223 A.3d 315
R.I.2020Background:
- In 2010 a receiver was appointed for Central Falls under Rhode Island’s Financial Stability Act after the city faced fiscal distress.
- Litigation followed over the receiver’s authority and the constitutionality of the Act; this Court in Moreau v. Flanders upheld the Act.
- In Shine v. Moreau (Shine I) this Court held the receiver could not recover attorneys’ fees, but held Mayor Moreau and the City Council’s attorney were entitled to indemnification and attorneys’ fees under municipal indemnity provisions.
- The elected officials later settled indemnity claims with the City in bankruptcy and then moved in Superior Court (for the first time) to obtain indemnification from the State.
- The Superior Court denied entry of judgment against the State; the elected officials appealed, arguing Shine I required state indemnification and that suits against a receiver are suits against the State.
- The Supreme Court affirmed: Shine I’s indemnity ruling was limited to the City; the receiver functioned as the City, not the State, and there was no basis to extend indemnification to the State.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Shine I mandated state indemnification for elected officials’ fees | Shine I required entry of judgment against the State; mandate rule compels state indemnification | Shine I relied on municipal statute/ordinances and limited indemnity to the City, not the State | Denied — Shine I provided indemnification from the City only, not the State |
| Whether litigation against a receiver equates to a suit against the State (entitling indemnity) | Receiver was an instrumentality of the State (appointed by the Director of Revenue), so costs should be borne by State | Receiver stood in the shoes of the City; Financial Stability Act does not pledge State credit for municipal obligations | Denied — receiver acted as the City; suit was not a basis for State indemnification |
Key Cases Cited
- Shine v. Moreau, 119 A.3d 1 (R.I. 2015) (held indemnification entitlement arose from municipal law and remanded for entry of judgment against City, not State)
- Moreau v. Flanders, 15 A.3d 565 (R.I. 2011) (upheld constitutionality of the Financial Stability Act)
- Waterman v. Caprio, 983 A.2d 841 (R.I. 2009) (standard: de novo review for pure questions of law)
- Pleasant Management, LLC v. Carrasco, 960 A.2d 216 (R.I. 2008) (explains the mandate rule and limits on lower courts following appellate mandates)
- Francis v. Buttonwood Realty Co., 765 A.2d 437 (R.I. 2001) (receiver stands in the shoes of the party whose estate is administered)
- Town of Lincoln v. Cournoyer, 375 A.2d 410 (R.I. 1977) (interlocutory orders with finality may be appealable to prevent irreparable harm)