claimant-Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
Alan M. Wishnoff, Buffalo, NY (Phillips, Lytle, Hitchcock, Blaine & Huber LLP, of counsel), for Defendant-Counter-Claimant-Appellant.
Cheryll Smith, Buffalo, NY (James L. Magavern, B. Kevin Burke, Jr., Law Student Assistant, Magavern, Magavern & Grimm, L.L.P., of counsel), for Plaintiff-Counter-Defendant-Appellee.
Before: OAKES, WALKER, and McLAUGHLIN, Circuit Judges.
This action arises out of the Village of Westfield's calculation of "user charges," which are imposed against Welch Foods, Inc. to finance the operation and maintenance costs for the Village's Water Pollution Control Plant. The district court stayed this action because a pending proceeding in New York state court was also addressing the legality of the user charges. The sole question before us is whether this action should have been stayed.
In the early 1970s, the Village of Westfield was required to construct or obtain the use of new wastewater treatment facilities. The Village's Water Pollution Control Plant was built in 1975, financed in part with federal funding provided under the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq. (FWPCA). Under federal law, the Village was required to adopt a user charge system based on actual use of wastewater treatment services, such that each user would pay its proportionate share of the plant's operation and maintenance costs based on its proportionate contribution to the total wastewater loading from all users. See 33 U.S.C. § 1284(b)(1)(A).
In 1975, the Village and Welch Foods, Inc. (Welch), which had a grape processing plant in the Village, entered into a sewer agreement pertaining to the construction and use of the plant. The agreement provided a formula for assessing user charges against Welch to finance the plant's operation and maintenance costs. These charges were to be based on Welch's actual discharge of organic materials creating biological oxygen demand to the plant.
In 1986, the Village amended the sewer ordinance and altered the formula for calculating user charges to contain "fixed" costs and "variable" costs. Under the new formula, the "fixed cost" element of operation and maintenance costs would be based on the design capacity for each industrial user. Welch objected to this amendment, arguing that the FWPCA required the user charges to be based on actual proportionate use. Although Welch disagreed with the Village's calculation of operation and maintenance charges based on design capacity rather than actual use, it paid these charges for almost a decade, until October 1995.
In 1984, before the Village amended the sewer ordinance to change the formula for calculating user charges, Welch sued the Village, seeking to recover industrial cost recovery charges which had been collected by the Village during a congressional moratorium on such charges. 1 A year later, Welch commenced a second state court action against the Village and the members of its Board of Public Utilities contesting the sewer user charges. This second action was consolidated with the 1984 action. The state court dismissed the industrial cost recovery claims, but not the user charge claim.
In 1990, Welch commenced an action in federal district court challenging the Village's 1986 ordinance. In 1993, Welch agreed to discontinue the federal action when the parties stipulated to add the claims asserted in the federal action to the ongoing state court action. New York State Supreme Court Justice Joseph Gerace began presiding over the state court action in 1991 or 1992.
In 1993, the Village moved to dismiss Welch's state court complaint and Welch cross-moved for summary judgment. The court noted in a 1994 order that Mogen David Wine Corporation and Growers Cooperative Grape Juice Company, two other local industrial users of the water pollution control plant, should have been joined to the action. The Village impleaded Mogen David and Growers Cooperative as third-party defendants in 1995.
In April 1995, the United States Environmental Protection Agency informed the Village by letter that its user charge system did not comply with federal law. It stated that federal law mandated that charges for operation and maintenance costs be based on actual use rather than design capacity, and that the Village was required to comply with federal law because it had accepted a federally funded grant award. 2
The court granted Welch's motion for partial summary judgment in October 1995, holding that the sewer charges imposed by the Village violated the FWPCA and the sewer agreement. The court also noted that "the main beneficiary of Welch's overcharges are the other industries, Mogen David and Grower's [sic] Cooperative." Welch stopped paying the sewer charges.
In May 1996, the Village moved to set aside the October 1995 ruling and to renew the summary judgment motions on which it was based. In July 1996, Justice Gerace granted the Village's motion, deferred ruling on the summary judgment motions, and provided for further discovery. 3 In Welch's words, the parties were "back at square one" after thirteen years of litigation.
On August 8, 1997, Justice Gerace ruled that Welch had to pay its back sewer charges from 1995-96 and 1996-97 in order to continue to litigate the validity and proper amount of those charges. He granted the Village's motion to dismiss Welch's RICO claim, and also dismissed Welch's claim under the FWPCA, holding that the statute did not create a "private right of action." Justice Gerace decided to convert the Village's motion to dismiss the complaint into a motion for summary judgment, and adjourned the motion until September 22, 1997, to allow the parties time to submit additional papers. On August 20, Justice Gerace gave the parties until January 20, 1998, to file dispositive motions.
On October 6, 1997, Justice Gerace reversed his earlier decision, holding that under the circumstances of the case Welch would not be required to pay the contested sewer charges while it litigated their validity. On February 4, 1998, the Fourth Department of the Appellate Division reversed Justice Gerace's July 1996, decision, reinstating the October 1995 order granting partial summary judgment in favor of Welch. On March 3, 1998, Justice Gerace reversed himself once again, and ordered Welch to pay the back sewer charges. On April 9, Justice Gerace held that the October 1995 order was not "the law of the case," and he subsequently signed an order declaring that the parties were "relieved from its terms."
On July 24, 1998, Justice Gerace denied Welch's motion that he recuse himself, denied Welch's motion for a change of venue, and granted the Village's motion to admonish Welch's counsel for his conduct in the litigation. On September 28, 1998, Justice Gerace again ordered Welch to pay back sewer charges.
Because Welch was granted permission in 1997 to add additional Board of Public Utilities members and Village Trustees as defendants, there are now twenty-five defendants and two third-party defendants in the state court action.
In January 1997, the Village sued Welch in state court to recover the sewer charges imposed on Welch for the 1995-96 and 1996-97 fiscal years. (As noted above, Welch ceased paying the charges after Justice Gerace's October 1995 decision, later set aside, that the charges violated federal law.) Welch was the sole defendant named in that action. Welch removed the action to the United States District Court for the Western District of New York. Welch served an answer with counterclaims in February 1997, seeking a declaration of rights under the sewer agreement and the FWPCA as well as damages caused by the Village's conduct.
In April 1997, Welch moved for partial summary judgment seeking dismissal of the Village's claims for user charges under the Village's 1986 sewer ordinance. The Village moved to stay or dismiss the action, arguing that Welch was attempting to circumvent the pending state court proceedings. At this time, the Village also served a supplemental answer in the state court action containing a new claim for user charges owed by Welch for fiscal years 1995-96 and 1996-97; this new claim was identical to the Village's complaint in the federal action.
United States District Court Judge William M. Skretny held a hearing to consider both motions. During the hearing, the court stated that
As I see it, the issues before [New York State Supreme Court Justice Gerace] are, for all practical purposes, similar and/or identical to the issues before me. I can't resolve any of these issues any quicker than Judge Gerace, at least as far as his schedule is concerned.... [I]t just, you know, plain doesn't make sense for me to duplicate or try to outrace Judge Gerace to the finish line. No matter how I look at it, in terms of the history of the state case, the issues with respect to the 1995 through 1997 period are, likewise, before him in some fashion, although it's kind of a jumbled mess in terms of the amended Complaint, and the counterclaims, and the motions to dismiss, and everything else. But nevertheless, they're, in some fashion, before him, so I'm inclined to grant the motion to stay....
The next day, the court granted a stay pending the outcome of the state court action, with a "report back" date set for September 3, 1997. After the parties reported back on September 3, the court extended the stay until January 27, 1998, and ordered the parties to return to discuss the status of the case.
On January 23, 1998, Welch filed a notice of motion seeking relief from...
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