Opinion
No. 1:00-CV-7.
November 9, 2000
ORDER
In accordance with the opinion entered this date, the Court hereby ORDERS that:
1. Plaintiff's motion for injunctive relief is DENIED.
2. This case is DISMISSED in its entirety.
CHARTER TOWNSHIP OF MUSKEGON v. CITY OF MUSKEGON (W.D.Mich. 2000)
CHARTER TOWNSHIP OF MUSKEGON, Plaintiff, v. CITY OF MUSKEGON, Defendant. No. 1:00-CV-7. United States District Court, Western District Of Michigan, Southern Division. Date: November 9, 2000
OPINION
ROBERT HOLMES BELL, United States District Judge.
In this case between Plaintiff Charter Township of Muskegon and Defendant City of Muskegon, the Court raised sua sponte the issue of subject matter jurisdiction. At a hearing on Plaintiff's motion for preliminary injunction on October 4, 2000, the parties requested time to brief the issue of jurisdiction. The Court granted the parties twenty-one days in which to do so. The Court concludes that the prior judgment vesting title of the Muskegon Township Water Distribution System No. 2 must stand. The Court does not have subject matter jurisdiction over the present controversy of rate setting, and the parties should seek redress in the appropriate state forum on those issues.
Facts
The present suit has its beginnings in an action filed in federal court on April 15, 1964, when out-of-state bondholders filed suit against both Muskegon Township and the City of Muskegon to protect their interest in bonds the Township had issued to build its water system. On June 15, 1972, a judgment was entered by the Court, ordering inter alia that once the bondholders who had commenced the suit were paid off, title of the water system would vest in the City of Muskegon. Those bonds were paid off in May of 1998. When in August of 2000 the City of Muskegon moved to act on its manifest ownership of the water system, the Township filed suit asking this Court to set aside the 1972 judgment.
In 1958 the original bonds amounted to $1,500,000, consisting of 1,500 $1,000 bonds, paying 4.5%-4.75% yearly. They were to be paid off in annual installments, the last installment of $60,000 to be paid on May 1, 1998. See Complaint, Civil Action No. 4731 (April 15, 1964).
There was some disagreement between the parties as to whether the judgment referred only the original bonds or would extend to financial obligations taken up by the City in the course of managing the water system. A certified copy of the 1972 judgment indicates that the judgment extended only to the original bondholders. Two paragraphs of the Judgment are pertinent. The first is paragraph 7:
The rates and charges of the township customers shall become uniform with the rates and charges throughout the City when all the outstanding bonds have been fully paid for the existing bond issue and the City has been fully reimbursed of any monies it may have obliged to loan to the Muskegon Township Water Distribution System No. 2. (emphasis added).
The second is paragraph 12:
The City's trusteeship and its obligation to maintain books and records shall continue until all existing bond and other obligations of the System, including obligations due the City, are paid in full, at which time title to the said Muskegon Township Water Distribution System No. 2 and any extensions thereto shall vest in the City of Muskegon. . ." (emphsis added).
"Existing" modifies the bonds and obligations of the water system.
At the time the judgment was entered, the only bonds or obligations outstanding were those that were the impetus for the suit at that time. The clear meaning of the text of the judgment is that when those bonds and obligations extent in 1972 were paid the consequences envisioned by the judgment became manifest.
These were that (1) title to Water System No. 2 would vest in the City of Muskegon as of May 1, 1998; (2) the City of Muskegon was no longer obligated to keep separate records for Water System No. 2; and (3) water rates in the City and Township would become uniform except where a difference is justified. The agreement states that the City shall not increase rates the Township sets unless demonstrated by increased cost of operation, and the City shall consult with the Township in advance of any rate increase. The language of the rate changes suggests that these would be open to later arbitration. That title would vest in the City was not open to further discussion.
The record reveals the intent of the parties as to the future title of the water system. The parties were "working toward a settlement" that would be submitted to the Court before June 15, 1972. Excerpt of Proceedings, at 2 (April 26, 1972). Judge Kent, who presided over those proceedings, stated that it was "understood that the decree may include a provision that upon retirement of all the bonds and upon payment of all the other obligations of the Township system, that the Township system will then become merged into and become a part of the water system of the City of Muskegon." Excerpt of Proceedings, at 7 (April 26, 1972).
The key section of the Proceedings transcript reveals that both parties were agreeing that the only bonds and obligations contemplated by the parties were those which were the subject of the original lawsuit:
The Court:Mr. Frederick, did you have something to say?Mr. Frederick: Sir, going back to your last statement on the City's assumption of the ownership of the system, should we have the words "existing bond issue."
The Court:Yes, existing bond issue.
Mr. Frederick: There may be more issued in the future, and this could go on for ever and ever.
The Court: Everything as to the bond issue, reference is made to that which is the subject of the lawsuit and no other bond issue. And no obligations except those required in order to remedy the default, except as the income of the — well, no, I think we can leave it right there, because from then on you are the operators. So when those obligations are liquidated, then the system becomes part of the City system. It is merged into it.
Mr. Knudsen: Okay, they take over the assets and liabilities.
The Court: Liabilities and everything; it all becomes part of the City system. Excerpt of Proceedings, at (April 26, 1972).
The transcript makes clear that the intent of the Court and the parties was that at the date the original bonds were paid off, the entire system, including any new bond obligations, would transfer to the City. The judgment also made clear that both parties would have a say in setting water rates. Should the parties be unable to come to an understanding, the judgment provided for arbitration, which may take place in the appropriate local or state forum.
Analysis
The issues raised by this case are whether this court has subject matter jurisdiction; and, assuming subject matter jurisdiction, whether the Township is entitled to relief from the 1972 judgment under FED. R. CIV. P. 60(b)(5).
Subject Matter Jurisdiction. The original suit was brought into federal court under diversity jurisdiction. In the present suit the basis for diversity jurisdiction has vanished. The question is whether the extension of jurisdiction thirty years ago makes it incumbent upon this Court to enter into a purely local political issue today.
In general courts have jurisdiction to enforce their prior judgments. Under the doctrine of res judicata prior judgments of a court are accorded special deference. See Allen v. McCurry, 449 U.S. 90, 94 (1980).
It is "a principle of first importance that the federal courts are courts of limited jurisdiction." Charles Alan Wright, Federal Courts, 4th ed., at 22 (1983). The primacy of this principle is illustrated in the Supreme Court's early recognition that a federal court is presumed to lack jurisdiction in a particular case until it has been demonstrated that jurisdiction over the subject matter exists. See Turner v. President, Directors and Co. of the Bank of North America, 4 Dall. 8 (1799). A federal court is obliged to notice want of jurisdiction on its own motion. See Sumner v. Mata, 449 U.S. 539, 547 n. 2 (1981); Louisville N. R. Co. v. Mottley, 211 U.S. 149 (1908); Mansfield, C. L.M Ry. v. Swan, 111 U.S. 379 (1884). The principle is also ensconced in FED. R. CIV. P.12(h)(3), recognizing the importance of preserving our federal system through the limitation of federal jurisdiction: "Whenever is appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action."
It is true, as the Township points out, that diversity jurisdiction is determined at the time the action is commenced, and that subsequent changes in state citizenship will not affect the diversity of that action. See Smith v. Sperling, 354 U.S. 91 (1957); Mullen v. Torrance, 22 U.S. 537 (1824). Here, however, the Township has filed what can only be called a new action. Two of the original parties are in the present suit, but they were non-diverse defendants in the original suit. The subject matter is different as well. In the original suit, the issue was the protection of the rights of the bondholders. The ownership of the water system was only ancillary to that. Here, the Township is bringing suit making the ownership of the water system the primary reason to bring the suit. Yet ownership of the system was settled by court order and agreement of the parties twenty-eight years ago. Were this court to revisit that matter in the absence of a clear Rule 60(B)(5) mandate, it would throw open the courthouse door to challenge any order of a court at any time.
There is precedent for a federal district court refusing to extend jurisdiction over a consent judgment where the grounds for federal jurisdiction have been abrogated. In Evans v. City of Chicago, 10 F.3d 474 (7th Cir. 1993), the plaintiff brought suit under federal question jurisdiction alleging that its due process rights had been violated. The district court entered judgment for the plaintiff. On appeal, Judge Frank Easterbrook, writing for the majority, stated that "principles of respect for a coordinate sovereign (and in some cases the eleventh amendment) mean that federal courts should refrain from adjudicating claims under state law, whether raised directly or whether used as the springboards for other theories." Evans, 10 F.3 d at 481.
In this case, the grounds for federal subject matter jurisdiction have vanished. Although Plaintiff asks that this Court extend jurisdiction on the basis of the 1972 consent judgment, such an extension of jurisdiction appears to be at the discretion of the court. Apart from the 1972 consent judgment there is neither diversity nor federal question jurisdiction.
What remains is a local disagreement that on the face of the pleadings must turn to state law for succor. "[I]t is difficult to think of a greater intrusion on state sovereignty than when a federal court instructs state officials on how to conform their conduct to state law." Pennhurst State School Hospital v. Halderman, 465 U.S. 89, 106, 104 S.Ct. 900, 911, 79 L.Ed.2d 67 (1984).
It is clear from Pennhurst that our federal system is not intended to address the intricacies of fundamentally local political disagreements. Judge Kent expressed these very sentiments as he expounded upon the nature of the case:
Frankly, gentlemen, the Court has been trying in pre-trial conferences to find out what is back of this case and why it was going to trial with a complete lack of success. Having heard the proofs, the Court is satisfied that it is a case that should never have been permitted to go to trial, that, no matter what happens here, everybody is going to suffer in a situation where it could by a recognition — which is primarily political in nature and over which this Court could exercise no control, and which exists not only in Muskegon but in many other locations — but by proper political decision which might not require a vote, a recognition that this area is part of the Muskegon community without regard to the label which is placed on it, the whole matter could readily [be] resolved. Chief Judge W. Wallace Kent, Comments of the Court, at 4 (August 23, 1969).
Under the principles of federalism and the facts of this case, it is clear that this Court does not have jurisdiction to adjudicate this purely local political issue between two non-diverse parties. Even if the Court did exercise jurisdiction, however, the Township's motion under Rule 60(b) would fail, both procedurally and on the merits.
Equity under Rule 60(b). The Township seeks to revisit the 1972 judgment under F. R. CIV. P. 60(b)(5), which allows a court to relieve a party from a final judgment when "the judgment has been satisfied, released, or discharged, or . . . it is no longer equitable that the judgment should have prospective application." Any motion under this rule by the parties "must be made within a reasonable time." FED. R. CIV. P. 60(b). The Court finds that the the Township's position does not reach the standard of equity demanded by Rule 60(b). In addition, the Township's motion under Rule 60(b) has not been made within a reasonable time of the judgment from which it seeks relief.
The Township argues that the circumstances have changed to such a degree that the Court should set aside the 1972 consent judgment. At that time the Township had "few powers" and "limited resources." Today, it is a Charter Township, in "sound financial health" and "fully capable of operating and maintaining its own water system." See Plaintiff's Brief in Support of Motion for Ex Parte Temporary Restraining Order, at 6.
Modification of a judgment is warranted under Rule 60 when there has been a significant change in the facts such that the judgment is plainly inequitable. See Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367 (1992). Here, however, the sound financial footing upon which the Township finds itself is insufficient to reverse the intent of the judgment. Indeed, that fiscally sound Township was intended by and encompassed by the 1972 consent judgment. Certainly in 1972 the Court could have provided for the return of the water system to the Township should the Township become financially sound. This the parties and the Court chose not to do. The outcome, though now disagreeable to the Township, simply does not reach to that level of inequity necessary for this Court to revisit the original judgment.
Relieving the Township would have the effect of negating one of the primary goals of the judgment — the transfer of the Water Distribution Center to the City upon completion of the payments due the original bondholders. It would also deeply involve the Court in what is a purely local dispute. Because the obligations to the original bondholders were fulfilled, the City has the right under the judgment to take over the Water Distribution System.
The Township seems to want to have its cake and eat it, too. Having struck a bargain with the City in 1972 to save the Township from financial default, it now wishes to retain the City's benefit of the bargain. In dismissing the current case, this Court allows the Township to pursue its aims in the appropriate forum — the courts of the State of Michigan, while at the same time ruling that the 1972 judgment stands.
Reasonable Time. The second issue is whether the Township has raised its 60(b)(5) motion within a reasonable time. It has not. The Township had twenty-eight years in which to file the motion seeking relief from what it now asserts is an inequitable judgment. This is outside the time limitations contemplated by the Rule.
What constitutes a reasonable time depends upon the facts of each case. See Smith v. Secretary of Health Human Services, 776 F.2d 1330 (6th Cir. 1985). Among the factors courts consider in this determination are the reasons for any delay in filing the motion; whether the party opposing the motion has been prejudiced by the delay; and general policy that judgments be final and the length of time between entry of the judgment and the filing of the motion.
Even where the judgment is founded upon a legal error, the time limitations of Rule 60(b) will be strictly adhered to. In Steinhoff v. Harris, 698 F.2d 270 (1983) the defendant made a Rule 60(b) motion seventy-seven days after entry of the final judgment. The Court of Appeals held that the trial judge "clearly abused his discretion when he granted defendant's Rule 60(b) motion." Steinhoff, at 273. In the present case there are no allegations of legal error. The only allegation is that the Township believes the original judgment to be inequitable given its present circumstances. The error alleged here, then, falls short of that in Steinhoff, while the time elapsed is many times that which was unreasonable in Steinhoff. It would, therefore, be an abuse of judicial discretion to set aside the 1972 judgment.
In addition, the City would be extremely prejudiced were this Court to revisit the judgment. The City has relied upon that judgment for twenty-eight years, with no inkling by the Township that the Township would challenge the judgment, or that it thought the judgment inequitable.
A court should engage in post-judgment consideration of the equities of the judgment "only under circumstances when the judgment involves prospective obligations and effects requiring ongoing court supervision or execution." Allstate Insurance Company v. Michigan Carpenters' Council, 760 F. Supp. 665 (W.D.Mich. 1991) (addressing the proper application of Rule 60(b)(5)). The judgment in this case does not involve prospective obligations, nor does it require ongoing court supervision. The judgment was fully executed in 1998 when the original bondholders were repaid, and title to the water system vested in the City. Further arbitration contemplated by the judgment concerning rates can be done through the appropriate state forum.
The Court, of course, is given discretion to revisit certain judgments. See Sarabia v. Toledo Police Patrolman's Ass'n., 601 F.2d 914, 917 (6th Cir. 1979); Grand Traverse Band of Ottawa and Chippewa Indians v. Michigan Dept of Natural Resources, 141 F.3d 635, 641 (1998) but see Evans v. City of Chicago, 10 F.3d 474, 481 (7th Cir. 1993) (refusing to extend jurisdiction because elements necessary for federal jurisdiction had "vanished"). Here, however, because of the equitable nature of the original judgment, the Township's unreasonable delay in bringing a Rule 60(b) motion, the prejudice a revisitation would bring to the City, and the doctrine of res judicata and stare decisis, it would be an abuse of that discretion to revisit the 1972 judgment. It would violate the very foundations of our judicial system to give the Township another bite at the apple merely because they now find themselves in disagreement to a judgment for which they bargained.
The 1972 judgment vesting title of the water system stands as it was entered by Judge Kent. The rates, however, as contemplated by that judgment, are open to further arbitration in the appropriate local or state forum.
Accordingly, an order consistent with this opinion will be entered.