Bedford School District & a. v. State of New Hampshire & a.

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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Cheshire
No. 2017-0422

BEDFORD SCHOOL DISTRICT & a.

v.

STATE OF NEW HAMPSHIRE & a.

Argued: April 17, 2018
Opinion Issued: August 17, 2018

Wadleigh, Starr & Peters, P.L.L.C., of Manchester (Michael J. Tierney on
the brief and orally), for the plaintiffs.

Gordon J. MacDonald, attorney general (Anne M. Edwards, associate
attorney general, on the brief and orally), for the defendants.

BASSETT, J. The State together with the other defendants (the New
Hampshire Department of Education; Margaret Wood Hassan, individually;
Christopher T. Sununu, as Governor; Virginia M. Barry, individually; and
Frank Edelblut, as Commissioner of the New Hampshire Department of
Education) (collectively, the “defendants”) appeal an order of the Superior Court
(Ruoff, J.) granting the plaintiffs, Bedford School District and William Foote
(collectively, “Bedford”), attorney’s fees in a case that Bedford had filed to
recover adequate education funding that the State withheld in fiscal year 2016
because of a statutory limit on state funding imposed under RSA 198:41, III(b)
(Supp. 2015) (repealed 2015, repeal effective July 1, 2017). On appeal, the
State argues that because the trial court specifically declined to find that the
State had acted in bad faith in this litigation, the trial court unsustainably
exercised its discretion in awarding attorney’s fees. The State also argues that
Bedford waived its right to attorney’s fees when it accepted education funds
appropriated by a bill that contained a waiver provision. We reverse.

RSA 198:40-a (Supp. 2017) sets forth the formula that the New
Hampshire Department of Education uses to determine “the cost of an
adequate education for each municipality based on the . . . pupils who reside in
that municipality.” RSA 198:40-a, III. Before it was repealed, RSA 198:41,
III(b) limited the total education grant a municipality could receive to a
percentage of the previous year’s grant. See RSA 198:41, III(b).

In 2015, the City of Dover brought a case against the State challenging
the constitutionality of the limit that RSA 198:41, III(b) imposed on adequate
education funding. See Dover v. State, Strafford County Superior Court, No.
219-2015-CR-00312 (Tucker, J.). In the Dover case, the parties reached an
agreement (the “Dover Stipulation”) in August 2015, which stated:

In the event that the City is successful in obtaining a preliminary
or permanent injunction against the cap required by R.S.A. 198:41
III(b) . . . the State will make a supplemental payment equal to the
sum total of all funds withheld in any education adequacy
payments made on or after September 1, 2015, because of the
application of the cap, within ten (10) business days [of the time
the order becomes a final judgment].

Further, in the interests of judicial economy and based on the fact
that this is a constitutional challenge to a systematic statewide
payment, the State agrees that it will be bound by any rulings
issued in this matter regarding the constitutionality of the cap
contained in R.S.A. 198:41, III(b) as it applies to all other school
districts in the state and that other school districts shall not be
required to intervene or join this action, or file separate actions to
benefit from any injunctive or declaratory order issued herein.

In June 2016, while the Dover case was still pending, Bedford sought to
“enjoin[] the application of the adequacy funding cap imposed by RSA 198:41,
III(b).” The trial court denied the motion, reasoning that the plaintiffs had
“failed to sustain their burden of demonstrating irreparable harm” because
“any short fall [Bedford] experienced in FY 2016 will likely be remedied by the
ruling on the similar issue presented in Dover v. State.” In September 2016,
the trial court in Dover granted a permanent injunction, ruling “that the
percentage cap is unconstitutional when it operates to reduce the full amount
of the statutory grant.” The State did not appeal that decision. Nor, notably,

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did the State distribute the funds withheld from Bedford within ten business
days after the order became a final judgment.

In November 2016, Bedford moved for summary judgment, seeking a
court order that the State pay Bedford $4,287,533 — the amount that had
been withheld in fiscal year 2016 due to the cap. Bedford also requested
“reasonable attorneys’ fees for needing to bring this action and motion.” In its
objection, filed in January 2017, the State asserted that the Dover Stipulation
did not, in fact, require the State to pay the withheld funds to Bedford within
10 days of the time the Dover order became a final judgment. The State also
argued that it should not be required to pay Bedford’s attorney’s fees.

In January 2017, House Bill (HB) 354-A was introduced in the legislature
to appropriate “additional adequate education grants to certain municipalities
as calculated in RSA 198:40-a and 198:41.” The requested appropriation
included the amount withheld from Bedford. As of early April 2017, the bill
had not passed. Nonetheless, on April 6, the trial court “order[ed] the State to
pay Bedford School District the withheld funds for FY 2016 within 30 days of
April 1, 2017.” The court also ordered the State to pay Bedford’s attorney’s
fees, citing Harkeem v. Adams, 117 N.H. 687, 691 (1977), for the proposition
that an exception to the general rule that parties are responsible for their own
attorney’s fees is warranted “[w]here an individual is forced to seek judicial
assistance to secure a clearly defined and established right, which should have
been freely enjoyed without such intervention.” (Quotation omitted.) Although
the trial court observed that it “stop[ped] short of finding bad faith,” it ruled
that:

an award of attorney’s fees in this matter is appropriate because
the State has always promised to pay, yet never has. . . . This
lawsuit was necessary to enforce compliance with the statute and
to compel the State to comply with promises and representations it
made to both the Court . . . and Plaintiffs . . . .

The court gave Bedford thirty days “to file an affidavit outlining its request for
reasonable attorney’s fees.”

On April 27, 2017, the legislature passed HB 354-A, which appropriated
$4,287,533 to Bedford. The bill provided that:

Acceptance of a disbursement by a municipality under this act
shall constitute a waiver and full release of any and all claims it
may have against the state of New Hampshire . . . arising out of the
state’s adequate education payments between September 1, 2008
and June 30, 2016.

Laws 2017, 28:1. On May 1, the State wired the $4,287,533 to Bedford.

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 Shortly thereafter, Bedford’s attorney submitted an affidavit in support of
its request for attorney’s fees. In response, the State argued that an award of
attorney’s fees was “unwarranted.” The State alternatively argued that,
“Bedford released its claim for attorney’s fees when it accepted, without protest
or reservation, the funds made available to [it] via HB 354-A.” On June 19, the
court ordered the State to pay Bedford $21,479 in attorney’s fees that were
“directly attributable” to the “State’s schizophrenic representations and
litigation strategy in this case.” This appeal followed.

On appeal, the State argues that the trial court unsustainably exercised
its discretion in awarding Bedford attorney’s fees because the exception to the
general rule that each party pays its own attorney’s fees cannot be applied in
the absence of a finding that the losing party has acted in bad faith. See
Harkeem, 117 N.H. at 690-91. The State also argues that, even if the award of
attorney’s fees was adequately supported by the record, it should be vacated
because “Bedford waived its claim for fees when it accepted the payment
offered by HB 354-A.” Bedford counters that the trial court sustainably
exercised its discretion in awarding attorney’s fees because Harkeem does not
require an explicit finding of bad faith and, alternatively, the fee award could be
affirmed on other grounds. Bedford also argues that its receipt of funds from
the State did not operate as a waiver of its right to an award of attorney’s fees.
Because we conclude that, by accepting funds appropriated by HB 354-A,
Bedford waived its right to an award of attorney’s fees, we need not decide
whether the trial court’s award of those fees was a sustainable exercise of
discretion.

As a threshold matter, Bedford contends that the State did not properly
preserve for appeal the issue of waiver because it did not argue waiver in its
summary judgment pleadings. Bedford further argues that, “even if the
argument was timely made but not considered, the State was obligated to move
for reconsideration . . . in order to preserve this argument for appellate review.”
We disagree. HB 354-A did not become effective until April 27, 2017, and
Bedford did not receive the appropriated funds until May 1. On May 18, when
responding to Bedford’s affidavit and request for fees, the State argued that
“Bedford’s claim for attorney’s fees should . . . be denied in its entirety . . .
[because] by accepting the funds provided by HB 354[-A], Bedford released the
State from that claim.” To preserve an argument for judicial review, we
generally require issues to be raised at the earliest possible time because trial
forums should have a full opportunity to come to sound conclusions and
correct errors in the first instance. See Sklar Realty v. Town of Merrimack, 125
N.H. 321, 328 (1984). Here, because the State raised the issue of waiver at the
earliest possible time, and the trial court implicitly rejected the State’s waiver
argument when it awarded fees, we conclude that the waiver argument is
preserved.

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 Addressing the parties’ waiver arguments requires us to engage in
statutory interpretation. In matters of statutory interpretation, we are the final
arbiters of the legislature’s intent as expressed in the words of the statute
considered as a whole. State v. Actavis Pharma, 170 N.H. 211, 217 (2017),
cert. denied, 138 S. Ct. 1261 (2018). When interpreting statutes, we ascribe
the plain and ordinary meanings to the words used. Id. Our goal is to apply
statutes in light of the legislature’s intent in enacting them and in light of the
policy sought to be advanced by the entire statutory scheme. Id.

Bedford first asserts that, because the funds were “provided by wire
transfer,” Bedford did not “accept” them within the meaning of the statute. The
State counters that Bedford “fails to explain how receiving those funds by wire
transfer (without protest or reservation as far as the record indicates) differs
from an ‘acceptance’ of them.” We agree with the State.

HB 354-A does not define “acceptance.” When a term is not defined in a
statute, we look to its common usage, using the dictionary for guidance. See
K.L.N. Construction Co. v. Town of Pelham, 167 N.H. 180, 185 (2014).
Webster’s Third New International Dictionary defines “acceptance” as “an
agreeing either expressly or by conduct to the act or offer of another so that a
contract is concluded and the parties become legally bound.” Webster’s Third
New International Dictionary 11 (unabridged ed. 2002). Black’s Law Dictionary
defines “acceptance” as “[a]n offeree’s assent, either by express act or by
implication from conduct, to the terms of an offer in a manner authorized or
requested by the offeror, so that a binding contract is formed.” Black’s Law
Dictionary 14 (10th ed. 2014). Here, Bedford acknowledges that “[o]n May 1,
2017, the State paid the $4,287,533.00 due to [Bedford].” Moreover, at oral
argument, Bedford conceded that at the time it received the payment, “the
town was absolutely aware of the language in HB 354[-A].” Accordingly, we
conclude that Bedford “accepted” the funds within the meaning of HB 354-A
when it received the funds, with full knowledge that HB 354-A contained a
waiver provision, yet did not return the payment, hold the funds in escrow, or
inform the State that, although it intended to keep the funds, it did not intend
to waive its claim for attorney’s fees.

Bedford next argues that it did not waive its right to an award of
attorney’s fees because the funds that it received from the State were not
disbursed pursuant to HB 354-A, but rather were “wired . . . in compliance
with the Superior Court’s Order.” The State counters that “the fact that the
court ordered the State to pay Bedford the shortfall in adequacy aid . . . does
nothing to change the fact that the funds to make the payment were disbursed
by HB 354-A.” We agree with the State. We construe Bedford’s argument as
an assertion that, as a matter of law, payment could not be disbursed
pursuant to HB 354-A and, at the same time, comply with the trial court order.
Bedford cites no legal authority for this proposition, and we see no reason why
the fact that the trial court ordered the payment means that the payment could

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not also be disbursed pursuant to, and subject to the conditions set forth in
HB 354-A. The two need not be mutually exclusive. On April 6, 2017, the trial
court ordered the State to pay Bedford. On April 27, the legislature
appropriated the funds to be paid to Bedford and other municipalities. Laws
2017, 28:1. HB 354-A states “the commissioner of the department of
education shall disburse a lump sum to each municipality as follows: . . .
Bedford $4,287,533.” Laws 2017, 28:1 (emphasis added). The State paid
Bedford $4,287,533 on May 1. We conclude that the payment was disbursed
pursuant to HB 354-A.

Bedford also contends that we should reject the State’s waiver argument
because “[t]he State does not explain how passage of HB 354[-A] on April 27,
2017 could change the Superior Court’s April 6, 2017 Order awarding fees. HB
354[-A] was only effective after April 27, 2017 or three weeks after the Superior
Court already awarded fees . . . .” The State responds that “even if the trial
court correctly ruled that Bedford was entitled to its attorneys’ fees, the final
order awarding those fees should still be vacated because, by operation of the
plain language of HB 354-A, Bedford has waived that claim.” We agree with
the State. As explained above, notwithstanding the fact that the trial court
ordered the State to pay Bedford’s attorney’s fees, Bedford waived its right to
those fees when it accepted funds disbursed by HB 354-A.

Bedford also argued that the receipt of funds did not operate to waive its
right to attorney’s fees because the attorney’s fee claim is not a claim “arising
out of the state’s adequate education payments between September 1, 2008
and June 30, 2016.” Laws 2017, 28:1. Bedford contends that the waiver
provision in “HB 354[-A] simply does not apply” because the trial court
awarded attorney’s fees “as a result of the State’s contradictory representations
regarding the applicability of the Stipulation,” not because of “the State’s
failure to make the constitutionally required funding payments.” The State
counters that, “[b]y the plain terms of the statute,” Bedford waived its right to
attorney’s fees because these fees were “incurred in seeking to recover its
‘capped’ adequacy payments from fiscal year 2016.” We agree with the State.
Although the trial court awarded fees based upon the “litigation strategy
employed by the State,” the underlying case was brought to recover adequacy
payments. Bedford acknowledged as much in its motion for summary
judgment: “This case concerns RSA 198:41, [III](b) and the State’s
constitutional obligations under Part II, Article 83, of the New Hampshire
Constitution to fund a constitutionally adequate education for . . . the 2016 . . .
Fiscal Year[].” Therefore, we conclude that the award of attorney’s fees falls
within the scope of the statutory waiver, as it is a “claim[] . . . arising out of the
state’s adequate education payments between September 1, 2008 and June 30,
2016.” Laws 2017, 28:1.

At oral argument, for the first time, Bedford advanced two additional
arguments as to why its receipt of funds from the State did not operate to waive

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its right to attorney’s fees: first, because RSA 198:42, II allows money from the
general fund to be used to pay for adequate education grants under certain
circumstances, in fact the funds may not have been disbursed pursuant to HB
354-A, RSA 198:42, II (Supp. 2017); and, second, HB 354-A gives rise to a
“separation of powers problem” because, by including the waiver provision, the
legislature effectively nullified a trial court order. Because both of these
arguments were raised for the first time at oral argument, we decline to
address them. See In the Matter of Gendron & Plaistek, 157 N.H. 314, 319-20
(2008) (stating that we generally decline to address issues raised for the first
time at oral argument because neither the parties nor the court will be
prepared to discuss an issue not addressed in the briefs).

Accordingly, for the reasons set forth above, we conclude that Bedford
waived its right to an award of attorney’s fees.

Reversed.

LYNN, C.J., and HICKS and HANTZ MARCONI, JJ., concurred.

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