Energy Management Corp. v. City of Shreveport , 467 F.3d 471 ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
October 6, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 05-30551
ENERGY MANAGEMENT CORP.;
TELLUS OPERATING GROUP, LLC,
Plaintiffs-Appellants,
versus
CITY OF SHREVEPORT,
Defendants-Appellee.
__________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
__________________________________________
Before BARKSDALE, STEWART, and CLEMENT, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Plaintiff-Appellant Energy Management Corporation (“EMC”) appeals the district court’s
judgment on remand declaring City of Shreveport (“Shreveport”) Ordinance 221“invalid” rather than
“preempted.” EMC also challenges the district court’s refusal to award damages, attorney’s fees and
costs. For the following reasons, we reverse and remand the judgment of the district court regarding
the declaratory judgment language, holding that the prior panel intended Ordinance 221 be preempted
by state law. We affirm the district court’s refusal to award damages and attorney’s fees and we
remand the issue of allocation of costs to the district court for further consideration.
I. FACTUAL AND PROCEDURAL BACKGROUND
Cross Lake, the focal point of this litigation, is the main source of water for Shreveport,
Louisiana. Energy Mgmt. Corp. v. City of Shreveport (Energy Mgmt. I), 397 F.3d 297, 299 (5th Cir.
2005). In 1910, the Louisiana legislature authorized the transfer of Cross Lake to Shreveport but the
state reserved all minerals and mineral rights, as well as the right to drill and operate wells. Id. Then,
in 1959, Louisiana established the Louisiana Office of Conservation (“LOC”) as the exclusive
authority to grant drilling permits; under Louisiana Revised Statute section 30:28(F), a city
government is specifically precluded from interfering with the decision of the LOC on these matters.
La. Rev. Stat. § 30:28(F) (2005). In 1990, Shreveport enacted Ordinance 221, forbidding any new
drilling within 1,000 feet of Cross Lake (“1,000 feet zone”)1 and setting up, among other rules, a
comprehensive regulatory scheme relating to various aspects of drilling activities within 5,000 feet
of the lake.2 EMC, a Mississippi corporation that owns Louisiana state-granted mineral interests
under and around Cross Lake, had already acquired mineral leases from the state by this time, but had
not obtained a permit from the LOC. EMC first attempted to negotiate with Shreveport to ease its
1
Both attorneys, during oral argument and in their respective briefs, refer to this area as
the “1,000 feet zone.”
2
Ordinance 221 is located at volume 1, pages 12-24 of the record. In addition to the
drilling requirements mentioned, the ordinance’s regulations include, for example, minimum
casing requirements, § 37-137, insurance requirements, § 37-146, plugging and abandonment
requirements, § 37-148, and a requirement to submit diagrams of well locations, § 37-138, and
drilling fluid programs, § 37-136, to Shreveport’s Director of Water and Sewerage for the
Director’s approval. Each provision of the ordinance relates in some way to the regulation of the
oil and gas drilling or production process.
2
restrictions within the 1,000 feet zone. The negotiations proved unsuccessful; thus, no permit was
ever obtained from the LOC, and eventually, EMC lost its ownership in the subject leases.
In 1997, EMC brought this diversity suit, alleging that Shreveport had no authority to regulate
drilling around Cross Lake. Energy Mgmt. I, 397 F.3d at 300. In that prior appeal, this court
concluded,
[T]he City of Shreveport’s Ordinance 221 is preempted by state law and is invalid to
the extent that it purports to prohibit the drilling of oil and gas wells in an area within
the state of Louisiana, an authority granted exclusively by state statute and regulations
to the [LOC].
Id. at 306. This court reasoned that Louisiana statutory and case law as well as opinions of the
Louisiana Attorney General supported this decision. Id. at 303–04. Therefore, the matter was
remanded to the district court “for entry of declaratory judgment declaring that Ordinance 221 is
invalid to the extent stated above and for consideration of any further relief to which EMC may be
entitled.” Id.
On remand, the district court requested briefing from the parties regarding appropriate
declaratory judgment language and any additional relief for EMC. Subsequently, the district court
entered the judgment as follows: “Ordinance 221 is hereby DECLARED invalid to the extent that it
purports to prohibit the drilling of oil and gas wells in an area within the state of Louisiana.” Energy
Mgmt. Corp. v. City of Shreveport, No. 97-2408 (W.D. La. May 5, 2005) (order granting
declaratory judgment). The district court did not track the language of the prior panel in Energy
Management I, which stated that the ordinance was preempted by state law. Moreover, the district
court found that EMC was not entitled to additional relief. The court stated:
Under Louisiana laws and legal principles, oil, gas and other minerals are fugacious
matter and are subject to capture. The damages complained of and testified to by
3
EMC experts are based on the value of lost production. The sought after minerals are
still in place and subject to capture. They are not “lost.”
Id. The court also stated, without explanation, that EMC was not entitled to attorney’s fees but made
no comment regarding EMC’s entitlement to costs. See id. Because it argues that Shreveport is
actively interpreting3 the language of the district court as invalidating only the 1,000 feet provision
and continuing to enforce the remainder of the ordinance, EMC appeals the district court’s ruling.
II. DISCUSSION
A. The District Court’s Interpretation of the Declaratory Judgment Language
1. Standard of Review
This court has a limited scope of review after remand. Volk v. Gonzalez, 262 F.3d 528, 533
(5th Cir. 2001). “On a second appeal following remand, the only issue for consideration is whether
the court below reached its final decree in due pursuance of [this court’s] previous opinion and
mandate.” Id. (alteration in original) (quoting Burroughs v. FFP Operating Partners, 70 F.3d 31,
33 (5th Cir. 1995)). We can consider a prior opinion to determine what was actually intended, but
we will not reconsider issues already decided by the earlier panel. Burroughs, 70 F.3d at 33.
2. Analysis
Before we reach the merits of this appeal, we first address Shreveport’s claim that EMC lacks
standing to contest the entirety of the ordinance and that an opinion issued by this court declaring the
ordinance entirely preempted would be nothing more than an advisory opinion. At oral argument,
3
Furthermore, the only court to interpret the holding in Energy Management I
characterizes it as, “the EMC case pertains to a mineral lessee challenging the validity of a
Shreveport city ordinance relating to drilling within 1,000 feet of Cross Lake.” Holland v.
Questar Exploration & Prod. Co., No. 03-2087, 2006 WL 461127, *3 n.3 (W.D. La. February,
23, 2006) (emphasis added).
4
counsel for Shreveport explained that because EMC was not a LOC permit holder, and the state of
Louisiana is not a party to the suit, this court cannot render a judgment as to whether the entirety of
Ordinance 221 conflicts with state law because such a judgment would amount to an advisory
opinion. Shreveport’s argument, however, is incorrect. The panel in Energy Management I
specifically found that EMC had standing to bring this suit and nowhere stated that EMC’s standing
was limited.4 Energy Mgmt. I, 397 F.3d at 301–02. As we have explained, the issues decided by the
first panel will not be relitigated. See Burroughs, 70 F.3d at 33. Shreveport’s contention that the
1,000 feet zone portion of Ordinance 221 is the only portion invalidated by the district court’s
decision because EMC only had standing to contest Ordinance 221 as it related to the 1,000 feet
zone, therefore, must fail. Likewise, this opinion is not advisory because EMC brought suit against
Shreveport contesting Ordinance 221 in its entirety.
This court has previously determined that EMC has the necessary standing; therefore, our
holding today turns solely on our determination of whether the prior panel intended that Louisiana
law preempt Ordinance 221 and, if so, whether the declaratory judgment language of the district court
reflects that intent. EMC contends that the Energy Management I panel found Ordinance 221
preempted in whole; however, the language of the district court’s opinion does not reflect this
conclusion. EMC is concerned that this overly narrow language could lead to the enforcement of
provisions that do not prohibit drilling but, nevertheless, restrict related activities because the present
judgment implies that Shreveport retains the ability to enforce costly and unnecessary requirements
4
In fact, in order to fully address whether EMC had standing, the Energy Management I
panel withdrew its previous opinion in its entirety, Energy Mgmt. Corp. v. City of Shreveport, 03-
30677, 2004 WL 2192376 (5th Cir. Oct 15, 2004), and substituted the opinion referred to infra as
Energy Management I.
5
not required by Louisiana for the drilling of oil and gas wells within the state. In contrast, Shreveport
argues that the only right exclusively statutorily reserved to the LOC is the oversight of drilling and,
therefore, Ordinance 221 is not invalid in its additional respects; it asserts that the district court
tracked the limiting language of this court’s Energy Management I decision.
Our duty is to review this case considering whether the court below effected the mandate of
the first panel. Volk, 262 F.3d at 533. Our reading of the Energy Management I panel opinion
clearly indicates that the court evaluated the various regulatory aspects of the ordinance and
ultimately determined that Ordinance 221 was preempted in its entirety. Therefore, Shreveport’s
claims on this matter are unsupported by the prior opinion. A closer look at Energy Management
I is not only instructive, but also dispositive.
The prior panel stated:
“Local power is not pre-empted unless it was the clear and manifest purpose of the
legislature to do so, or the exercise of dual authority is repugnant to a legislative
objective; if there is no express provision mandating pre-emption, the courts will
determine the legislative intent by examining the pervasiveness of the state regulatory
scheme, the need for state uniformity, and the danger of conflict between the
enforcement of local laws and the administration of the state program.” Palermo
Land Co. v. Planning Comm’n of Calcasieu Parish, 561 So. 2d 482, 497 (La.
1990). In this case there is no express provision mandating pre-emption. However,
all other inquiries lead to the conclusion that local regulation of oil and gas drilling
activities is preempted by comprehensive state regulation of oil and gas activities
under the LOC.
Regulations by the state of oil and gas drilling activity through the LOC are clearly
pervasive addressing every phase of the oil and gas exploration process from
exploration and prospecting to cleanup of abandoned oilfield waste sites. . . . In every
case which has been brought to our attention involving a challenge to the authority
of the LOC, its far-reaching authority has been upheld.
397 F.3d at 303. The opinion’s reference not just to drilling but to drilling “activities,” as well as its
statement that the regulations address “every phase of the . . . process,” supports our interpretation
6
that the prior panel’s language effectuated the preemption of Ordinance 221 in its entirety.
Furthermore, in support of its determination, the prior panel highlighted Louisiana cases upholding
the “far-reaching” authority of the LOC, cases which addressed not only drilling5 but also other
aspects of the drilling process, including post-drilling disposal.6
Thereafter, the prior panel relied on Louisiana Attorney General (“AG”) opinions to support
its holding. According to the panel, the Louisiana AG “has consistently concluded that attempts at
local regulation of drilling operations are preempted by state law.” Id.7 One of the opinions
addressed whether a local governing body could require permits from oil and gas operators for the
use of local roads. La. Op. Att’y Gen. 88-418 (1988), 1988 WL 428412. The AG found such
permits to be an impermissible interference with a valid permit issued by the LOC. Id. Likewise,
Ordinance 221 greatly complicates the drilling process around Cross Lake and, arguably, interferes
with drilling. For example, under section 37-133 of the ordinance, titled “Approval Required,” the
5
Energy Mgmt. I, 397 F.3d at 303 (citing Greater New Orleans Expressway Comm’n v.
Traver Oil Co., 494 So. 2d 1204 (La. Ct. App. 1986) (holding that the Commission could not
restrict drilling within one mile of the New Orleans Causeway Bridge contrary to authorization of
LOC and Corps of Engineers)).
6
Energy Mgmt. I, 397 F.3d at 303 (citing Rollings Envtl. Servs. of La., Inc. v. Iberville
Parish Police Jury, 371 So. 2d 1127 (La. 1979) (determining that LOC regulations preempted a
parish ordinance prohibiting disposal of hazardous waste within the parish); Desormeaux Enters.,
Inc. v. Vill. of Mermentau, 568 So. 2d 213 (La. Ct. App. 1990) (invalidating an ordinance
prohibiting a corporation from operating a disposal facility on property within the village only
after it received a permit from the commissioner of conservation)); see also Twin Parish Port
Comm’n v. Berry Bros., Inc., 663 So. 2d 257 (La. Ct. App. 1995) (declaring an ordinance
regulating the discharge of oil into a navigable water preempted by comprehensive state
regulations).
7
The Energy Mgmt. I panel cited three opinions from the Louisiana Attorney General, two
of which dealt directly with permitting for well drilling. 397 F.3d at 303 (citing La. Op. Att’y
Gen. 82-1021 and 89-416.)
7
ordinance provides that drilling within the 5,000 feet area may not proceed unless Shreveport’s
Director of Water and Sewerage has found that all requirements of the ordinance are met. The
ordinance then lists thirteen requirements (e.g., site diagrams, spill prevention plans, proof of
insurance) that must accompany an application for approval. Such requirements are analogous to the
road permitting requirements found invalid by Louisiana courts and the AG opinion.
The prior panel also examined Louisiana Revised Statute section 30:28(F), the provision
which grants exclusive authority to the LOC to regulate drilling in Louisiana. The panel found one
passage from the statute particularly significant:
[The statute] provides that “[n]o other agency or political subdivision of the state
shall have the authority, and they are hereby expressly forbidden, to prohibit or in any
way interfere with the drilling of a well or test well in search of minerals by the holder
of such permit.”
Energy Mgmt. I, 397 F.3d at 304 (quoting La. Rev. Stat. § 30:28(F) (2005)). This language
compelled the panel to conclude that it was “clear” that the “process of regulating when and where
an oil and gas well may be drilled” is entirely vested in the LOC. Id. Finally, the panel noted that
“the statute gives the Commissioner [of the LOC] authority to issue regulations and orders to ‘ensure
ground water aquifer safety,’ which is the same concern motivating the adoption of Ordinance 221.”
Id.
The holding of the prior opinion is clear, in fact, the prior panel leads off by unequivocally
stating in the introductory paragraph, “[We] find that Ordinance 221 is preempted by Louisiana’s
comprehensive regulation of oil and gas drilling.” Perhaps, as counsel for Shreveport argued, the
ambiguity in this case lies in the concluding paragraph of the opinion. There, the court stated that
the ordinance is “preempted by state law and is invalid to the extent that it purports to prohibit the
drilling of oil and gas wells in an area within the state of Louisiana.” Energy Mgmt. I, 397 F.3d at
8
305 (emphasis added). We agree that this language (i.e., “invalid to the extent that . . .”), when read
out of context and not in conjunction with the entire opinion, is seemingly limiting; as we have
explained, however, we do not agree that it was intended by the prior panel to be construed as such.
Therefore, we find the following three aspects of Energy Management I instructive and
supportive of our conclusion that Ordinance 221 is preempted in its entirety: (1) the express language
of Energy Management I does not suggest the ordinance was intended to be invalid only to the
limited extent urged by Shreveport; (2) the cases and the AG opinions on which the prior panel relied
relate to more than drilling and therefore suggest to us that Energy Management I addressed aspects
of the ordinance beyond drilling prohibition in the 1,000 feet zone, contrary to Shreveport’s
argument; (3) La. Rev. Stat. section 30:28(F) provides that local political subdivisions are expressly
forbidden to “in any way interfere with the drilling of a well.” Accordingly, we hold the prior panel
opinion held that Ordinance 221 is entirely preempted by state law.
B. The District Court’s Determination regarding Damages
1. Standard of Review
We review legal conclusions underlying an award of damages de novo. Nat’l Hispanic
Circus, Inc. v. Rex Trucking, Inc., 414 F.3d 546, 552 (5th Cir. 2005). “If the district court
committed no legal error, we review its factual findings for clear error.” Id.
2. Analysis
The district court declined to award damages on the basis that the oil and gas underlying the
1,000 feet zone is not “lost.” In dismissing EMC’s damages claim, the district court cited the rule
of capture, which governs the ownership rights of landowners over the natural resources underlying
9
their land. See La. Rev. Stat. § 31:6. Under the rule of capture, “[o]wnership of land does not
include ownership of oil [and] gas. . . . The landowner has the exclusive right to explore and develop
his property for the production of such minerals and to reduce them to possession and ownership.”
Id. It is indisputable that this is the law in Louisiana, but EMC urges that there are other avenues for
recovery for a mineral lease owner who has lost the ability to enjoy his lease rights.
EMC claims that the rule of capture is inapplicable to this case, and that it is entitled to
damages under state law and/or 42 U.S.C. § 1983. EMC explains it established by a preponderance
of uncontroverted evidence at trial that the value of lost production from two specific units8 was
$9,817,000.000. Furthermore, EMC argues that the district court’s reasoning is without merit
because EMC lost its mineral leases and, along with that, its ownership rights in the leases and
minerals, specifically as a result of Shreveport’s enforcement of Ordinance 221. EMC, however, has
not clearly explained to us its underlying cause of action–specifically, how it overcomes the hurdle
of its state law takings claim being prescribed.9 EMC states that § 1983 extends protection to all
rights guaranteed by the Fourteenth Amendment and that it provides an independent federal remedy
8
EMC stated in its brief that though its losses included thousands of acres of mineral
interests, it limited its claims for damages to the losses included in only two particular units, the
“HOSS RC SUA” and “HOSS RC SUB” Units.
9
EMC also fails to address whether its federal claim is time-barred. See Drury v. U.S.
Army Corps. of Eng’rs, 359 F.3d 366, 367 n.1 (5th Cir. 2004) (“If [the appellant’s] state claim is
time-barred, his federal claim is also time-barred.”) (citing Braden v. Tex. A&M Univ. Sys., 636
F.2d 90, 92 (5th Cir. 1981), for the proposition that “[s]ection 1983 has no statute of limitations
period, thus federal courts apply the state prescription statute governing the most analogous cause
of action.”); see also Liberty Mut. Ins. Co. v. Brown, 380 F.3d 793, 799 (5th Cir. 2004) (finding
that the three year prescriptive period for an inverse condemnation action in Louisiana had
expired, and, therefore, the appellant’s takings claim was prevented from ever ripening, and the
federal court lacked jurisdiction to consider the takings claim).
10
regardless of the availability of an adequate remedy under state law. EMC does not offer further
explanation regarding the nature of its § 1983 claim except to state that the takings claim is an
alternative claim “in case the ordinance was found valid.” Notwithstanding EMC’s argument, the
record reflects that the Energy Management I panel held that EMC’s takings claim was prescribed.10
Therefore, EMC’s takings claim is without merit.
As another potential damage recovery avenue, EMC briefly turns from state law to federal
law, alleging that Shreveport violated its due process rights under the Fourteenth Amendment, “in
that the ordinance is arbitrary and unreasonable and that the means employed by the ordinance lack
a real and substantial relation to the goal Shreveport seeks to achieve.”11 The essence of EMC’s
argument is to urge a substantive due process claim under § 1983. Even though the prior panel made
10
EMC devoted a substantial portion of its damages discussion in its brief and at oral
argument to this issue as a potential means of recovery. It explains that “[p]roperty shall not be
taken or damaged by the state or its political subdivisions except for public purposes and with just
compensation paid to the owner or into court for his benefit.” La. Const. art. 1, § 4, cl. B.
Furthermore, it points out that Louisiana Revised Statute 13:5111 provides for attorney’s fees
and other relief in a successful takings claim.
Relief, however, is not available if the takings claim has prescribed; “[a]ctions for
compensation for property taken by the state, a parish, municipality, or other political subdivision
or any one of their respective agencies shall prescribe three years from the date of such taking.”
La. Rev. Stat. § 13:5111 (2005). In this case, Shreveport enacted Ordinance 221 in 1990; the
earliest date evidencing action in this lawsuit is December 12, 1997, when EMC paid its filing fee.
This is well beyond the statutorily provided prescription period. EMC begs to differ and relies on
HC Gun & Knife Shows, Inc. v. City of Houston, 201 F.3d 544, 546 (5th Cir. 2000), and Huggs,
Inc. v. LPC Energy, Inc., 889 F.2d 649 (5th Cir. 1989), as support for its position that its takings
claim is not prescribed. These cases, however, are inapplicable to the instant appeal; both were
brought within the required statute of limitations or prescriptive period. Accordingly, it is clear to
us that EMC has no takings cause of action under state law because, as the Energy Management
I panel concluded, its claim is subject to the Louisiana law of prescription, and the record reflects
that its claim has prescribed.
11
EMC quotes from the district court’s Memorandum Ruling, dated June 13, 2003.
11
no mention of any § 1983 claim, we will analyze whether EMC should be awarded damages for a
substantive due process violation under § 1983.12
Section 1983 provides a civil remedy in federal court for violations, under color of state law,
of the rights, privileges and immunities secured by the Constitution and laws of the United States.
Findeisen v. N. E. Indep. Sch. Dist., 749 F.2d 234, 236-37 (5th Cir. 1984). Section 1983 extends
protection to all rights guaranteed by the Fourteenth Amendment, including substantive due process.
Id. at 237. In determining whether EMC has alleged a substantive due process violation, this court
reviews Shreveport’s actions “against the deferential ‘rational basis’ test that governs substantive due
process.” Simi Inv. Co. v. Harris County, Tex., 236 F.3d 240, 249 (5th Cir. 2000). In the initial step
of this analysis, EMC must demonstrate that it has a constitutionally protected property right to which
the Fourteenth Amendment’s due process protection applies. Simi, 236 F.3d at 249–50. Even
though EMC did not fully develop its § 1983 claim via its brief or during oral argument before this
panel, we are safe to assume that EMC does have such a right, because the prior panel found that
EMC had a “legally protected property right” to “exploit its mineral interests.” Energy Mgmt. I, 397
F.3d at 302. Therefore, the next step in the substantive due process inquiry is whether the action is
rationally related to a legitimate government interest. Simi, 236 F.3d at 250–51 . (citing FM Props.
Operating Co. v. City of Austin, 93 F.3d 167, 174 (5th Cir. 1988)). This court has said that “[t]he
12
EMC claims in its brief that the ordinance is “arbitrary”; a “substantive due process claim
based on an allegedly arbitrary and unlawful attempt to interfere with private property rights
suggests that this claim is one of substantive due process.” Simi Inv. Co. v. Harris County, Tex.,
236 F.3d 240, 249 (5th Cir. 2000). On the other hand, with a procedural due process claim,
EMC would have to show that the process provided by the state of Louisiana was inadequate and
did not secure EMC’s liberty interests. See Wilkinson v. Austin, 125 S. Ct. 2384, 2395-96
(2005). EMC has made no such showing. We note, however, that we are analyzing this
substantive due process claim out of an abundance of caution, as EMC only mentions a possible
due process claim in a footnote.
12
question is only whether a rational relationship exists between the [policy] and a conceivable
legitimate objective. If the question is at least debatable, there is no substantive due process
violation.” Simi, 236 F.3d at 250-51 (citing FM Props. Operating Co., 93 F.3d at 175 (alteration in
original)).
Our analysis reveals that the enactment of Ordinance 221 was rationally related to
Shreveport’s interest in protecting its water supply. The state of Louisiana gave Shreveport the
authority in Act 31 of 1910 to adopt ordinances to protect its water supply; further, the preamble to
Ordinance 221 specifically states that Shreveport is empowered to protect its water and that the intent
of the ordinance is to do so. See Energy Mgmt. I, 397 F.3d at 302. The fact that the ordinance is
deemed preempted by state law does not convert Shreveport’s actions into a violation of EMC’s due
process rights. FM Props. Operating Co., 93 F.3d at 174.
We hold the district court did not err in denying the award of damages to EMC upon either
ground contended in its brief. Though the district court relied on the rule of capture as support for
this determination, we conclude that the overriding reason the denial of damages is proper is because
EMC’s takings claim is time-barred and its due process claim fails on the merits; neither state nor
federal law provide a present path for recovery. Finding no basis to award damages to EMC, we do
not entertain EMC’s pre-and post-judgment interest request.
C. The District Court’s Determination Regarding Awarding Attorney’s Fees
1. Standard of Review
The district court has broad discretion to award attorney’s fees, and an appellate court has
only a limited opportunity to “appreciate the complexity of trying any given case and the level of
professional skill needed to prosecute it.” Hopwood v.Texas, 236 F.3d 256, 277 (5th Cir. 2000).
13
Accordingly, we review the factual findings supporting a district court’s grant or denial of attorney’s
fees for clear error and the conclusions of law underlying the award are reviewed de novo. Volk, 262
F.3d at 534; see also CenterPoint Energy Houston Elec. LLC v. Harris County Toll Road Auth., 436
F.3d 541 n.17 (5th Cir. 2006).
2. Analysis
The district court did not explain why it refused to award attorney’s fees to EMC. EMC
claims that it is entitled to attorney’s fee under 42 U.S.C. § 1988. Section 1988 governs attorney’s
fees awards in § 1983 suits and states that “[i]n any action or proceeding to enforce a provision of
[§ 1983] . . . the court, in its discretion, may allow the prevailing party, other than the United States,
a reasonable attorney’s fee as part of the costs.” 42 U.S.C. § 1988(b). This court has noted that,
to be deemed a “prevailing party,” “at a minimum, a plaintiff must receive ‘some relief on the merits
of his claim.’” Walker v. City of Mesquite, Tex., 313 F.3d 246, 249 (5th Cir. 2002) (quoting Hewitt
v. Helms, 482 U.S. 755, 760 (1987)). Furthermore, this court has determined that for a party to
qualify as a prevailing party it must (1) “obtain actual relief, such as an enforceable judgment or a
consent decree; (2) that materially alters the legal relationship between the parties; and (3) modifies
the defendant’s behavior in a way that directly benefits the plaintiff at the time of the judgment or
settlement.” Walker, 313 F.3d at 249 (citing Farrar v. Hobby, 506 U.S. 103, 111–12(1992)).
We find unpersuasive EMC’s reasoning that if we find Ordinance 221 preempted, then EMC
must be the “prevailing party” for purposes of § 1988 and is deserving of attorney’s fees. As we
previously stated, EMC has not successfully proven its damages claim; its takings claim is time-barred
and its § 1983 due process claim fails on the merits. EMC, therefore, does not pass the threshold
outlined in Walker, as we interpret the threshold “relief” in this case to be the award of damages
14
rather than the determination that Ordinance 221 is entirely preempted by state law. Therefore,
attorney’s fees are not warranted under § 1988, as urged by EMC, because EMC is not a prevailing
party as it pertains to the issue of damages.
Nonetheless, EMC directs this court to Williams v. Hanover Housing Authority, 113 F.3d
1294, 1297–98 (1st Cir. 1997), for the proposition that an award of attorney’s fees under § 1988 is
possible even when a party prevails under state law rather than on federal grounds. EMC
misconstrues the impact of this case on its situation. It is true that the significance of the First
Circuit’s decision in Williams was that attorney’s fees were possible under § 1988 when the party has
prevailed on state, though not federal grounds, on an alleged constitutional violation. Id. at 1297.
EMC, however, has not prevailed on its damages claim on state or federal grounds; thus, Williams
is not applicable. A plain reading of both Williams and Walker explains that without any recovery,
attorney’s fees are out of EMC’s reach. Therefore, even though EMC has prevailed based on this
court’s holding that Energy Management I determined that Ordinance 221 is entirely preempted by
state law, this ruling is separate and apart from its claim for damages based on state law, its claim for
damages based on federal law, its subsequent § 1988 claim to recover attorney’s fees, and its request
for cost. Accordingly, we hold that the district court did not err in refusing to award attorney’s fees.
4. The District Court’s Determination Regarding Awarding Costs
1. Standard of Review
A district court has wide discretion whether to award costs to the prevailing party. Brazos
Valley Coal. of Life, Inc. v. City of Bryan, Tex., 421 F.3d 314, 327 (5th Cir. 2005); Medina v.
Ramsey Steel Co., Inc., 238 F.3d 674, 686 (5th Cir. 2001). The court, however, recognizes a “strong
presumption” that the district court will likely do so. Salley v. E.I. DuPont de Nemours & Co., 966
15
F.2d 1011, 1017 (5th Cir. 1992). “We review for abuse of discretion, but if the court does not award
costs to the prevailing party, we require the district court to state its reasons.” Id.
2. Analysis
The district court in this case did not award costs to EMC and it did not state its reasons; in
fact, the court did not even mention costs in its judgment. EMC argues that it is the “prevailing
party” under 42 U.S.C. § 1988 and, therefore, Federal Rule of Civil Procedure 54 provides that it
is entitled to costs. See Fed. R. Civ. P. 54(d) (“[C]osts other than attorney’s fees shall be allowed
as of course to the prevailing party unless the court otherwise directs”). Furthermore, EMC points
out that it was awarded costs in its prior appeal, as evidence that it should again be deemed as the
prevailing party for purposes of this issue. As we explained earlier, EMC is not a prevailing party for
purposes of § 1988 and did not prevail on its damages claim under § 1983 or on state law grounds.
EMC has, however, prevailed on the declaratory judgment language issue, as this opinion mandates
that, on remand, the district court’s declaratory judgment language mirror the intent of the Energy
Management I opinion. Accordingly, we remand the issue of allocation of costs to the district court
for further consideration; the district court may exercise its discretion to grant or deny costs–with
stated reasons.
III. CONCLUSION
Quoting the language of the Energy Management I panel, “[i]n summary, we conclude that
the City of Shreveport’s Ordinance 221 is preempted by state law.” 397 F.3d at 306. Accordingly,
we VACATE the district court’s declaratory judgment and REMAND this case for entry of
declaratory judgment language in accordance with the prior panel’s expressed intent that Ordinance
221 be preempted in its entirety. Furthermore, we AFFIRM the district court’s refusal to award
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damages and attorney’s fees and REMAND the issue of allocation of costs to the district court for
further relief to which EMC may be entitled.
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