Case Summary for April 8, 2003

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Case Summary for April 8, 2003

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DOCKET SUMMARIES
SUPREME COURT OF MISSOURI

Tuesday, April 8, 2003

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SC84807
Thomas E. Bauer v. Transitional School District of the City of St. Louis, The Board of Education of the City of St. Louis, et al.
St. Louis City
Constitutionality of student bill of rights

In May 1998, the general assembly enacted Senate Bill 781, which contained the "St. Louis Students' Bill of Rights," as part of the state's efforts to settle the federal St. Louis desegregation case. If approved by the voters of St. Louis city, this bill of rights would require the city board of education to implement, consistently with the state and federal constitutions, specific student assignment procedures and certain educational practices normally left to the discretion of the local school district. SB 781 also created the transitional school district, required the transitional district to place the student bill of rights on the city ballot before March 15, 1999, and authorized the transitional district to impose, after voter approval, a sales or property tax to raise funds for education. After legal counsel advised the transitional district that the student bill of rights was unconstitutional in its entirety, the transitional district refused to place the issue on the ballot. City resident and voter Thomas Bauer sued the transitional district in November 1998 and ultimately added the city, its board of election commissioners and the state board of education as defendants. He also ultimately amended his petition to seek a declaratory judgment that the student bill of rights was constitutional. Bauer did not expedite his petition, however, and in July 1999, the state board of education dissolved the transitional district. Eventually, in July 2002, the court upheld the constitutionality of the student bill of rights and directed the city's board of education, transitional district and board of election commissioners to place the student bill of rights on the November 2002 general election ballot. In October 2002, the court stayed its judgment pending resolution of this appeal, taken by the city board of education.

The board argues the state education board revoked the transitional district's authority to certify the student bill of rights when it dissolved the transitional district. It contends the plain language of statutes in chapter 162, RSMo, does not grant either it or the board of election commissioners the authority to place the student bill of rights on the ballot. It argues the case became moot when the absolute deadline March 15, 1999, imposed by the general assembly, passed without action. The board contends the student bill of rights is an invalid special law that violates the requirements of article III, section 42 of the state constitution. It asserts that there is no substantial justification for the student bill of rights because a general law could have achieved the same result. The board argues the student bill of rights violates due process because its ballot language is misleading and deceptive. It contends the ballot language contains two separate and distinct propositions in violation of previous decisions of this Court. The board asserts that, evaluated based on the law and facts as they existed in 1998, the student bill of rights wholly violates the supremacy clause by contravening federal court orders designed to remedy constitutional transgressions.

Bauer responds that the court below did not err or abuse its discretion in ordering the transitional school district, the city board of education and the city board of election commissioners to place the student bill of rights on the ballot. He argues courts should not conduct a pre-election review of the legality of a referendum proposal unless the referendum is unconstitutional on its face. He contends the student bill of rights is not unconstitutionally moot on its face because no penalties were prescribed for failure to place the student bill of rights before March 15, 1999. Bauer asserts that the student bill of rights is not unconstitutional because it is not a special law, does not violate due process and does not contain two separate and distinct propositions.

SC84647
Home Builders Association of Greater St. Louis, Inc. v. City of Wildwood, Missouri
St. Louis County
Validity of city ordinance

During the 1999 legislative session, Senate Bill 20 was proposed to add 22 new statutory sections relating to community improvement. In the days before the session ended, SB 20 was amended to modify section 89.410, RSMo, with provisions restricting the abilities of cities, towns and villages to withhold from developers or subdivision owners certain bonds or escrows for subdivision improvements. After the bill passed, section 89.410 required a 95-percent release on construction bonds but expressly exempted maintenance bonds from any release requirements. The city of Wildwood subsequently amended its ordinance No. 675 to require release of 95 percent on its construction bonds. It also moved the maintenance obligations to a separate 10-percent maintenance deposit so the deposit was not part or commingled with the escrow for actual construction, which was subject to separate statutory procedures. The Home Builders Association of Greater St. Louis, Inc., sued the city, alleging the ordinance violated the amended section 89.410, RSMo. The court granted the association summary judgment, invalidating provisions of the ordinance, which it found directly conflicted with section 89.410, and enjoining the city from enforcing those provisions. The court also ordered the city to return all escrow amounts it held in excess of those authorized by section 89.410.

The city appeals, arguing that section 89.410 does not limit the initial amount of subdivision bonds to "actual costs" but rather leaves discretion to the city council to require reasonable conditions, providing for and securing actual construction and installation. The city contends its ordinance does not conflict with section 89.410 because the statute expressly exempts maintenance bonds from the statute's specific regulations. It asserts SB 20 is unconstitutional because its title was too restrictive, broad or amorphous to express the subject matter of the legislation clearly, because it contained more than one subject and because it was changed from its original purpose. The city argues the association lacked standing to challenge section 89.410 because it was not an owner or a developer authorized to sue or seek relief. It contends the court unconstitutionally granted retroactive relief as to escrow funds deposited before the effective date of SB 20's provisions. It asserts the court erred in invalidating entire sections authorizing developer escrows and ordering unnamed funds held in excess of those authorized by section 89.410 because it also invalidates provisions authorizing subdividers to post bonds and provides no adequate basis to apply the judgment to actual escrows.

The association responds that the court properly invalidated the ordinance provisions because section 89.410 limits permissible construction escrows to actual costs of construction, prohibits any subdivision bonds or escrows in excess of the actual costs of construction, and mandates release of those deposits upon completion of improvements. The association argues the title of SB 20, "relating to community improvement," is constitutional because it properly describes the general nature of the bill's contents. It contends the bill is not unconstitutional because all of its provisions and all amendments to those provisions fairly relate to the subject of community improvement. The association asserts that it has standing to pursue its claims on its members' behalf and that further review of this issue is precluded. The association responds that the court's finding that SB 20's terms apply to all escrow funds the city held prior to the bill's effective date does not constitute unconstitutional retroactive legislation and that the court's order requiring return of these funds is appropriate equitable relief. The association further argues that it is entitled to recovery of its attorneys' fees because Wildwood did not make a good faith effort to comply with the ordinance or reasonably litigate this matter.

The Missouri Municipal League argues, as amicus curiae, that the court's judgment conflicts with section 89.410's plain language, which expressly exempts maintenance bonds from regulation. The municipal league contends the statute also leaves to a city's discretion the amount of a subdivision construction bond that is necessary to provide for and secure the actual construction that will take place years after the bond is accepted.

SC84792
State of Missouri, ex rel. Jeremiah W. Nixon, Attorney General, State of Missouri v. Vince Karpierz, Reg. No. 1013181, and James L. McMullin
Clay and Cole counties
Constitutionality of incarceration reimbursement act

After Vince Karpierz was convicted in Clay County and sentenced to three years in prison, he retained Kansas City attorney James McMullin to represent him in a civil suit against the city's police department. They entered into a contingency fee agreement providing that McMullin's attorneys' fees would be 50 percent of any recovery McMullin obtained for Karpierz. On Karpierz's behalf, McMullin filed suit against the police department in February 1999 in Clay County. The court ultimately determined that the police department had violated the state's criminal activity forfeiture act and that Karpierz was entitled to a monetary recovery. In January 2002, the state filed a petition in Cole County, pursuant to section 217.837.4, RSMo 2000, seeking reimbursement for its more than $36,850 in costs in incarcerating Karpierz, who was released from prison in December 2001. In April 2002, the police department paid about $46,470, representing the full amount of the judgment in Karpierz's favor plus statutory interest, to the receiver appointed as part of the state's action in Cole County. Pursuant to the contingency fee agreement, McMullin's share of the proceeds was $1,473 in litigation expense reimbursements plus nearly $22,500 in attorneys' fees. The Cole County court found section 217.837.4 to be constitutional and determined that the state was entitled to the full cost of Karpierz's incarceration.

Kapierz and McMullin appeal. They argue that McMullin, who spent more than 250 hours working on Karpierz's case, has a property interest in the judgment proceeds. They contend that the state's reliance on section 217.837.4 is unconstitutional because it permits a taking of McMullin's property without just compensation. They assert that McMullin was entitled to his attorneys' fees under the common fund doctrine because Karpierz's action against the police department created a common fund from which the state benefited without compensating McMullin for his efforts.

The state responds that the money the police department paid to Karpierz is not McMullin's property but rather is Karpierz's property subject to McMullin's lien for his attorneys' fees under the contingency fee agreement and that McMullin's attorneys' lien is subordinate to the state's claim. The state argues its taking of the judgment does not violate the takings clauses of the state and federal constitutions. The state contends that the incarceration reimbursement act does not violate the contract clauses of the state and federal constitutions because the contingency fee agreement was not an existing contract. The state further responds that the common fund doctrine does not apply to Karpierz's judgment because the case from which it resulted is not a class-action lawsuit, mass disaster tort, antitrust litigation, probate matter or a case involving disputed trust funds.

SC85024
Dunn Industrial Group, Inc., Dunn Industries, Inc. v. City of Sugar Creek, Missouri, et al., LaFarge Corporation, et al.
Jackson County
Enforceability of arbitration provision

In October 1998, Lafarge Corporation agreed to design and to build a cement manufacturing plant, an underground limestone mine and other improvements on land owned by the city of Sugar Creek, Missouri. In June 1999, Lafarge contracted with Dunn Industrial Group (DIG) to design and build the cement plant. In the contract, which contained an arbitration provision, DIG agreed to build the plant for a little more than $76.1 million by December 2000. At about the same time, DIG's parent company, Dunn Industries (Dunn) signed a guarantee of DIG's performance of its contractual obligations. In October 2000, after extensive negotiations over proposed terms, DIG and Lafarge agreed to a change order into which DIG interjected a clause permitting either party to pursue their respective contract or legal remedies. In March 2001, DIG sued Lafarge and Sugar Creek. Lafarge sought to stay litigation and to compel arbitration, while Dunn and DIG sought to stay arbitration. In November 2001, the court, without opinion, denied Lafarge's motions and granted Dunn and DIG's motion to stay arbitration.

Lafarge appeals, arguing initially that all three issues raised in the court's order may be heard by this Court and that Dunn and DIG conceded appellate court jurisdiction over the trial court's denial of Lafarge's motion to compel arbitration while the appeal was pending before the court of appeals. Lafarge contends its written contract with Dunn and DIG includes an enforceable, mandatory arbitration agreement that is permitted under Missouri's equitable mechanic's lien statutes. Lafarge asserts that the October 2000 change order did not modify, rescind or otherwise alter the mandatory arbitration agreement and that this agreement covers all the disputes and claims at issue between the parties, including those that relate to the change order. Lafarge argues that both DIG and Dunn agreed to arbitrate Lafarge's claims in the written contract's arbitration agreement and Dunn's written guaranty, which Lafarge contends estops Dunn from avoiding the arbitration agreement.

Dunn and DIG initially argue that this Court has jurisdiction only to hear the appeal of the denial of the motion to compel arbitration and the grant of the motion to stay arbitration. They also contend this Court lacks jurisdiction under the state's uniform arbitration act to consider the appeal of the order denying the motion to stay civil litigation. As to the merits, Dunn and DIG respond that the state's equitable mechanic's lien statute vests exclusive jurisdiction with the circuit court for all claims and is not preempted by the federal arbitration act because the state and federal statutes may be read in harmony. They argue that, in the change order, Lafarge agreed that DIG could bring an action at law for its claims on the construction project. They contend that neither Dunn nor DIG was bound by contract to arbitrate because they contend the October 2000 change order changed the dispute resolution procedures for project disputes. They assert that Missouri's procedural rules for compulsory counterclaims and Missouri's equitable lien statute bar arbitration because Lafarge's arbitration proceedings were brought after the equitable lien action began and concerned the same subject as the lien action.