IN THE
INDIANA TAX COURT
____________________________________________________________
TOWN OF ST. JOHN, et al., )
)
Petitioners, )
)
v. ) Case No. 49T10-9309-TA-70
)
STATE BOARD OF TAX )
COMMISSIONERS, )
)
Respondent )
____________________________________________________________
ORDER AND JUDGMENT ENTRY
FOR PUBLICATION
June 16, 2000
FISHER, J.
Petitioners present one issue for consideration: whether the Court should adopt and
apply the private attorney general exception to the American rule regarding litigation expenses
and order the State Board of Tax Commissioners (State Board) to pay Petitioners’
attorneys’ fees and costs in this matter.
See footnote
FACTS AND PROCEDURAL HISTORY
Proceedings in this matter now approach the seven-year mark. For an overview
of this case’s procedural history, see State Board of Tax Commissioners v. Town
of St. John, 702 N.E.2d 1034, 1035-36 (Ind. 1998). In an order
dated April 23, 1999, the Court asked the parties to submit briefs on
the issue of payment of attorneys’ fees and costs. Both parties, represented
by counsel, responded accordingly. Having received their submissions, the Court heard oral
argument on the attorneys’ fees issue on February 28, 2000 and took the
matter under advisement.
See footnote
Additional facts will be supplied as needed.
ANALYSIS, OPINION & ORDER
The issue presented by Petitioners is one of first impression in this Court.
The Court first will review the United States Supreme Court’s view of
the private attorney general exception. Second, the Court will consider Indiana decisions
recognizing the exception. Third, the Court will examine the opinions of jurisdictions
that have adopted and applied the exception. Fourth, the Court will discuss
the decisions of jurisdictions declining to adopt the exception. Finally, the Court
will explain why the exception should be recognized and applied in the present
case to award Petitioners reasonable attorneys’ fees and costs.
I. United States Supreme Court
The United States Supreme Court, in Alyeska Pipeline Service Co. v. Wilderness Society,
421 U.S. 240, 269-71, 95 S. Ct. 1612, 1627-28, 44 L. Ed.2d 141
(1975), ruled that federal courts could not award attorneys’ fees using the private
attorney general exception. Alyeska Pipeline involved a dispute over the anticipated issuance
of rights-of-way and special land-use permits by the Secretary of the Interior for
a proposed pipeline that would transport oil from the North Slope of Alaska.
Following an Act of Congress, the merits of the litigation before the
Court of Appeals for the District of Columbia were effectively terminated. However,
the Court of Appeals considered and granted the request by respondent environmental groups
for attorneys’ fees, applying the private attorney general exception to the American rule.
See id., 421 U.S. at 245-46, 95 S. Ct. at 1616.
The Supreme Court explained that, under the American rule, the “prevailing litigant is
ordinarily not entitled to collect a reasonable attorneys’ fee from the loser.”
Id., 421 U.S. at 247, 95 S. Ct. at 1616. The Court
noted that in English courts, pursuant to statutory authorization, counsel fees are regularly
allowed to the prevailing party. See id., 421 U.S. at 247, 95
S. Ct. at 1616. The Court then proceeded to review the development
of limitations imposed by it and Congress as regards attorneys’ fees awards.
See id., 421 U.S. at 247-59, 95 S. Ct. at 1617-22. In
particular, the Court focused upon an 1853 costs statute, as enacted and in
its subsequent amended and recodified forms, which specified in detail the nature and
amount of taxable items of cost in federal courts. See id. at
1618-23. The Supreme Court observed that Congress has made specific provisions for
attorneys’ fees under certain federal statutes but has not “changed the general statutory
rule that allowances for counsel fees are limited to the sums specified by
the costs statute.” Id., 421 U.S. at 255, 95 S. Ct. at
1620. Furthermore, the Supreme Court pointed out that in recent cases it
had “reaffirmed the general rule that, absent statute or enforceable contract, litigants pay
their own attorneys’ fees.” Id., 421 U.S. at 257, 95 S. Ct.
at 1621 (citations omitted). However, the Court did acknowledge certain exceptions, which
are permissible as “assertions of inherent power in the courts to allow attorneys’
fees in particular situations, unless forbidden by Congress.”
See footnote
Id., 421 U.S. at
1259, 95 S. Ct. at 1622. The Supreme Court summarized as follows:
Congress has not repudiated the judicially fashioned exceptions to the general rule against
allowing substantial attorneys’ fees; but neither has it retracted, repealed, or modified the
limitations on taxable fees contained in the 1853 statute and its successors.
Nor has it extended any roving authority to the Judiciary to allow counsel
fees as costs or otherwise whenever the courts might deem them warranted.
What Congress has done, however, while fully recognizing and accepting the general rule,
is to make specific and explicit provisions for the allowance of attorneys’ fees
under selected statutes granting or protecting various federal rights. . . .
Under this scheme of things, it is apparent that the circumstances under which
attorneys are to be awarded and the range of discretion of the courts
in making those awards are matters for Congress to determine.
Id., 421 U.S. at 260-62, 95 S. Ct. at 1623-24. See also
id. nn.33-35 (listing various federal statutes allowing award of attorneys’ fees).
In reversing the Court of Appeals’ award of fees, the Supreme Court also
focused on whether the federal courts provide a proper arena for determining what
polices are more important than others. See id., 241 U.S. at 263-64,
95 S. Ct. at 1625. The Supreme Court opined that “it would
be difficult, indeed, for the courts, without legislative guidance, to consider some statutes
important and others unimportant and allow attorneys’ fees only in connection with the
former.” Id. Moreover, the Supreme Court elaborated that a wide range
of statutes arguably satisfies the criterion of public importance. See id., 421
U.S. at 264, 95 S. Ct. at 1625. If that is so,
the Court questioned, “how could a court deny attorneys’ fees to private litigants
in actions under 42 U.S.C. § 1983 seeking to vindicate constitutional rights?”
Id. (emphasis in original). The Supreme Court finally concluded that:
[Federal courts] are not free to fashion drastic new rules with respect to
the allowance of attorneys’ fees to the prevailing party in federal litigation or
to pick and choose among plaintiffs and the statutes under which they sue
and to award fees in some cases but not in others, depending upon
the courts’ assessment of the importance of the public policies involved in particular
cases.
Id., 421 U.S. at 269, 95 S. Ct. at 1627.
In discussing the private attorney general exception, state courts often refer to and
rely upon the Supreme Court’s Alyeska Pipeline opinion. Therefore, it is important
to keep in mind the basis for the Supreme Court’s ruling. In
short, the Supreme Court’s rejection of the private attorney general exception can be
explained as follows: (1) Congress has reserved the right to allow attorneys’
fees only under certain circumstances; (2) specific exceptions to the American rule are
expressly identified in statute; and (3) without legislative guidance, federal courts may not
selectively create new exceptions to the American rule based upon the alleged importance
of the public policies at issue. See id.
II. Indiana Cases
Indiana courts generally apply the American rule when deciding whether to award attorneys’
fees. The Indiana Supreme Court has observed that the “right to recover
attorney’s fees from one’s opponent does not exist in the absence of a
statute or some agreement, though a court of equity may, under some circumstances,
allow attorneys’ fees to be paid out of a fund brought under its
control.” See Gavin v. Miller, 222 Ind. 459, 54 N.E.2d 277, 280
(1944) (citing State ex rel. Reilly v. United States Fidelity & Guar. Co.,
218 Ind. 89, 31 N.E.2d 58, 60 (1941)). See also Trotcky v.
Van Sickle, 227 Ind. 441, 85 N.E.2d 638, 640 (1949) (stating that American
rule applies equally in courts of law and courts of equity) (citations omitted);
Kikkert v. Krumm, 474 N.E.2d 503, 504-05 (Ind. 1985) (noting American rule).
The Indiana Court of Appeals on numerous occasions has acknowledged Indiana’s adherence to
the American rule. See, e.g., Courter v. Fugitt, 714 N.E.2d 1129, 1132
(Ind. Ct. App. 1999); Barrington Mgmt. Co. v. Paul E. Draper Family Ltd.
Partnership, 695 N.E.2d 135, 142 (Ind. Ct. App. 1998) (citation omitted); and Shumate
v. Lycan, 675 N.E.2d 749, 754 (Ind. Ct. App. 1997), trans. denied.
This Court must decide whether to recognize one particular exception to the American
rule—the private attorney general exception. The private attorney general exception has been
recognized by the Indiana Court of Appeals, which first noted the exception in
Saint Joseph’s College v. Morrison, 158 Ind. App. 272, 302 N.E.2d 865, 870
(1973). In Saint Joseph’s College, the Court of Appeals first concluded that
a sub-contractor did not have a valid mechanic’s lien for certain work performed
under an oral contract, so that the sub-contractor could not recover attorneys’ fees
pursuant to the Mechanics’ Lien Statute. See id. at 869 (citing Ind.
Code Ann. § 32-8-3-14 (Burns Repl. 1965)). The Court then stated that
certain limited exceptions to the American rule exists and quoted the following summarization
of exceptions from La Raza Unida v. Volpe, 57 F.R.D. 94 (N.D. Cal.
1972) (citing Sims v. Amos, 340 F. Supp. 691 (M.D. Ala. 1972), summarily
aff’d, 409 U.S. 942, 93 S. Ct. 290, 34 L. Ed. 215 (1972)):
1) The “obdurate behavior” situation. Here the courts use their equitable powers to
impose costs on defendants who behaved in bad faith.
See footnote
2) The “common fund” situation. Here the courts use their equitable powers to
ensure that the beneficiaries of litigation are the ones who share the expense.
This is a defensive use of the equitable power of the courts
to prevent the unjust enrichment of “free riders”.
See footnote
3) The “private attorney general” situation. Here the courts use their power offensively
when necessary and appropriate to insure the effectuation of a strong Congressional policy.
Id. at 870. The Court of Appeals found that neither the “common
fund” exception nor the “private attorney general” exception applied to the facts at
hand. See id. Moreover, the Court of Appeals determined that the
college had not acted in bad faith or with vexatious and oppressive conduct.
See id. at 870-71. Absent a valid mechanic’s lien or “special
circumstances,” the Court of Appeals held that the trial court had improperly awarded
attorneys’ fees. See id. at 871.
The Saint Joseph’s College court merely identified the private attorney general exception in
dicta; it did not adopt or apply the exception. Several appellate court
cases subsequent to the opinion in Saint Joseph’s College also have identified the
exception.
See footnote
Two recent cases merit further discussion.
In Downing v. City of Columbus, 505 N.E.2d 841 (Ind. Ct. App. 1987),
trans. denied, three police officers, who also were members of the Indiana National
Guard, challenged the City’s personnel policy which stated that employees on military leave
would receive their regular pay less pay received from the military. The
trial court granted summary judgment in favor of the City. The Court
of Appeals reversed, determining that the plain language of Ind. Code § 10-2-4-3
stated that employees of any municipality shall be entitled to a leave of
absence without loss of pay for time spent fulfilling national guard duties.
See id. at 842. In reaching its conclusion, the Court of Appeals
noted that Article XII of the Indiana Constitution provides for a state militia
and that the existence of a militia is an “area of interest within
which the state is required to act.” Id. at 844. Military
pay for members of the National Guard, the Court of Appeals concluded, is
a matter reserved to the State, and the full pay statute in question
serves both state and national interests that are more important than local or
municipal interest. See id. (quoting Reed v. Tulsa, 569 P.2d 451,
454 (Okla. 1977)).
The Court of Appeals in Downing, however, declined to award the police officers
attorneys’ fees. See id. at 845. Although the obdurate behavior and common
fund exceptions were “viable” in Indiana, the Court of Appeals asserted that the
private attorney general exception has only been identified in dicta and has never
been acknowledged by the Indiana Supreme Court or used to support a fees
award in Indiana. See id. The Court of Appeals noted that
the Saint Joseph’s College opinion relied upon two federal district court opinions in
recognizing the private attorney general exception and that the United States Supreme Court
in Alyeska Pipeline had explicitly declared those two decisions to be erroneous.
See id. (citing LaRaza Unida v. Volpe, 57 F.R.D. 94 (N.D. Cal. 1972)
and Sims v. Amos, 340 F. Supp. 691 (M.D. Ala. 1972)). Both
LaRaza Unida and Sims, the Court elaborated, were class actions in which “plaintiffs
sought injunctive or declaratory relief to preserve basic civil liberties or to effectuate
public interest litigation.” Id. The Court indicated that both cases permitted
an award of attorneys’ fees under the private attorney general exception when nothing
in a statutory scheme precluded such an award and when: (1) the
party has effectuated a strong Congressional policy; (2) the action has benefited a
large class of people; and (3) given the necessity and financial burden of
private enforcement, the award is essential. See id. (quoting La Raza
Unida, 57 F.R.D. at 98). In affirming the denial of fees, the
Court of Appeals concluded, “We see nothing in the record which would indicate
that such an approach would apply in this case.” Id.
More recently, in Morgan County v. Ferguson, 712 N.E.2d 1038 (Ind. Ct. App.
1999), the Court of Appeals again considered the private attorney general exception.
In Ferguson, Morgan County officials appealed the trial court’s award of attorneys’ fees
and deposition costs in a quiet title action concerning a tract of land
purchased by the plaintiff at a tax sale. The trial court ordered
that Morgan County pay the attorneys’ fees of the two disputing landowners, reasoning
that the county was the cause of the error leading to the action.
See id. at 1044. The trial court in part relied upon
the private attorney general exception; it determined that a party should not have
to pay attorney fees to attack a sovereign when the sovereign has committed
error. See id. The Court of Appeals reversed the award of
fees and costs to be paid by Morgan County. See id. at
1046. In reaching its decision, the Court made the following analysis:
Indiana recognizes three exceptions to the rule that each party must pay his
own attorney fees. These exceptions authorize an award of attorney fees where
a party acted in bad faith (the obdurate behavior exception), where the court
wants to insure the beneficiaries of an action share the expenses of the
action (the common fund exception), and where the court compensates a private party
who brought suit to effectuate a strong legislative policy (the private attorney general
exception). We have held, however, that the private attorney general exception only
applies where the party acting in the private attorney general capacity was authorized
to do so by statute. Here, there is no basis for an
award of attorney fees or costs. Accordingly, the trial court erred in
ordering Morgan County to pay attorney fees and costs on this basis.
Id. at 1044-45 (citations omitted).
The Ferguson court cites Downing to support its assertion that the private attorney
general exception applies only where the party was authorized by statute to act
in such capacity. See id. at 1044 (citing Downing, 505 N.E.2d at
845). This is incorrect. The Downing court did not reach this
conclusion. In Downing, the Court of Appeals acknowledged the federal rule prohibiting
fees awards, absent statutory authorization, using the private attorney general exception. See
Downing, 505 N.E.2d at 845. Further, the Downing court correctly observed that
the Supreme Court in Alyeska Pipeline posited that the decisions in La Raza
Unida and Sims erroneously employed the private attorney general exception. See id.
See also Alyeska Pipeline, 421 U.S. at 270 n.46, 95 S. Ct.
at 1628 n.46. However, the Court of Appeals in Downing merely
concluded that the record did not indicate that the private attorney general exception,
as the exception is espoused in La Raza Unida and Sims, applied to
the facts before it. See Downing, 505 N.E.2d at 845. The Downing
court never held that the private attorney general theory exception applies only where
the party acting as a private attorney general is authorized by statute to
do so.
See footnote
Ferguson, therefore, correctly identifies the private attorney general exception but
then misinterprets Indiana precedent in applying the exception to the facts before the
Court.
The Indiana Supreme Court has not acknowledged the private attorney general exception to
the American rule. The Indiana Court of Appeals has acknowledged the exception
on various occasions since 1973. However, the Court of Appeals has never
supported an award of attorneys’ fees using the exception. These cases offer
the Court guidance but do not compel a finding that Indiana courts under
no circumstances should apply the private attorney general exception to support an award
of attorneys’ fees. The Court will therefore examine the approaches to the
exception as articulated and applied by other jurisdictions.
III. States Adopting the Private Attorney General Exception
Certain states allow an award of attorneys’ fees pursuant to the private attorney
general exception. Serrano v. Priest, 569 P.2d 1303 (Cal. 1977) is the
seminal case adopting the exception. In Serrano, plaintiffs’ counsel sought to engage
the trial court’s equitable powers to award attorneys’ fees where plaintiffs successfully challenged
the constitutionality of the state’s public school financing formula. The trial court
ordered the state to pay a total of $800,000 in fees pursuant to
the private attorney general exception. In affirming the awards, the California Supreme
Court first found that the common fund and substantial benefits exceptions did not
apply. See id. at 1309, 1312.
Next, the Court identified three basic factors to be considered in awarding fees
under the private attorney general exception: “(1) the strength or societal importance
of the public policy vindicated by the litigation, (2) the necessity for private
enforcement and the magnitude of the resultant burden on the plaintiff, [and] (3)
the number of people standing to benefit from the decision.”
See footnote
Id. at
1314. The Court stated that the public policy at issue was grounded
in the state constitution and that the interests furthered by the litigation were
“constitutional in stature.”
See footnote
Id. at 1315. Further, the trial court’s
findings made it clear that the benefits flowing from the litigation were to
be widely enjoyed among the state’s citizens and that subsidization of the plaintiff
was justified because of the nature of the litigation.
See footnote
See id.
A recent decision by the Supreme Court of Montana adopts the approach taken
in Serrano. In Montanans for the Responsible Use of the School Trust
v. State ex rel. Board of Land Commissioners, 989 P.2d 800 (Mont. 1999),
the Court considered in part whether the trial court improperly denied the plaintiff-organization
(Montrust) attorneys’ fees. Montrust had filed a complaint challenging the constitutionality of
fourteen statutes concerning Montana’s school trust lands. The trial court permanently enjoined
eleven statutes, concluding that ten of the challenged statutes violated the Act of
February 22, 1889, ch. 180, 25 Stat. 676 (Enabling Act) and certain provisions
of Montana’s Constitution. The Supreme Court formally adopted the private attorney general
exception and the three-part inquiry outlined in Serrano. See Montanans, 989 P.2d
at 812. Applying the three basic factors, the Court determined that the
trial court had abused its discretion in denying Montrust’s request for reasonable attorney
fees. The Court observed:
First, Montrust has litigated important public policies that are grounded in Montana’s Constitution.
Second, the State argues that it had a duty to defend the
statutes in the present case; thus, the State does not dispute the necessity
of private enforcement of Montana’s Constitution. Nor does the State dispute the
magnitude of Montrust’s consequent burden. Third, Montrust’s litigation has clearly benefited a
large class: all Montana citizens interested in Montana’s public schools. . .
. In the present case, Montrust has successfully litigated issues of importance
to all Montanans and incurred significant legal costs. We conclude that the
District Court ignored recognized principles in denying Montrust reasonable attorney fees, resulting in
“substantial injustice.”
Id. The Court adopted the private attorney general exception despite a state
statute limiting an award of reasonable attorneys’ fees against the state to situations
where the court finds that the state’s claim or defense was frivolous or
pursued in bad faith. See id. at 810 -11(citing Mont. Code Ann.
§ 25-10-711).
The Supreme Court of Idaho applied the private attorney general theory in Hellar
v. Cenarrusa, 682 P.2d 524, 530-31 (Idaho 1984). In Hellar, the Court
held that the legislature’s reapportionment scheme violated the Idaho Const. art. III, §
5, which provides that legislative districts composed of multiple counties shall consist of
undivided, contiguous counties. See id. at 528. The trial court had granted
attorneys’ fees pursuant to the three prong inquiry of Serrano, finding that: (1)
an important public policy (i.e., ensuring constitutional representation) was at issue; (2) without
private enforcement, the legislation would not have been challenged; and (3) every Idaho
citizen is affected by the litigation. See id. at 531.
The fees award was upheld. See id. The Court specifically noted
that Plaintiffs’ counsel was a sole practitioner who endured extensive time and monetary
demands to prosecute the case. See id. at 530. Further, the
Court indicated that Idaho’s Attorney General had been asked to defend the disputed
apportionment statute; thus, “that office could not provide a defense of either Idaho
Const. art. 3 § 5 or the interest of the people of Idaho
as that interest has been determined both by the trial court and [the
Idaho Supreme Court].” Id. The Court approved the fees award, despite
language in Idaho Rules of Civil Procedure 54(e)(1) limiting the discretion of trial
courts in awarding fees to those cases brought, pursued or defended frivolously, unreasonably
or without foundation. The Court had adopted I.R.C.P. 54(e)(1) as permitted by
statute, Idaho Code §§ 12-120 & -121. Asserting that it continued to
adhere to the American rule, the Court held that the limitation imposed by
I.R.C.P. 54(e)(1) did not apply where the fees award is made under the
private attorney general exception. See id. at 531.
Utah has also recognized the private attorney general exception but limited its application
to extraordinary circumstances. In Stewart v. Utah Public Service Commission, 885 P.2d
759 (Utah 1994), a group of ratepayers challenged an order issued by the
Utah Public Service Commission (Commission) increasing the authorized rate of return on equity
for U.S. West Communications, Inc. (USWC). USWC was a regulated public
entity that was wholly owned by an unregulated industrial company. Ratepayers also
challenged the constitutionality of Utah Code § 54-4-4.1(2), which allowed a public utility
to reject incentive rate regulation plans approved by the Commission. The
Court first found that the order fixed an unlawful rate of return on
equity. See id. at 773. The Court also found that section
54-4-4.1(2) unconstitutionally delegated legislative powers to a private party. See id. at
776-77. Finally, the Court held that the Commission’s incentive plan was invalid.
See id. at 781.
The Utah Supreme Court concluded that the facts warranted an award of attorneys’
fees to the ratepayers’ counsel. See id. at 783. The Court
noted that Utah followed the American rule but that, absent a statutory or
contractual authorization, a “court has inherent equitable power to award reasonable attorney fees
when it deems it appropriate in the interest of justice and equity.”
Id. at 782. The Court outlined instances when courts have exercised their
inherent equitable power, including when applying the private attorney general exception. See
id. at 782-83 (citing Serrano, 569 P.2d at 1314). The Court invoked
its inherent equitable powers to award attorneys’ fees in the case. See
id. at 783.
The Utah Supreme Court ordered the action remanded to the Commission for a
determination of the fees award. See id. at 784. The Court required
that, if the Commission found that USWC must disgorge overcharges, the Commission was
to award attorneys’ fees from that fund. See id. at 783.
If no such fund were created, USWC would be ordered to pay the
fees under the private attorney general theory. See id. The Court
supported its award by reasoning: (1) ratepayers “successfully vindicated an important public
policy”; (2) the litigation’s outcome would “necessarily benefit all USWC ratepayers in the
state of Utah”; and (3) without the ratepayers’ action, collections under the unlawful
rate of return would have remained unchallenged and no ratepayer “would every have
had any relief.” Id. In reaching its decision, the Court emphasized
the fact that the ratepayers, acting entirely on their own, challenged USWC, the
Commission, and the Division of Public Utilities.
See footnote
See id. However, in
a footnote, the Court noted the “exceptional nature” of the case and pointed
out that “any future award of attorney fees under [the private attorney general]
doctrine will take an equally extraordinary case.” See id. at 783 n.19.
The private attorney general theory has not been applied only when constitutional principles
are at issue. In Arnold v. Arizona Department of Health Services, 775
P.2d 521 (Ariz. 1989), the Supreme Court of Arizona considered whether the state
and county governments breached a statutory duty to provide mental health care to
the chronically mentally ill (CMI patients). Arizona legislation required the Arizona State
Hospital, the Arizona Department of Health Services and the Maricopa County Health Department
to coordinate their treatment efforts of CMI patients, but the three agencies were
found to essentially operate independently. See id. at 527. The trial
court had entered a detailed order requiring the defendant agencies to provide community
mental health services to all CMI patients class members, as prescribed by law.
The county argued that it did not have a mandatory, non-discretionary duty
to treat all CMI patients; rather, the county maintained that it had a
general duty to treat the indigent sick. See id. at 531.
The Court held that the county, by statute, was required to provide mental
health services to the CMI patients. See id. at 532. The
trial court awarded attorneys’ fees to the prevailing party; the court held the
county responsible for one-third of the fees award using the private attorney general
exception. See id. at 536-37.
The Supreme Court of Arizona affirmed the award of attorneys’ fees. See
id. at 537. Noting that Arizona had long recognized the private attorney
general exception but not before applied it, the Court officially adopted and applied
the exception. See id. The Court observed that the decision to
adopt the exception involved a choice of two policies—encouraging public interest litigation and
preserving the American rule. See id. The Court reasoned that, while
longstanding, the American rule had been “eroded” by statute and by state and
federal judicial decisions. Id. Given this erosion of the American rule
coupled with the benefit to state citizens from public interest litigation, the Court
deemed adoption of the private attorney general exception to be appropriate. See
id.
State courts have applied the private attorney general exception under various factual situations
to enforce citizens’ constitutional and statutory rights against violations of those rights committed
by state and local governments and, in Utah, by a regulated public utility.
See footnote
The American rule still prevails in these jurisdictions; the circumstances where the
private attorney general exception has been recognized and applied are generally exceptional in
nature. In all cases, the award of attorneys’ fees using the exception
is fact specific. In applying the exception, courts tend to weigh three
factors in deciding whether to award fees: (1) the importance of the
rights being vindicated; (2) the necessity for private enforcement; and (3) the number
of persons potentially benefiting from the litigation’s outcome. With this in mind,
the Court now examines the rationales of those state jurisdictions declining to adopt
and apply the private attorney general exception.
IV. States Rejecting the Private Attorney General Exception
Other jurisdictions have chosen to follow the United States Supreme Court’s lead in
Alyeska Pipeline by rejecting the private attorney general exception in litigation involving both
constitutional and statutory rights. A 1999 opinion from the Supreme Court of
New Mexico is representative of these cases. In New Mexico Right to
Choose/NARAL v. Johnson, 986 P.2d 450 (N.M. 1999), plaintiffs-advocates cross-appealed the trial court’s
decision denying them attorneys’ fees. The advocates had sought injunctive relief against
the state’s Secretary of the Human Services Department, alleging that the Department had
adopted new rules for its medical assistance program that violated their rights under
the state constitution. The Department was enjoined from enforcing its new rules,
but the advocates were only awarded costs. At trial, the advocates contended
that they were entitled to fees under the private attorney general exception.
The Court first noted that New Mexico had strictly adhered to the American
rule since the state’s territorial days. See id. at 453 (citations omitted).
The Court observed that adoption of the private attorney general exception would
be a departure from established precedent and that any departure from precedent required
“special justification.”
See footnote
See id. (citation omitted). This need for a special
justification created reluctance on the part of the Court to extend awards of
attorneys’ fees except in limited circumstances. See id. at 454 (citation omitted).
The Court explained that two important policies underlie the American Rule. First,
the American rule promotes equal access to the courts for the resolution of
bona fide disputes. See id. This justification, the Court observed, is
rooted in the Founders’ deliberate departure from the English practice of awarding attorneys’
fees. See id. (citation omitted). The Court voiced its unwillingness to
move towards a system that might discourage potentially meritorious actions because of high
litigation costs; in other words, it reasoned that fee shifting might favor the
wealthy and penalize the poor. See id. (citations omitted). Second,
the Court rationalized that the American rule tends to preserve judicial resources.
See id. (citation omitted). More specifically, a rule expanding the court’s
authority to award attorneys’ fees will often require the court to determine what
fee is reasonable—an added burden on judicial administration. See id. (citation omitted).
These policies, the Court asserted, are still important today, and the state’s
constitutional jurisprudence does not provide a basis for concluding that the American rule
is “so unworkable as to be intolerable.”
See footnote
Id. (citation omitted).
The Court further explained that its past rulings allowing attorneys’ fees involved “exceptional
circumstances.” Id. at 455. The Court’s recognized exceptions were characterized as “limited
in number and narrow in scope” and “appear to be consistent with the
policies underlying the American rule.” Id. The referenced exceptions fell into
three categories, encompassing exceptions arising: (1) from a court’s inherent powers to
sanction the bad faith conduct of litigants and attorneys;
See footnote
(2) from certain exercises
of a court’s equitable powers;
See footnote
and (3) simultaneously from judicial and legislative powers.
See footnote
See id. The Court concluded that any new exception should be
consistent with the policies underlying the American rule and that the advocates had
argued for an exception than was “overly broad and not consistent with those
policies.” Id.
The Court analyzed recognized exceptions to the American rule and concluded that these
limited, narrow exceptions appear consistent with the policies underlying the rule. See
id. at 455-57. In contrast, the Court reasoned that the private attorney
general exception is “overly broad and not consistent with those policies.” Id.
at 455. The Court offered several reasons for this conclusion. First,
the Court could not justify extending the scope of its inherent powers because
applying the private attorney general exception requires courts to “look beyond the proceedings
before it to determine which rights are of more societal importance than others”
and the advocates did not show that making such “broad determinations” involved powers
which could not be dispensed with in court. Id. at 458.
The Court expressed concerns that it lacked sufficient guidelines to use its inherent
powers to create and apply the private attorney general exception. See id.
Moreover, the Court worried that an “unprincipled use of the doctrine would
upset the careful ‘balancing of competing public policy concerns’ that underlies the American
rule and its recognized exceptions.” Id. (citation omitted). Finally, with respect
to expanding the Court’s inherent powers, it weighed the necessity of protecting public
revenues unless specifically allowed to redirect them by statute. See id.
The Supreme Court of New Mexico held similar concerns for expanding its equitable
powers, noting that the state’s “present case law on equitable exceptions provides no
general principle from which we may derive an additional exception that would cover
the facts of this case.” Id. at 459. Concluding its analysis,
the Court declined to “adopt a new rule that moves New Mexico courts”
towards an English system for awarding attorneys’ fees. Id. Summarizing, the
Court stated:
Unbridled judicial authority to “pick and choose” which plaintiffs and causes of action
merit an award of attorney fees under the private attorney general doctrine would
not promote equal access to the courts for the resolution of good faith
disputes inasmuch as it lacks sufficient guidelines to prevent courts from treating similarly
situated parties differently and could easily result in decisions that favor a particular
class of private litigants while unduly discouraging the government from mounting a good
faith defense. Such authority also would not promote the goal of conserving
judicial resources inasmuch as it calls for the courts to engage in a
fact-specific reexamination of the merits of a case to determine the significance and
scope of the rights that have been protected.
Id. (citations omitted).
In Doe v. State, 579 A.2d 37 (Conn. 1990), a class of indigent
women and physicians prevailed in its challenge to the legality of regulations restricting
the funding of abortions under the state’s Medicaid program. The trial court
found that the regulation exceeded the statutory authority of the commissioner of income
maintenance and violated the plaintiffs’ due process rights under Conn. Const. art. I,
§ 10.
See footnote
Determining that the cited constitutional provision authorized a fees award,
the trial court awarded the class of indigent women attorneys’ fees.
The Court concluded that the state constitution did not create a “right” to
attorneys’ fees. See Doe, 579 A.2d at 47. Therefore, the Court
next considered whether an alternative basis, including the private attorney general exception, existed
upon which to affirm the fees award. See id. The Court
asserted that it is “well entrenched” that Connecticut adheres to the American rule.
See id. It observed that the state legislature has not “chosen
to repudiate the American rule, but rather has made specific provisions for attorneys’
fees in selected statutes.” Id. at 48. Thus, the Court concluded
that it is “inappropriate for the judiciary to establish under the private attorney
general doctrine a broad rule permitting such fees whenever a private litigant has
at substantial cost to himself succeeded in enforcing a significant social policy that
may benefit others.” Id. (citation omitted). Cf. Moore v. City of
Pacific, 534 S.W.2d 486, 504-05 (Mo. 1976) (declining to adopt private attorney general
exception in disallowing fees award, after concluding that plaintiff made prima facie showing
that disputed redistricting ordinance violated constitutional “one man-one vote” principles).
States have also rejected the private attorney general theory when statutory violations are
primarily at issue. The Supreme Court of Illinois dealt with a property
taxation case nearly twenty-five years ago in Hamer v. Kirk, 356 N.E.2d 524
(Ill. 1976). In Hamer, the Court reversed the trial court’s award of
attorneys’ fees in an action brought on behalf of a class of taxpayers
and resulting in an order that the Lake County Board of Review equalize
the level of assessment for each township in the county. See id.
at 525, 529. The order came after much protracted litigation, including several
prior appeals to the Supreme Court of Illinois. See id. at 525
(citing Hamer v. Lehnhausen, 328 N.E.2d 11, 13 (Ill. 1975) (explaining that proceedings
related to case had been pending in state courts for past decade and
that litigation resulted from failure of state and local officials to produce uniformity
in assessments as required by statute)). The Court stated that no authority
existed in Illinois to “support an award of attorney’s fees solely on the
basis of a public interest rationale.” Id. at 528. Noting that
in Alyeska Pipeline the United States Supreme Court had held it to be
inappropriate to reallocate the burdens of litigation in the manner and extent requested,
the Court asserted, “We believe that such a determination by this court would
be equally inappropriate.”
See footnote
Id. (citing 421 U.S. at 247, 95 S. Ct.
at 1616).
The Supreme Court of Washington rejected the private attorney general exception in Blue
Sky Advocates v. State, 727 P.2d 644 (Wash. 1986). In Blue Sky
Advocates, a group of wheat farmers and citizens (Blue Sky) intervened in administrative
proceedings involving site certification for a proposed coal-fired electrical generating facility. Blue
Sky raised and expended substantial sums in successfully obtaining a reduction in sulfur
dioxide emissions from the project. Blue Sky sued the state to recover
its expenses, including attorneys’ fees. Over a vigorous dissent, the Court refused
to adopt the private attorney general exception. See id. at 649 and
649-52 (Dore, J., dissenting). In so doing, the Court adopted the reasoning
in Alyeska Pipeline, where the United States Supreme Court determined that it was
up to Congress and not the judiciary to fashion an exception to the
American rule and award fees in some cases but not others.
See footnote
See
id. at 649 (citing Alyeska Pipeline, 421 U.S. at 269, 95 S.
Ct. at 1627).
In Jones v. Muir, 515 A.2d 855 (Pa. 1986), parties challenged the failure
by the State of Pennsylvania to implement collection of charges for a special
fund designed to provide citizens with medical treatment and rehabilitative services arising from
automotive-related injuries. A state statute, 42 Pa. Cons. Stat. § 2503, enumerated
nine traditionally recognized bases for awarding attorneys’ fees; none authorized a fees award
pursuant to the private attorney general exception. See id. at 861.
The Court noted that the General Assembly had specified in statute numerous circumstances
where attorneys’ fees awards are permitted, including several “actions to enforce public interest
embodied in enactments of the General Assembly.” Id. at 862 (citing statutes
in footnote thirteen dealing with environmental, energy and other concerns). Concluding that
the power to authorize the awarding of attorneys’ fees rests exclusively with the
General Assembly and noting that the legislature had not approved of fees awards
under the private attorney general exception, the Court refused to adopt the exception.
See id. at 862 (citing Alyeska Pipeline, 421 U.S. at 269, 95
S. Ct. at 1627). Cf. Nemeth v. Abonmarch Dev., Inc., 576 N.W.2d
641, 651-53 (Mich. 1998) (rejecting private attorney general exception absent statutory authorization, where
environmental protection statute allowed costs to be apportioned to parties in the “interests
of justice”); Pearson v. Board of Health of Chicopee, 525 N.E.2d 400, 403
(Mass. 1988) (concluding that Court “should not depart from our general rule that
each party bears its own legal costs” in reversing trial court’s fees award
in action by registered voters contesting validity of meetings held in violation of
state’s open meeting law); Van Emmerik v. Montana Dakota Utilities Co., 332 N.W.2d
279, 284 (S.D. 1983) (applying rationale in Alyeska Pipeline and following Hamer in
rejecting private attorney general exception and affirming denial of fees award in class
action commenced by taxpayer seeking a refund of sales taxes from state and
retailers of utility services), cert. denied, 464 U.S. 915, 104 S. Ct. 278,
78 L. Ed. 2d 257 (1983); Providence Journal Co. v. Mason, 359
A.2d 682, 688 (R.I. 1976) (noting that legislature had expressly provided for awarding
of attorneys’ fees in some cases and that it could but had not
done so under the state’s Fair Employment Practices Act, so that trial court
correctly reversed commission’s fees award).
Courts refusing to adopt the private attorney general exception strictly adhere to the
American rule. These courts tend to emphasis the lack of statutory authorization
to award fees using the exception. Applying the United States Supreme Court’s
rationale in Alyeska Pipeline, these courts also express reluctance to weigh the relative
societal importance of individuals’ rights and legislative policies. This reluctance largely stems
from a perceived lack of guidance in adjudging the importance of such rights
and policies combined with a desire not to interfere with legislative prerogatives.
Also, the courts wish to avoid burdening the judicial system with disputes as
to what constitutes proper fees. Although these concerns possess merit, the Court
will next explain why the private attorney general exception should be recognized, adopted
and applied to support an award of attorneys’ fees to Petitioners in the
present case.
V. Adoption and Application of Private Attorney General Exception
The Court finds that it is appropriate, given the extraordinary circumstances of the
present case, to award Petitioners attorneys’ fees pursuant to the private attorney general
exception. Although the Indiana Supreme Court has yet to recognize the private
attorney general exception, the Indiana Court of Appeals has recognized the exception no
fewer than sixteen times since 1973. As explained supra, neither the Downing
court nor the Ferguson court rejected the existence of the exception—only its application
to the specific facts under consideration. See Downing, 505 N.E.2d at 845
(“We see nothing in the record which would indicate that [the exception] would
apply in this case.”); Ferguson, 712 N.E.2d at 1045 (“Here, there is no
basis for an award of attorney fees or costs.”). Heretofore, the exception
has never been applied to support an award of attorneys’ fees. That
fact, however, fails to convince this Court that the exception should never be
used as a basis for a fees award. Cf. Montanans, 989 P.2d
at 811-12 (stating that Court had previously recognized but not applied private attorney
general exception); Arnold, 775 P.2d at 537 (observing that Arizona had long recognized
the private attorney general exception but had not applied it until present case).
In deciding whether to apply the exception in the present case, the
Court turns to the Serrano and Montanans decisions, discussed supra, for guidance.
In its recent Montanans opinion, the Supreme Court of Montana adopted the three-factor
inquiry announced in Serrano. Thus, in deciding whether to apply the private
attorney general exception, both states’ supreme courts considered: (1) the strength or
societal importance of the public policy vindicated by the litigation; (2) the necessity
for private enforcement and the magnitude of the resultant burden on the plaintiff;
and (3) the number of people standing to benefit from the decision. See
Serrano, 569 P.2d at 1314; Montanans, 989 P.2d at 811-12. The
Court will examine these three factors as well.
Through the efforts of their counsel, Petitioners have vindicated a constitutional principle of
substantial importance. The Property Taxation Clause, article X, section I of the
Indiana Constitution, calls on the General Assembly to provide by law a “uniform
and equal rate of property assessment and taxation,” in order to “secure a
just valuation for taxation of all property.” As our Supreme Court has
noted, the Property Taxation Clause requires a system of “assessment and taxation
characterized by uniformity, equality, and just valuation based on property wealth . .
. .” State Bd. of Tax Comm’rs v. Town of St. John,
702 N.E.2d 1034, 1040 (Ind. 1998). This provision “establishes mandatory minimum requirements
for our system of property assessment and taxation.” Boehm v. Town of
St. John, 675 N.E.2d 318, 324 (Ind. 1996) (subsequent history omitted). The
Property Taxation Clause thus limits the State’s power to tax. According to
the Supreme Court, compliance with the clause is subject to judicial review; therefore,
the “State Board’s assessment regulations must be based on objectively verifiable data to
enable review of the system and to ensure that it generally provides for
uniformity and equality based on property wealth.” Town of St. John, 702
N.E.2d at 1042.
The private attorney general exception promotes vindication of important public rights. In
Serrano, the Supreme Court of California affirmed the lower court’s determination that the
state’s public school financing system violated state constitutional provisions guaranteeing equal protection of
the laws. See Serrano, 569 P.2d at 1304. In Montanans, the
Supreme Court of Montana found that the State, as trustee of lands granted
it by the federal government to benefit “common schools,” had violated certain state
constitutional provisions regarding administration of the trust lands. See Montanans, 989 P.2d
at 805-10. See also Hellar, 682 N.E.2d at 531 (noting trial court’s
conclusions, as to legislative reapportionment scheme, that “there may be no greater public
policy” than insuring proper representation); Stewart, 885 P.2d at 776-77 & 783 (finding
statute unconstitutionally delegated legislative powers to a private party and that ratepayers “have
successfully vindicated an important public policy”). As did the courts in Serrano
and Montanans, this Court finds that an important policy, one “grounded in” the
state constitution, has been litigated by Petitioners. Serrano, 569 P.2d at 1315;
Montanans, 989 P.2d at 812. The Property Taxation Clause expresses a cornerstone
principle in Indiana taxation law: the State may not arbitrarily assess property.
Petitioners sought to enforce this principle. Thus, they successfully litigated a
public policy of substantial importance.
Enforcement of the Property Taxation Clause required private litigation that resulted in a
significant burden on Petitioners’ time and resources. In the present challenge, the
Attorney General of Indiana has represented the Respondent State Board throughout this litigation.
The Attorney General has been obligated to defend the State Board’s unconstitutional
system at every step. Thus, public enforcement of the Property Taxation Clause’s
mandate for a uniform, equal and just assessment system has been impossible.
See Serrano, 569 P.2d at 1315 n.20 (noting trial court’s finding that neither
California Attorney General nor any other governmental counsel could reasonably have been expected
to institute litigation); Montanans, 989 P.2d at 812 (pointing out State’s argument that
it had a duty to defend disputed statutes); Hellar, 682 P.2d at 530
(observing that Idaho Attorney General had been asked by legislature to defend unconstitutional
reapportionment scheme, so that the office could not defend either the constitutional provision
at issue or the “interest of the people”); Stewart, 885 P.2d at 783
(noting significance of fact that committee responsible for representing consumer interests made no
appearance in case and that public service commission and division opposed ratepayers on
all issues).
The burden on Petitioners’ time and resources in prosecuting their constitutional challenge over
the past seven years has been immense. The breadth of litigation in
the present case has been vast. The Attorney General has vigorously defended
the State Board’s unconstitutional system from the inception of this litigation. As
Petitioners note, they have been required to litigate a motion to dismiss, a
seven day trial, an appeal to the Indiana Supreme Court, a remand to
this Court, a second appeal to the Supreme Court and another remand to
this Court. (Br. of Pet’rs in Supp. of Att’ys’ Fees at 27-28.)
Due to the State Board’s inability to promulgate constitutional regulations to date,
Petitioners have been forced to continue petitioning this Court for appropriate relief.
Moreover, following this Court’s order of May 31, 2000, Petitioners’ involvement in this
case will likely continue for at least two more years. See Town
of St. John v. State Bd. of Tax Comm’rs, No 49T10-9309-TA-70, 2000 WL
695610, at *3 (Ind. Tax Ct. May 31, 3000) (ordering all assessments in
Indiana be made under constitutional regulations as of March 1, 2002 and allowing
Petitioners to respond to State Board’s monthly progress reports). The record in
this case, including all evidence submitted at trial, transcripts and briefs by the
parties, is extensive and demonstrates a great number of hours of work on
the part of Petitioners’ counsel. The not-for-profit Indiana Civil Liberties Union
(ICLU) and four private “cooperating attorneys” represent Petitioners; they have collected no fees
from their clients but have incurred more than $60,000 in out-of-pocket expenses.
(Reply Br. of Pet’rs in Supp. of Att’ys’ Fees, Attach. 4) (Aff.
of Kenneth Falk ¶¶ 5 & 6.)
The State Board unconvincingly dismisses the magnitude of Petitioners’ burden. It argues that
Petitioners undertook this litigation with no expectation of payment under the private attorney
general exception. Further, the State Board asserts that the “private economic interests
that will benefit” from the result of this litigation could have prosecuted the
case. (Resp’t Br. Opp’g Att’ys’ Fees at 17.) According to the
State Board, these groups, had they brought the present case, could have financed
it. The State Board argues that most claims challenging the state constitution
will involve related federal constitutional claims, so that recovery under of fees under
42 U.S.C. § 1988 possibly will be available. Finally, the State Board
maintains that Indiana constitutional law has advanced adequately without a need for fee
shifting.
None of these arguments seriously refutes the enormity of Petitioners’ burden in the
present case, as that burden has developed. At the time this case
was filed, Indiana’s appellate courts had recognized the private attorney general exception on
several occasions. More importantly, though, regardless of Petitioners’ anticipated basis for requesting
fees at the inception of this litigation, they could not have known or
fully appreciated at the time of filing the burden they would face in
combating the State Board’s fervent and protracted defense of its unconstitutional system.
The Court focuses on the actual, great burden faced by Petitioners, not the
imagined burden of any for-profit entity that could have shouldered the expenses of
this litigation. In addition, the State Board does not take into account
how for-profit entities may opt to avoid costly litigation by using their resources
to force the State Board to bargain and reach a mutually agreeable conclusion
as to assessment and taxation issues. The Court declines the State Board’s
invitation to speculate on future state constitutional challenges by unknown parties and whether
those actions will make federal constitutional claims. Similarly, the Court is not
concerned with how litigants in other, recent cases have advanced constitutional claims; the
State Board fails to show how these cases are pertinent to the facts
and issues at hand, beyond placing the cases in the general category of
“constitutional.” (Resp’t Br. Opp’g Att’ys’ Fees at 18.)
Although the ICLU was financially supported by private interests to a limited extent,
that support was minimal. (Reply Br. of Pet’rs in Supp. of Att’ys’
Fees, Attach. 1) (Dep. of Sheila Kennedy at 18) (noting that ICLU received
approximately $20,000 from two private groups). According to Petitioners, the proceeds from
fundraising “came no where close to covering the out of pocket expenses incurred.”
(Reply Br. of Pet’rs in Supp. of Att’ys’ Fees at 16).
See id., Attach. 4 (Aff. of Kenneth Falk ¶ 7) (“The funding of
the [ICLU] is such that it can not assume this financial burden for
cases.”). Cf. Serrano, 569 P.2d at 1315 n.20 (noting trial court’s finding
that plaintiffs individually had insufficient resources to retain counsel to vindicate rights to
equitable educational and taxation systems); and Hellar, 682 P.2d at 530 (noting
that plaintiffs’ counsel was subjected to extensive time demands and was forced to
borrow money to meet his office obligations during litigation). The ICLU and
its cooperating attorneys were faced with a great burden, as to the protracted
litigation in this case. To dismiss that burden now would trivialize the
efforts of counsel in enforcing the state constitution and would ignore the fact
that, in many instances, only public interest firms or entities are prepared for
and willing to challenge constitutional violations. See Serrano, 569 P.2d at 1316
(stating that denial of fees to attorneys in public interest firms would be
“essentially inconsistent” with the private attorney general theory).
Additionally, the Indiana Supreme Court’s opinion of December 4, 1998 underscores the need
for private enforcement in this case. In its opinion, the Supreme Court
concluded that the Property Taxation Clause does not “create a personal, substantive right
of uniformity and equality. . . . It does not establish an
entitlement to individual assessments for abstract evaluation of property wealth, nor does it
mandate the consideration of independent property wealth evidence in individual assessments or tax
appeals.” Town of St. John, 702 N.E.2d at 1040. Thus, taxpayers
have no constitutional right to produce evidence to the State Board at the
administrative level that their individual properties, when compared to similar properties, are not
fairly and equitably assessed. Without this opportunity, individual taxpayers are seriously prejudiced
in their ability to successfully challenge the constitutionality of their assessments under the
Property Taxation Clause and will have to make a Herculean effort to do
so. As Petitioners observe, “the only way that this unconstitutionality can be
raised is through a global attack on the total system of taxation itself.
The rights in this case must, necessarily, be enforced by citizens who
are complaining not about their own personal situations, but about the total system.”
(Br. of Pet’rs in Supp. of Att’ys’ Fees at 27.) In
fact, this Court in its order of April 23, 1999 dismissed Petitioners’ individual
claims for their individual properties in this case, stating that the “Constitution does
not prescribe any one single assessment system, so no individual has an entitlement
under Article 10, § 1 to any particular assessment or assessment methodology.”
This being the case, Petitioners were obligated to attack the constitutionality of the
State Board’s assessment system in its entirety—a task that could not be accomplished
without the expenditure of a great deal of time and resources. The
Court finds that there was need for private enforcement in the present case
and that Petitioners incurred a considerable burden in enforcing their constitutional rights.
The Court finds that all Indiana citizens, either directly or indirectly, stand to
benefit from this litigation’s outcome. The new regulations will directly impact the
three million Indiana real property taxpayers, whose properties will be assessed under a
constitutional system based on objectively verifiable data. The new regulations will lead
to uniformity and equality of assessments throughout Indiana. Homeowners, businesses and local
government entities, including schools, that rely upon property taxes for support will benefit
from the elimination of arbitrary assessment practices. Even the State Board, through
its Commissioner, has admitted that the ability to judge whether various classes of
property are being treated equally and fairly is a benefit to all citizens
and all taxpayers of Indiana. (Reply Br. of Pet’rs in Supp. of
Att’ys’ Fees at 12) (citing Attach. 2, Dep. of Timothy Brooks, at 24-25.)
Petitioners correctly list several benefits of this litigation: (1) an end
to arbitrary assessments; (2) abandonment of a self-referential system in favor of one
using objectively verifiable data; (3) greater accuracy of assessments; (4) equality of assessments
among various jurisdictions throughout the state; (5) equality of taxation among various classes
of property; (6) improved assessment appeals; and (7) equity for taxing bodies. (Br.
of Pet’rs in Supp. of Att’ys’ Fees at 4-11.) The far-reaching impact
of this litigation cannot be questioned; virtually all Indiana citizens will benefit from
this litigation. Cf. Serrano, 569 N.E.2d at 1315 n.19 (noting trial court’s
finding that litigation protected rights of every California child); Montanans, 989 N.E.2d at
812 (stating that litigation benefited “all Montana citizens interested in Montana’s public schools”);
Hellar, 682 P.2d at 531 (noting trial court’s finding that “every Idaho citizen”
affected by reapportionment of state legislature); and Stewart, 885 P.2d at 783 (concluding
that “results achieved by ratepayers will necessarily benefit all [of utility’s] ratepayers in
the state of Utah”).
Having examined the three-prong inquiry of Serrano, the Court finds that each factor
has overwhelmingly been met in the present case. A strong public policy
has been vindicated. A need for private enforcement is present and the
burden on Petitioners to prosecute this case has been tremendous. Finally, a
great number of persons across Indiana will benefit from the outcome of this
litigation. Thus, a fees award pursuant to the private attorney general exception
is appropriate in the present case.
However, the State Board disagrees, making several arguments. The State Board invokes
sovereign immunity principles in opposing the adoption and application of the private attorney
general exception as a basis for a fees award.
See footnote
It cites article
X, section three of the Indiana Constitution, which provides, “No money shall be
drawn from the Treasury, but in pursuance of appropriations made by law.”
According to the State Board, the General Assembly has defined many ways in
which citizens may obtain compensation from the State Treasury, and this Court should
not create a new, common law method for litigants to access the State
Treasury.
Claims of sovereign immunity will not prevent Petitioners from recovering reasonable attorneys’ fees
where the private attorney general exception can be appropriately applied. The State
may not invoke sovereign immunity to shield it from all claims against it
in all cases. For example, the Indiana Supreme Court in Campbell v.
State, 259 Ind. 55, 284 N.E.2d 733, 737 (Ind. 1972) limited the defense
in tort cases, holding that it is “not available to any greater extent
than is now available to municipal corporations and counties of this state.”
The Indiana Supreme Court recently reaffirmed its Campbell decision in Benton v. City
of Oakland City, 721 N.E.2d 224, 230 (Ind. 1999).
See footnote
Sovereign immunity is a limited, yet viable doctrine. Our Supreme Court has
held that, based on sovereign immunity principles, the “State is not liable for
interest on payments due unless it binds itself by contract or statute to
pay [pre-judgment] interest.” Indiana Dep’t of Pub. Welfare v. Chair Lance Serv.,
Inc., 523 N.E.2d 1373, 1379 (Ind. 1988). However, even where pre-judgment interest
is concerned, the Supreme Court has acknowledged an exception, i.e., “interest on amounts
unlawfully exacted as taxes and paid under protest.” Id. at 1379-80 (citing
Metropolitan Life Ins. Co. v. State, 194 Ind. 657, 144 N.E. 420 (1924)).
Moreover, to support its sovereign immunity argument, the State Board correctly acknowledges that,
as a general rule, equitable estoppel will not be applied against governmental authorities.
(Resp’t Br. Opp. Att’ys’ Fees at 11)(citing Indiana Dep’t of Envtl. Mgm’t
v. Conard, 614 N.E.2d 916, 921 (Ind. 1993); U.S. Outdoor Advertising Co. v.
Department of Transp., 714 N.E.2d 1244, 1257 (Ind. Ct. App. 1999)). Equitable
estoppel is a doctrine “by which a person may be precluded by his
act or conduct, or silence when it is his duty to speak, from
asserting a right he otherwise would have.” Black’s Law Dictionary 373 (6th
ed. abr. 1991). The party claiming equitable estoppel must show: “(1)
lack of knowledge and of the means of knowledge as to the facts
in question; (2) reliance upon the conduct of the party estopped, and (3)
action based thereon of such a character as to change his position prejudicially.”
U.S. Outdoor Advertising, 714 N.E.2d at 1259 (quotations omitted). However,
as the Court of Appeals has pointed out, application of equitable estoppel to
government entities “is not absolutely prohibited.” Id. at 1260 (citing City of
Crown Point v. Lake County, 510 N.E.2d 684, 687 (Ind. 1987)). Indeed,
this Court has likewise acknowledged the limited application of equitable estoppel to government
entities but implied that the doctrine could be used where there is “clear
evidence that [the government’s] agents made representations upon which the party asserting estoppel
relied.” West Publ’g Co. v. Indiana Dep’t of Revenue, 524 N.E.2d 1329,
1333 (Ind. Tax Ct. 1988). Thus, although the principle of sovereign immunity
limits application of equitable estoppel to governmental entities, it does not absolutely bar
its use. Where the facts clearly support application of the doctrine, it
can and should be applied to governmental entities. A similar conclusion can
be drawn with the private attorney general exception. Where the facts support
application of the exception, application against the State may be permitted at the
Court’s discretion.
As with most jurisdictions rejecting the private attorney general exception, the State Board
argues that fee-shifting is a legislative matter, that the General Assembly knows how
to and has enacted numerous fee-shifting statutes and that adopting the exception will
result in problematic ranking of rights between allegedly fee-meriting and non-fee-meriting claims.
(Resp’t Br. Opp. Att’ys’ Fees at 12-17.) See, e.g., Johnson, 986 N.E.2d
at 458 (expressing concerns that guidelines for private attorney general exception were vague,
that legislature had established public policy as to fees awards in certain civil
rights cases and that public revenues must be protected); Doe, 579 A.2d at
48 (concluding that it is inappropriate allow fees award under private attorney general
exception, where legislative policy was to select situations where such awards are appropriate);
Blue Sky Advocates, 727 P.2d at 649 (adopting reasoning from Alyeska Pipeline that
courts are not free to “pick and choose” among claims meriting a fees
award, based upon the court’s assessment of a public policy’s importance); and Nemeth,
576 N.W.2d at 653 (observing that legislature “knows how to provide for attorney
fees when enacting a statute and has done so on many occasions”) (citations
omitted). The General Assembly has provided for fee shifting in several statutes.
See footnote
(Resp’t Br. Opp. Att’ys’ Fees at 15.) Moreover, the “obdurate behavior”
exception has essentially been codified at Ind. Code Ann. § 34-52-1-1 (West 1999).
See footnote
In addition, as the State Board indicates, Ind. T.R. 23(D), which governs
class actions, implicitly endorses the common fund exception.
See footnote
The Court is not precluded from allowing fees in some circumstances simply because
the General Assembly has chosen to permit fee shifting under other circumstances.
As in Arizona, where the Supreme Court identified at least seventy-three statutes providing
for fee shifting, this Court notes that Indiana’s fee shifting statutes, together with
the obdurate behavior and common fund doctrines, have “eroded” the American rule’s status
in this state. See Arnold, 775 P.2d at 537. Drawing a
parallel between Indiana Code 34-52-1-1 and Idaho Rule of Civil Procedure 54(e)(1), both
of which basically restrict awards to bad faith behavior, the Court agrees with
the conclusion of the Supreme Court of Idaho that application of the private
attorney general exception is not limited by such a restricting provision. See
Hellar, 682 P.2d at 531. See also Montanans, 989 P.2d at 810-12
(noting that trial courts have discretion in awarding fees to “make an injured
party whole” and adopting private attorney general exception, despite statute limiting fees award
against state to situations where state’s actions were frivolous or done in bad
faith). Further, Indiana does not have a cost statute similar to that
discussed in Aleyska Pipeline, which statute dated back to 1853. It was
this statute, in its original and subsequent forms, which the Supreme Court relied
upon to a large degree in rejecting the private attorney general exception.
Thus, Indiana lacks the same historical legislative grounds for refusing to apply the
exception. Moreover, the General Assembly cannot envision every possible instance where a
fees award may be appropriate. The presence of various provisions for fee
shifting does not manifest an intent by the General Assembly to forbid a
fees award in all cases; thus, the Court finds that it may justify
a fees award pursuant to the private attorney general exception.
The Court need not worry about the burdens of weighing the importance of
different public interests or fear the loosed “dogs” of litigation predicted by the
State Board. (Resp’t Br. Opp. Att’ys’ Fees at 16.) As did
the Supreme Court of Utah in Stewart, 885 P.2d at 783 n.19, this
Court, in “holding that the private attorney general doctrine applies here, [] note[s]
the exceptional nature of this case. . . . [A]ny future
award of attorney fees under this doctrine will take an equally extraordinary case.”
This reservation should hold the menacing hounds at bay; while not necessarily
limiting its decision to successful vindication of important rights under the constitution, this
Court will insist that future litigants requesting attorneys’ fees under the private attorney
general exception show that equally extraordinary circumstances, when considered in their totality, are
present. In making future decisions, the Court will not be without sufficient
guidelines. The three-part inquiry, as used in Serrano and Montanans, provides meaningful
direction when examining the particular facts of a case to decide whether the
exception is applicable. The Court should not and will not deny an
appropriate fees award in the present case simply out of fear that it
will be asked to exercise its analytical skills in future cases to determine
whether those particular cases reflect equally extraordinary circumstances.
Finally, the State Board contends that, even if the private attorney general theory
is recognized and adopted by this Court, it does not apply in this
case. The State Board supports its position with several arguments. First,
it claims that that residential property taxes will increase because of this case.
According to the State Board, the new assessment regulations resulting from this
litigation will ultimately shift the tax burden from businesses to homeowners. Thus,
the State Board maintains that the “general public,” which it characterizes as “residential
property owners,” will pay higher taxes, and it is the general public that
should benefit under the private attorney general exception. (Resp’t Br. Opp. Att’ys’
Fees at 25.) Second, the State Board argues that the present litigation
will spawn additional litigation over the legality of the rules governing the next
reassessment, and taxpayers will have to pay for this litigation as well.
Third, the State Board, while admitting that this “litigation will lead to a
more transparent property tax assessment system,” contends that the same citizens whose taxes
will pay the attorneys’ fees will be paying higher taxes as a result
of this litigation. (Resp’t Br. Opp. Att’ys’ Fees at 26.)
The Court will not repeat its earlier discussion of the benefits of this
litigation but will simply note that a constitutional taxation and assessment system will
benefit all real property taxpayers—both business and residential property owners. The Court
declines the State Board’s invitation to pit one group of taxpayers against another.
While tax burdens will likely shift and residential taxpayers may have to
pay higher property taxes as a result of this litigation (a speculative assertion),
taxpayers do not have Petitioners to blame. As this Court has previously
noted, “the State Board does not know how to measure equality of taxation
among the various classes of property, [so] for over thirty years no measurement
of equality has been undertaken.” Town of St. John v. State Bd. of
Tax Comm’rs, 690 N.E.2d 370, 376 (Ind. Tax Ct. 1997), rev’d in part,
aff’d in part, 702 N.E.2d 1034 (Ind. 1998). Blame lies squarely with
the party in the best position to fix the longstanding unconstitutional system—the State
Board. As the Court stated in its hearing on April 28, 2000,
“The Constitution is what forms the foundation for our system of government, and
if we’re to have a government of laws and not of men it
can never be too expensive to follow the Constitution. The cost of
doing otherwise is too dear.” (H’rg Tr. at 60.) To
borrow a phrase from the Supreme Court of Arizona, in determining that the
State Board has a duty to develop a constitutional system for taxation of
real property, the “duty may may well be more expensive in the breach
than in the fulfillment.” Arnold, 775 P.2d at 538. In other
words, the detriment to taxpayers of continuing to deal with an unconstitutional assessment
system is more expensive, in time and resources, than fixing the problem.
As the Court noted in its order and judgment entry of March 2,
1998 (as clarified April 2, 1998), “In our legal system, constitutional rights are
a categorical imperative.” Town of St. John v. State Bd. of Tax
Comm’rs, 691 N.E.2d 1387, 1389 (Ind. Tax Ct. 1998), rev’d 702 N.E.2d 1034
(Ind. 1998) (reversing Tax Court’s order to consider “all competent real world evidence”
on or after May 11, 1999). The Court, therefore, will not hear
the State Board to complain that the very taxpayers who have been suffering
under the present system for so long will be further harmed by paying
to correct the State Board’s costly mistakes.
A fees award is not inconsistent with Indiana precedent. The exception is
intended to promote meritorious public interest litigation, either constitutional or statutory. See
Serrano, 569 P.2d at 1316; Arnold, 775 P.2d at 537.
See footnote
The Court
has previously discussed how the public’s interest is advanced by this litigation.
Further, Indiana has recognized the exception for almost three decades. This case
represents the first application of the exception to support a fees award in
Indiana. If no Indiana court had previously recognized the exception, this Court
perhaps would have deemed the exception unavailable at this time to support a
fees award. This is not the case. As the Supreme Court
has posited, the common law is not a “frozen mold of ancient ideas,
but such law is active and dynamic . . . .” Sandy
Ridge Oil Co. v. Centerre Bank Nat’l Ass’n, 510 N.E.2d 667, 670 (Ind.
1987) (quoting Perkins v. State, 252 Ind. 549, 554, 251 N.E.2d 30, 33
(1969)) (responding to certified question from federal court). The common law “must
keep pace with changes in society.” Id. (quoting Troue v. Marker, 253
Ind. 284, 290, 252 N.E.2d 800, 804 (1969)).
See footnote
The Court’s decision today
does not run afoul of established precedent; it reflects the logical refinement of
the common law exceptions to the American rule to meet society’s need to
promote public interest litigation.
The Court’s ruling also does not undermine the purposes for the American rule.
The Court’s decision does not discourage meritorious litigation on the part of
poor taxpayers who may fear being forced to pay their opponents’ fees.
The private attorney general exception is typically applied against government entities that fail
to protect the important rights of citizens. But cf. Stewart, 885 P.2d
at 762 (fees awarded against regulated public utility). That is the situation
before the Court, and the Court has limited application of the exception to
situations where petitioners demonstrate the presence of extraordinary circumstances. A group of
taxpayers challenging the constitutionality of state regulations is in no danger of being
forced to pay the State’s attorneys’ fees under the exception, as the state
necessarily acts through the public’s Attorney General to enforce and defend the constitution.
Thus, if anything, the Court’s ruling today promotes meritorious litigation by those
who otherwise may not be able to afford to enforce their constitutional rights.
The State Board can still be expected to mount meritorious defenses to constitutional
challenges. In the present case, this Court noted that the State Board
had not been able to measure equality of taxation among the various classes
of property for more than thirty years, yet insisted throughout the course of
this litigation that its regulations did not violate the Property Taxation Clause. Town
of St. John, 690 N.E.2d at 376. That hopefully will no longer
be the case once the State Board promulgates new, constitutional regulations. Then,
the State Board likely can justifiably oppose constitutional attacks. Moreover, given the
Court’s limits on application of the exception, the Court does not expect that
its resources will be subjected to a substantial burden in deciding an appropriate
fees award pursuant to the exception. Further, as indicated supra, the Court
should and does not shirk its responsibility for deciding such matters. After
all, the Court would have to expend resources in determining appropriate fees under
the other recognized exceptions to the American rule. In short, determining fees
is part of the Court’s basic function.
CONCLUSION
Indiana recognizes the private attorney general exception to the American rule. The
Court considers the three-factor inquiry provided for in Serrano and Montanans in deciding
whether to award fees using the exception. The Court finds that, given the
extraordinary circumstances of this case, a fees award is both appropriate and justified.
Therefore, the Court hereby ENTERS FINAL JUDGMENT pursuant to Ind. T.R. 58
and ORDERS the State Board to pay reasonable attorneys’ fees and costs to
Petitioners’ counsel.
Petitioners shall submit their proposed fees award to the Court on or before
thirty days from the date of this Order. Respondent shall have thirty
days from Petitioners’ filing to respond. Petitioners thereafter shall have fifteen days
to submit their reply.
Thomas G. Fisher, Judge
Indiana Tax Court
Distribution:
Representing Petitioners:
Thomas M. Atherton
KATZ & KORIN, P.C.
1120 Market Tower
10 West Market Street
Indianapolis, IN 46204
Richard A. Waples
Attorney at Law
410 North Audubon Road
Indianapolis, IN 46219
Peter H. Donahoe
HILL FULWIDER McDOWELL FUNK
& MATTHEWS, P.C.
One Indiana Square, Suite 2000
Indianapolis, IN 46204-2031
James K. Gilday
WOOD TUOHY GLEASON MERCER
& HERRIN
3400 Bank One Center Tower
Indianapolis, IN 46204-5134
Kenneth J. Falk
Legal Director
Indiana Civil Liberties Union
1031 East Washington Street
Indianapolis, IN 46202
Representing Respondent:
Karen M. Freeman-Wilson
Attorney General of Indiana
By: Jon Laramore
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, IN 46204-2770
Footnote:
The American rule is the “requirement that each litigant must pay its
own attorney’s fees, even if the party prevails in the lawsuit.”
Black’s
Law Dictionary 82 (7th ed. 1999). See also Hall v. Cole, 412
U.S. 1, 4, 93 S. Ct. 1943, 1945-46 (1973) (noting that “traditional American
rule ordinarily disfavors the allowance of attorneys’ fees in the absence of statutory
or contractual authorization”). For an overview of the American rule, its development,
rationales and its exceptions, see Dan B. Dobbs, Dobbs Law of Remedies, §§
3.10(1)-(2) (West Publ’g 2d ed. 1993). See also John F. Vargo, The
American Rule on Attorney Fee Allocation: The Injured Person’s Access to Justice,
42 Am. U. L. Rev. 1567, 1570-78 (tracing development of American rule).
The private attorney general exception allows an award of attorneys’ fees to plaintiffs
in “certain kinds of important litigation that will result in public benefits, .
. . at least where such fees are necessary to finance important and
beneficial litigation that otherwise might not be brought.” Dobbs, supra at 398.
Footnote:
In this Court’s most recent order, dated May 31, 2000, the Court
pursuant to Ind. Trial Rule 54(B) expressly retained jurisdiction over the attorneys’ fees
issue. See Town of St. John v. State Bd. of Tax Comm’rs,
No. 49T10-9309-TA-70, 2000 WL 695610, at *7 n.18 (Ind. Tax Ct. May 31,
2000).
Footnote:
These exceptions include: (1) recovery from a common fund; (2) assessment
of fees as part of a fine levied by a court for “willful
disobedience” of its order; and (3) when the losing party acts in bad
faith.
See Alyeska Pipeline, 421 U.S. at 257-59, 95 S. Ct. at
1621-22. See also infra, nn.4 & 5 (discussing common fund, common or
substantial benefit and obdurate behavior doctrines recognized in Indiana).
Footnote:
The Indiana Supreme Court considered the obdurate behavior exception in
Kikkert v.
Krumm, 474 N.E.2d 503 (Ind. 1985). According to the Court, “The nature
of an attorney fee award under the obdurate behavior exception is punitive, designed
to reimburse a prevailing party who has been dragged into baseless litigation and
thereby subjected to great expense.” Id. at 505 (citations omitted) (emphasis in
original). Cf. Hall, 412 U.S. at 5, 93 S. Ct. at 1946
(stating that it is “unquestioned” that federal courts may award attorneys’ fees to
a successful party where an opponent has acted in “bad faith, vexatiously, wantonly,
or for oppressive reasons”) (citations omitted).
Footnote:
“The common fund doctrine is deeply rooted in American jurisprudence[.] . .
. Pursuant to the common fund doctrine, the court may award attorney’s
fees to a party who initiated the action from a fund created or
preserved by that party’s counsel.”
Community Care Ctrs., Inc. v. Indiana Family
and Soc. Servs. Admin., 716 N.E.2d 519, 542 (Ind. Ct. App. 1999) (citing
Trustees v. Greenough, 105 U.S. 527, 26 L. Ed. 1157 (1882); Charles Alan
Wright, et al., Federal Practice And Procedure § 2675 (1998)), trans. denied. The
common fund exception is similar to but distinct from the “common benefit” or
“substantial benefit” exception. “The substantial benefit rule permits the plaintiff’s lawyer to
recover from persons who share in a supposed benefit which is not a
cash benefit and does not provide funds from which the lawyer can be
paid.” Dobbs, supra note 1 at 396. See also Hall, 412
U.S. at 5-7, 93 S. Ct. at 1946-47 (recognizing substantial benefit theory) (citing
Mills v. Electric Auto-Lite Co., 396 U.S. 375, 393-96, 90 S. Ct. 616,
626-27 (1970)); Community Care Ctrs., 716 N.E.2d at 542-45 (discussing differences between the
two exceptions and holding that common benefit exception should not be applied where
award can be based upon tangible benefits or a “fund”). The common
benefit or substantial benefit exception is viewed as an extension or outgrowth of
the common fund exception. See Community Care Ctrs., 716 N.E.2d at 543.
Accord Serrano v. Priest, 569 P.2d 1303, 1309 (Cal. 1977). Inexplicably,
the Supreme Court of Arizona, in adopting the private attorney general exception, as
discussed infra, equivocated the exception with the substantial benefit exception. See Arnold
v. Arizona Dep’t of Health Servs., 775 P.2d 521, 536-37 (Ariz. 1989) (reciting
that trial court had awarded attorneys’ fees “under the ‘private attorney general doctrine,’
also known as the ‘substantial benefits doctrine.’).
Footnote:
See Community Care Ctrs., Inc. v. Indiana Family and Soc. Servs. Admin.,
716 N.E.2d 519, 544 (Ind. Ct. App. 1999) (“Courts of this State have
also consistently recognized, albeit rarely, a private-attorney-general exception to the American Rule to
justify an award of attorney’s fees.”) (citations omitted), trans. denied; Citizens Action Coalition
of Ind., Inc. v. PSI Energy, Inc., 664 N.E.2d 401, 405 n.2 (Ind.
Ct. App. 1996) (“In the ‘private attorney general’ situation, courts compensate a private
party who brought suit to effectuate a strong legislative policy.”) (citation omitted); Wernke
v. Halas, 600 N.E.2d 117, 123 (Ind. Ct. App. 1992) (“There are exceptions
[to the American rule] for obdurate behavior, a common fund situation, and private
attorney general situations.”) (citation omitted); Estate of Kroslack, 570 N.E.2d 117, 120 (Ind.
Ct. App. 1991); Highland Realty, Inc. v. Indianapolis Airport Authority, 551 N.E.2d 1176,
1178 (Ind. Ct. App. 1990), vacated, 563 N.E.2d 1271 (Ind. 1990); Greensburg Local
No. 761 v. Robbins, 549 N.E.2d 79, 80 (Ind. Ct. App. 1990) (“[S]everal
exceptions have evolved in recent years . . . [including] where the court
compensates a private party who brought suit to effectuate a strong legislative policy
(the private attorney general exception).”) (citation omitted); Dotlich v. Dotlich, 475 N.E.2d 331,
347 (Ind. Ct. App. 1985), trans. denied; City of East Chicago v. Broomes,
468 N.E.2d 231, 234 (Ind. Ct. App. 1984); City of Logansport v. Remley,
453 N.E.2d 326, 330 n.4 (Ind. Ct. App. 1983); City of Marion v.
Antrobus, 448 N.E.2d 325, 332 (Ind. Ct. App. 1983); Cox v. Ubik, 424
N.E.2d 127, 129 (Ind. Ct. App. 1981) (describing private attorney general exception as
“where the court compensates a private party who has brought suit to effectuate
a strong legislative policy”) (citation omitted); Umbreit v. Chester B. Stem, Inc., 176
Ind. App. 53, 373 N.E.2d 1116, 1119 (1978) (citation omitted); City of Indianapolis,
Through Dep’t of Transp. v. Central R.R. Co. of Indianapolis, 175 Ind. App.
120, 369 N.E.2d 1109, 1113 (1977).
Footnote:
This interpretation is illogical. The American rule itself permits awards of
attorneys’ fees where authorized by statute; thus, the private attorney general exception necessarily
comes into play only when no statute authorizing an award of attorneys’ fees
applies to the facts before the court.
Footnote: California has codified the private attorney general exception. Effective in 1978,
Cal. Civ. Proc. Code § 1021.5 (West 2000) currently provides in part:
Upon motion, a court may award attorneys’ fees to a successful party against
one or more opposing parties in any action which has resulted in the
enforcement of an important right affecting the public interest if: (a) a
significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public
or a large class of persons, (b) the necessity and financial burden of
private enforcement, or of enforcement by one public entity against another public entity,
are such as to make the award appropriate, and (c) such fees should
not in the interest of justice be paid out of the recovery, if
any. . . .
Footnote:
As explained by the Court, though, it is not enough to determine
that the public policy vindicated is constitutional; such a determination “simply establishes the
first of the three elements requisite to the award . . . .”
Serrano, 569 P.2d at 1315 n.18. To justify a fees award
using the private attorney general theory, the other two prongs must be shown.
See id. Further, the Court in Serrano expressly declined to consider
whether the private attorney general exception could be employed to support an attorneys’
fees award where the litigation has vindicated a public policy having a statutory
basis. See id. at 1315.
Footnote:
The Serrano court also determined that the fees award was not affected
by the fact that plaintiffs’ attorneys received funding from charitable or public sources.
See Serrano, 569 P.2d at 1316. According to the Court:
Because the basic rationale underlying the “private attorney general” theory which we here
adopt seeks to encourage the presentation of meritorious constitutional claims affecting large numbers
of people, and because in many cases the only attorneys equipped to present
such claims are those in funded “public interest” law firms, a denial of
the benefits of the rule to such attorneys would be essentially inconsistent with
the rule itself.
Id.
Footnote:
In Utah, utilities can only charge those rates found to be “just
and reasonable” by the Commission.
Stewart, 885 P.2d at 771 (citing Utah
Code § 54-4-4). As the Court observed, the Commission’s role is to
“protect the interests of both the ratepayers and the shareholders and to accommodate
both those interests to the overall public interest.” See id. at 776.
In Stewart, the Court found it significant that the “Committee of Consumer Services,
which by statute is charged with the responsibility of representing consumer interests, made
no appearance at all on this appeal and that the Commission and Division
of Public Utilities have opposed the ratepayers on all issues.” Id. at
783.
Footnote:
Petitioners point to two other jurisdictions that have allowed attorneys’ fees in
public interest litigation, where the courts did not explicitly apply the private attorney
general exception but where the courts’ theories, according to Petitioners, provide a basis
for recognition and application of the exception in the present case. In
Tanner v. Oregon Health Sciences University, 980 P.2d 186, 189 (Or. Ct. App.
1999), review denied, 994 P.2d 129 (Or. 1999), Oregon’s Court of Appeals explained
that, to obtain an award of attorneys’ fees under the Supreme Court of
Oregon’s decision in Deras v. Myers, 535 P.2d 541 (Or. 1975), three conditions
must be satisfied: (1) the proceeding must be one in equity; (2)
the requesting party must have prevailed; and (3) the requesting party must have
been seeking to vindicate an important constitutional right applying to all citizens without
any gain peculiar to the party. See id. (citing Armatta v. Kitzhaber,
959 P.2d 49 (Or. 1998)). As the Court of Appeals explained, the
third condition required that a party seek a “public benefit.” See id.
at 189.
Alabama, in Shelby County Commission v. Smith, 372 So.2d 1092, 1096-97 (Ala. 1979),
explicitly rejected the private attorney general exception, as the exception is adopted in
Serrano. The Court seems to have at least implicitly reconsidered its rigid
position in Shelby County. In Brown v. State, 565 So.2d 585, 591-92
(Ala. 1990), the Supreme Court of Alabama permitted an award of attorneys’ fees
in a class action challenging class members’ convictions for traffic offenses where the
members had been issued improperly verified traffic complaints. The Court observed that:
[P]laintiffs have, however, made a significant contribution to the integrity of our system
of jurisprudence in calling attention to a serious flaw in its administration. .
. . This litigation clearly resulted in a benefit to the general
public. It is unquestionable that plaintiffs’ attorneys rendered a public service by
bringing an end to an improper practice. The public nature of the
services rendered by these lawyers justifies an award of attorney fees.
Id. (citing Callahan v. Wallace, 466 F.2d 59, 62 (5th Cir. 1972)).
Footnote:
In evaluating whether “substantial justification” is present, New Mexico courts consider:
(1) whether the precedent was so unworkable that is intolerable; (2) whether parties
justifiably relied upon the precedent, so that reversing it would create an undue
hardship; (3) whether the legal principles have developed to the extent that the
old rule is no more than a remnant of abandoned doctrine; and (4)
whether the facts have changed in the interval from the old rule to
reconsideration, so that the old rule has been robbed of its justification.
See Johnson, 986 P.2d at 453-54 (citation omitted).
Footnote:
The Court cites to
Fleishmann Distilling Corp. v. Maier Brewing Co., 386
U.S. 714, 87 S. Ct. 1404, 18 L. Ed. 475 (1967) in describing
the purposes behind the American rule. See Johnson, 986 P.2d at 454.
In Fleischmann, the Supreme Court stated:
In support of the American rule, it has been argued that since litigation
is at best uncertain one should not be penalized for merely defending or
prosecuting a lawsuit, and that the poor might be unjustly discouraged from instituting
actions to vindicate their rights if the penalty for losing included the fees
of their opponents’ counsel. Also, the time, expense, and difficulties of proof
inherent in litigating the question of what constitutes reasonable attorney’s fees would pose
substantial burdens for judicial administration.
Fleischmann, 386 U.S. at 718, 87 S. Ct. at 1407.
Footnote:
Inherent powers are those arising from the necessity for both trial and
appellate courts to impose a variety of sanctions on both litigants and attorneys
for purposes of regulating the courts’ dockets, promoting judicial efficiency and deterring frivolous
filings.
See Johnson, 986 P.2d at 455 (citation omitted).
Footnote:
In New Mexico, exceptions to the American rule arising under the Court’s
equitable powers include allowing awards for attorneys’ fees when a common fund has
been established and when fees are incurred in dissolving a wrongful injunction.
See Johnson, 986 P.2d at 456-57 (citations omitted).
Footnote:
As to this third category, the Supreme Court of New Mexico noted
that the “recognized exceptions to this category are narrow in scope.”
Johnson,
986 P.2d at 457 (identifying two exceptions, one involving divorce and child custody
proceedings and the other involving breaches of fiduciary duties) (citations omitted).
Footnote:
This provision provides: “All courts shall be open, and every person,
for an injury done to him in his person, property or reputation, shall
have remedy by due course of law, and right and justice administered without
sale, denial or delay.” The provision originated in the Magna Carta and
has been adopted in substantially the same form in the constitutional provisions of
most states.
Doe, 579 A.2d at 43 (citations omitted). Petitioners assert
that Indiana’s open court’s provision, Ind. Const. art. 1, § 12, which is
substantially similar to Connecticut’s version, supports adoption of the private attorney general exception.
The Court, however, does not believe this provision to be relevant in
deciding whether to adopt the private attorney general exception.
Footnote:
The Appellate Court of Illinois has recently reaffirmed the
Hamer decision.
In Fischer v. Brombolich, 616 N.E.2d 743 (Ill. App. Ct. 1993), appeal denied,
plaintiffs obtained a temporary injunction against the enforcement of an city ordinance transferring
control of the police department from the police and fire commissioner to the
mayor. The injunction was upheld on appeal and a permanent injunction entered.
Plaintiffs requested attorneys’ fees; the trial court dismissed the request. Plaintiffs
urged the Appellate Court to recognize and apply the private attorney general theory.
The Court set forth the following reasons supporting its refusal to adopt
the exception:
While adoption of the private attorney general theory may indeed create an environment
more conducive to litigation designed to challenge elected officials’ questionable conduct, the supreme
court has not sanctioned such a theory nor has the legislature created such
a fee-shifting statute. . . . There is no authority to support
an award of attorney fees solely on the basis of a public-interest rationale.
Further, the supreme court has been reluctant to reallocate the burdens
of litigation without legislative guidance. Even the knowledge that the litigation was
almost certainly brought about by the illegal actions of the individual members of
the legislative bodies has been held insufficient to justify fee shifting.
Id. at 745 (citations omitted).
Footnote:
The Court in
Blue Sky Advocates disapproved of the plurality opinion in
Miotke v. Spokane, 678 P.2d 803, 821-22 (Wash. 1984), which applied the private
attorney general exception to support an award of attorneys’ fees to plaintiffs in
a public nuisance action seeking an injunction and damages regarding raw sewage that
was being discharged into the Spokane River. Blue Sky Advocates, 727 P.2d
at 649. The Supreme Court of Washington recently reaffirmed its holding from
Blue Sky Advocates in City of Seattle v. McCready, 931 P.2d 156, 161-62
(Wash. 1997).
Footnote:
Sovereign immunity developed in England as a common law doctrine founded on
the substantive principle that “the king could do no wrong” and the procedural
notion that the king, as sovereign, was not subject to suit in his
own court.
See State v. Rendleman, 603 N.E.2d 1333, 1335 (Ind. 1992).
Footnote:
The General Assembly has the authority to determine the nature and extent
of the immunity of governmental units as regards tort claims.
See
Benton, 721 N.E.2d at 232. The Indiana Tort Claims Act [ITCA], Ind.
Code Ann. §§ 34-13-3-1 to –25 (West 1999), was enacted as a response
to the Campbell opinion and “established extensive immunity provisions which shield governmental units
from [tort] liability . . . .” Benton, 721 N.E.2d at 232.
Footnote:
For example,
Ind. Code Ann. §§ 34-52-2-1 to –6 (West 1999) governs
fees awards by courts reviewing final orders by state agencies made pursuant to
the Administrative Orders and Procedures Act. To review a representative list of
attorneys’ fees statutes pertinent to contract litigation, see James P. Nehf, Contract Damages
as Substitute for Full Performance, 32 Ind. L. Rev. 765, 778-79 (1999).
Footnote:
Section 34-52-1-1(b) provides:
In any civil action, the court may award attorney’s fees as part of
the cost to the prevailing party, if the court finds that either party:
(1) brought the action or defense on a claim or defense that is
frivolous, unreasonable, or groundless;
(2) continued to litigate the action or defense after the
party’s claim or defense clearly became frivolous, unreasonable, or groundless; or
(3) litigated the action in bad faith.
Also note,
Ind. Appellate Rule 66(E) (effective Jan. 1, 2001) permits the Court
on appeal to “assess damages if an appeal, petition, or motion, or response,
is frivolous or in bad faith. Damages shall be in the Court’s
discretion and may include attorneys’ fees.”
Footnote:
Ind. T.R. 23(D) states in part: “The court shall allow reasonable attorney’s
fees and reasonable expenses incurred from a fund recovered for the benefit of
a class under this section and the court may apportion such recovery among
different attorneys.” Trial rules, of course, are creatures of the Supreme Court,
not the General Assembly. See Humbert v. Smith, 655 N.E.2d 602, 604
(Ind. Ct. App. 1995) (“The Indiana Supreme Court has the inherent power to
establish rules governing the course of litigation in our trial courts.”), aff’d, 664
N.E.2d 357 (Ind. 1996); see also Ind. T.R. 80(D) (providing procedure for amending
rules). The State Board points to no statute that similarly applies common
fund principles. Thus, the General Assembly has not positively expressed a position
as to the common fund doctrine. But cf. Johnson, 986 P.2d at
457 (noting that recognized equitable exceptions could be traced back to either a
statute or a court rule, so they were not contrary to the American
rule).
Footnote:
See Carl Cheng, Important Rights and the Private Attorney General Doctrine, 73
Cal. L. Rev. 1929, 1931 (1985) (“The doctrine was further supported by the
policy of encouraging public interest litigation by shifting costs away from interests which
otherwise could not afford to be represented in courts.”).
Footnote:
Indiana does not require a court to find “substantial justification,” based on
one of four considerations, in recognizing the expansion of common law doctrines, as
does New Mexico.
See Johnson, 986 P.2d at 453-54.