Depot Square Pizzeria, LLC v. Dep't of Taxes, 169 A.3d 204

Taxpayer (LLC operating a pizzeria and concession stand/food truck at Norwich University events) did not collect or remit Vermont meals tax between 2011–2014.
Department of Taxes audited and assessed $27,810 in meals tax, interest, and penalties; Commissioner affirmed after reconsideration.
Taxpayer appealed to Superior Court but did not oppose the Department’s motion to dismiss (the Department had abated the tax during administrative review) and moved for attorney's fees under 32 V.S.A. § 9275.
Superior Court denied fees, citing sovereign immunity (no express statutory waiver), the American Rule (no statutory authority to shift fees), and lack of bad faith by the Department (so equity exception did not apply).
Taxpayer appealed, arguing § 9275 waives sovereign immunity/creates an exception to the American Rule and alternatively that equity permits fees absent bad faith.
Supreme Court affirmed: § 9275’s reference to "such relief as may be equitable" and prohibition on taxing costs against the State do not constitute an express waiver of sovereign immunity or authorization of attorney’s fees; no equitable exception applied because no bad faith.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether 32 V.S.A. § 9275 authorizes awarding attorney's fees against the State	§ 9275’s grant of "such relief as may be equitable" permits fees and thus waives sovereign immunity	Statute does not expressly authorize fees; waivers of sovereign immunity must be explicit and construed narrowly	Held: No — § 9275 does not waive sovereign immunity or authorize attorney's fees
Whether the prohibition on taxing costs against the State implies fees are allowed	"No costs taxed against the State" does not preclude fees; fees are equitable relief	That prohibition plus silence on fees shows the Legislature did not intend to allow fees; costs are more modest and commonly available than fees	Held: The prohibition supports denying fees; silence indicates no intent to authorize fees
Whether equitable powers permit awarding attorney's fees absent statutory authorization	Equity can award fees as "such relief as may be equitable" regardless of statute	American Rule restricts fee awards; equitable exception requires bad faith or exceptional conduct	Held: No — equitable exception not met; no bad faith or exceptional circumstances
Whether the American Rule is displaced here	§ 9275 and equity displace the American Rule in this case	American Rule remains; departures demand exceptional circumstances or statutory authorization	Held: American Rule applies; no exception warranted

LaShay v. Dep't of Soc. & Rehab. Servs., 160 Vt. 60, 625 A.2d 224 (Vt. 1993) (sovereign immunity protects the State unless expressly waived by statute)
Library of Congress v. Shaw, 478 U.S. 310 (U.S. 1986) (waivers of sovereign immunity are construed narrowly)
In re Williams, 166 Vt. 21, 686 A.2d 964 (Vt. 1996) (declining to imply waiver of sovereign immunity from statutory silence)
Town of Milton Board of Health v. Brisson, 147 A.3d 990 (Vt. 2016) (statutes that intend attorney's fees usually say so expressly; American Rule limits fee awards)
In re Gadhue, 149 Vt. 322, 544 A.2d 1151 (Vt. 1988) (equitable exception to American Rule requires bad faith or exceptional circumstances)
Joe v. United States, 772 F.2d 1535 (11th Cir. 1985) (sovereign immunity bars fee awards against the United States absent express statutory authorization)