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Alliance for Water Efficiency v. Fryer

United States District Court, N.D. Illinois, Eastern Division

January 18, 2017

JAMES FRYER, Defendant.

          Jeffrey Cole Magistrate Judge.



         The history of this case is summarized in Alliance for Water Efficiency v. Fryer, 808 F.3d 1153 (7th Cir. 2015)[Dkt. #89], which reversed this court's decision in Alliance for Water Efficiency v. Fryer, 2015 WL 102166 (N.D.Ill. 2015)[Dkt. #50]. It is further discussed below and in the companion Memorandum Opinion and Order dealing with Mr. Fryer's motion for attorneys' fees. See Alliance for Water Efficiency v. Fryer, WL (N.D.Ill. 2017). [Dkt. #115].[1]

         The Final Judgment of the Court of Appeals was issued the same day as the Seventh Circuit's Opinion and was docketed as the Mandate on January 13, 2016. [Dkt. #88]. See also Rule 41(a), Federal Rules of Appellate Procedure. The Mandate provided that the Judgment of the District Court was reversed, “with costs [which were specified in the Mandate], in accordance with the decision of [the Seventh Circuit]....” [Dkt. #88]. See also Dkt. #87.


         Mr. Fryer has filed a “Motion For Restitution Following Reversal On Appeal.” [Dkt. #96]. The motion claims that upon reversal of a judgment “the right to restitution is well established.” [Dkt. 96 at 3, ¶11]. Indeed, it insists that under established Supreme Court precedent, “restitution may be obtained in the main action itself without filing a new lawsuit.” Id. at ¶11. It goes on to say that because of the Seventh Circuit's having vacated this court's injunction - “because it contains terms on which the parties ha[d] not agreed, ” 808 F.3d at 1157 - the Alliance has been “unjustly enriched” in the amount computed by Mr. Fryer of $133, 817.30. [Dkt. #96 at 4, ¶12].

         This amount is made up of (1) $26, 855.03 which Mr. Fryer says is the claimed value of the so called Santa Rosa data. Mr. Fryer claims he was required to turn over that data to the Alliance - even though the Seventh Circuit made clear that “no such requirement appears in the injunction [that satisfies F.R.C.P. 65(d)(1)] or in any judgment satisfying Fed.R.Civ.P. 58.” Alliance for Water Efficiency, 808 F.3d 1157; (2) $105, 807.50 as recompense for the benefit the Alliance supposedly received - according to Mr. Fryer's estimate - by publishing its report first, even though the settlement agreement did not prescribe the order of publication; (3) $1, 154.77 in claimed interest for the Alliance's supposed delay in paying Mr. Fryer the settlement amount for his past efforts on the project, and; (4) an injunction ordering the Alliance to destroy all digital and hard copies of its separate report - which Mr. Fryer agreed in the settlement agreement the Alliance could prepare and publish - and to cease any use of any report containing the Santa Rosa data.

         The Alliance asserts that Mr. Fryer is attempting to “undo the terms of the settlement agreement, ” and that under the “guise of restitution after reversal on appeal, [he] is now seeking additional compensation because the Alliance did precisely what Fryer agreed to do in the settlement agreement, namely the publication by the Alliance of its own report and the right to use in that report the data that had been already been collected.” The Alliance concludes that because “Fryer did not confer any benefit on [the Alliance] or have his property taken as a result of the judgment reversed on appeal he has no legal basis for restitution damages.” [Dkt. #101 at 1].

         As the Supreme Court stressed in US Airways, Inc. v. McCutchen, U.S., 133 S.Ct. 1537, 1546-47 (2013), quoting the Restatement (Third) of Restitution and Unjust Enrichment (2011): “‘A valid contract defines the obligations of the parties as to matters within its scope, displacing to that extent any inquiry into unjust enrichment.'” In those circumstances, hewing to the parties' exchange yields “appropriate” as well as “equitable” relief. That observation applies here with singular force.



         The case law concerning claims for restitution following a reversal on appeal is perhaps less than clear despite the long period in which restitution has been an accepted remedy. See Restatement (Third) of Restitution and Unjust Enrichment (2011); Dan B. Dobbs, Remedies, 222 - et seq. (West Publishing Co. 1973)(“restoration is a simple word but a difficult subject”).[2] It is a long established principle “that a party against whom an erroneous judgment or decree has been carried into effect is entitled, in the event of a reversal, to be restored by his adversary to that which he has lost thereby.” Arkadelphia Milling Co. v. St. Louis Sw. Ry. Co., 249 U.S. 134, 145 (1919); Reed v. Allen, 286 U.S. 191, 203 (1932); Wyatt v. Syrian Arab Republic, 800 F.3d 331, 340 (7th Cir. 2015); Gould v. Hiram Walker & Sons, Inc., 266 F.2d 249, 253 (7th Cir. 1959).

         It is generally conceded that a restitution claim is not aimed at compensating the plaintiff so much as forcing the defendant to give up benefits that it would be unjust for him to keep. Indeed, “[i]t is now universally recognized that the principle central to all restitution awards is the principle against unjust enrichment....” Dobbs, supra at 229. The American Law Institute notes in Restatement Third, Restitution and Unjust Enrichment § 1(b) (2011): “[u]njust enrichment” is a term of art. The substantive part of the law of restitution is concerned with identifying those forms of enrichment that the law treats as ‘unjust' for the purposes of imposing liability .... Unjust[] enrichment is enrichment that lacks an adequate legal basis. Unjust enrichment is a necessary element or precondition of the larger claim of restitution. The restitutionary claim affirmatively seeks the return of the benefit for which it would be unconscionable for the defendant to retain.” Roy L. Brooks, Postconflict Justice in the Aftermath of Modern Slavery, 46 Geo. Wash. Int'l L. Rev. 243 (2014). And as used in the Restatement, the terms restitution and unjust enrichment will often be treated as synonymous. Any more particular meaning that the words may carry should be clear from the context.[3]

         But, the proper procedure in restitution cases is, perhaps, not so well established. In Reed, the Supreme Court held that restitution was a remedy and listed more than one possible avenue for a litigant seeking relief to follow:

Two remedies exist, the one by summary motion addressed to the appellate court, the other by a plenary suit. The books show that it has long been the practice to embody in the mandate of reversal a direction that the plaintiff in error ‘be restored to all things which he hath lost by occasion of the said judgment. What this was might be ascertained through an order to show cause known as a scire facias quare restitutionem habere non debet. Inquiry was then made whether anything had been taken ‘by colour of the judgment, ' with an appropriate mandate for the return of anything discovered. On the other hand, the litigant who has prevailed on the appeal is not confined to a motion for summary relief. He may elect to maintain an action, or the court in its discretion may remit him to that remedy. One form of remedy or the other, however, is granted as of right. The remedy in its essence like the one for money had and received is for the recovery of benefits that in good conscience may no longer be retained. ‘It is one of the equitable powers, inherent in every court of justice so long as it retains control of the subject-matter and of the parties, to correct that which has been wrongfully done by virtue of its process.'

286 U.S. at 203-04. (Emphasis supplied). See also Mathis v. DCR Mortg. Ill. Sub, I, LLC, 952 F.Supp.2d 828, 834 (W.D.Tex. 2013); United States v. Fleet National Bank, 288 B.R. 167 (D.Mass. 2002).

         Mr. Fryer did not directly ask the Seventh Circuit for a restitution order. He asked it to instruct the district court to award him interest due to what he characterizes as the Alliance's late payment of $25, 000 under the March 13th settlement agreement for past work on the project. The Court of Appeals did not grant that request; it simply vacated the injunction and reversed without remand. In the absence of a remand from the Court of Appeals, there is a question whether a district court retains the authority to grant restitution in the same case. In Arkadelphia Milling, the Supreme Court conditioned the power of the district court upon “retain[ing] control of the subject-matter and of the parties . . . .” 249 U.S. at 146; see also Northwestern Fuel Co. v. Brock, 139 U.S. 216, 219 (1891)(“the power is inherent in every court, while the subject of controversy is in its custody, and the parties are before it, to undo what it had no authority to do originally, and in which it, therefore, acted erroneously, and to restore, so far as possible, the parties to their former position. Jurisdiction to correct what had been wrongfully done must remain with the court so long as the parties and the case are properly before it, either in the first instance or when remanded to it by an appellate tribunal.”)(emphasis supplied); Wyatt, 800 F.3d at 331(noting that some case law suggested that the proper avenue for a claim for restitution was a new suit in the proper court).

         Of course, once Mr. Fryer appealed, the district court was divested of jurisdiction at least for most purposes. See Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982)(“The filing of a notice of appeal is an event of jurisdictional significance - it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal.”); Wyatt, 800 F.3d at 341. Mr. Fryer does not address the question of whether, after the reversal without a remand, a lower court can grant restitution. But there is authority that a district court has such power. See United States v. Kellington, 217 F.3d 1084, 1094 n. 11 (9th Cir. 2000)(collecting cases); Caldwell v. Puget Sound Elec. Apprenticeship & Training Trust, 824 F.2d 765, 766-68 (9th Cir. 1987).[4] And see the discussion in Educ. Media Co. at Virginia Tech v. Insley,, 2014 WL 3812359, at *1 (E.D. Va. 2014); Glaberson v. Comcast Corp., 295 F.R.D. 95, 102 (E.D. Pa. 2013). The rule of mandate would not appear to bar consideration of these issues (with the exception of that discussed infra at 24).


         “[E]quitable remedies are a special blend of what is necessary, what is fair, and what is workable. . . .” Lemon v. Kurtzman, 411 U.S. 182, 200 (1973). Restitution is often called an equitable remedy and calls for a court to exercise discretion in determining whether restitution is proper and, if so, how much should be awarded. Porter v. Warner Holding Co., 328 U.S. 395, 400 (1946). An order of restitution will be upset only if the district court used inappropriate factors or did not exercise discretion at all. United States v. Frith, 461 F.3d 914, 919 (7th Cir.2006). Discretion, it must be remembered, denotes the absence of a hard and fast rule. Langnes v. Green, 282 U.S. 531, 541 (1931); United States v. Davis, 202 F.2d 621, 624-25 (7th Cir.1953). And while it may not be exercised arbitrarily, it allows for two decision makers to reach opposite conclusions on virtually identical sets of facts. See Mejia v. Cook County, Ill., 650 F.3d 631, 635 (7th Cir. 2011); United States v. Banks, 546 F.3d 507, 508 (7th Cir. 2008). See also McCleskey v. Kemp, 753 F.2d 877, 891 (5th Cir. 1985)(“‘The very exercise of discretion means that persons exercising discretion may reach different results from exact duplicates.”), aff'd., McCleskey v. Kemp, 481 U.S. 279, 289-290 (1987). These principles, when applied to the facts of this case, counsel that the motion for restitution be denied.

         C. The Santa Rosa Data


         The first prong of Mr. Fryer's restitution claim addresses the so-called Santa Rosa data. He contends the Alliance has no right to data pertaining to water usage by the City's residents and should pay him a little over $26, 000 for it, destroy all its reports that refer to it, and never make use of the data again. In other words, he wants a good deal more than what he previously agreed to in the March 13th settlement. And what he wants would or could make the Alliance's future efforts in this area futile. According to Mr. Fryer, the Alliance obtained the data as a result of a court order the Seventh Circuit found invalid on appeal. But Mr. Fryer loses sight of the fact that the Seventh Circuit did not find the March 13th settlement agreement invalid. To the contrary, it held that the parties were bound by that to which they had agreed. It was this court (and the Alliance) which gave the settlement agreement a greater reach than it should have had.

         Indeed, the Court of Appeals noted that some of the “language [in a memorandum opinion] suggests that [I] wanted Fryer to turn additional data over to the Alliance or a consultant.” But it held that since “no such requirement appears in the injunction or in any judgment satisfying Fed.R.Civ.P. 58, Fryer [was] therefore under no obligation beyond those undertaken in the settlement agreement.” Alliance, supra, 808 F.3d at 1157. Mr. Fryer's current contention that he was required to turn over the Santa Rosa data to the Alliance [Dkt. #39] is, at bottom, an objection to the holding of the Court of Appeals. But he cannot relitigate or quarrel with the Court's holding.

         The record of the settlement conference of March 13th, which everyone agrees defined the parties' obligations, reads in pertinent part:

MR. WIX [counsel for the Alliance]: With respect to point 2 and the turnover of data, Mr. Fryer will turn over all utility data. Subject to that data requiring a release of AWE getting those releases from the case study utilities. Mr. Fryer will provide AWE shortly with a list of who those are.
MS. CASEY [counsel for Mr. Fryer]: Yes.
MR. WIX: So by March 14th close of business Mr. Fryer will provide us with the list of case study utilities who have confidentiality agreements. AWE will get the releases from those case study utilities. At which point Mr. Fryer will turn over all utility data within two weeks. That was not part of the description (inaudible).
MS. CASEY: Certainly. Michelle Casey for James Fryer. That data will be conveyed to plaintiff in some sort of hard copy format, whether it is via CD or via flash drive.
MR. WIX: The data that is being turned over will not include Mr. Fryer's interviews, notes that he's taken during the course of this case -- or the project. Sorry. With respect to point No. 4, AWE will pay Mr. Fryer the sum of $25, 000. We didn't talk about this specifically, but we would ...

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