Court Opinion

ID: 2663267
Source: CourtListenerOpinion
Date Created: 2014-04-03 21:31:12.959607+00
Date Added: 2024-06-11T12:59:31.199062
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 13-2517

        VAQUERÍA TRES MONJITAS, INC.; SUIZA DAIRY, INC.,

                     Plaintiffs, Appellees,

                               v.

MYRNA COMAS PAGAN, Secretary of the Department of Agriculture for
the Commonwealth of Puerto Rico; EDMUNDO ROSALY, Administrator of
the Office of the Milk Industry Regulatory Administration for the
                   Commonwealth of Puerto Rico,

                     Defendants, Appellants.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO

         [Hon. Daniel R. Domínguez, U.S. District Judge]

                             Before

                       Lynch, Chief Judge,
                Selya and Howard, Circuit Judges.

     Edward W. Hill for appellants.
     Rafael Escalera Rodríguez, with whom Amelia Caicedo Santiago,
Carlos M. Hernández Burgos, and Reichard & Escalera were on brief,
for appellees.

                          April 3, 2014
          LYNCH, Chief Judge. Understandably concerned by language

in a district court order which opined that Puerto Rico had waived

its Eleventh Amendment immunity by entering into a Settlement

Agreement, the Commonwealth's milk regulatory agency (Spanish

acronym "ORIL") appeals. The court's language on that immunity was

in no sense necessary to the approval of the Settlement Agreement

or to entry of the judgment.   In the motion seeking approval, no

party raised any Eleventh Amendment issue, nor was such an issue

briefed or argued.   The statement is contrary to the principle of

constitutional avoidance.   We conclude that the language at issue

is merely a statement of dicta and not a judgment.   The statement

is wholly gratuitous, does not respond to any argument made in

those proceedings, and has the obvious effect of causing confusion.

We strongly suggest to the district court that it issue an amended

order deleting the language.   We otherwise dismiss the appeal for

want of appellate jurisdiction.

                                  I.

          The facts of this long running case are found in more

detail in Puerto Rico Dairy Farmers Association v. Comas Pagan, ___

F.3d __ (1st Cir. Apr. 3, 2014), and in our court's previous

decision, Vaquería Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464

(1st Cir. 2009), reh'g en banc denied, 600 F.3d 1 (1st Cir. 2010),

cert. denied, 131 S. Ct. 2441 (2011).   We assume familiarity with

those decisions.

                                  -2-
              On October 29, 2013, the plaintiffs Suiza Dairy, Inc.

("Suiza")     and   Vaquería       Tres   Monjitas,    Inc.   ("VTM"),      and   the

government defendants, Myrna Comas Pagan, the Secretary of the

Department of Agriculture for the Commonwealth of Puerto Rico, and

Edmundo Rosaly, the Interim Administrator of ORIL (the Office for

the   Milk    Industry     Regulatory     Administration),       filed    with    the

district court for its approval the Final Settlement Agreement and

Memorandum of Understanding Between the Parties ("Agreement"),

executed that day.

              We briefly describe the substance of the settlement. The

Agreement      provided      for    the   adoption     and    implementation       of

Regulation 12, which governs pricing mechanisms in Puerto Rico's

milk industry.           In effect, Regulation 12 establishes the price

margins      for   all    players    in   the   industry.      As    part   of    the

implementation       of    Regulation     12,   ORIL   pledged      to   conduct    a

comprehensive study of the milk industry within twelve months of

the effective date of the Agreement.

              Under the Agreement, the government of Puerto Rico is

also obligated to create a "Special Fund to promote the efficiency

of the Milk Market in Puerto Rico."              In addition to the "Special

Fund," the government agreed to contribute funds over four years to

Suiza and VTM as part of a regulatory accrual mechanism designed to

allow the processors to recoup a fair rate of return on their

products.

                                          -3-
           We turn from this substantive summary to the Agreement's

precise language.       The Agreement first recited that there was no

concession of the validity of the plaintiffs' claims or of any

court order entered and that the effect of entry of the order would

be dismissal of the case with prejudice.              The substance of the

Agreement was found in covenants, contained in subparagraphs 3

through 17 of the paragraph.            The Agreement included a final

paragraph stating the parties' rights moving forward:

           The terms and conditions of this settlement
           will be incorporated into the firm, final and
           unappealable judgment to be issued by the
           District Court. That Judgment will be equally
           binding to and enforceable against all
           signatories   of  this   Agreement  and   the
           Government of Puerto Rico. All such parties
           hereby waive any defense they may have to the
           enforcement of this Agreement.

(emphasis added).

           At   the    hearing   on    whether   to   enter   the   Settlement

Agreement as a judgment, counsel for Suiza added that although the

Agreement did not contain an explicit clause regarding contempt,

the   plaintiffs      waived   all    attempts   to   find    the   government

defendants in contempt.          Plaintiffs did not assert that the

Commonwealth had waived its immunity either in the Agreement or

specifically in the Agreement's "waive any defense" clause.              At no

time did any issue concerning the Commonwealth's Eleventh Amendment

                                       -4-
immunity come up at that hearing or in the settlement papers before

judgment was entered.1

           The district court's order, entered on November 7, 2013,

began with a paragraph identifying those who were parties to the

Final Settlement Agreement.    The second paragraph approved and

incorporated all of the covenants with numbered paragraphs, as

follows:

           1.    All the covenants of the Settlement
           Agreement executed on October 29, 2013 are
           incorporated herein.

           2.      The   Court   has   original   federal
           jurisdiction in a federal question civil
           action, pursuant to 28 U.S.C. § 1331, and
           retains jurisdiction for compliance purposes,
           as to the terms and conditions of the
           Settlement Agreement of October 29, 2013 to
           ensure proper[] and timely implementation.
           The Court, hence, shall retain federal
           jurisdiction   to   enforce   the   Settlement
           Agreement until such time as the Commonwealth
           of Puerto Rico, the Puerto Rico Department of
           Agriculture and ORIL, as well as all signatory
           parties have complied fully and effectively
           with the Settlement Agreement, and have
           maintained such compliance for no less than
           four consecutive years, that is, December 31,
           2017.

           3.   The Commonwealth of Puerto Rico through
           the Secretary of Justice, the Puerto Rico
           Department of Agriculture and ORIL and its
           highest   executives,  shall   inform  their

     1
        The Commonwealth of "Puerto Rico enjoys the same immunity
from suit that a State has under the Eleventh Amendment."
Maysonet-Robles v. Cabrero, 323 F.3d 43, 53 (1st Cir. 2003).   It
has consistently stated its Eleventh Amendment immunity at all
stages of the litigation. See Vaquería Tres Monjitas, Inc., 587
F.3d at 477-80.

                                -5-
           successors as to the terms and conditions of
           this Settlement Agreement, particularly those
           economic terms and covenants that may remain
           to be fulfilled.

           4.   The Commonwealth of Puerto Rico, the
           Puerto Rico Department of Agriculture and ORIL
           shall require compliance with the Settlement
           Agreement by all of its agencies, departments,
           officials, employees, and their respective
           assigns and successors.

           5.   The Settlement Agreement of October 29,
           2013 does not include the Puerto Rico Dairy
           Farmers Association ("PRDFA"), hence, the
           PRDFA may proceed with their litigation filed
           under Civil No. 08-2191 (DRD).

(footnote and internal citation omitted).

           After the numbered provisions of the second paragraph,

there is a third paragraph, which is the source of Puerto Rico's

concern:

           The Court is of the opinion that the voluntary
           signatures of the well represented authorized
           agents of the Commonwealth of Puerto Rico, the
           Puerto Rico Department of Agriculture and
           ORIL, constitutes a pellucid waiver of the
           Eleventh Amendment, as all the parties clearly
           stated that "[a]ll such parties hereby waive
           any defense they may have to the enforcement
           of this Agreement." . . . See also Watson v.
           Texas, 261 F.3d 436 (5th Cir. 2001); Ellis v.
           University of Kansas Medical Center, 163 F.3d
1186 (10th Cir. 1999).

Unlike the earlier language, which imposes requirements consistent

with the covenants of the Agreement, this paragraph signals merely

that it states the view of the court.

           The final paragraph of the order closes the case for

statistical   purposes   and   notes    that   the   court   will   "retain

                                  -6-
jurisdiction for compliance purposes of all the covenants of the

Settlement Agreement . . . or any other related matter and/or

remedy related to the full compliance of the Settlement Agreement."

           On December 5, 2013, ORIL filed a motion to alter or

amend the judgment pursuant to Fed. R. Civ. P. 59(e), in which it

argued that there had been no Eleventh Amendment waiver and sought

the elimination of the Eleventh Amendment paragraph in the district

court's November 7 Order.     ORIL objected to the district court's

sua sponte statements of opinion on Eleventh Amendment waiver.2

ORIL stressed that it had asserted its Eleventh Amendment immunity

continuously throughout the litigation and never waived it.         Not

only did ORIL not intend to waive its immunity, it argued, but the

language   of   the   Settlement   did   not   contain   the   "required

unequivocal language" to support an Eleventh Amendment waiver

finding.   In its motion, ORIL characterized the monetary relief

included in the Settlement as an Ex parte Young-type remedy, see

209 U.S. 123 (1908), which did not imply a broader Eleventh

Amendment waiver. It cited Frazar v. Gilbert, 300 F.3d 530, 549-50

     2
        In an effort to reap a windfall, Suiza opposed ORIL's Rule
59(e) motion even though it had not argued for or requested the
district court's Eleventh Amendment statement.       In its newly
adopted position, Suiza argued that the Settlement "contemplated
enforcement proceedings on which the District Court could provide
remedies for non-compliance" with the Agreement, and that the
"waive any defense" language included a waiver of Eleventh
Amendment immunity.

                                   -7-
(5th Cir. 2002), rev'd on other grounds, Frew ex rel. Frew v.

Hawkins, 540 U.S. 431 (2004).

          The   district     court    issued   an   Opinion    and     Order   on

December 30, 2013, denying ORIL's Rule 59(e) motion and reiterating

its view that the Agreement constituted an Eleventh Amendment

waiver.   The    rejection    of     reconsideration,   said     the    court's

statement, was based on the "waive any defense" clause of the

Settlement Agreement, along with the fact that the Agreement

provided for public funds to be paid to the milk processors as part

of the Settlement's regulatory solution.

          We stress ORIL disagrees only with the court's statement

on Eleventh Amendment waiver in its opinion, and otherwise agrees

with the court's approval of the Settlement Agreement.

                                     II.

          First, we think it is plain that the Eleventh Amendment

waiver statement in the unnumbered third paragraph in the district

court's order is pure dicta.           See Municipality of San Juan v.

Rullan, 318 F.3d 26, 28 n.3 (1st Cir. 2003) ("Dicta comprises

observations    in   a   judicial    opinion   or   order     that   are   'not

essential' to the determination of the legal questions then before

the court." (quoting Dedham Water Co. v. Cumberland Farms Dairy,

Inc., 972 F.2d 453, 459 (1st Cir. 1992))).

          The district court's approval and incorporation of the

Settlement Agreement between the parties did not in any way require

                                      -8-
addressing or resolving Eleventh Amendment issues.           As the parties

agree, both the approval Order and the underlying Agreement can

stand without such a resolution.3           That it was not necessary is

amply demonstrated by the Supreme Court's decision in Frew, 540
U.S. 431.     There, the Court considered whether a district court

could enforce a consent decree entered into by state officials

without violating the Eleventh Amendment.             There, as here, the

state officials did not challenge the validity of the underlying

agreement.     Id. at 437-38.     The Court concluded that enforcement

was proper because the consent decree and the requested remedy were

enforceable under Ex parte Young.          Id. at 436-37.    It declined to

even address whether there had been an Eleventh Amendment waiver,

and noted that "[w]hen a federal court has entered a consent decree

under Ex parte Young, the law's primary response to these concerns

has its source not in the Eleventh Amendment but in the court's

equitable powers and the direction given by the Federal Rules of

Civil Procedure."      Id. at 441.

             Second,   at   the   very     least,   the   district   court's

unprompted expression of opinion about the Eleventh Amendment runs

afoul of the mandated adherence to the general principle of

constitutional avoidance. Under this doctrine, "federal courts are

     3
         The court retained jurisdiction over the case for
compliance purposes. The district court's ability to enforce the
Settlement going forward also does not require an Eleventh
Amendment holding at this stage.

                                     -9-
not to reach constitutional issues where alternative grounds for

resolution are available."         Am. Civil Liberties Union v. U.S.

Conference of Catholic Bishops, 705 F.3d 44, 52 (1st Cir. 2013).

The canon of constitutional avoidance binds both this court and the

district court. See Ashwander v. Tenn. Valley Auth., 297 U.S. 288,

347 (1936) (Brandeis, J., concurring) ("The Court will not pass

upon a constitutional question although properly presented by the

record, if there is also present some other ground upon which the

case may be disposed of."); Sony BMG Music Entm't v. Tenenbaum, 660
F.3d 487, 508 (1st Cir. 2011).            The district court's Eleventh

Amendment statement unnecessarily reached out into and purported to

opine on a difficult and consequential constitutional issue.

          There is particular reason to practice avoidance of

unnecessary   statements   about    Eleventh   Amendment   issues.   The

Eleventh Amendment "largely shields States from suit in federal

court without their consent."        Hess v. Port Auth. Trans-Hudson

Corp., 513 U.S. 30, 39 (1994).       The "central purpose" of Eleventh

Amendment immunity is "to 'accord the States the respect owed them

as' joint sovereigns," Fed. Mar. Comm'n v. S.C. State Ports Auth.,

535 U.S. 743, 765 (2002) (quoting P.R. Aqueduct & Sewer Auth. v.

Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993)), and it is

"concerned not only with the States' ability to withstand suit, but

with their privilege not to be sued," Metcalf & Eddy, Inc., 506
U.S. at 147 n.5.

                                   -10-
          In   light   of   the   Eleventh   Amendment's   importance   to

protecting both the state fisc and the dignity of the state,

Fresenius Med. Care Cardiovascular Res., Inc. v. P.R. & Caribbean

Cardiovascular Ctr. Corp., 322 F.3d 56, 64-65 (1st Cir. 2003), the

standard for finding a waiver is a stringent one.4           We will not

find waiver unless it is "stated 'by the most express language or

by such overwhelming implications from the text as [will] leave no

room for any other reasonable construction.'"        Edelman v. Jordan,

415 U.S. 651, 673 (1974) (quoting Murray v. Wilson Distilling Co.,

213 U.S. 151, 171 (1909)); see College Sav. Bank v. Fla. Prepaid

Postsecondary Educ. Expense Bd., 527 U.S. 666, 675-76 (1999).

Apart from a clear declaration of waiver, a state may also waive

     4
        We note, without addressing any substantive question of
Eleventh Amendment waiver, the district court's citation of Ellis
v. University of Kansas Medical Center, 163 F.3d 1186 (10th Cir.
1998), in its statement does not support the court's language.
Ellis states:
     [T]he fact that the defendants here entered into a
     settlement agreement with Ellis does not act as a waiver
     of the defendants' constitutionally protected immunity
     because the settlement agreement does not itself
     indicate, nor does the record otherwise reflect, an
     unequivocal intent to waive the immunity by the
     agreement.   See Johns v. Stewart, 57 F.3d 1544, 1554
     (10th Cir. 1995) (because constructive consent is
     insufficient, state's partial settlement does not
     constitute a waiver of Eleventh Amendment immunity in
     absence of unequivocal expression of a waiver); see also
     Saahir v. Estelle, 47 F.3d 758 (5th Cir. 1995) (state's
     participation in settlement agreement not sufficient to
     waive its sovereign immunity).
Id. at 1195. And Ellis holds the agreement could be enforced under
Ex parte Young. Id. at 1198. Watson v. Texas, 261 F.3d 436 (5th
Cir. 2001), also cited by the district court, is likewise
distinguishable and involves different settlement language.

                                   -11-
the Eleventh Amendment "by consent to or participation in a federal

program for which waiver of immunity is an express condition," or

by "affirmative conduct in litigation."          New Hampshire v. Ramsey,

366 F.3d 1, 15 (1st Cir. 2004).

            Suiza    has    conceded    the   district      court's   Eleventh

Amendment statement was not necessary to the judgment. We construe

the statement as being merely an expression of opinion.                     Cf.

Watchtower Bible & Tract Soc'y of N.Y., Inc. v. Colombani, 712 F.3d
6, 11 (1st Cir. 2013) (construing language in a district court

order as not being final order). Consistent with our construction,

we strongly suggest the district court strike the statement.                The

statement    has    resulted      in   considerable   confusion       and   has

unnecessarily prolonged this litigation.              Cf. Sony BMG Music

Entm't, 660 F.3d at 508 (vacating and remanding part of a district

court's judgment where "[a] decision on a constitutional due

process   question    was   not    necessary,   was   not    inevitable,    had

considerable impermissible consequences, and contravened the rule

of constitutional avoidance").

            Part of the obligation of federal appellate courts is not

to engage in premature assessment of issues not presented by appeal

from a judgment. As former Circuit Judge, now Justice, Breyer said

in United States v. Ottati & Goss, Inc., 900 F.2d 429, 443 (1st

Cir. 1990), we do not hear appeals from statements made by district

courts which are not, "in any sense, necessary to the [district

                                       -12-
court's] judgment."   See also In re Williams, 156 F.3d 86, 90 (1st

Cir.   1998)   ("[F]ederal     appellate   courts   review   decisions,

judgments, orders, and decrees -- not opinions . . . ."); accord

Harrison v. United States, 284 F.3d 293, 302 (1st Cir. 2002)

(because the district court did not need to reach the issue of

damages, any findings regarding damages are dicta).

                                  III.

          The case will be remanded to the district court in

accordance with this opinion.      We dismiss the appeal for want of

appellate jurisdiction.      Costs are awarded to ORIL.

                                  -13-