Title: Agency of Natural Resources v. Lyndonville Savings Bank & Trust Co.

State: vermont

Issuer: Vermont Supreme Court

Document:

Agency of Natural Resources v. Lyndonville Savings Bank & Trust Co. (2001-190);
174 Vt. 498; 811 A.2d 1232

[Filed 19-Aug-2002]

                                 ENTRY ORDER

                      SUPREME COURT DOCKET NO. 2001-190

                               MAY TERM, 2002


  Agency of Natural Resources	       }	APPEALED FROM:
                                       }
                                       }
       v.	                       }	Environmental Court
                                       }	
  Lyndonville Savings Bank & Trust     }
  Company	                       }
                                       }	DOCKET NO. 40-3-99 Vtec

                                                Trial Judge: Merideth Wright 

             In the above-entitled cause, the Clerk will enter:

       The Lyndonville Savings Bank & Trust Company appeals from the
  environmental court's order declining to award the Bank attorney's fees
  incurred in an enforcement action voluntarily dismissed by the Agency of
  Natural Resources following the first day of hearing.  We affirm.

       For the most part, the relevant facts are not in dispute.  On February
  5, 1999, the Agency issued an administrative order pursuant to 10 V.S.A. §
  8008 alleging that the Bank's logging activities at Bolton Valley during
  the summer of 1997 violated Vermont's "heavy cutting" law, 10 V.S.A. §
  2625, which had been enacted earlier that summer.  The law requires a
  permit to log forty or more acres of woodland below a certain density.  Ken
  Davis, an outspoken opponent of the law, had conducted the Bolton Valley
  logging operation for the Bank and was obligated by an indemnification
  agreement with the Bank to pay any fines imposed as the result of the
  operation.  The Agency alleged that the Bank had cut plus or minus
  sixty-four acres, and imposed a civil penalty of $22,000.

       The Bank challenged the administrative order in the environmental
  court.  After the Agency filed a pre-trial memorandum on May 26, 1999, both
  parties filed various motions to compel additional discovery. 
  Approximately one week before the scheduled September 22, 1999 hearing, the
  court granted the Agency's motion to amend its administrative order to
  allege that the heavy cut had taken place on forty or more acres.  The day
  before the hearing, the Bank served the Agency with a motion for sanctions
  under V.R.C.P. 11, asserting that the Agency's decision to proceed with the
  enforcement action against the Bank was patently frivolous because the
  Agency had made so many mistakes in conducting its survey of the operation
  that it would be unable to prove that the Bank had heavily logged forty or
  more acres, in violation of the law.

 
        
       The following day, the hearing proceeded with the State calling its
  first witness, the state forester who had investigated the Bank's logging
  operation.  Midway through direct examination, the court permitted counsel
  for the Bank to conduct a voir dire examination of the witness concerning a
  computer-generated map of the cut area that the Agency sought to put into
  evidence.  The examination revealed several discrepancies between the scale
  of the underlying map and the scale of the inspected areas.  The hearing
  concluded with the court directing the Agency to arrange for the computer
  file of the base map of the cut area to be retrieved and printed, for a
  one-inch scale line to be physically drawn on the new printout, and for the
  inspection lines to be replotted on the new computer-generated base map. 
  New hearing dates were set for October 12, 19, and 25.  On October 7, 1999,
  the Agency moved to dismiss the proceeding under V.R.C.P. 41(a)(2).  In
  response, the Bank requested reimbursement for its costs, expenses, and
  attorney's fees.  On November 17, 1999, the court ordered that the
  dismissal be with prejudice and scheduled an evidentiary hearing on the
  Bank's motion for Rule 11 sanctions.  The Agency moved for reconsideration,
  and on January 26, 2001, the court denied the Bank's motion for attorney's
  fees and costs, except for the Bank's expert witness fees from the
  September 22 hearing.  The court also gave the Agency the option of
  dismissing the case with prejudice or dismissing the case without prejudice
  but being obligated to reimburse the Bank for additional fees.  The Agency
  elected to dismiss the case with prejudice.

       On appeal, the Bank first argues that the court erred in concluding,
  as a matter of law, that it could not consider an award of attorney's fees
  because the Agency voluntarily dismissed its enforcement action within
  twenty-one days of the Bank's service of its Rule 11 motion.  Before
  addressing this argument, we must examine Rule 11, relevant case law, and
  the environmental court's reasoning in denying the Bank's motion for
  attorney's fees.  Rule 11 imposes upon attorneys and unrepresented parties
  an obligation to present the court with only those pleadings that assert
  claims, defenses or other legal positions "warranted by existing law or by
  a nonfrivolous argument for the extension, modification, or reversal of
  existing law or the establishment of new law."  V.R.C.P. 11(b)(2); see
  Bennington Realty, LLC v. Jard Co., 169 Vt. 538, 538,