Valley Disposal, Inc. v. Central Vermont Solid Waste Management District
Docket: Nos. 85, 650, Dockets 95-7074, 95-7078
Court: Court of Appeals for the Second Circuit; December 7, 1995; Federal Appellate Court
The case addresses the award of attorneys' fees under 42 U.S.C. § 1988 following the dismissal of a lawsuit due to an agreement between the parties. The Circuit Court clarifies several points of law:
1. The Supreme Court's ruling in *Cooter & Gell v. Hartmarx Corp.*, which overruled the Circuit's previous decision in *Santiago v. Victim Services Agency*.
2. A district judge may only reject a party's waiver of attorney fees if the overall settlement is also rejected.
3. Fee waivers do not need to be explicitly included in the settlement agreement; however, if not explicitly stated, there should be evidence of the parties' intent to include costs in the global settlement.
4. A party typically should receive costs for preparing a successful § 1988 application, and a district court must provide reasons if it denies these costs.
The background of the case involves the Central Vermont Solid Waste Management District enacting a flow control ordinance that led to a lawsuit by garbage haulers and a rival landfill, alleging violations of the dormant Commerce Clause and antitrust laws. After a series of legal proceedings, including a Supreme Court decision that invalidated the ordinance, the parties settled and dismissed the complaint. Subsequently, the plaintiffs sought attorneys' fees, which the District contested on several grounds, including res judicata and waiver of fees. The district court granted attorneys' fees but denied the costs associated with the fee motion. The District appealed the fee award, while the plaintiffs cross-appealed concerning the denial of costs.
The district court dismissed the complaint under Rule 41(a)(2) of the Federal Rules of Civil Procedure and later granted the plaintiffs' motion for attorneys’ fees, which the District challenges, asserting that the court lacked subject matter jurisdiction to consider post-dismissal motions. The District cites Santiago v. Victim Services Agency, which held that a notice of dismissal strips the court of jurisdiction over the case, rendering any subsequent order for fees void. However, this reliance is deemed misplaced due to the Supreme Court’s ruling in Cooter, Gell v. Hartman Corp., which affirmed that federal courts retain the authority to address collateral issues, such as attorneys’ fees, even after a case is dismissed. The Supreme Court rejected the notion that a voluntary dismissal serves as a jurisdictional barrier to further proceedings regarding Rule 11 sanctions, indicating that such matters are independent and may be addressed long after the principal action is concluded. While the District argues that Santiago remains binding and that the Cooter, Gell decision only addressed Rule 11, the Court notes that it has previously acknowledged the ability to consider fees post-judgment, thereby undermining the District's position.
Cooter, Gell overruled the Second Circuit's decision in Johnson Chemical Co. v. Home Care Products, which had previously barred district courts from considering post-dismissal motions for Rule 11 sanctions. The court explicitly noted that the question of a district court’s authority to award statutory attorney’s fees after a voluntary dismissal, as raised in Santiago, was left for future consideration. While Johnson has not been universally accepted, many courts have aligned with Santiago’s interpretation of Rule 41(a)(1)(i) by denying attorney fees under 42 U.S.C. § 1988 post-dismissal. The current ruling affirms that Santiago is no longer valid, as the Supreme Court in Cooter, Gell indicated that motions for attorney's fees can be addressed even after a case's termination, undermining Santiago's premise that jurisdiction ceases upon dismissal. Additionally, the ruling references White v. New Hampshire Department of Employment Security, where the Supreme Court clarified that a motion for attorney’s fees under § 1988 is collateral to the main action and not governed by the 10-day limit of Rule 59(e) for altering judgments. This establishes that requests for attorney’s fees should be treated separately from the merits of the case.
The determination of whether a party is a "prevailing party" eligible for attorneys’ fees must be made by the court after the merits of the case have been resolved, rather than through the parties' stipulation. Attorneys’ fees are distinct from other forms of relief and are not meant to compensate for the injury underlying the action; they are separate from the cause of action. The Supreme Court clarified that district courts have jurisdiction over post-judgment applications for attorneys’ fees under 42 U.S.C. § 1988, and there is no basis for treating post-dismissal and post-judgment applications differently regarding this jurisdiction. The district court found it had subject matter jurisdiction over the plaintiffs’ fee application.
The district also contended that the plaintiffs waived their right to attorneys’ fees due to a settlement agreement intended to resolve all claims and the dismissal of their complaint with prejudice. The district court rejected this argument, emphasizing that fee waivers must be clearly stated in the settlement agreement. A general release must explicitly indicate the intention to settle all claims, including those for attorneys’ fees. The court agreed with the plaintiffs that neither the Settlement Agreement nor the Motion for Dismissal contained an explicit waiver of the 1988 fees. The court criticized the district court for applying a more stringent standard from the Third Circuit regarding fee waivers, noting that its own precedent allows for broad language in settlement agreements to cover all claims, including attorneys’ fees, unless indicated otherwise.
The intent of the parties governs settlement agreements, and a settlement that does not explicitly mention fees or provide a general release of all claims does not imply a waiver of attorney’s fees. The standard established by the Third Circuit in Ashley is stricter than that in Brown, where a waiver was found due to broad release language in the settlement. In this case, the settlement agreement stipulated a dismissal with prejudice but did not include a general release of claims or state that the settlement was without costs to either party. Instead, it specified which costs were waived, indicating no intent to waive unmentioned costs, such as the plaintiffs’ attorneys’ fees under 1988. The inclusion of a claim for these fees in the dismissed complaint does not alter this interpretation, as the agreement primarily resolved substantive claims. Additionally, the district court maintained discretion to reject any waiver of fees, deciding not to accept any potential waiver present in the settlement agreement.
District courts have substantial discretion to accept or reject settlement agreements, but they cannot exercise a “line-item veto” over such agreements. The Supreme Court in Evans clarified that a court may reject a settlement containing a waiver of statutorily authorized attorneys’ fees only by rejecting the entire agreement, not selectively enforcing parts of it. If the district court found a waiver of attorneys’ fees, it could only reject the entire settlement; hence, its alternative ruling cannot be upheld. However, since the district court correctly determined that no waiver occurred, its decision regarding the fee question is affirmed.
In addressing costs related to the 1988 petition, the district judge granted full legal fees for the underlying case but denied pre-award interest and motion costs. While district judges have broad discretion in awarding fees under 1988, they must evaluate the costs of preparing the fee motion similarly to the costs of the underlying case. Citing Gagne, the court noted that time spent preparing the fee application is compensable unless otherwise justified. However, the district court must provide reasons for deviating from the assumption that motion costs should be granted when underlying costs are permitted. The lack of reasoning for denying the costs of the 1988 application necessitates a remand for the district court to clarify its decision.
The court concludes that following the Supreme Court's ruling in Cooter, Gell v. Hartmarx Corp., the precedent set in Santiago v. Victim Services Agency is no longer applicable in this circuit. Consequently, the district court retained subject matter jurisdiction to consider a motion for attorneys' fees under 42 U.S.C. § 1988 even after dismissing the underlying complaint. The court clarifies that while a negotiated fee waiver does not need to be explicitly stated in a settlement agreement, the intent of the parties regarding waiving fees must be assessed. Waivers of attorneys' fees under § 1988 will generally not be found unless there is a mutual release that resolves all claims or a clear indication that the settlement carries no costs for either party. The district judge could only reject the waiver by also rejecting the entire settlement. If the district court denies motion costs, it must record its reasons. The court affirms in part and vacates and remands in part, noting the district court's focus on whether plaintiffs are 'prevailing parties' entitled to fees. The defendants did not dispute the finding of plaintiffs as prevailing parties. Rule 41(a)(1) provides automatic dismissal under certain conditions; however, it does not apply here as the defendants had filed a motion for summary judgment and one defendant did not sign the stipulation of dismissal. The opinion also distinguishes between voluntary dismissals and consent judgments, emphasizing that a district court can conditionally approve or disapprove a settlement. Lastly, it notes that while changing circumstances might allow for modifications to consent decrees, such modifications are irrelevant in this case since no decree had yet been established.
