Germann v. Stephens

No. 05-446

IN THE SUPREME COURT OF THE STATE OF MONTANA

2006 MT 130

_______________________________________
SHELLEY GERMANN,

Plaintiff and Appellant,

v.

GARY STEPHENS, DON NELSON, SHIRLEY
JACOBSON, and JAN METZMAKER, in their
official and individual capacities as Council Members
of the City of Whitefish, THE CITY COUNCIL OF
WHITEFISH, and THE CITY OF WHITEFISH,

Defendants and Respondents.
______________________________________

APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead, Cause No. DV 00-022A
The Honorable Ted O. Lympus, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Taryn S. Hart, Richard F. Gallagher, Church, Harris, Johnson & Williams,
P.C., Missoula, Montana

For Respondents Stephens, Nelson, Jacobson and Metzmaker:

Angela K. Jacobs, Hammer, Hewitt & Jacobs, PLLC, Kalispell, Montana

For Respondent City of Whitefish:

James M. Ramlow and Shelly F. Brander, Kaufman, Vidal, Hileman &
Ramlow, P.C., Kalispell, Montana

____________________________________

Submitted on Briefs: March 8, 2006
Decided: June 13, 2006

Filed:
______________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.

¶1 The City of Whitefish (City) enacted a temporary zoning ordinance in 1999 and a

permanent zoning ordinance in 2000 that required business owners to obtain conditional

use permits in order to operate new establishments that serve alcohol or permit gambling.

The City denied Shelley Germann’s (Germann) applications for conditional use permits.

Germann appeals from an order of the Eleventh Judicial District, Flathead County,

granting summary judgment in favor of the City, the City Council of Whitefish (Council),

and Gary Stephens, Don Nelson, Shirley Jacobson, and Jan Metzmaker (Council

Members), in their official and individual capacities as Council Members. Germann

further appeals from the District Court’s decision to grant attorney fees to the Council

Members under 42 U.S.C. § 1988 and its denial of her motion for costs incurred in

preparation for a settlement conference. We affirm in part, reverse in part, and remand

for further proceedings consistent with this Opinion.

¶2 Germann’s appeal presents the following issues:

¶3 1. Whether the District Court properly granted summary judgment to the City on

Germann’s state and federal claims.

¶4 2. Whether the District Court properly granted summary judgment to the Council

Members on Germann’s state and federal claims.

¶5 3. Whether the District Court abused its discretion in awarding attorneys’ fees to

the Council Members under 42 U.S.C. § 1988.

¶6 4. Whether the District Court abused its discretion by denying Germann’s motion

for costs incurred in preparation for a mandatory settlement conference.

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 FACTUAL BACKGROUND

¶7 Germann owned the Downtowner Motel located at 224 Spokane Avenue in

Whitefish from 1995 until 2002. Local zoning ordinances in effect before June of 1999

designated the Downtowner’s property as WB-3. The zoning ordinances allowed for bars

and casinos on property zoned WB-3. The Downtowner sits directly across the

intersection of Spokane Avenue and Second Street from the Whitefish Central School.

The School’s primary entrance sits on Spokane Avenue and lies approximately 420 feet

from the entrance to the Downtowner. The School’s mailing address is 600 East Second

Street.

¶8 Germann applied with the Department of Revenue (DOR) for approval to transfer

an on-premises liquor license for operation at the Downtowner in August of 1998.

Germann also applied for a gambling operator’s license in September of 1998. DOR

mailed a notice of the proposed liquor license transfer to various City officials, including

the City Attorney and Virgil Bench, the City Building Inspector. The notice requested

that City officials inform DOR by February 27, 1999, whether the application satisfied all

of the local laws and ordinances that the respective officials were responsible for

regulating. DOR also published two separate notices of Germann’s application in the

Whitefish Pilot newspaper.

¶9 Bench received phone calls from several concerned citizens regarding Germann’s

intent to operate a bar and casino at the Downtowner. Bench telephoned DOR in

response and notified it that the Downtowner was within 400 feet of Central School and

Foursquare Church. Bench also sent two letters to DOR noting that the Downtowner was

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within 600 feet of a school and a church. Bench expressed his view that the

Downtowner’s proximity to the school and the church precluded operation of a bar and

casino under State liquor licensing laws.

¶10 Section 16-3-306, MCA, prohibits DOR from granting retail liquor licenses to

establishments located “within 600 feet of and on the same street as a building used

exclusively as a church . . . or as a school . . . .” The statute further provides that the

distance shall be measured in a straight line from the center of the nearest entrances of

each establishment. Section 16-3-306, MCA. DOR’s administrative rules restrict the

application of § 16-3-306, MCA, however, only to those instances in which the business

mailing addresses of each establishment are on the same street. Rule 42.12.129(1)(b),

ARM.

¶11 The City issued Germann a building permit in April of 1999 that allowed

Germann to change the Downtowner from Group B occupancy to Group A occupancy.

Group A occupancy allows for uses such as bars and casinos. The City lacked any

authority, however, to permit Germann to open a bar or casino, as the State of Montana

exclusively regulates the operation of bars and casinos. See Title 16, Chapter 3, Montana

Code Annotated (Control of Liquor, Beer, and Wine); Title 23, Chapter 5, Montana Code

Annotated (Gambling).

¶12 City officials became concerned that DOR’s interpretation of § 16-3-306, MCA,

would allow Germann to operate a bar and casino despite its close proximity to the

Central School. The City was further concerned that other bars and casinos might be

proposed, particularly in light of its inability to control the opening of such

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establishments. The City thereafter enacted emergency Ordinance 99-8 (Emergency

Ordinance) on June 7, 1999, as a temporary ordinance that prohibited “any new

establishments [from] attempting to sell on-premises alcoholic beverages, beer and/or

wine or attempting to permit or operate gambling or gaming” within the City unless such

establishments received a conditional use permit from the Council.

¶13 DOR had not approved Germann’s application for a liquor license at the time the

Emergency Ordinance took effect. Section 23-5-119, MCA, provides that applicants for

a gambling license must possess a valid liquor license as a prerequisite to obtaining a

gambling license. The Montana Gambling Control Division (MGCD) earlier had filed a

disciplinary action against Germann for making false representations on her gambling

license application. Germann had yet to resolve this disciplinary action with MGCD at

the time the City passed the Emergency Ordinance. In fact, neither DOR nor MGCD had

ruled on Germann’s applications by the time that she sold the Downtowner in 2002.

¶14 Germann applied for a conditional use permit to operate her property as a bar and

casino on September 27, 1999. The Flathead Regional Development Office (FRDO)

prepared a staff report evaluating Germann’s application. FRDO’s report noted that the

Downtowner sat on the edge of a residential neighborhood near the Central School,

residences, and a church. The report recommended denial of Germann’s application.

FRDO presented the report to the city-county planning board and the board likewise

recommended denial. FRDO then presented the report to the Council on December 20,

1999. Members of the public spoke at the Council meeting and voiced their concerns

about the Downtowner’s proximity to the church and to the Central School. The Council

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adopted FRDO’s report as findings of fact and denied Germann’s application.

¶15 The Council enacted a permanent zoning ordinance (Ordinance 00-06) on April 3,

2000, that precluded casinos on property zoned WB-3, such as the Downtowner.

Ordinance 00-06 still allowed bars on WB-3 property if an applicant received a

conditional use permit from the Council. Germann applied for a conditional use permit

to operate the Downtowner as a bar in April of 2002. Germann still had not received a

liquor license from DOR. FRDO reviewed the application and recommended it be denied

based on the Downtowner’s proximity to the Central School, churches, and residential

neighborhoods. FRDO noted that the Downtowner’s parking lot was a mere 100 feet

from the school. The Council considered Germann’s application in June of 2002.

Several members of the public again voiced their opposition to the establishment of a bar

near the Central School. The Council denied Germann’s application.

PROCEDURAL BACKGROUND

¶16 Germann filed an action against the City, alleging various state and federal claims

for damages allegedly suffered as a result of the City’s enactment of the Emergency

Ordinance and Ordinance 00-06, and from its denial of her applications for conditional

use permits. Count two of Germann’s complaint requested a declaratory judgment that

the Emergency Ordinance was void and unenforceable. Germann moved for partial

summary judgment on this count. The City filed a cross motion for summary judgment.

The District Court granted the City’s motion after determining that the Emergency

Ordinance was valid and enforceable. Germann did not appeal the District Court’s

ruling.

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¶17 Germann filed a motion for leave to file a second amended complaint. The

District Court granted Germann’s motion subject to several conditions. Notably, the

District Court refused to allow Germann to repeat allegations that the Emergency

Ordinance was void and unenforceable, as it already had disposed of that issue on

summary judgment. Germann’s amended complaint still contained allegations that the

Emergency Ordinance was void and unenforceable despite the District Court’s

admonition. Germann’s second amended complaint also included state and federal

claims against the City, Council, and the Council Members in their individual and official

capacities, including claims under 42 U.S.C. § 1983 (§ 1983).

¶18 The District Court’s Rule 16 Scheduling Order required a settlement conference

between the parties. The City and Germann scheduled a conference for December 7,

2004, in Kalispell. The City requested postponement of the conference by two weeks to

secure more settlement authority for its representative. The parties attended the

conference on December 21, 2004, but the City declined to make a settlement offer.

¶19 The Council Members moved for summary judgment on Germann’s individual

and official capacity claims. The District Court granted their motion, reasoning that § 2-

9-305(5), MCA, and our decision in Kiely Const., L.L.C. v. City of Red Lodge, 2002 MT

241, 312 Mont. 52, 57 P.3d 836, provided the Council Members with immunity for

Germann’s state and federal individual capacity claims. The District Court further

granted summary judgment to the Council Members on Germann’s official capacity

claims. The court reasoned that the official capacity claims were redundant of

Germann’s claims against the City. The District Court awarded the Council Members

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attorneys’ fees pursuant to 42 U.S.C. § 1988 (§ 1988) after determining that Germann’s

claims against the Council Members were unreasonable.

¶20 The City also moved for summary judgment on the grounds that its actions did not

deprive Germann of the legal use of her property. The City argued that § 16-3-306,

MCA, prohibited DOR from licensing Germann’s property as a bar because of the

Downtowner’s proximity to Central School. The City noted that Germann would be

unable to obtain a gaming license without first acquiring a liquor license. The District

Court agreed and granted the City’s motion for summary judgment, ruling that DOR

exceeded its statutory authority in its interpretation of § 16-3-306(1), MCA. The District

Court determined that the proper interpretation of § 16-3-306(1), MCA, did not require

establishments to have business mailing addresses on the same street. Because the

Downtowner was within 600 feet of a school located on the same street, the District

Court held that § 16-3-306(1), MCA, precluded all claims against the City. The District

Court further concluded that Germann was not entitled to settlement costs incurred in

preparation for the court mandated settlement conference. This appeal followed.

STANDARD OF REVIEW

¶21 We review a district court’s decision to grant summary judgment de novo, based

on the same criteria applied by the district court. Hardy v. Vision Service Plan, 2005 MT

232, ¶ 10, 328 Mont. 385, ¶ 10, 120 P.3d 402, ¶ 10. We must determine whether the

district court applied the law correctly. Hardy, ¶ 10. If we reach the same conclusion as

the district court, but on different grounds, we may nonetheless affirm the district court’s

judgment. Safeco Ins. Co. of America v. Liss, 2000 MT 380, ¶ 25, 303 Mont. 519, ¶ 25,

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16 P.3d 399, ¶ 25.

¶22 We review a district court’s award of attorneys’ fees under § 1988 for an abuse of

discretion. Ihler v. Chisholm, 2000 MT 37, ¶ 24, 298 Mont. 254, ¶ 24, 995 P.2d 439, ¶

24. A district court abuses its discretion if it bases its fee award upon an inaccurate view

of the law or a clearly erroneous finding of fact. Ihler, ¶ 24.

¶23 We review a district court’s decision to award or deny sanctions for failure to

comply with a Rule 16 Scheduling Order for an abuse of discretion. See Seal v.

Woodrows Pharmacy, 1999 MT 247, ¶ 26, 296 Mont. 197, ¶ 26, 988 P.2d 1230, ¶ 26.

We afford the district court discretion because it sits in the best position to evaluate

whether one party has disregarded the rights of the opposing party and what sanctions for

such conduct, if any, addresses most appropriately the sanctionable conduct. Seal, ¶ 26.

DISCUSSION

¶24 1. Whether the District Court properly granted summary judgment to the City on

Germann’s state and federal claims.

¶25 Germann argues that the District Court improperly granted summary judgment in

favor of the City. She brought state claims and federal § 1983 claims against the City for

its actions in passing the Emergency Ordinance, Ordinance 00-06, and in denying her

applications for conditional use permits. Specifically, Germann brought a takings claim

under Article II, Section 29, of the Montana Constitution and the 5th and 14th

Amendments to the U.S. Constitution, substantive and procedural due process claims

under Article II, Section 17, of the Montana Constitution and the 5th and 14th

Amendments to the U.S. Constitution, and an equal protection claim under Article II,

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Section 4, of the Montana Constitution and the 14th Amendment to the U.S. Constitution.

Germann maintains that the court misinterpreted § 16-3-306(1), MCA, in holding that it

precluded all of her claims against the City.

¶26 A plaintiff first must establish that it possesses a protected liberty or property

interest to establish a viable § 1983 claim because the guarantees of the 5th and 14th

amendments apply only when a constitutionally protected liberty or property interest is at

stake. Kiely, ¶ 23. To have a property interest in a benefit, a plaintiff clearly must have

more than an abstract need or desire for it. Rather, it must have a legitimate claim of

entitlement to it. ISC Distributors, Inc. v. Trevor (1995), 273 Mont. 185, 193, 903 P.2d

170, 175.

¶27 Federal due process and takings claims require a plaintiff first to demonstrate that

it possesses a constitutionally protected property interest. Kiely, ¶ 23; Gammoh v. City of

La Habra (9th Cir. 2005), 395 F.3d 1114, 1122. State due process and takings claims

likewise require the plaintiff to first establish that it has a property interest. Montana

Media, Inc. v. Flathead County, 2003 MT 23, ¶ 65, 314 Mont. 121, ¶ 65, 63 P.3d 1129, ¶

65 (due process); Seven Up Pete Venture v. State, 2005 MT 146, ¶ 26, 327 Mont. 306, ¶

26, 114 P.3d 1009, ¶ 26 (takings). Independent sources, such as state law, create property

interests. Seven Up Pete, ¶ 26.

¶28 When a plaintiff claims a property interest under state law, we determine whether

a reasonable expectation of entitlement exists based largely on the language of the statute

relied upon and the extent to which the legislature couched the entitlement in mandatory

terms. Kiely, ¶ 27. Any significant discretion conferred upon a local agency defeats a

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claim of entitlement. Kiely, ¶ 28. Stated another way, a property interest exists only

when the legislature has so narrowly circumscribed the issuing agency’s discretion that it

virtually assures the interest’s approval. Kiely, ¶ 28.

¶29 Section 16-4-401, MCA, outlines the necessary criteria for obtaining a liquor

license in Montana. That section states that a “license under this code is a privilege that

the state may grant to an applicant and is not a right to which any applicant is entitled.”

Section 16-4-401(1), MCA. The statutory scheme provides broad discretion to DOR to

determine whether an applicant qualifies for a liquor license. For example, § 16-4-

405(3)(a), MCA, provides that DOR may not issue a license if it determines that the

welfare of the people residing in the vicinity of the premises would be adversely or

seriously affected by issuance of the license. An applicant for a gambling license to

operate card games, sports pools, or video gaming must possess a valid liquor license to

be eligible to offer gaming. Section 23-5-119, MCA.

¶30 Germann’s state and federal due process and takings claims thus turn on the

deprivation of her asserted protected interest to operate a bar and casino at the

Downtowner. Germann relies on the zoning ordinances in effect before the enactment of

the Emergency Ordinance and Ordinance 00-06 for her assertion that the City’s actions

deprived her of her right to operate a bar and casino at the Downtowner. The zoning laws

in place before the enactment of the Ordinances allowed for bars and casinos on property

zoned WB-3. The zoning ordinances could not, however, affirmatively authorize her to

operate a bar or casino. Only DOR and MGCD possessed the authority to approve

Germann’s request to open a bar and casino. See Title 16, Chapter 3, Montana Code

11
Annotated (Control of Liquor, Beer, and Wine); Title 23, Chapter 5, Montana Code

Annotated (Gambling).

¶31 Germann had yet to obtain a liquor license from DOR at the time the City passed

the Ordinances and denied her applications for conditional use permits. She therefore did

not have a property interest in operating the Downtowner as a bar. Moreover, Germann

cannot assert that she ultimately was entitled to a liquor license. The statutory scheme

explicitly states that receipt of a liquor license is not a right, but a privilege. Section 16-

4-401(1), MCA. The legislature vested DOR with discretion when determining whether

an applicant qualifies for a liquor license. Germann accordingly did not enjoy an

entitlement to a liquor license. Kiely, ¶ 28.

¶32 The mere fact that Germann had applied for a liquor license at the time that the

City had enacted the Ordinances did not guarantee she would receive such an entitlement.

We rejected a similar claim in Seven Up Pete where a mining company in possession of a

State mineral lease argued that its application for a mining permit provided it with a

protected property interest. Seven Up Pete, ¶ 22. We held that a voter-approved

initiative enacted while the permit application was pending did not deprive the mining

company of a protected property interest in the yet to be obtained mining permit. Seven

Up Pete, ¶ 33. Further, Germann could not receive a gaming license without first

obtaining a liquor license. Section 23-5-119, MCA. The City’s actions therefore did not

deprive Germann of any vested property right to operate the Downtowner as a bar or as a

casino.

¶33 Germann’s inability to establish that she possessed a protected property interest in

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operating her establishment as a bar or casino precludes her from establishing her § 1983

due process and takings claims or her corresponding state claims. Kiely, ¶ 23; Gammoh,

395 F.3d at 1122; Montana Media, ¶ 65; Seven Up Pete, ¶ 26. The City therefore did not

deprive her of a protected property interest, either in enacting the Ordinances or in

denying her conditional use permits. Germann did not appeal the District Court’s

determination on summary judgment that the Ordinances were valid and enforceable.

Our determination that Germann’s lack of a protected property interest in operating the

Downtowner as a bar or casino precludes all claims against the City dispenses with the

need to evaluate whether the District Court properly interpreted § 16-3-306, MCA. If we

reach the same conclusion as the district court, but on different grounds, we may

nonetheless affirm the district court’s ruling. Safeco Ins., ¶ 25. We therefore conclude

that the District Court properly granted summary judgment to the City on all of

Germann’s state and federal claims.

¶34 2. Whether the District Court properly granted summary judgment to the Council

Members on Germann’s state and federal law claims.

¶35 Germann argues that the District Court improperly held that § 2-9-305(5), MCA,

immunized the Council Members from Germann’s state and federal law claims.

Germann’s claims against the Council Members suffer from the same defect, however, as

her claims against the City. Her claims against the Council Members and the City arise

from the same conduct, namely the Council’s actions in passing the Ordinances and

denying Germann’s applications for conditional use permits. Our determination that

Germann lacks a protected property interest in operating the Dowtowner as a bar or

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casino precludes all claims against the Council Members and dispenses with our need to

evaluate whether the Council Members enjoyed immunity from suit. We therefore

conclude that the District Court properly granted summary judgment to the Council

Members on all of Germann’s state and federal claims. Safeco Ins., ¶ 25.

¶36 3. Whether the District Court abused its discretion in awarding attorneys’ fees to

the Council Members under 42 U.S.C. § 1988.

¶37 Courts may award reasonable attorneys’ fees to prevailing parties in relation to the

prosecution of a federal civil rights claim. 42 U.S.C. § 1988(b). Section 1988 entitles

prevailing defendants to attorneys’ fees only when a plaintiff’s civil rights claim

represents a frivolous, unreasonable, or groundless claim, or where the plaintiff continued

to litigate after it clearly became so. Thomas v. City of Tacoma (9th Cir. 2005), 410 F.3d

644, 647. If a party prevails on a § 1983 claim, they also are entitled to attorneys’ fees on

pendent state claims where the state and federal causes of action arise from a common

nucleus of operative fact. Mateyko v. Felix (9th Cir. 1990), 924 F.2d 824, 828.

A. Official Capacity Claims

¶38 The District Court awarded attorneys’ fees to the Council Members for Germann’s

official capacity claims on the grounds that longstanding jurisprudence dictates that there

is no need for plaintiffs to bring official capacity claims when plaintiffs can sue the

municipality directly. The U.S. Supreme Court stated over 20 years ago that plaintiffs no

longer need to bring official capacity claims against local government officials. Kentucky

v. Graham (1985), 473 U.S. 159, 167, n.14, 105 S.Ct. 3099, 3106, n.14, 87 L.Ed.2d 114.

The Court reasoned that official capacity claims generally represent only another way of

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pleading an action against an entity of which an officer is an agent. Graham, 473 U.S. at

165, 105 S.Ct. at 3105. Germann’s official capacity claims against the Council Members

constitute causes of action that do not provide for personal liability against the Council

Members. The City remains ultimately liable for the actions of its employees in official

capacity claims. Graham, 473 U.S. at 169, 105 S.Ct. at 3107. The Ninth Circuit has

determined that causes of action that do not provide for liability against the named

defendants constitute unreasonable claims, entitling the prevailing defendant to attorneys’

fees. Morse v. North Coast Opportunities, Inc. (9th Cir. 1997), 118 F.3d 1338, 1343.

We agree.

¶39 It appears that reasonable diligence and inquiry by Germann into the law would

have revealed that her official capacity claims not only were unnecessary, but inadequate

to provide for personal liability against the Council Members. Margolis v. Ryan (9th Cir.

1998), 140 F.3d 850, 854. At the very least, the Council Members demonstrated to

Germann that clearly established law dictated that her official capacity claims were

duplicative and unnecessary when they filed their brief in support of their motion for

summary judgment on July 16, 2003. It was thereafter unreasonable for Germann to

persist in her official capacity claims against the Council Members. Thomas, 410 F.3d at

647. The District Court did not abuse its discretion in awarding the Council Members

attorneys’ fees for Germann’s § 1983 official capacity claims and for Germann’s pendent

state law claims. Mateyko, 924 F.2d at 828. We reverse and remand, however, for the

District Court to limit the amount of attorneys’ fees to the amount that the Council

Members incurred in defending against Germann’s official capacity claims and pendent

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state law claims after July 16, 2003.

B. Individual Capacity Claims

¶40 The District Court premised its award of attorneys’ fees to the Council Members

for Germann’s individual capacity claims on the grounds that Germann knew or should

have known that § 2-9-305(5), MCA, and our decision in Kiely afforded the Council

Members immunity from suit. Germann argues that § 2-9-305(5), MCA, serves as a

double recovery statute that applies only when a party has recovered against a

governmental entity. She further argues that § 2-9-305(5), MCA, cannot immunize the

Council Members because state law cannot immunize federal claims under § 1983. The

Council Members counter that our decision in Kenyon v. Stillwater County (1992), 254

Mont. 142, 835 P.2d 742, and the plain language of § 2-9-305(5), MCA, dictate that § 2-

9-305(5), MCA, serves as more than just a double recovery statute. The Council

Members further contend that § 2-9-305(5), MCA, does not provide government

employees with absolute immunity from § 1983 claims and therefore does not deprive

plaintiffs of a remedy for constitutional violations.

i. State Claims Against the Council Members in their Individual
Capacities

¶41 Section 2-9-305(5), MCA, titled “Immunization, defense, and indemnification of

employees,” provides, in pertinent part, that recovery against a governmental entity

means that “the employee whose conduct gave rise to the suit is immune from liability”

for the same conduct if the claim arises out of the course and scope of the employee’s

employment. The explicit grant of immunity in the second sentence of § 2-9-305(5),

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MCA, belies Germann’s contention that the statute serves merely as an anti-double

recovery statute.

¶42 We applied this statute to a similar situation in Kenyon, 254 Mont. 142, 835 P.2d

742. Former county employee Roberta Kenyon (Kenyon) filed an age discrimination suit

against Stillwater County (County) and the County Attorney, C. Ed Laws (Laws).

Kenyon, 254 Mont. at 145, 835 P.2d at 744. Kenyon based her claim on Laws’s decision

to discharge her and replace her with a younger woman. Kenyon, 254 Mont. at 145, 835

P.2d at 744. She named both the County and Laws as defendants. Kenyon, 254 Mont. at

145, 835 P.2d at 744. The district court granted summary judgment to Laws individually

on the grounds that Laws was an agent of the County acting within the scope of his

authority. Kenyon, 254 Mont. at 146, 835 P.2d at 745.

¶43 We upheld the grant of summary judgment, but on different grounds. Kenyon, 254

Mont. at 146-47, 835 P.2d at 745. We noted that state law subjects governmental entities

to liability for their wrongful conduct and that of their employees acting within the scope

of their employment. Kenyon, 254 Mont. at 146, 835 P.2d at 745 (citing § 2-9-102, MCA

(1987)). We cited § 2-9-305, MCA (1987), in reasoning that where a litigant brings an

action against a county based on actionable conduct by a county employee, the employee

enjoys immunity from individual liability for the conduct where the county acknowledges

that the conduct arose out of the course and scope of the employee’s official duties.

Kenyon, 254 Mont. at 146, 835 P.2d at 745.

¶44 Here the City acknowledged that Germann based her claims upon the conduct of

the Council Members taken in the scope and course of their employment. Germann

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named the City as a defendant based upon the actions of the Council Members in

enacting the Emergency Ordinance and Ordinance 00-06, and subsequently denying her

applications for conditional use permits. The plain language of § 2-9-305(5), MCA, and

our decision in Kenyon demonstrate that the Council Members clearly enjoyed immunity

from Germann’s state law claims. We therefore agree with the District Court’s

determination that § 1988 entitled the Council Members to attorneys’ fees for Germann’s

state law claims against them in their individual capacities. Franceschi v. Schwartz (9th

Cir. 1995), 57 F.3d 828, 832. We must still evaluate, however, whether the District Court

properly determined that Germann should have known that § 2-9-305(5), MCA, afforded

immunity to the Council Members from Germann’s federal claims against them in their

individual capacities.

i.i. Federal Claims Against the Council Members in their Individual
Capacities

¶45 Germann relies on Martinez v. California (1980), 444 U.S. 277, 100 S.Ct. 553, 62

L.Ed.2d 481, to support her position that state law cannot immunize federal claims.

Martinez involved a California statute that purported to provide absolute immunity to

government entities and employees from liability for injuries resulting from parole

release determinations. Martinez, 444 U.S. at 280, 100 S.Ct. at 556. The U.S. Supreme

Court concluded that Martinez failed to establish a violation of § 1983, but noted that

state law cannot immunize conduct by persons acting under color of state law that

violates § 1983. Martinez, 444 U.S. at 284, n.8, 100 S.Ct. at 558, n.8.

¶46 Germann further relies on our decision in Miller v. City of Red Lodge, 2003 MT

44, 314 Mont. 278, 65 P.3d 562. The plaintiff in Miller sued the City of Red Lodge, but

18
did not bring an action against individual government employees. Miller, ¶ 27. We held

that the doctrines of judicial and quasi-judicial immunity do not afford local government

entities immunity from § 1983 actions, overruling our previous decision in Reisdorff v.

County of Yellowstone, 1999 MT 280, 296 Mont. 525, 989 P.2d 850. Miller, ¶ 26. We

reiterated our statement from Reisdorff that state immunity laws “do not shield the State

or its officials from liability based on 42 U.S.C. §1983.” Miller, ¶ 18 (quoting Reisdorff,

¶ 32).

¶47 We distinguish these cases from Germann’s claims. In Martinez, the statute at

issue purported to grant absolute immunity to both the governmental entity and its

employees, thereby entirely depriving plaintiffs of a remedy. Martinez, 444 U.S. at 280,

100 S.Ct. at 556. Conversely, granting immunity to the Council Members under § 2-9-

305(5), MCA, would not deprive Germann of a remedy. She still could pursue an action

against the City for the conduct of the Council Members.

¶48 Although we cited to Reisdorff in Miller for the proposition that state immunity

laws do not shield the State or its officials from § 1983 liability, our recitation of that

proposition in both cases paints too broadly. In Miller, the plaintiff brought an action

against only the governmental entity. Miller, ¶ 27. We did not squarely address the issue

Germann presents--whether state immunity laws afford immunity to government

employees for violations of § 1983 where the government entity remains a viable

defendant. Reisdorff, in turn, relied on Morrison v. Jones (9th Cir. 1979) 607 F.2d 1269,

1273, in stating that “state immunity laws . . . do not shield the State or its officials from

liability based on . . . § 1983.” Reisdorff, ¶ 32. Morrison addressed a state statute that

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purported to grant absolute immunity to a governmental employee, without mention of

the governmental entity’s liability. See Morrison, 607 F.2d at 1273. The actual language

employed by Morrison recognized that “state law immunities . . . cannot override a

section 1983 cause of action.” Morrison, 607 F.2d at 1273 (emphasis added). Again,

application of § 2-9-305(5), MCA, would not override Germann’s § 1983 action because

the City remains liable for the actions of its Council Members.

¶49 The U.S. Supreme Court provided further instruction in Felder v. Casey (1988),

487 U.S. 131, 108 S.Ct. 2302, 101 L.Ed.2d 123. Felder addressed the application of a

Wisconsin notice-of-claim statute to plaintiff’s § 1983 action. Felder, 487 U.S. at 134,

108 S.Ct. at 2304-05. The Court noted that where state courts entertain a federally

created cause of action, “the federal right cannot be defeated by the forms of local

practice.” Felder, 487 U.S. at 138, 108 S.Ct. at 2306. The Court recognized the

preemption question at issue, namely whether “the application of the State’s notice-of-

claim provision to §1983 actions brought in state courts [is] consistent with the goals of

the federal civil rights laws, or [whether] the enforcement of such a requirement instead

stand[s] as an obstacle to the accomplishment and execution of the full purpose and

objectives of Congress[.]” Felder, 487 U.S. at 138, 108 S.Ct. at 2306-07, (internal

quotations omitted). The Court further noted that the main objective of the civil rights

statutes serves to ensure that individuals whose federal constitutional or statutory rights

are abridged may recover damages or secure injunctive relief. Felder, 487 U.S. at 139,

108 S.Ct. at 2307.

¶50 The Court accordingly reasoned that any assessment of the applicability of a state

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law to federal civil rights litigation must be made in light of the purpose and nature of the

federal right. Felder, 487 U.S. at 139, 108 S.Ct. at 2307. To illustrate, the Court

observed that “we have held that a state law that immunizes government conduct

otherwise subject to suit under §1983 is preempted, even where the federal civil rights

litigation takes place in state court, because the application of the state immunity law

would thwart the congressional remedy.” Felder, 487 U.S. at 139, 108 S.Ct. at 2307.

The Court went on to hold that the burdensome requirements of Wisconsin’s notice-of-

claim statute conflicted with the remedial objectives of the civil rights laws and federal

law thus preempted the state statute. Felder, 487 U.S. at 153, 108 S.Ct. at 2314.

¶51 Our recent decision in Kiely further illuminates the issue. Kiely Construction

(Kiely) brought state and federal claims, including a § 1983 action, against the City of

Red Lodge (City) and against individually named City Council members based on the

City Council’s denial of Kiely’s subdivision plat application. Kiely, ¶¶ 8, 12. The

District Court granted summary judgment to the individually named City council

members, concluding that § 2-9-305(5), MCA, provided immunity from suit. Kiely, ¶ 14.

¶52 We determined that Kiely failed to demonstrate a § 1983 claim on appeal. Kiely, ¶

47. We then addressed whether the District Court properly dismissed the individual

defendants before trial based on § 2-9-305(5), MCA. Kiely, ¶¶ 78-90. All of Kiely’s

alleged complaints turned on actions performed by the individually named defendants

while serving as members of the city council. Kiely, ¶ 88. As a result, we determined

that the district court properly dismissed the individual defendants in light of the fact that

allowing Kiely to collect damages from both the City and the council members would

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violate the first sentence of § 2-9-305(5), MCA. Kiely, ¶ 88.

¶53 Although we did not address the application of the second sentence of § 2-9-

305(5), MCA, we upheld the district court’s decision to dismiss the individual defendants

before trial and thus before any determination of liability under § 1983 and before any

recovery from the City. Kiely, ¶ 88. Our holding therefore suggests that § 2-9-305(5),

MCA, affords immunity to government employees under § 1983 where the government

entity remains a viable defendant for the same course of conduct.

¶54 We turn to the application of § 2-9-305(5), MCA, to Germann’s federal law claims

and whether the District Court properly concluded that § 1988 entitled the Council

Members to attorneys’ fees because Germann knew or should have known that § 2-9-

305(5), MCA, shielded the Council Members from suit. The main objective of § 1983

serves to ensure that individuals who have suffered a deprivation of their constitutional or

statutory rights are afforded relief through damages or injunctive relief. Felder, 487 U.S.

at 139, 108 S.Ct. at 2307. Our analysis of the applicability of § 2-9-305(5), MCA, to

Germann’s federal claims must be taken in light of this objective.

¶55 The District Court’s determination to afford immunity to the Council Members for

Germann’s federal claims against them in their individual capacities under § 1983 does

not immunize fully the governmental conduct of which Germann complains. The City

has acknowledged that the Council Members acted within the scope and nature of their

employment when they undertook the actions giving rise to Germann’s complaint.

Granting immunity to the Council Members would not deprive Germann of a remedy

against the City for these same actions. See Monell v. New York City Dept. of Social

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Services (1978), 436 U.S. 658, 690, 98 S.Ct. 2018, 2035-36, 56 L.Ed.2d 611 (holding that

§ 1983 subjects municipalities and other local government units to liability). Indeed, to

succeed on her claims against the City would require Germann to prove the same set of

alleged facts as her claim against the Council Members. Affording immunity from

Germann’s federal claims to the Council Member’s under § 2-9-305(5), MCA, would not

thwart the objectives of § 1983.

¶56 We disagree, however, with the District Court’s determination that Germann

should have known that § 2-9-305(5), MCA, affords the Council Members immunity

from Germann’s federal claims. The District Court relied upon § 2-9-305(5), MCA, and

Kiely in determining that Germann should have known that the Council Members were

immune from federal claims. Kiely indicates that § 2-9-305(5), MCA, affords immunity

to government employees under § 1983 where the government entity remains a viable

defendant for the same course of conduct. It does not, however, explicitly hold so. We

based our decision in Kiely on the first sentence of § 2-9-305(5), MCA, but it is the

statute’s second sentence that grants immunity to government employees.

¶57 Given the ambiguity of Kiely’s holding and the prolixity of analysis necessary to

conclude that § 2-9-305(5), MCA, affords immunity to government employees for federal

claims where the governmental entity remains a viable defendant, we cannot conclude

that Germann should have known that § 2-9-305(5), MCA, shielded the Council

Members from her federal law claims. Accordingly, we cannot deem unreasonable her

federal claims against the Council Members in their individual capacities. Section 1988

therefore does not entitle the Council Members to attorneys’ fees for their defense of

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Germann’s federal claims against them in their individual capacities.

¶58 4. Whether the District Court abused its discretion by denying Germann’s motion

for costs incurred in preparation for a mandatory settlement conference.

¶59 The Scheduling Order required the parties to hold a settlement conference before

January 21, 2005. It further provided that failure of counsel to adhere to this Scheduling

Order could result in sanctions. Germann argues that the City failed to participate in the

settlement conference in good faith by sending a representative with no settlement

authority and by failing to notify her that the settlement conference would be futile. The

City counters that it had no duty to make a settlement offer and that it participated in the

settlement conference as required by the Court’s Rule 16 Scheduling Order.

¶60 Rule 16(a), M.R.Civ.P., allows courts to create scheduling orders, wherein a court

can require parties to attend settlement conferences to facilitate the settlement of a case.

Rule 16(f) authorizes courts to impose sanctions against a party who fails to comply with

a scheduling order or fails to participate in good faith, including the expenses incurred as

a result of noncompliance. Vermeer of Washington, Inc. v. Jones, 2004 MT 77, ¶ 12, 320

Mont. 435, ¶ 12, 87 P.3d 516, ¶ 12; Rule 16(f), M.R.Civ.P. The City revealed to

Germann before the settlement conference that its representative “has extremely limited

settlement authority.” The City suggested pushing back the settlement conference by two

weeks to allow the City’s representative to “potentially [gain] some greater authority.”

The City noted, however, that it did not believe that there was much settlement value to

the case. The record does not disclose the actual settlement authority vested in the City’s

representative.

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¶61 The City concedes that its representative’s authority may have been “extremely

limited.” Courts have recognized, however, that sending representatives with very little

authority does not necessarily constitute grounds for sanctions. E.g., Halaby, McCrea &

Cross v. Hoffman (Colo. 1992), 831 P.2d 902, 908. The Rule 16 Scheduling Order here

merely required the parties to attend a settlement conference. The City attended the

conference as required by the court. The City declined to offer Germann a settlement,

but failure to settle a case, without more, does not constitute grounds for sanctions.

National Ass’n of Gov’t Emp., Inc. v. Nat. Feder. of Fed. Emp. (5th Cir. 1988), 844 F.2d

216, 223. The City candidly informed Germann before the settlement conference that its

representative had limited authority to settle and that it did not believe there was much

potential for settlement.

¶62 The District Court determined that Germann was not entitled to sanctions for the

City’s conduct. The district court sits in the best position to evaluate whether litigants

have abused the rights of other parties during the course of litigation. Seal, ¶ 26. We

therefore conclude that the District Court did not abuse its discretion in denying

Germann’s motion for sanctions.

CONCLUSION

¶63 We affirm the District Court’s decision to grant summary judgment to the City on

Germann’s state and § 1983 claims based on Germann’s lack of a protected property

interest. We affirm the District Court’s decision to dismiss Germann’s claims against the

Council Members for the same reason. We also affirm the District Court’s award of

attorneys’ fees to the Council Members for all of Germann’s state law claims against the

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Council Members. We affirm in part the District Court’s award of attorneys’ fees to the

Council Members for Germann’s federal official capacity claims, but we reverse the

award of fees incurred before the Council Members filed their brief in support of their

motion for summary judgment on July 16, 2003. We reverse the District Court’s award

of attorneys’ fees for Germann’s federal claims against the Council Members in their

individual capacities. We remand to the District Court for the limited purpose of

recalculating attorneys’ fees in light of this ruling. Finally, we affirm the District Court’s

denial of costs to Germann based on her claim of bad faith by the City with respect to the

settlement conference.

/S/ BRIAN MORRIS

We Concur:

/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
/S/ JOHN WARNER
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
/S/ JIM RICE

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