2022 Ark. 206
Ark.2022Background
- Plaintiffs (Buonauito et al.) sued, challenging use of Amendment 91 tax funds on two six‑lane interstate projects (CA0602 and CA0608); this Court previously held that use was an illegal exaction.
- On remand the Department identified $121,109,391.84 in unreimbursed Amendment 91 expenditures for those projects and the circuit court ordered reimbursement to the Amendment 91 fund.
- Plaintiffs had a 25% contingency agreement with Denton & Zachary and moved for attorneys’ fees, costs, and expenses; plaintiff experts and local attorneys testified about hours, contingency standards, and alleged statewide benefit.
- The circuit court awarded $18,160,000 (approx. 15% of the $121.1M reimbursement) plus $6,896.70 in costs, prompting appeal by Highway and State defendants.
- Defendants argued (inter alia) sovereign immunity, lack of statutory authority for fees under the American Rule, and that no common fund or pecuniary benefit to the Treasury was created because the Department merely reallocated funds internally.
- The Supreme Court reversed the fee award (holding no statutory basis nor applicable American‑rule exception), and affirmed denial of plaintiffs’ contempt motion (finding reimbursement/accounting occurred).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether attorneys’ fees are authorized by statute | Fees allowable under illegal‑exaction principles and Walther; a reasonable contingency fee is proper | No statute authorizes fees against the State; Ark. Code §26‑35‑902 applies only to counties/cities/towns | Reversed: no statutory authority here (§26‑35‑902 does not apply to the State) |
| Whether exceptions to the American Rule permit fees (common‑fund or substantial‑benefit) | Plaintiffs: litigation produced substantial benefit and preserved/returned Amendment 91 funds, justifying fees | Defendants: no new common fund and no pecuniary benefit to Treasury because funds remained within State and were reallocated | Reversed: neither common‑fund nor substantial‑benefit exceptions apply where funds never left State’s control; Court declines to extend exceptions further |
| Whether sovereign immunity bars fee recovery | Plaintiffs: sovereign immunity not a bar given illegal‑exaction context and precedent (Wilson II) | Defendants: sovereign immunity prevents fee awards against State absent legislative waiver | Not reached as a basis for decision (Court reversed on statutory/American‑rule grounds); Court declined further analysis of sovereign immunity in fee context |
| Whether contempt was warranted for failure to reimburse Amendment 91 fund | Plaintiffs: defendants willfully disobeyed court’s reimbursement order | Defendants: they completed accounting entries and reimbursed fund via departmental transfers | Affirmed: contempt denied — record shows Department effected the reimbursement/accounting adjustments |
Key Cases Cited
- Buonauito v. Gibson, 2020 Ark. 352 (holding use of Amendment 91 funds on CA0602/CA0608 was an illegal exaction)
- Walther v. Wilson, 2019 Ark. 105 (recognizing substantial‑benefit fee award where state funds were returned from a private entity)
- Wilson v. Walther, 2017 Ark. 270 (underlying Wilson decision addressing GIF appropriations)
- Lake View Sch. Dist. No. 25 v. Huckabee, 340 Ark. 481 (expanding substantial‑benefit exception in unique circumstances)
- Millsap v. Lane, 288 Ark. 439 (adopting the substantial‑benefit exception in derivative‑action context)
- Munson v. Abbott, 269 Ark. 441 (refusing fee award in illegal‑exaction suit against the State absent statutory authorization)
- Chrisco v. Sun Indus., 304 Ark. 227 (set of factors referenced for fee determinations)