Vaqueria Tres Monjitas, Inc. v. Comas-Pagan , 748 F.3d 21 ( 2014 )

United States Court of Appeals
For the First Circuit
No. 13-2517
VAQUERÍA TRES MONJITAS, INC.; SUIZA DAIRY, INC.,
Plaintiffs, Appellees,
v.
MYRNA COMAS PAGAN, Secretary of the Department of Agriculture for
the Commonwealth of Puerto Rico; EDMUNDO ROSALY, Administrator of
the Office of the Milk Industry Regulatory Administration for the
Commonwealth of Puerto Rico,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Daniel R. Domínguez, U.S. District Judge]
Before
Lynch, Chief Judge,
Selya and Howard, Circuit Judges.
Edward W. Hill for appellants.
Rafael Escalera Rodríguez, with whom Amelia Caicedo Santiago,
Carlos M. Hernández Burgos, and Reichard & Escalera were on brief,
for appellees.
April 3, 2014
LYNCH, Chief Judge. Understandably concerned by language
in a district court order which opined that Puerto Rico had waived
its Eleventh Amendment immunity by entering into a Settlement
Agreement, the Commonwealth's milk regulatory agency (Spanish
acronym "ORIL") appeals. The court's language on that immunity was
in no sense necessary to the approval of the Settlement Agreement
or to entry of the judgment. In the motion seeking approval, no
party raised any Eleventh Amendment issue, nor was such an issue
briefed or argued. The statement is contrary to the principle of
constitutional avoidance. We conclude that the language at issue
is merely a statement of dicta and not a judgment. The statement
is wholly gratuitous, does not respond to any argument made in
those proceedings, and has the obvious effect of causing confusion.
We strongly suggest to the district court that it issue an amended
order deleting the language. We otherwise dismiss the appeal for
want of appellate jurisdiction.
I.
The facts of this long running case are found in more
detail in Puerto Rico Dairy Farmers Association v. Comas Pagan, ___
F.3d __ (1st Cir. Apr. 3, 2014), and in our court's previous
decision, Vaquería Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464
(1st Cir. 2009), reh'g en banc denied, 600 F.3d 1 (1st Cir. 2010),
cert. denied, 131 S. Ct. 2441 (2011). We assume familiarity with
those decisions.
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On October 29, 2013, the plaintiffs Suiza Dairy, Inc.
("Suiza") and Vaquería Tres Monjitas, Inc. ("VTM"), and the
government defendants, Myrna Comas Pagan, the Secretary of the
Department of Agriculture for the Commonwealth of Puerto Rico, and
Edmundo Rosaly, the Interim Administrator of ORIL (the Office for
the Milk Industry Regulatory Administration), filed with the
district court for its approval the Final Settlement Agreement and
Memorandum of Understanding Between the Parties ("Agreement"),
executed that day.
We briefly describe the substance of the settlement. The
Agreement provided for the adoption and implementation of
Regulation 12, which governs pricing mechanisms in Puerto Rico's
milk industry. In effect, Regulation 12 establishes the price
margins for all players in the industry. As part of the
implementation of Regulation 12, ORIL pledged to conduct a
comprehensive study of the milk industry within twelve months of
the effective date of the Agreement.
Under the Agreement, the government of Puerto Rico is
also obligated to create a "Special Fund to promote the efficiency
of the Milk Market in Puerto Rico." In addition to the "Special
Fund," the government agreed to contribute funds over four years to
Suiza and VTM as part of a regulatory accrual mechanism designed to
allow the processors to recoup a fair rate of return on their
products.
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We turn from this substantive summary to the Agreement's
precise language. The Agreement first recited that there was no
concession of the validity of the plaintiffs' claims or of any
court order entered and that the effect of entry of the order would
be dismissal of the case with prejudice. The substance of the
Agreement was found in covenants, contained in subparagraphs 3
through 17 of the paragraph. The Agreement included a final
paragraph stating the parties' rights moving forward:
The terms and conditions of this settlement
will be incorporated into the firm, final and
unappealable judgment to be issued by the
District Court. That Judgment will be equally
binding to and enforceable against all
signatories of this Agreement and the
Government of Puerto Rico. All such parties
hereby waive any defense they may have to the
enforcement of this Agreement.
(emphasis added).
At the hearing on whether to enter the Settlement
Agreement as a judgment, counsel for Suiza added that although the
Agreement did not contain an explicit clause regarding contempt,
the plaintiffs waived all attempts to find the government
defendants in contempt. Plaintiffs did not assert that the
Commonwealth had waived its immunity either in the Agreement or
specifically in the Agreement's "waive any defense" clause. At no
time did any issue concerning the Commonwealth's Eleventh Amendment
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immunity come up at that hearing or in the settlement papers before
judgment was entered.1
The district court's order, entered on November 7, 2013,
began with a paragraph identifying those who were parties to the
Final Settlement Agreement. The second paragraph approved and
incorporated all of the covenants with numbered paragraphs, as
follows:
1. All the covenants of the Settlement
Agreement executed on October 29, 2013 are
incorporated herein.
2. The Court has original federal
jurisdiction in a federal question civil
action, pursuant to 28 U.S.C. § 1331, and
retains jurisdiction for compliance purposes,
as to the terms and conditions of the
Settlement Agreement of October 29, 2013 to
ensure proper[] and timely implementation.
The Court, hence, shall retain federal
jurisdiction to enforce the Settlement
Agreement until such time as the Commonwealth
of Puerto Rico, the Puerto Rico Department of
Agriculture and ORIL, as well as all signatory
parties have complied fully and effectively
with the Settlement Agreement, and have
maintained such compliance for no less than
four consecutive years, that is, December 31,
2017.
3. The Commonwealth of Puerto Rico through
the Secretary of Justice, the Puerto Rico
Department of Agriculture and ORIL and its
highest executives, shall inform their
1
The Commonwealth of "Puerto Rico enjoys the same immunity
from suit that a State has under the Eleventh Amendment."
Maysonet-Robles v. Cabrero, 323 F.3d 43, 53 (1st Cir. 2003). It
has consistently stated its Eleventh Amendment immunity at all
stages of the litigation. See Vaquería Tres Monjitas, Inc., 587
F.3d at 477-80.
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successors as to the terms and conditions of
this Settlement Agreement, particularly those
economic terms and covenants that may remain
to be fulfilled.
4. The Commonwealth of Puerto Rico, the
Puerto Rico Department of Agriculture and ORIL
shall require compliance with the Settlement
Agreement by all of its agencies, departments,
officials, employees, and their respective
assigns and successors.
5. The Settlement Agreement of October 29,
2013 does not include the Puerto Rico Dairy
Farmers Association ("PRDFA"), hence, the
PRDFA may proceed with their litigation filed
under Civil No. 08-2191 (DRD).
(footnote and internal citation omitted).
After the numbered provisions of the second paragraph,
there is a third paragraph, which is the source of Puerto Rico's
concern:
The Court is of the opinion that the voluntary
signatures of the well represented authorized
agents of the Commonwealth of Puerto Rico, the
Puerto Rico Department of Agriculture and
ORIL, constitutes a pellucid waiver of the
Eleventh Amendment, as all the parties clearly
stated that "[a]ll such parties hereby waive
any defense they may have to the enforcement
of this Agreement." . . . See also Watson v.
Texas, 261 F.3d 436 (5th Cir. 2001); Ellis v.
University of Kansas Medical Center, 163 F.3d
1186 (10th Cir. 1999).
Unlike the earlier language, which imposes requirements consistent
with the covenants of the Agreement, this paragraph signals merely
that it states the view of the court.
The final paragraph of the order closes the case for
statistical purposes and notes that the court will "retain
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jurisdiction for compliance purposes of all the covenants of the
Settlement Agreement . . . or any other related matter and/or
remedy related to the full compliance of the Settlement Agreement."
On December 5, 2013, ORIL filed a motion to alter or
amend the judgment pursuant to Fed. R. Civ. P. 59(e), in which it
argued that there had been no Eleventh Amendment waiver and sought
the elimination of the Eleventh Amendment paragraph in the district
court's November 7 Order. ORIL objected to the district court's
sua sponte statements of opinion on Eleventh Amendment waiver.2
ORIL stressed that it had asserted its Eleventh Amendment immunity
continuously throughout the litigation and never waived it. Not
only did ORIL not intend to waive its immunity, it argued, but the
language of the Settlement did not contain the "required
unequivocal language" to support an Eleventh Amendment waiver
finding. In its motion, ORIL characterized the monetary relief
included in the Settlement as an Ex parte Young-type remedy, see
209 U.S. 123 (1908), which did not imply a broader Eleventh
Amendment waiver. It cited Frazar v. Gilbert, 300 F.3d 530, 549-50
2
In an effort to reap a windfall, Suiza opposed ORIL's Rule
59(e) motion even though it had not argued for or requested the
district court's Eleventh Amendment statement. In its newly
adopted position, Suiza argued that the Settlement "contemplated
enforcement proceedings on which the District Court could provide
remedies for non-compliance" with the Agreement, and that the
"waive any defense" language included a waiver of Eleventh
Amendment immunity.
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(5th Cir. 2002), rev'd on other grounds, Frew ex rel. Frew v.
Hawkins, 540 U.S. 431 (2004).
The district court issued an Opinion and Order on
December 30, 2013, denying ORIL's Rule 59(e) motion and reiterating
its view that the Agreement constituted an Eleventh Amendment
waiver. The rejection of reconsideration, said the court's
statement, was based on the "waive any defense" clause of the
Settlement Agreement, along with the fact that the Agreement
provided for public funds to be paid to the milk processors as part
of the Settlement's regulatory solution.
We stress ORIL disagrees only with the court's statement
on Eleventh Amendment waiver in its opinion, and otherwise agrees
with the court's approval of the Settlement Agreement.
II.
First, we think it is plain that the Eleventh Amendment
waiver statement in the unnumbered third paragraph in the district
court's order is pure dicta. See Municipality of San Juan v.
Rullan, 318 F.3d 26, 28 n.3 (1st Cir. 2003) ("Dicta comprises
observations in a judicial opinion or order that are 'not
essential' to the determination of the legal questions then before
the court." (quoting Dedham Water Co. v. Cumberland Farms Dairy,
Inc., 972 F.2d 453, 459 (1st Cir. 1992))).
The district court's approval and incorporation of the
Settlement Agreement between the parties did not in any way require
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addressing or resolving Eleventh Amendment issues. As the parties
agree, both the approval Order and the underlying Agreement can
stand without such a resolution.3 That it was not necessary is
amply demonstrated by the Supreme Court's decision in Frew, 540
U.S. 431. There, the Court considered whether a district court
could enforce a consent decree entered into by state officials
without violating the Eleventh Amendment. There, as here, the
state officials did not challenge the validity of the underlying
agreement. Id. at 437-38. The Court concluded that enforcement
was proper because the consent decree and the requested remedy were
enforceable under Ex parte Young. Id. at 436-37. It declined to
even address whether there had been an Eleventh Amendment waiver,
and noted that "[w]hen a federal court has entered a consent decree
under Ex parte Young, the law's primary response to these concerns
has its source not in the Eleventh Amendment but in the court's
equitable powers and the direction given by the Federal Rules of
Civil Procedure." Id. at 441.
Second, at the very least, the district court's
unprompted expression of opinion about the Eleventh Amendment runs
afoul of the mandated adherence to the general principle of
constitutional avoidance. Under this doctrine, "federal courts are
3
The court retained jurisdiction over the case for
compliance purposes. The district court's ability to enforce the
Settlement going forward also does not require an Eleventh
Amendment holding at this stage.
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not to reach constitutional issues where alternative grounds for
resolution are available." Am. Civil Liberties Union v. U.S.
Conference of Catholic Bishops, 705 F.3d 44, 52 (1st Cir. 2013).
The canon of constitutional avoidance binds both this court and the
district court. See Ashwander v. Tenn. Valley Auth., 297 U.S. 288,
347 (1936) (Brandeis, J., concurring) ("The Court will not pass
upon a constitutional question although properly presented by the
record, if there is also present some other ground upon which the
case may be disposed of."); Sony BMG Music Entm't v. Tenenbaum, 660
F.3d 487, 508 (1st Cir. 2011). The district court's Eleventh
Amendment statement unnecessarily reached out into and purported to
opine on a difficult and consequential constitutional issue.
There is particular reason to practice avoidance of
unnecessary statements about Eleventh Amendment issues. The
Eleventh Amendment "largely shields States from suit in federal
court without their consent." Hess v. Port Auth. Trans-Hudson
Corp., 513 U.S. 30, 39 (1994). The "central purpose" of Eleventh
Amendment immunity is "to 'accord the States the respect owed them
as' joint sovereigns," Fed. Mar. Comm'n v. S.C. State Ports Auth.,
535 U.S. 743, 765 (2002) (quoting P.R. Aqueduct & Sewer Auth. v.
Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993)), and it is
"concerned not only with the States' ability to withstand suit, but
with their privilege not to be sued," Metcalf & Eddy, Inc., 506
U.S. at 147 n.5.
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In light of the Eleventh Amendment's importance to
protecting both the state fisc and the dignity of the state,
Fresenius Med. Care Cardiovascular Res., Inc. v. P.R. & Caribbean
Cardiovascular Ctr. Corp., 322 F.3d 56, 64-65 (1st Cir. 2003), the
standard for finding a waiver is a stringent one.4 We will not
find waiver unless it is "stated 'by the most express language or
by such overwhelming implications from the text as [will] leave no
room for any other reasonable construction.'" Edelman v. Jordan,
415 U.S. 651, 673 (1974) (quoting Murray v. Wilson Distilling Co.,
213 U.S. 151, 171 (1909)); see College Sav. Bank v. Fla. Prepaid
Postsecondary Educ. Expense Bd., 527 U.S. 666, 675-76 (1999).
Apart from a clear declaration of waiver, a state may also waive
4
We note, without addressing any substantive question of
Eleventh Amendment waiver, the district court's citation of Ellis
v. University of Kansas Medical Center, 163 F.3d 1186 (10th Cir.
1998), in its statement does not support the court's language.
Ellis states:
[T]he fact that the defendants here entered into a
settlement agreement with Ellis does not act as a waiver
of the defendants' constitutionally protected immunity
because the settlement agreement does not itself
indicate, nor does the record otherwise reflect, an
unequivocal intent to waive the immunity by the
agreement. See Johns v. Stewart, 57 F.3d 1544, 1554
(10th Cir. 1995) (because constructive consent is
insufficient, state's partial settlement does not
constitute a waiver of Eleventh Amendment immunity in
absence of unequivocal expression of a waiver); see also
Saahir v. Estelle, 47 F.3d 758 (5th Cir. 1995) (state's
participation in settlement agreement not sufficient to
waive its sovereign immunity).
Id. at 1195. And Ellis holds the agreement could be enforced under
Ex parte Young. Id. at 1198. Watson v. Texas, 261 F.3d 436 (5th
Cir. 2001), also cited by the district court, is likewise
distinguishable and involves different settlement language.
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the Eleventh Amendment "by consent to or participation in a federal
program for which waiver of immunity is an express condition," or
by "affirmative conduct in litigation." New Hampshire v. Ramsey,
366 F.3d 1, 15 (1st Cir. 2004).
Suiza has conceded the district court's Eleventh
Amendment statement was not necessary to the judgment. We construe
the statement as being merely an expression of opinion. Cf.
Watchtower Bible & Tract Soc'y of N.Y., Inc. v. Colombani, 712 F.3d
6, 11 (1st Cir. 2013) (construing language in a district court
order as not being final order). Consistent with our construction,
we strongly suggest the district court strike the statement. The
statement has resulted in considerable confusion and has
unnecessarily prolonged this litigation. Cf. Sony BMG Music
Entm't, 660 F.3d at 508 (vacating and remanding part of a district
court's judgment where "[a] decision on a constitutional due
process question was not necessary, was not inevitable, had
considerable impermissible consequences, and contravened the rule
of constitutional avoidance").
Part of the obligation of federal appellate courts is not
to engage in premature assessment of issues not presented by appeal
from a judgment. As former Circuit Judge, now Justice, Breyer said
in United States v. Ottati & Goss, Inc., 900 F.2d 429, 443 (1st
Cir. 1990), we do not hear appeals from statements made by district
courts which are not, "in any sense, necessary to the [district
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court's] judgment." See also In re Williams, 156 F.3d 86, 90 (1st
Cir. 1998) ("[F]ederal appellate courts review decisions,
judgments, orders, and decrees -- not opinions . . . ."); accord
Harrison v. United States, 284 F.3d 293, 302 (1st Cir. 2002)
(because the district court did not need to reach the issue of
damages, any findings regarding damages are dicta).
III.
The case will be remanded to the district court in
accordance with this opinion. We dismiss the appeal for want of
appellate jurisdiction. Costs are awarded to ORIL.
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