Osier v. The City of Burlington, No. S1588-09 CnC ( Crawford, J., Sept. 25, 2012)

[The text of this Vermont trial court opinion is un official. It has been reformatted from the origina l. The accuracy of the text and the accompanying data included in the Vermont trial cou rt opinion database is not guaranteed.] STATE OF VERMONT

SUPERIOR COURT CIVIL DIVISION Chittenden Unit DOCKET NO.: S1588-09 CnC

FRED OSIER and EUGENE SHAVER Plaintiffs

v.

THE CITY OF BURLINGTON and JONATHAN LEOPOLD Defendants

DECISION ON THE CITY’S MOTION TO DISMISS AND ON PEN DING MOTIONS FOR SUMMARY JUDGMENT

This is a taxpayer lawsuit brought by two residents of the City of Burlington (the City). It alleges the misuse of general City funds to cove r capital expenses and operating losses incurred by Burlington Telecom (BT)—a City-owned ca ble system. Alleging a need to recover taxpayer funds paid in violation of law, fraud and deceit, and breach of the duty of faithful performance, the plaintiffs seek to hold Jonathan L eopold, Chief Administrative Officer of the City during the period when the deficit was incurre d, personally liable for approximately $17 million dollars paid out of the City’s “pooled cash account” to cover BT’s expenses during the years 2007 to 2010.

Plaintiffs also name the City as a defendant. Alth ough they previously alleged conversion, plaintiffs now sue the City for “Recove ry of Taxpayer Funds Paid to BT in Violation of Law.” As against the City, plaintiffs seek an o rder requiring BT to reimburse the pooled cash account for the $17 million it has borrowed from th is account in violation of the Certificate of Public Good (CPG) issued by the Public Service Boar d. They also seek an accounting and an order permanently enjoining the City from taking an y further actions that violate BT’s CPG or the City Charter, or that are likely to place Burli ngton taxpayers at further risk of financial loss.

Numerous motions are currently pending: (1) Plainti ffs’ motion for summary judgment against Mr. Leopold (filed Aug. 1, 2011); (2) the C ity’s motion for summary judgment (filed Oct. 24, 2011); (3) Mr. Leopold’s motion for summar y judgment (filed Feb. 17, 2012); (4) the City’s Rule 12(b)(1) motion to dismiss (filed Apr. 2, 2012); (5) Mr. Leopold’s motion to dismiss Counts I and III (filed April 3, 2012); and (6) Mr. Leopold’s (renewed) motion for summary judgment on Count II (also filed April 3, 2012). O n May 8, 2012, Mr. Leopold filed a motion to
amend his answer and affirmative defenses to add 24 V.S.A. § 903 as an affirmative defense. The court held a hearing on all pending motions on June 27, 2012, granted Mr. Leopold’s motion2

to amend on August 3, 2012, and is now in receipt o f the parties’ briefing on the question of 24 V.S.A. § 903 as well as all of the other issues rai sed in the earlier motions.

FACTS

The essential facts concerning the BT controversy a re not in dispute. They have been the subject of several previous inquiries, most notably the order of the Public Service Board (PSB) which issued on 10/8/10, available at http://psb.ve rmont.gov/sites/psb/files/orders/2010/7044 OrderReSummaryJudgment.pdf.

The Burlington City Charter has long authorized the City to operate its own municipal electrical system. In 1996, the Vermont legislatur e amended the charter to permit City “ownership, operation and utilization of cable tele vision, fiber optic cable and other telecommunications within the corporate limits of t he city.” 1995, No. M-17 (Adj. Sess.), § 23 (codified as amended at 24 V.S.A. app. ch. 3 § 431( 4) (City of Burlington)). The charter change required such a City-owned utility to obtain a cert ificate of public good (CPG) from the Public
Service Board.

The charter amendments also addressed the issue of funding for BT. Section 438(c) of the City Charter provides in part:

If the city [elects to build a cable system], the p ublic service board, in considering any application for a certificate of public good, s hall ensure that any and all losses from these businesses, and, in the event these busi nesses are abandoned or curtailed, any and all costs associated with invest ment in cable television, fiber optic, and telecommunications network and telecommu nications business-related facilities, are borne by the investors in such busi ness, and in no event are borne by the city’s taxpayers, the state of Vermont, or are recovered in rates from electric
ratepayers.

24 V.S.A. app. ch. 3 § 438(c). From its conception , BT was required to pay its own way. The legislature prohibited the use of taxpayers’ money to pay for capital or operating costs.

The Public Service Board issued a CPG in September 2005. The certificate includes
Condition 60 which follows the charter amendment in forbidding the use of public money to pay
for the cost of the BT “build-out” or construction. Condition 60 states:

The City shall make payments on behalf of [the buil d-out of BT] only when and to the extent that BT has cash reserves, revenues r eceivable, or other payments receivable that, collectively, equal or exceed the sum of the payments to be made by the City plus the balance of any other current p ayments owed to the City. BT3

may participate in the City’s pooled cash managemen t system provided, however, that BT shall reimburse the City within two months of the City’s expenditure for any expenses incurred or payments made by the City in support of services that BT provides to non-City entities. The City shall o btain Board approval prior to appropriating any funds other than as described abo ve in the support of BT’s [build-out] activities.

Certificate of Public Good dated 9/13/05. Since 20 07, BT has been unable to meet its construction costs and other expenses from operatin g revenues. Commencing in January 2007, it withdrew more money from the City’s pooled cash acc ount than it paid in. (The pooled cash account is the equivalent of a common checking acco unt maintained for the use of all City departments.) By March 2007, it was in violation o f Condition 60 because it had run a deficit in the account for more than 60 days.

According to defendants, BT was able to repay its i nitial overdraft in August 2007 when it obtained financing from CitiCapital. The relief was short-lived. By November 2007, BT was, again, drawing more money out of the pooled cash ac count than it put in. By January 2008, it
was in violation of Condition 60 because the defici t had lasted more than 60 days. The deficit position continues to the present day and is curren tly approximately $16.9 million.

Jonathan Leopold was the Chief Administrative Offic er of the City from April 2006 until July 1, 2011. As CAO, Mr. Leopold had direct super visory authority over the finances of BT and the use of the pooled cash account. In his dep osition, Mr. Leopold states that he was
unaware of Condition 60 and the restriction on the use of the account until an attorney for the City informed him about the condition in November 2 008. Mr. Leopold describes his decision to allow BT to run a large deficit in violation of the original charter amendments and the Certificate of Public Good as a pragmatic decision to borrow mo ney in the short-term until refinancing was in place. He states that refinancing became unavai lable in 2008 when the credit markets in the
United States and elsewhere entered a state of cris is.

There is no evidence that any funds withdrawn from the pooled cash account were used for any purpose except the construction costs and o ther normal business expenses of BT. City money drawn from many departments—and from the taxp ayers—was used to meet BT’s expenses. There is no evidence—indeed, no allegati on whatsoever—of corruption or personal benefit to Mr. Leopold or any other City employee. The plaintiffs allege only that the use of these City funds was unauthorized and occurred in o bvious violation of the city charter and the requirements of the Public Service Board.

Additional facts and procedural history material to the issues presented are set forth as necessary below.4 ANALYSIS

As noted above, there are numerous motions pending that raise a variety of different issues. The court finds it helpful to divide its a nalysis into parts addressing separately plaintiffs ’ claims against the City of Burlington and plaintiff s’ claims against Jonathan Leopold.

I. Claims Against Mr. Leopold

The three claims against Mr. Leopold are: (1) “Reco very of Taxpayer Funds Paid to BT in Violation of Law”; (2) fraud and deceit; and (3) breach of the duty of faithful performance. Under each of these theories, plaintiffs seek a jud gment requiring Mr. Leopold to repay the $17 million. See Fourth Am. Compl. ¶ 1 (“Plaintiffs se ek a judgment requiring Defendants to repay such funds promptly and with interest . . . .”); ¶ 37 (“Plaintiffs seek equitable relief requiring Defendants to restore to the City’s General Fund al l sums advanced to BT from the cash pool in violation of BT’s CPG or City Charter, plus interes t.”). 1 Each of these three claims is the subject of the plaintiffs’ August 2011 summary judgment mot ion, Mr. Leopold’s February 2012 summary judgment motion, or Mr. Leopold’s April 201 2 motions to dismiss and for summary judgment. Much of the briefing has focused on whet her Mr. Leopold is entitled to qualified immunity. 2

This is not the first time American taxpayers have sued to impose personal liability on public officials for spending public funds without authorization. Various states have developed tests for when an official is personally responsibl e for the expenditure. This case is one of the first in which taxpayers seek to recover against a Vermont official. In determining the principles which apply in this state, the court turns first to the spectrum of experience in other states.

Some courts have ruled that public officials who sp end money without legal authorization are personally liable for those amounts regardless of motive or other considerations. See Stanson

v. Mott , 551 P.2d 1, 15 n.12 (Cal. 1976) (collecting cases following the “strict liability” rule);
63C Am. Jur. 2d Public Officers and Employees § 339 (“Some courts . . . have followed a strict liability rule and hold a public official personall y liable whenever he or she has permitted expenditures that the public entity is not authoriz ed to make.”). This is the rule which plaintiffs seek to apply in their August 2011 motion for summa ry judgment and in their subsequent filings. Plaintiffs assert that the only facts material to t heir motion are that the Public Service Board adopted Condition 60, that Mr. Leopold was responsi ble for all expenditures from the City’s “cash pool,” and that Mr. Leopold authorized the ex penditure over time of more than $16.9

1 Paragraphs 1 and 37 are incorporated into each Cou nt of the Fourth Amended Complaint. See id

. ¶¶ 38, 48.

2 The topic of qualified immunity has also been disc ussed in some of the court’s prior rulings in this case. E.g., Ruling on Def. Leopold’s Mot. to Dismiss at 5 (file d Aug. 19, 2010); Ruling on Mot. for Interlocutory Appeal at 5 (Oct. 20, 2010).5

million for BT from the “cash pool” in violation of Condition 60. See Pls.’ Reply at 2 (filed Oct. 11, 2011).

The majority of states have not adopted a rule of s trict personal liability for unauthorized expenditures. Instead, they have imposed requireme nts of unreasonable behavior or bad faith which limit recovery against a public official for misspent money.

Some states require a showing of negligence. In Stanson , the California Supreme Court adopted a “due care” standard under which public of ficials could be personally liable “if they spend funds having reasonable cause to suspect that the expenditure might be improper, or if they fail to prevent an improper expenditure becaus e of negligent performance of their official oversight duties.” 551 P.2d at 15 n.12.

More frequently other states have adopted a “good f aith” standard. See State v. Newbern

, 398 N.E.2d 683, 686 (Ind. Ct. App. 1979) (“[W]e hol d that when a controller acts in good faith, reasonably believing that he has the authority to a pprove expenditure of the money for the stated purpose, he will not be held individually liable fo r the money if the expenditure is later determined to be inappropriate.”). Connecticut req uires both a showing of subjective good faith and an additional showing that there was ambiguity about the extent of the official’s authority.
See Arminio v. Butler , 440 A.2d 757, 762–63 (Conn. 1981) (general rule i s to hold public officials personally liable for unauthorized expend itures, even if in good faith, but recognizing an exception in cases where the illegal payment “is fo r a public purpose, the municipality has received fair value for the money expended, the off icial did not receive personal profit, and the source of the authority violated by the office is c learly ambiguous”).

Still other states have enacted legislation to limi t personal liability to willful violations of spending limits. See Powers v. Goodwin , 291 S.E. 2d 446, 470 (W.Va. 1982) (noting persona l liability provisions in W. Va. Code § 11-8-29); Burt v. Blumenauer , 699 P.2d 168, 177 (Or. 1985) (discussing Oregon’s personal liability statu te, ORS § 294.100).

The Vermont courts have not addressed the appropria te standard. The Vermont legislature, however, has enacted a single provisio n which greatly limits the potential liability of a municipal official for expenditures of public fun ds. Title 24, section 903—entitled “Nonliability of municipal officers for money paid out”—provides:

An action shall not be maintained against a person for money paid out by him as an officer of a municipal corporation in accordance with a vote of such corporation, whether such vote was valid or not.

Although this provision has been part of the law of Vermont in substantially the same form since its enactment in 1896, it has apparently not been c ited in any reported case. Within the confines of the statute, it provides immunity from claims fo r repayment of expenditures by municipal
officers.6

Are the required elements of § 903 present in this case? The court concludes that they

are.

1. There is no dispute that this is an action for money paid out by Mr. Leopold as an officer of a municipal corporation. There is no di spute that he authorized the expenditures from the “pooled cash” account and that he did so in his capacity as Chief Administrative Officer of the City of Burlington.

2. The money was paid “in accordance with a vote o f such corporation.” The record is now clear that each of the City’s annual budget res olutions called for the expenditure of
substantial funds for BT. Each resolution was ado pted following a vote by the City Council. To understand what was voted on requires a close readi ng of the budget resolutions.

In each of the years in question, the City Council adopted a budget for BT which included budgeted revenues as well as budgeted expe nditures. The budgeted revenues and expenditures for the years in question were:

Fiscal Year Budgeted REVENUES

including revenue from BT operations as well as financing Budgeted EXPENDITURES all subject, however, to the “available for expenditure” limitation described below 2007 $8,091,510.00 $ 8,458,890.00 2008 $9,673,644.00 $ 9,673,644.00 2009 $6,051,010.00 $17,163,536.00 2010 $8,832,166.00 $15,874,130.00

The actual revenues and expenditures for each year in question turned out to be less than the budgeted figures. The difference between actual re venues and actual expenditures is deficit spending. It is hardly surprising that BT had to b uild its cable network before it could receive income from subscribers or that in the early years of construction costs were much greater than

revenues.

There are only two ways that an organization can op erate at a deficit. It can borrow the money from elsewhere. BT did this twice but was un able to refinance after 2008. The other way is that it can spend money from reserves or account s which were intended for other purposes. This was what Mr. Leopold authorized in violation o f Condition 60.

But for purposes of § 903, did he authorize this sp ending in violation of the budget resolutions passed by City Council? The answer has to be “No.” Each annual expenditure was the subject of a budget vote. The resolutions expr essly authorized expenditures in 2009 and 2010 that were approximately $11 million and $7 mil lion dollars in excess of budgeted revenues. This budgeted shortfall is roughly equal to the def icit from “pooled cash.” In approving expenditures in excess of budgeted revenues, the Ci ty Council recognized that in some years, the cost of building out BT would exceed any reasonable estimate of revenues. The budget7

resolutions make it clear that City Council authori zed deficit spending in excess of income during the years at issue.

Before reaching the conclusion that the expenditure s were authorized, the court considers
two issues.

A. What is the meaning of the “limitation on expen ditures” provision?

The budget resolutions all contain language which r educes spending if there is a shortfall
in revenues:

[T]he appropriations for . . . all Enterprise Funds 3 . . . shall not be considered appropriations which are available for expenditure unless and to the extent that
there is received for the benefit of such accounts the level of estimated revenue for the credit of such accounts equivalent to the a mount set forth in the budget.

In other words, a shortfall in revenues must reduce the actual spending dollar-for-dollar. In fact, BT did reduce its spending in fiscal year 2007. M oreover, applying the limitation on expenditures this way, there is no suggestion in th e record that, in any of the years in question, BT spent more than the appropriations “available fo r expenditure.” 4

Plaintiffs place far greater weight on this provisi on. They contend that no spending was authorized in excess of operational revenues. If t his were true, then all spending in excess of revenues would be unauthorized. Neither the languag e nor the context of the provision supports such an interpretation. The provision reduces appr opriations by any difference between revenues
received and revenues budgeted . If the operational revenue projection was too ro sy, then spending in that year must be reduced. But the com parison is only between budgeted and actual revenues – not between total appropriations, includ ing deficit spending to be covered by financing, and actual revenues.

Read as a whole, the budget resolutions support thi s interpretation. As previously discussed, the resolutions anticipate a great defic it between revenues and spending, including construction costs, in the years in question (2007 – 2010). It makes sense to adjust spending downwards in response to a relatively small shortfa ll in actual revenues. It makes no sense to pretend that BT revenues would be sufficient to pay for construction in the early years of the enterprise.

3 There is no dispute that BT is an “Enterprise Fund .”

4 The only possible exception is fiscal year 2008, b ut Mr. Leopold points out—and plaintiffs do not dis pute—that the FY 2007 budget resolution included a carryover clause that carried over unexpended balances from t he 2007 appropriations to fiscal year 2008, and the applica tion of that carryover clause meant that BT’s expen ditures in 2008 were within the authorized budget.8

For purposes of this case, the “limitation on expen ditures” provision does not change the conclusion that the expenditures, adjusted downward s in some years, were authorized by vote of
the council.

B. Does the existence of Condition 60 change the e ffect of § 903?

The funds in dispute were clearly paid out in viola tion of the requirements of the state regulator. In applying § 903 to this lawsuit, the court does not condone this behavior. The use of the pooled cash account fell far below standards of candor and rectitude which we expect from public officials. It also violated the promise mad e to the citizens at the time of the Charter
amendments in 1996 that BT would not be built with taxpayers’ money.

These observations do not change the immunity provi sion. Even an unlawful vote – held in secret or without notice to the public, for exam ple – would be sufficient to confer immunity on municipal officials. Section 903 does not mince wo rds. An official is immune from suit when he spends money authorized by vote, legal or not. Mr. Leopold may have violated the regulatory condition, but he did not spend money without autho rization from the City Council.

The court concludes that the immunity created by § 903 applies in this case. There is no need to go further to determine whether Vermont wil l adopt a “good faith” standard for an expenditure falling outside of § 903. The court gr ants Mr. Leopold’s motion for summary judgment on the narrow ground that the annual expen ditures for BT were all authorized by vote of the City Council.

II. Plaintiffs’ Claim Against the City

The only count in the Fourth Amended Complaint tha t is directed against the City is Count I: “Recovery of Taxpayer Funds Paid to BT in Violation of Law.” As mentioned above, plaintiffs seek an order requiring BT to reimburse the pooled cash account for the $17 million it

has borrowed from this account in violation of the CPG issued by the PSB. They also seek an accounting and an order permanently enjoining the C ity from taking any further actions that violate BT’s CPG or the City Charter, or that are l ikely to place Burlington taxpayers at further
risk.

The City now moves to dismiss Count I on the follow ing grounds: (1) the court should apply the doctrine of primary jurisdiction and decl ine to exercise jurisdiction in favor of the Public Service Board, and (2) plaintiffs’ recovery claim against the City is not ripe. In a motion for summary judgment filed on October 24, 2011, the City also argues that plaintiffs do not have standing to pursue their claims against the City be cause the relief they seek would materially interfere with the City’s ability to operate BT, an d that the claims against the City should be dismissed under V.R.C.P. 17 because the “real parti es in interest” who are pursuing this case9

have refused to identify themselves or be named as plaintiffs in this action. 5 The court considers together all of the City’s arguments, whether raise d in the motion to dismiss or the motion for summary judgment.

A. Standing / Real Party in Interest

The City acknowledges that, as a general propositio n, taxpayers have standing to seek relief from official action. The City argues, howe ver, that plaintiffs lack standing in this case because the relief they seek concerns a proprietary function of the City. In support, the City cites McQuillin for the proposition that “[d]iscretionary powers relating to the management of a public utility by a municipality will not be interf ered with by injunction at the instance of taxpayers . . . .” 18 E. McQuillin, The Law of Mun icipal Corporations § 52.21 (3d ed.) (WL updated Oct. 2011). Plaintiffs maintain that the C ity cannot defeat their suit against it on the grounds of discretionary decision-making because to do so would be contrary to legislative intent and would permit the City to get away with spending public funds secretly and illegally.

The rule set forth in McQuillin is, however, subje ct to an exception. Examination of the cases cited shows that courts will not interfere ju st because they might disagree with a business judgment, but will entertain suit in cases involvin g, among other things, violation of law. E.g.,
Butler v. Karb , 117 N.E. 953, 955 (Ohio 1917) (quoting Dailey v. New Haven , 22 A. 945, 947 (Conn. 1891)). Violation of law is precisely what plaintiffs allege in this case.

The City also argues that Osier and Shaver are not the real parties in interest because other individuals are paying their litigation fees and costs. “The Vermont Rules of Civil Procedure require that every action be prosecuted i n the name of the real party in interest.” Smedberg v. Detlef’s Custodial Serv., Inc. , 2007 VT 99, ¶ 30, 182 Vt. 349 (citing V.R.C.P. 17(a)). The effect of this rule “is that the actio n must be brought by the person who, according to the governing substantive law, is entitled to enfor ce the right.” Id . (quoting 6A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 1543, at 334 (2d ed. 1990)). This inquiry has to do with the named-plaintiffs’ entitlement to enforce their rights, not with who is paying for the litigation. See Krohn v. Gardner , 433 N.W.2d 95, 98 (Neb. 1995) (agreement between insureds and their insurer under which insurer agre ed to supply counsel and pay costs related to insureds’ attempt to secure judgment against tortfe asor did not assign any right of action, nor did it change the fact that the insureds were the real parties in interest); Speer v. Cimosz , 642 P.2d 205, 208 (N.M. Ct. App. 1982) (chiropractor was cou nsel’s client and the real party in interest

5 The City’s summary-judgment motion was filed prior to the Fourth Amended Complaint, and addressed som e issues that are no longer germane, such as conversi on (which is not asserted in the Fourth Amended Com plaint) and BT’s capacity to be sued (which is irrelevant now b ecause the Fourth Amended Complaint does not name B T as a defendant). However, the summary-judgment motion a lso discusses the primary jurisdiction question, ar gues that plaintiffs’ claims for an accounting and a permanen t injunction are moot, and asserts the standing and real-party-ininterest arguments.10

despite the fact that chiropractor’s legal fees in action to recover for services rendered were paid by chiropractic legal fund).

For these reasons, the court concludes that neithe r the standing doctrine nor the realparty-in-interest requirement presents a hurdle to plaintiffs’ claim against the City. The court will therefore deny the City’s October 24, 2011 mot ion for summary judgment.

B. Primary Jurisdiction and Ripeness

The court previously took up the issue of primary jurisdiction in its “Ruling on Motion to Dismiss” dated May 11, 2010. The court considered the three factors set forth in Gallipo v. City of Rutland , 2005 VT 83, 178 Vt. 244, and concluded that each factor favored deferring to the PSB. Ruling at 3–5 (Toor, J.). The court also con sidered the danger of inconsistent rulings, and concluded that that factor also weighed in favor of deferring to the PSB. Id . at 5. However, the court reasoned that plaintiffs’ right to be heard i n the PSB proceedings was significant, and concluded that, rather than dismissal, it would be more appropriate to order a stay to permit plaintiffs to seek participation in the PSB process

.

On July 19, 2010 plaintiffs Osier and Shaver moved to intervene in the PSB’s Docket
No. 7044. The PSB denied the motion. See Order Re Motion to Intervene, No. 7044 (Vt. Pub. Serv. Bd. Dec. 16, 2010), available at http://psb.v ermont.gov/sites/psb/files/orders/2010/7044 OrderReTaxpayerIntervention.pdf. Plaintiffs subseq uently moved to lift the stay in this court, and the court granted the motion. See Ruling on Mo tions at 1–2 (filed Jan. 21, 2011) (Toor, J.) (“[The] stay was imposed to allow the Public Servic e Board to address the issues first. Plaintiffs have submitted a decision from the PSB denying thei r motion to intervene. No party has opposed the motion. The motion is granted.”). In a ruling dated March 3, 2011, the court acknowledged that the City and BT in fact did file an opposition to the motion to lift the stay, but determined that the opposition did not alter its co nclusion:

As the City and BT point out, many of the rationale s for the court’s original stay order still apply as long as the rela ted matter is pending before the Public Service Board. However, the PSB has now rej ected the Plaintiffs’ attempt (albeit a half-hearted one) to intervene in that ac tion. Moreover, this case is proceeding against defendant Leopold in any event. Because Plaintiffs have no other legal forum in which to be heard, and because it would be inefficient to have discovery proceed only against Leopold when the iss ues as to all the defendants are overlapping, the court concludes that there is no reason to continue the stay in this case. If, in the future, particular actions a re requested from the court that would directly raise the specter of potentially inc onsistent rulings, the parties may
raise the issue at that time.11

Ruling on Mot. To Recons. at 1–2 (filed Mar. 3, 201 1) (Toor, J.). Docket No. 7044 remains open with the PSB.

In its Rule 12(b)(1) motion, the City now asserts that its violation of Condition 60 is the subject of PSB Docket No. 7044, that the issue of t he remedy for that violation will be addressed by the PSB, and that whether or not plaintiffs may intervene in the PSB proceeding should not be a determinative factor in deciding whether to dismi ss this case on primary jurisdiction grounds. Along similar lines, the City contends that plainti ffs’ Count I is not ripe for review because the PSB is addressing the same issues raised in that cl aim, and because the City’s cure period is ongoing.

Plaintiffs argue that (1) the City’s motion to dis miss is too late pursuant to V.R.C.P. 12(b) and is barred by the law-of-the-case doctrine and ( 2) the court’s earlier ruling denying the City’s motion to dismiss was correct. In reply, the City asserts that plaintiffs have not articulated a valid reason to apply the discretionary law-of-the- case doctrine, especially in light of the different posture of this case now compared to Marc h 2011.

It is true that a Rule 12(b) motion must generally be made “before pleading if a further pleading is permitted.” V.R.C.P. 12(b). “A strict interpretation of the timing provision’s language leads to the conclusion that the district judge must deny any Rule 12(b) motion made after a responsive pleading is interposed as being too late.” 5C Wright, Miller, Kane & Marcus, Federal Practice and Procedure: Civil 3d § 1361 (WL updated Apr. 2012). There are exceptions, however, including the certain defenses preserved p ursuant to V.R.C.P. 12(h). See id

.

Here, the City’s Rule 12(b)(1) motion to dismiss th e count against it in the fourth amended complaint was filed on April 2, 2012. This was after the City answered the third amended complaint (February 14, 2011). The court g ave defendants until April 1, 2012 to answer the fourth amended complaint; the City did n ot file an answer but instead filed its Rule 12(b)(1) motion on April 2, 2012. There is some di spute about whether the City’s motion is truly a challenge the court’s jurisdiction (and thu s whether it comes within V.R.C.P. 12(h)), especially given the court’s previous recognition t hat the doctrine of primary jurisdiction is not “truly jurisdictional.” Ruling on Mot. to Dismiss at 3 n.2 (May 11, 2010) (Toor, J.). Nevertheless, the court concludes that the City cou ld move to dismiss when it did because a further pleading—namely, an answer to the fourth am ended complaint—was permitted. Moreover, the court had previously expressly ruled that the City could raise the issue again.

In addition, the court concludes that law-of-the-c ase doctrine does not preclude ruling on this issue now. The court’s May 11, 2010 ruling di d not hold that the doctrine of primary jurisdiction could never operate in this case. Rat her, at that early stage of the case, the court was12

concerned about plaintiffs’ access to a forum in wh ich to be heard, and the inefficiencies of having discovery proceed only against Mr. Leopold w hen the issues as to all defendants were overlapping. Now, more than two years later, there has been ample opportunity for discovery against all defendants. Plaintiffs have had an opp ortunity to participate in this forum as well as
before the PSB. The court’s earlier concerns are n o longer present, and the court’s previous analysis of the Gallipo factors controls. The court has reviewed Central Vermont Public Service Corp. v. Town of Springfield , 135 Vt. 436 (1977), and City of South Burlington v. Vermont
Electric Power Co. , 133 Vt. 438 (1975), and does not believe that eit her case requires a contrary
result.

The court’s May 11, 2010 ruling came before the PSB ’s October 8, 2010 order, available at http://psb.vermont.gov/sites/psb/files/orders/20 10/7044OrderReSummaryJudgment.pdf. It is very clear from that order that the PSB is overseei ng BT’s efforts to cure its Condition 60
violation. See id . at p.33, ¶ 10 (requiring BT to file periodic repo rts detailing its progress in curing or resolving violations of the CPG). An ord er from this court requiring BT to reimburse the City might effectively be a “cure” to the Condi tion 60 violation, but it is apparent that the PSB is already handling the need to cure the violat ion.

Plaintiffs argue that application of the primary ju risdiction doctrine would prejudice them because the PSB cannot provide meaningful relief. They assert that the PSB’s only options are to revoke BT’s CPG or to assess penalties, neither of which restores the $17 million to the City’s general fund. That may be true, but the court is u nconvinced that the sort of judgment plaintiffs seek would be any more meaningful. Taking $17 mill ion out of BT would repay the taxpayers, but it would undoubtedly also eviscerate BT, result ing in negative consequences for the City (such as a lowered credit rating) and its taxpayers . The better course is to defer to the process presently being overseen by the PSB. The court wil l therefore dismiss the claim against the City, without prejudice to it being re-filed after PSB Do cket No. 7044 is closed.

C. Whether Plaintiffs’ Claims for an Accounting an d a Permanent Injunction are Moot

Plaintiffs’ demands for an accounting and a perman ent injunction were previously set out as separate counts in the Third Amended Complaint. They now appear in the Fourth Amended Complaint among plaintiffs’ requests for relief. T he City argues that these claims or requests for relief are now moot. City’s Mot. for Summ. J. at 1 5–18 (filed Oct. 24, 2011); City’s Mot. to Dismiss at 1 n.1 (filed Apr. 2, 2012). According t o the City, an accounting would not provide plaintiffs with any more relief than they already h ave by way of the Interim Stipulated Order in this case, the responses they have received in disc overy, and the materials supplied to the Public Service Department. The City also asserts that any demand for an order permanently enjoining13

the City from violating Condition 60 is moot becaus e the City has complied with Condition 60 since October 2, 2009. 6

Plaintiffs contend that their request for an accou nting is not moot because the information they received under the Interim Stipulated Order is insufficiently detailed for them to evaluate BT’s true financial condition or prospects and beca use the City’s discovery responses do not constitute an accounting. Plaintiffs also argue th at, unless the City agrees to make permanent the interim order prohibiting violations of Condition 6 0, their request for a permanent injunction is not moot because without it, the City would be free to return to its old ways.

In reply, the City maintains that the accounting c laim is moot because the City has produced tens of thousands of pages of documents in discovery, monthly reports to plaintiffs, copies of status reports to the PSB, and actual pri ntouts from the City’s accounting and financial management program. The City says that, to the ext ent that plaintiffs claim that they cannot understand the materials provided, plaintiffs could have followed up at any time. The City also says that plaintiffs’ request for a permanent injun ction is moot because the City is bound to comply with the CPG regardless of an order from thi s court.

The court concludes that plaintiffs’ demand for a permanent injunction is moot. The City is in no way free to return to its “old ways.” The public scrutiny brought upon the City, coupled with the active oversight by the Public Service Boa rd and an electoral change, suggest as much. Moreover, a permanent injunction effectively making a PSB order an order of this court as well would be administratively confusing and redundant, and could lead to conflicting or inconsistent rulings in the event of noncompliance.

Finally, the court concludes that this is not an a ppropriate case for an accounting.

Equitable jurisdiction for an accounting is usually invoked in cases where: (1) there is a fiduciary relationship between the parti es, accompanied by a duty on the part of the defendant to render an account; (2) the re are mutual accounts, or, if the account is all on one side, the account is complica ted; and (3) there is a need for discovery.

6 The parties did dispute whether the City had viola ted Condition 60 (and this court’s Interim Stipulat ed Order prohibiting such violations) when it made payments to a financial advisor. The court ruled that the C ity’s actions did not violate the court order, and denied plainti ffs’ motion for contempt. Ruling at 7 (filed Aug. 19, 2011). The PSB reached a similar conclusion when considering t he same issue. See Hr’g Officer’s Report on Burlin gton Telecom’s Mot. for Declaratory Ruling Regarding Cer tain Payments at 6–7, No. 7044 (Vt. Pub. Serv. Bd. Nov. 23, 2011), available at http://psb.vermont.gov/sites/ps b/files/orders/2011/2011-2/7044%20OrderReConsultant Payments.pdf (“[N]o violation of Condition 60 is ev ident with respect to these payments.”).14

1 Am. Jur. 2d Accounts and Accounting § 54 (WL updated Aug. 2012) (footnotes omitted). Here, there has already been ample discovery, and p laintiffs have not explained with specificity what more they need.

CONCLUSION

The court construes Mr. Leopold’s motion for summar y judgment (filed Feb. 17, 2012) to include his recent argument on statutory nonliabili ty pursuant to 24 V.S.A. § 903, and on that
limited basis GRANTS the motion. Plaintiffs’ motion for summary judgme nt against Mr. Leopold (filed Aug. 1, 2011) is therefore DENIED . Mr. Leopold’s motion to dismiss Counts I and III (filed April 3, 2012) is MOOT . Mr. Leopold’s (renewed) motion for summary judgm ent on Count II (also filed April 3, 2012) is also MOOT

.

The City’s motion for summary judgment (filed Oct. 24, 2011) is DENIED . The City’s motion to dismiss (filed Apr. 2, 2012) is GRANTED , without prejudice to re-file the reimbursement portion of Count I against the City a fter PSB Docket No. 7044 is closed.

Dated at Burlington this ___ day of September 2012.

_________________ Geoffrey Crawford, Superior Court Judge