Wash. Elec. Co-op. v. Mass. Mun. Wholesale Elec., Civ. No. 89-94

CourtUnited States District Courts. 2nd Circuit. District of Vermont
Citation894 F. Supp. 777
Decision Date03 August 1995
Docket Number5:91-270 and 5:91-271.,Civ. No. 89-94




Stephen Skill Ankuda, Parker & Ankuda, P.C., Springfield, VT, Gerald J. Caruso, Ferriter, Scobbo, Sikora, Caruso & Rodophele, P.C., Boston, MA, for plaintiffs North Attleborough Elec. Dept., Mansfield Mun. Elec. Dept., Georgetown Mun. Light Dept., Ashburnham Mun. Light Plant, Boylston Mun. Light Dept., Danvers Elec. Div., Groton Elec. Light Dept., Hingham Mun. Light Plant, Middleborough Gas and Elec. Dept., Paxton Mun. Light Dept., Shrewsbury's Elec. Light Plant, Sterling Mun. Light Dept., Templeton Mun. Light Plant, Wakefield Mun. Light Dept., West Boylston Lighting Plant, Hudson Light and Power Dept., Peabody Mun. Light Plant, Massachusetts Mun. Wholesale Elec. Co.

Robert B. Hemley, Gravel & Shea, Burlington, VT, Bert J. Capone, David A. Grossbaum, Peabody & Arnold, Boston, MA, for defendants Paterson, Walke & Pratt, P.C., Stephen Walke, Ralph W. Howe, III.

Joseph E. Frank, Paul Frank & Collins, P.C., Burlington, VT, for defendants Paterson, Gibson, Noble & Goodrich, Charles E. Gibson, Jr., Austin B. Noble, Julian R. Goodrich.

Leonard F. Wing, Jr., Ryan, Smith & Carbine Ltd., Rutland, VT, for defendant Martin Nitka.

Douglas Clark Pierson, Pierson, Wadhams, Quinn & Yates, Burlington, VT, for defendants Downs, Rachlin & Martin, William B. Piper.

Edward Vanderveer Schwiebert, Abell, Kenlan, Schwiebert & Hall, P.C., Rutland, VT, for defendant Kenneth Mason.

Robert A. Mello, The Law Office of Robert A. Mello, South Burlington, VT, for defendants Robert B. Page, James A. Fox.


BILLINGS, Senior District Judge.

The following matters bring these actions to the Court's attention:

1. Magistrate Judge Jerome J. Niedermeier's Report and Recommendation, filed March 31, 1995. Magistrate Niedermeier recommended that the Court grant the various motions for summary judgment submitted by the law firm Defendants in all three of the pending actions. Numerous objections and responses have been filed.

2. Magistrate Niedermeier's Order, filed March 31, 1995, denying a Motion by Plaintiff Washington Electric Cooperative ("WEC") to amend its crossclaim in action 89-CV-94. Two of the law firm Defendants have filed Objections and Statements of Appeal to that Order. WEC has filed a reply and statement in support of the Order.

3. Motions for Entry of Final Judgment filed in action 5:91-CV-270 by Village of Morrisville, et al.; Village of Ludlow, et. al.; Village of Stowe, et al.; and WEC, et al.

After a brief discussion of the facts of this case, we will discuss the Magistrate's Report and Recommendation, the Magistrate's Order and the Motions for Entry of Final Judgment seriatim.


In 1979, certain Vermont utilities ("Vermont Participants") entered into power sales agreements ("PSAs") with the Massachusetts Municipal Wholesale Electric Company ("MMWEC")2 for shares of the power generating potential of New Hampshire's Seabrook nuclear facility. The PSAs were formulated as "take-or-pay" contracts. In other words, they required regular monthly payments by the Participants to MMWEC regardless of whether the utility actually received any power.

Prior to entering into the PSAs, the Vermont Participants had to qualify for participation in the venture. The Vermont Participants provided MMWEC's general and bond counsel with legal opinions to comply with this condition. In 1981 and 1985 MMWEC issued revenue bonds to finance the project. Again, the Vermont Participants were required to submit legal opinions demonstrating their authority to enter into the PSAs.3 These legal opinions were provided by the law firm of Paterson, Gibson, Noble & Goodrich, ("PGNG")4 the law firm of Downs, Rachlin & Martin and attorney William Piper, (collectively "DRM/Piper")5 the law firm of Paterson, Walke & Pratt and attorneys Ralph W. Howe6 and Stephen Walke (collectively "PWP"),7 and attorney Martin Nitka ("Nitka").8

In 1988, the Vermont Supreme Court found the PSAs ultra vires and void ab initio. See Vermont Dep't of Public Serv. v. Massachusetts Mun. Wholesale Elec. Co. ("MMWEC I"), 151 Vt. 73, 558 A.2d 215 (1988), cert. denied, 493 U.S. 872, 110 S.Ct. 202, 107 L.Ed.2d 155 (1989). The Vermont Supreme Court provided two grounds to justify its holding. First, the court determined that 30 V.S.A. § 4002,9 which authorizes Vermont utilities to participate together in the purchase of "supplies of capacity and energy from other utilities," did not empower the Vermont Participants to enter into the PSAs by which they obtained shares of "project capability." Id. at 80, 558 A.2d 215. As a second ground for its holding, the Vermont Supreme Court relied on the principle of nondelegation. Id. at 81, 558 A.2d 215. Quoting Thompson v. Smith, the court observed that it "has long adhered to the `deeprooted principle of law that the delegate of power from the sovereign cannot without permission recommit to another agent or agency the trust imposed upon its judgment and discretion.'" Id. (quoting 119 Vt. 488, 501, 129 A.2d 638 (1957)). The court ruled that the PSAs violated the nondelegation doctrine by redelegating the Vermont Participants' spending powers and by limiting the future exercise of discretion and judgment by their legislative bodies.10Id. at 82, 558 A.2d 215.

Adhering to the Vermont Supreme Court's opinion in MMWEC I, the Vermont Participants ceased making payments to MMWEC under the PSAs. As a result of step-up provisions in the contracts, MMWEC and the individual Massachusetts utilities who were also participating in the project ("Massachusetts Participants") were obligated to assume the Vermont Participants' share of the payments.

WEC has filed an action in contract against MMWEC for return of the funds paid pursuant to the PSAs. (89-CV-94). Within that action, WEC has filed a cross-claim against the law firms who issued the legal opinions. MMWEC and the Massachusetts Participants brought separate actions seeking compensatory damages against the Vermont Participants, their directors, and the various attorneys and law firms that issued the opinions. (91-CV-270 and 91-CV-271). In this Opinion and Order, we focus on the actions brought by WEC, MMWEC and the Massachusetts Participants against the lawyers who represented the Vermont Participants. These actions sought damages on claims of negligence, negligent misrepresentation, breach of warranty, and indemnity and contribution. In his Report and Recommendation, the Magistrate granted summary judgment to the law firm Defendants, concluding that neither the negligence nor the indemnity and contribution claims could be sustained.


1. The Magistrate's Report and Recommendation

A. Standard of Review

Pursuant to 28 U.S.C. § 636(b)(1)(B), the Court referred this matter to the Magistrate to conduct hearings and to submit to the Court recommendations for the disposition of the law firm Defendants' Motions for Summary Judgment. Section 636(b)(1) provides that the Court:

shall make a de novo determination of those portions of the Magistrate's report ... and recommendation to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate. The judge may also receive further evidence or recommit the matter to the magistrate with instructions.

See also Fed.R.Civ.P. 72. Based on this standard, we review the Magistrate's Report and Recommendation de novo.

The lawyer Defendants have advanced a number of different arguments in support of their various Motions for Summary Judgment. Summary judgment is appropriate when the Court finds that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The initial burden of demonstrating that no genuine issue of material fact exists rests on the party seeking summary judgment. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The burden then shifts to the opposing party, who may not rest on its pleading but must present "significant probative evidence" demonstrating that a factual dispute exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986). The Court must view these materials and draw all inferences in the light most favorable to the non-movant. Id. at 255, 106 S.Ct. at 2513-14.

B. Plaintiffs' Negligence Claims

In their Motions for Summary Judgment, the attorneys contended that because no attorney-client relationship existed between the lawyer Defendants and either MMWEC or the Massachusetts Participants, the law firms cannot be considered liable in this action.11 The Magistrate agreed, examining the question under both Vermont and Massachusetts law.12

As the Magistrate indicated, in order to succeed on a claim of attorney negligence or "malpractice" in Vermont, a party must demonstrate the existence of an attorney-client relationship. Brown v. Kelly, 140 Vt. 336, 338, 437 A.2d 1103 (1981). See also Bresette v. Knapp, 121 Vt. 376, 380, 159 A.2d 329 (1960) ("not only must the relationship of attorney and client have existed between the parties, but this relationship must also have been professional in character"); Howard Bank, N.A. v. Estate of Pope, 156 Vt. 537, 539, 593 A.2d 471 (1991) ...

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