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. e du/thir dc ir c uit_1998/41Filed March 9, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-7020

TAMARIND RESORT ASSOCIATES, A U.S. Virgin Islands Joint Venture consisting of TAMARIND RESORT CORPORATION, a Delaware Corporation, CULLIGAN PORSCHE, INC., a New York Corporation

v.

GOVERNMENT OF THE VIRGIN ISLANDS

Tamarind Resort Associates ("TRA"),

Appellants

Appeal from the District Court of the Virgin Island s (Division of St. Thomas) (D.C. Civ. No. 95-cv-00010)

Argued December 9, 1997

Before: SLOVITER, STAPLETON and MANSMANN, Circuit Judges.

(Filed March 9, 1998)George H.T. Dudley, Esquire

Henry L. Feuerzeig, Esquire Charles E. Engeman, Esquire Dudley, Topper & Feuerzeig

Law House 1A Frederiksberg Gade Charlotte Amalie, St Thomas

USVI 00804

Everett C. Johnson, Jr., Esquire
(ARGUED) Leonard A. Zax, Esquire Mary E. Britton, Esquire

Latham & Watkins 1001 Pennsylvania Avenue, N.W.

Suite 1300 Washington, D.C. 20004

COUNSEL FOR APPELLANT

TAMARIND RESORT

Julio A. Brady, Esquire Paul L. Gimenez, Esquire Gary M. Alizzeo, Esquire (ARGUED) Office of Attorney General of Virgin Islands Department of Justice 48B-50 Kronprindsens Gade Charlotte Amalie, St Thomas

USVI 00802

COUNSEL FOR APPELLEE

OPINION OF THE COURT

MANSMANN, Circuit Judge.

After the Government of the Virgin Islands denied Tamarind Resort Associates ("TRA") a Coastal Zone Management Act ("CZMA") permit in order to develop Hans Lollik Island, TRA brought suit against the Governm ent in the District Court of the Virgin Islands alleging b reach of contract, temporary and permanent unconstitutional

2takings, and violation of TRA's constitutional righ ts to due

process and equal protection. The district court gr anted summary judgment for the Government on the breach o f contract claim and, treating the constitutional cla ims as an administrative writ of review, affirmed the Board o f Land Use Appeals' decision denying TRA a coastal zone pe rmit.

In this appeal, we are asked to determine whether summary judgment was appropriate on TRA's breach of contract claim. In addition, we must examine the ex tent to which the District Court of the Virgin Islands has jurisdiction to decide writs of review and determin e if the district court erred in reviewing TRA's constitutio nal claims in its appellate capacity.

Because we agree with the district court that the agreement is unambiguous and that the Government di d not breach the agreement by applying the CZMA to TR A, we will affirm the district court's grant of summary j udgment on the breach of contract claim. With respect to th e remaining constitutional claims, however, we find t hat the district court erred in treating those claims as a writ of

review and therefore will remand for the district c ourt to consider TRA's constitutional claims under its orig inal, federal question jurisdiction.

I.

Great Hans Lollik Island is a 500 acre uninhabited island located approximately two miles off the coast of St . Thomas. In 1964, when the Island was owned by Hans Lollik Corporation, the Corporation and the Government of the Virgin Islands entered into an agreement which was enacted into law as Act No. 1145, 1964 V.I. Sess. L aws 120, and amended by Act No. 1327, 1965 V.I. Sess. L aws 47, and Act No. 1883, 1967 V.I. Sess. Laws 53. The agreement contains a provision identifying it as "contractual and proprietary in nature."1

___________________________________________________ ______________

1. The district court applied principles of contrac t interpretation rather than canons of statutory construction in interpreti ng the agreement pursuant to our rationale in West Indian Co., Ltd. v. Government of the Virgin Islands, 844 F.2d 1007, 1016-17 (3d Cir. 198 8). The parties have not disputed this ruling on appeal. For the reasons articulated by the district court, we also will interpret the agreemen t under basic contract principles.

3Under the agreement, the Government approved "the u se

of Hans Lollik Island for the purposes of a Hotel, Marina and Housing Project" and provided for the lease of certain

Government land to construct a marina and related facilities. The agreement states that the initial d evelopment objective is to construct a hotel "with accommodati ons for no less than fifty (50) rooms . . . together with a further development plan calling for the construction of approximately one hundred and fifty (150) major residences." The agreement also contains language t hat mirrors the Contract Clause of Article I, S10, cl. 1 of the

United States Constitution which states that "the Government will not adopt any legislation impairing or limiting the obligations of this contract."

In October of 1978, the Government enacted the Virg in Islands Coastal Zone Management Act, V.I. Code Ann. tit. 12, SS 901-914 (1982 & Supp. 1997) in order to harm onize the goals of environmental protection and economic development. V.I. Code Ann. tit. 12, S 903(b)(1)-(1 1); see also Virgin Islands Conservation Soc'y, Inc. v. Vir gin Islands Bd. of Land Use Appeals, 881 F.2d 28, 29 (3d Cir. 1 989). The general purpose of the CZMA was to set up a comprehensive program for the management, conservat ion, and orderly development of the coastal area. West I ndian Co., Ltd. v. Government of the Virgin Islands, 844 F.2d 1007, 1011 (3d Cir. 1988); see also V.I. Code Ann. tit. 12, S 903(b)(4). Under the CZMA, development of the coa stal zone may only be accomplished by obtaining a permit from the Coastal Zone Management Commission ("CZMC"). V. I. Code Ann. tit. 12, SS 904 and 910. The CZMA also pr ovides, however, that "[n]othing herein contained shall be construed to abridge or alter vested rights obtaine d in a development in the first tier coastal zone prior to the effective date of [this Act]." V.I. Code Ann. tit. 12, S 905(f).

Hans Lollik Island is located in the first tier coa stal zone and is subject to CZMA restrictions absent a vested right in development obtained prior to February 1, 1979, the

effective date of the CZMA.

TRA is a joint venture established in the Virgin Is lands comprised of Tamarind Resort Corporation, a Delawar e corporation, and Culligan Porsche, Inc., a New York

4corporation. In 1990, TRA purchased Hans Lollik Isl and.

TRA is the successor-in-interest to the 1964 agreem ent between the Government and Hans Lollik Corporation.

TRA developed a plan to construct an 800-unit resor t on the island including a 150 unit hotel. TRA submitte d an application to the CZMC for a permit. The CZMC reje cted TRA's application. TRA thereafter submitted a plan for a 675-unit development, including a 150 unit hotel an d 525 residences consisting of 160 major residences and 3 65 villas or condominium-style homes.

The CZMC held public hearings on TRA's revised plan at which many speakers voiced opposition to the develo pment. The CZMC ultimately denied TRA a permit for constru ction of the 675-unit proposal in a detailed decision set ting forth its extensive findings and conclusions.

TRA appealed the CZMC decision to the Board of Land Use Appeals. The Board affirmed the CZMC's decision rejecting TRA's permit application. TRA then brough t this action against the Government in the District Court of the Virgin Islands asserting claims for breach of contr act, temporary and permanent unconstitutional takings, a nd violation of TRA's constitutional rights to due pro cess and equal protection. TRA moved for summary judgment on the breach of contract and the due process and equal protection claims and the Government cross moved fo r summary judgment on all claims. The district court granted summary judgment in favor of the Government on TRA' s breach of contract claim and, treating TRA's remain ing

constitutional claims as an administrative writ of review, affirmed the Board of Land Use Appeals' decision de nying TRA's permit application. This timely appeal follow ed.

II.

We review the district court's order granting summa ry judgment on TRA's breach of contract claim de novo. Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90 F.3d 737 , 743 (3d Cir. 1996).

5A.

Under the law of the Virgin Islands, interpretation of an integrated agreement is to be determined as a quest ion of law by the court if it does not depend on the credi bility of

extrinsic evidence or a choice of reasonable infere nces to be drawn from extrinsic evidence.2 Restatement (Second ) of Contract S 212(2) (1981). Any determination as to m eaning should be made in light of the relevant evidence, b ut after the transaction has been examined in its entirety, the words of an integrated agreement are the most impor tant evidence of intention. Id. at S 212, cmt. b. It is axiomatic that where the language of a contract is clear and unambiguous, it must be given its plain meaning. Id . at S 202(3)(a).

In addition, "[i]t is a fundamental principle of co ntract law that `disputes involving the interpretation of unambiguous contracts are resolvable as a matter of law, and are, therefore, appropriate cases for summary judgment.' " Hadley v. Gerrie, 124 B.R. 679, 683 (D .V.I.), aff 'd, Gas House, Inc. v. Unicorp American Corp., 952 F.2d 1392 (3d Cir. 1991)(table decision)(citing Reed, Wi ble and Brown v. Mahogany Run Dev. Corp., 550 F. Supp. 1095
, 1099 (D.V.I. 1982)). We have consistently embraced the basic common law principle that a contract is unambiguous if it is reasonably capable of only one construction. See, e.g., Sumitomo Mach. Corp. of Am erica, Inc. v. AlliedSignal, Inc., 81 F.3d 328, 332 (3d Ci r. 1996);

___________________________________________________ ______________

2. The agreement does not provide what law governs its interpretation, but because the agreement relates to property withi n the Virgin Islands, was performed in the Virgin Islands, and was entere d into by the Government of the Virgin Islands, we will apply Vir gin Islands law. The Virgin Islands Code establishes the sources of law for the Islands as

follows:

The rules of the common law, as expressed in the restatements of the law approved by the American Law Institu te, and to the extent not so expressed, as generally understood an d applied in the United States, shall be the rules of decision in th e courts of the Virgin Islands in cases to which they apply, in the absence of local laws

to the contrary.

V.I. Code Ann. tit. 1, S 4 (1967).

6American Flint Glass Workers Union, AFL-CIO v. Beau mont

Glass Co., 62 F.3d 574, 581 (3d Cir. 1995). We ther efore will affirm a grant of summary judgment in a breach of contract action only where the contract is unambigu ous and the moving party is entitled to judgment as a m atter of

law.

B.

TRA bases its breach of contract claim on the asser tion that the Government breached the agreement by requi ring TRA to obtain a CZMA permit prior to developing Han s Lollik Island. TRA contends that in applying the CZ MA to TRA, the Government impaired TRA's rights under the agreement in breach of its covenant to refrain from adopting any legislation impairing or limiting the obligations of the agreement. In order to determine whether application of the CZMA impairs TRA's contractual r ights for purposes of summary judgment, we must first determine what rights the agreement grants TRA and/ or whether the agreement is ambiguous as to the contra ctual rights to which TRA is entitled.

The agreement contemplates an initial development o n Hans Lollik Island of a hotel with a minimum offift y rooms and approximately one hundred and fifty major resid ences. In addition, the agreement provides that:

In regard to questions of land use and the z oning laws,

the Government has satisfied itself and does hereby determine that the use of the respective sit es in question for purposes of a Hotel, Marina and Housing Project are approved. The Government will fu rther, consistent with the public interest, issue s uch certificates, licenses and permits and take such other action as may be required of it under any sa fety, health and related laws, and any rulings and regula tions in

connection therewith.

The Government contends that the agreement granted TRA the right to use the Island for purposes of a Hotel , Marina, and Housing Project, but that the agreement did not grant TRA unlimited discretion to develop the Island for that use. By contrast, TRA contends that the Government grant ed it

7a vested right to develop Hans Lollik Island on any scale

above the specified minimum levels contemplated by the agreement. We find TRA's interpretation of the agre ement to

be unreasonable.

Prior to the agreement, Hans Lollik Island was zone d as R-10 under the Virgin Islands Zoning and Subdivisio n Act which permitted one or two family residential use o nly. Under the plain language of the agreement, the Government granted TRA an exception to the R-10 zon ing classification by approving the use of the Island f or purposes of a Hotel, Marina, and Housing Project. I n light of the entire transaction between the parties, the only reasonable interpretation of the agreement is that it granted TRA the right to use the property for commercial pu rposes but did not grant TRA unlimited discretion to devel op the property for that use.

This interpretation is further supported by the fac t that the Government only agreed to issue necessary permi ts for development if the proposed development was consist ent with the public interest. Under TRA's interpretatio n of the agreement, the Government would have no discretion to deny TRA the appropriate permits for development. W ere we to accept TRA's interpretation, the phrase `consist ent with the public interest' would be rendered nugatory, wh ich is an interpretation to be avoided. See Restatement (S econd) of Contracts S 203(a)(1981)(stating that "an interp retation which gives . . . effective meaning to all the term s is preferred to an interpretation which leaves a part .. . of no effect").

In addition, the plausibility of TRA's interpretati on is further undermined by the agreement's silence on discretional development limits. For example, while the agreement contemplates the development of a hotel w ith a minimum of fifty rooms and approximately one hundre d and fifty major residences, the agreement does not set a maximum size limit. The agreement, however, does co ntain an integration clause which specifies that the agre ement "constitutes the entire agreement of the parties." It is therefore evident from the agreement that the parti es had no understanding as to a maximum level of developme nt.

8The agreement's silence on a maximum development

level, however, does not indicate, as TRA contends, that TRA was granted unlimited discretion to develop the Island. Both parties have relied on United States v. Winsta r Corp., 116 S. Ct. 2432 (1996), to support their respective positions on this point. Winstar construed the unmistakabilit y doctrine, a canon of contract construction which pr ovides that "a contract with a sovereign government will n ot be read to include an unstated term exempting the othe r contracting party from the application of a subsequ ent sovereign act." Winstar, 116 S. Ct. at 2456. It is somewhat unclear after the Winstar plurality opinion as to t he type of contract to which the unmistakability doctrine appl ies. See Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569, 1578-79 (Fed. Cir. 1997)(noting that plurality foun d the doctrine inapplicable to risk of loss shifting cont racts but that remaining five justices agreed that the doctri ne's application is unrelated to the nature of the under lying contract). It is clear, however, that one of the ba sic principles underlying the doctrine is the concern t hat it would be unreasonable to presume, in the absence of an express contractual provision, that a sovereign int ended a contractual waiver of a basic sovereign power. See generally Winstar, 116 S. Ct. at 2477 (Scalia, J., concurring )(stating that "[w]hen the contracting party is the governmen t . . . it is simply not reasonable to presume . . . that the sovereign [promises] that none of its multifarious sovereign acts, needful for the public good, will incidentally disa ble it or the other party from performing one of the promised acts."); Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 14 8 (1982)("[t]o presume that a sovereign forever waive s the right to exercise one of its sovereign powers unles s it expressly reserves the right to exercise that power in a commercial agreement turns the concept of sovereign ty on its head, and we do not adopt this analysis.").

Based on this basic principle and under the specifi c facts of this case, we find TRA's position that the Gover nment granted TRA unlimited discretion to develop the Isl and, thereby relinquishing its power to regulate that development, to be unreasonable in light of the fac t that the agreement does not contain any language to that eff ect. Accordingly, because the agreement does not speak t o a

9maximum limitation on development and does not expl icitly

or implicitly grant TRA the right of unlimited deve lopment, the Government was at liberty to restrict TRA's development by applying the CZMA to TRA.3

Our decision in West Indian Co., Ltd. (WICO) v. Government of the Virgin Islands, 844 F.2d 1007 (3d Cir. 1988) is instructive on this point. In WICO, we exa mined the relationship between contractual obligations an d general police powers. WICO brought suit against th e Government of the Virgin Islands for a violation of the

contract clause of the United States Constitution a fter the Government enacted a Repeal Act which purported to repeal a Second Addendum to a settlement agreement between the Government and WICO that exempted WICO from the CZMA. WICO, 844 F.2d 1013-14.

We noted that the threshold inquiry in such a case is whether the state law has operated as a substantial impairment of a contractual relationship. Id. at 10 21. We held that the Repeal Act substantially impaired WIC O's contractual rights under the Second Addendum by attempting to withdraw WICO's right to be free for a limited time from CZMA restrictions. In completing our anal ysis, we held that the Repeal Act was invalid because the re was no legitimate public purpose for the regulation's s ubstantial impairment.4 Significantly, we noted that:

___________________________________________________ ______________

3. TRA also argues that the CZMA, by its own terms, does not apply to development of the Island because the agreement gra nted TRA a vested right to develop prior to the effective date of the CZMA. As properly

noted by the district court, the Board's interpretation o f the CZMA does not

relate to TRA's breach of contract claim but is mor e appropriately analyzed in connection with a potential writ of rev iew. Accordingly, we will discuss this portion of TRA's argument in Part III in connection with

TRA's constitutional claims.

4. We applied the following three-step analysis fro m the Supreme Court's decision in Energy Reserves Group, Inc. v. Kansas P ower & Light Co., 459 U.S. 400, 411-12 (1983): (1) whether the state law substantially impairs the contractual relationship; and if so (2) whether the state has a significant and legitimate public purpose for the regulation; and if so (3) whether the adjustment of rights and responsibi lities of the contracting parties is based on reasonable conditio ns and is of a character appropriate to the public purpose justify ing adoption of the regulation. WICO, 844 F.2d at 1021. We held that th e Repeal Act was invalid because there was a substantial impairment in WICO's contractual relationship and because the Repeal Act could not be justified by a significant public purpose. Id. at 1 021-22.10We hold only that the Repeal Act is invalid. We do not,

of course, hold that the police power of the Virgin Islands with respect to WICO's [land] was ex hausted when the Second Addendum was approved. WICO is obviously not immune from generally applicab le police power measures not inconsistent with the Sec ond Addendum. Moreover, if conditions materially change so as to create a substantial problem that c ould not be foreseen in 1982, it may be that generally a pplicable land use regulations could validly alter the manner in which WICO may utilize its property.

Id. at 1022-23.

In accordance with WICO, TRA is not immune from Government regulations that are not inconsistent wi th TRA's contractual rights under the agreement. Becau se we hold that the agreement is unambiguous and grants T RA the right to use the Island for commercial purposes but does not grant TRA unlimited discretion to develop the Island for that use, the Government's application o f the CZMA to TRA does not impair any of TRA's contractua l rights. Accordingly, summary judgment was appropria tely granted in favor of the Government on TRA's breach of

contract claim.

III.

With respect to TRA's constitutional claims, we exe rcise plenary review over the district court's decision t o examine these claims in an appellate capacity. See Union Pa cific R.R. Co. v. Ametek, Inc., 104 F.3d 558, 561 (3d Cir. 1997)(stating that "[t]his court exercises plenary review over matters of jurisdiction."). In order to evaluate th e propriety of the district court's decision, we must first exa mine the boundaries of the jurisdiction currently conferred upon the District Court of the Virgin Islands.

A.

Our analysis of the jurisdictional boundaries of th e District Court of the Virgin Islands must begin wit h Article IV, Section 3 of the United States Constitution, wh ich

11grants Congress the power to designate the jurisdic tion of

the district court and the territorial court. Brow v. Farrelly, 994 F.2d 1027, 1032 (3d Cir. 1993). Congress first exercised this power in 1936 by enacting the Revise d Organic Act, 48 U.S.C. SS 1541-1645 (1994). Id. The 1936 Revised Organic Act was subsequently replaced by th e more comprehensive Revised Organic Act of 1954. The Revi sed Organic Act acts as the constitution of the Virgin Islands and as such defines the jurisdictional boundaries o f the Virgin Islands courts. Id.

Section 1612 of the 1954 Revised Organic Act confer s upon the District Court of the Virgin Islands feder al question jurisdiction as well as original jurisdict ion over questions of local law subject to the exclusive jur isdiction of

local courts over civil actions where the amount in controversy is less than $500. Revised Organic Act of July 22, 1954, ch. 558, SS 22-23, 68 Stat. 506 (1955) (a mended 1978, 1984); Brow, 994 F.2d at 1032. In addition, s ection 1613 of the 1954 Revised Organic Act provides that local courts shall share concurrent jurisdiction over all actions conferred upon them by local law. Revised Organic A ct of July 22, 1954, ch. 558, S 23, 68 Stat. 506 (1955) ( amended 1978, 1984); Brow, 994 F.2d at 1032 n.2.

In 1984, Congress amended the Revised Organic Act a nd effectively eliminated the District Court of the Vi rgin Islands' original jurisdiction over local matters. Congress amended section 1612(b) by granting the district co urt only original jurisdiction over federal questions, diver sity actions and any local matters "the jurisdiction over which is not then vested by local law in the local courts of the Virgin Islands." 48 U.S.C. S 1612(b)(1994). In addition, C ongress amended section 1611(b) to permit the Virgin Island s legislature to vest jurisdiction in the local court s over all matters in which any court established by the Unite d States does not have exclusive jurisdiction. Id. at S 1611(b). We have interpreted section 1611 as amended as empowering the Virgin Islands legislature to comple tely divest the district court of its original jurisdict ion over local actions. Estate of Thomas Mall, Inc. v. Territorial Court of Virgin Islands, 923 F.2d 258, 262-64 (3d Cir. 1991)

.

12In 1990, the Virgin Islands legislature exercised t his

power and divested the district court of its jurisd iction over all local civil matters effective October 1, 1991. V.I. Code Ann. tit. 4, S 76(a) (1997). We have held that this 1990 enactment not only stripped the district court of i ts original jurisdiction over local matters when a complaint is filed in the district court, but also divested the district court of its jurisdiction to determine writs of review appealing local

administrative determinations. Moravian Sch. Adviso ry Bd. of St. Thomas V.I. v. Rawlins, 70 F.3d 270, 273 (3d Cir. 1995). Specifically, we held that the Virgin Island s legislature implicitly repealed the general Virgin Islands provision which establishes writs of review as civi l actions, V.I. Code Ann. tit. 5, S1421, to the extent that pr ovision confers writ of review jurisdiction upon the distri ct court

over local matters. Id.

B.

The district court examined TRA's constitutional cl aims in its appellate capacity based on the premise that TRA could have brought those claims via a writ of revie w in the district court pursuant to V.I. Code Ann. tit. 12, S 913(d)(1982). Section 913(d) is a provision of th e CZMA which provides that a petition for writ of review m ay be filed in the district court pursuant to the general Virgi n Islands writ of review provisions by any person aggrieved b y the denial of an application for a coastal zone permit. V.I. Code Ann. tit. 12, S 913(d). Under the rationale of Mora vian and because the general Virgin Islands writ of review p rovisions have been implicitly repealed as they apply to the district court's jurisdiction to decide writs of review over local matters, section 913 of the CZMA is similarly inval id as it applies to the district court's former writ of revi ew jurisdiction. TRA therefore could not have brought a writ of review in the district court under section 913(d) o f the CZMA. Accordingly, the district court erred in revi ewing TRA's constitutional claims in its appellate capaci ty.

At oral argument, the Government stated that it was unopposed to our remanding TRA's constitutional cla ims.

Because the district court should examine TRA's constitutional claims under its original jurisdicti on in the

13first instance, we will remand for the district cou rt to

determine whether there are any genuine issues of m aterial fact relating to these claims that would preclude s ummary judgment.5

IV.

We conclude that because the Agreement unambiguousl y grants TRA the use of Hans Lollik Island for commer cial purposes but does not grant TRA unlimited discretio n in development, the Government did not breach the Agreement by applying CZMA restrictions to TRA. We will therefore affirm that portion of the district court 's order that granted summary judgment on Count I. We alsofi nd that the district court erred in examining Counts I I, III, and IV under its former writ of review jurisdiction, an d therefore remand for further proceedings consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

___________________________________________________ ______________

5. As previously noted, TRA has asserted on appeal that the CZMA by its own terms does not apply to TRA because the Agreeme nt granted TRA a vested right in development prior to the effective date of the CZMA. The district court interpreted this claim as a writ of review challenge to the CZMC's decision to deny TRA a CZMA permit. While we hold that the district court does not have original jurisdiction over writs of review,

on remand the district court should determine whether it would be appropriate to exercise supplemental jurisdiction o ver any writ of review claims fairly made by TRA. See City of Chicago v. I nternational College of Surgeons, ___ S. Ct. ___, ___ 1997 WL 76450, *7 (19 97)(holding that district court had supplemental jurisdiction over c laims challenging administrative decision once case was properly remo ved based on original jurisdiction arising from constitutional c laims).

14