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Pedreira, v. Sunrise Children's Services, Inc.

United States District Court, W.D. Kentucky

December 21, 2016



          Charles R. Simpson III, Senior Judge United States District Court

         This matter is before the court on motion of the plaintiffs, Alecia M. Pedreira, et al., for voluntary dismissal of the action with prejudice and incorporation of the Settlement Agreement, as amended, into the court's order of dismissal as a consent decree.[1]

         The long and storied history of this case was set out by the United States Court of Appeals for the Sixth Circuit.[2]

Sunrise[3] operates group homes, places children in foster care, and provides related services for the State of Kentucky, which provides 65% of Sunrise's revenue. Sunrise describes its mission as “to extend the grace and hope of our loving God to the young people in our care by meeting their physical, emotional and spiritual needs.” Some of those young people have alleged that Sunrise pressured them to become practicing Christians.
Fifteen years ago, Alicia Pedreira and some other Kentucky taxpayers filed this lawsuit, arguing, in part, that Kentucky's payments to Sunrise violated the Establishment Clause. The plaintiffs named Sunrise as a necessary defendant under Federal Rule of Civil Procedure 19 for purposes of this claim. Without Sunrise, the plaintiffs alleged, they could not obtain complete relief and Sunrise itself would be unable to protect its interests. Seven years later, Sunrise and Kentucky moved to dismiss the suit for lack of standing. The district court granted the motion, but on appeal [the United States Court of Appeals for the Sixth Circuit] reversed, holding that the plaintiffs have standing as Kentucky taxpayers. See Pedreira v. Ky. Baptist Homes for Children (Pedreira I), 579 F.3d 722, 731-33 (6th Cir. 2009).
On remand, the plaintiffs filed an amended complaint, which again named Sunrise as a necessary defendant. In 2012, Sunrise and Kentucky moved for summary judgment. R. 480. The plaintiffs never responded to the merits of that motion. Instead, citing ongoing settlement negotiations, they moved to extend their deadline for responding to it. Over Sunrise's objection, the district court granted the motion.
A few months later, the plaintiffs and Kentucky-but not Sunrise-agreed to [a] settlement…which runs 15 pages single-spaced. Kentucky expressly denies in [that] agreement that it (or Sunrise) violated the Establishment Clause or otherwise violated the rights of children in Sunrise's care. But the settlement require[d] Kentucky to change some of the terms in its standard two-year contracts with Sunrise and other providers. The new terms require[d] providers to inform a child and the child's parents of a foster home's religious affiliation, to provide children with opportunities to go to the church of their choice, and to provide non-religious alternatives to religious activities. Providers must also agree not to discriminate against children on the basis of religion, coerce children to engage in religious activity, or attempt to convert children to a new religion. Further, when children leave their care, providers must give them an exit survey that asks, among other things, whether the provider tried to convert the child to a new religion.[4]
In return, the plaintiffs agree[d] to dismiss their lawsuit with prejudice and to waive any claims based on conduct occurring before the settlement. The plaintiffs retain the right to bring claims based on future conduct, but must submit to arbitration before doing so.
The settlement provide[d] that the Kentucky district court that entered the agreement shall have exclusive jurisdiction to enforce it. Although the ACLU and Americans United (neither of which is a party to this case) have the same rights as Kentucky and the plaintiffs to seek enforcement of the agreement, Sunrise (which is a party to the case) has no rights to do the same. The settlement also recite[d] that it [was] “Not [sic] Consent Decree, ” and purport[ed] to divest the district court of its power to hold Kentucky in contempt as a remedy for violations of the agreement (which, the parties contemplated, the district court would incorporate into its order dismissing the case). The settlement expires seven years after its effective date, subject to certain exceptions not relevant here.
After the plaintiffs and Kentucky reached agreement on the settlement, they asked the court to stay the case while they finalized some of the settlement's terms. Again over Sunrise's objection, the district court granted the motion. In September 2013-nearly a year after Sunrise moved for summary judgment-the plaintiffs and Kentucky filed a motion asking the court to dismiss the suit and retain jurisdiction to enforce the settlement. Sunrise objected and filed a motion to dismiss for lack of jurisdiction. The district court denied Sunrise's motion, granted the plaintiffs' motion to dismiss, entered an order incorporating the settlement, and retained jurisdiction to enforce that order. Another appeal followed.

         After reviewing the agreement and this court's treatment of it, the matter was remanded for consideration of the settlement as a consent decree rather than a private agreement, and for the court to address whether the consent decree[5] is fair, reasonable and consistent with the public interest. The Court of Appeals mandated that the court consider whether the consent decree is fair to Sunrise Children's Services, Inc. (“Sunrise”) in particular, and directed that the court afford anyone affected by the consent decree the opportunity to present evidence and have its objections heard.[6] The decision of the Court of Appeals was rendered on October 6, 2015. Rehearing en banc was denied November 12, 2015.

         Shortly thereafter, on November 18, 2015, the parties to the original agreement entered into a First Amendment to Settlement Agreement (the “Amendment”), apparently for the purpose of attempting to cure an aspect of the Settlement Agreement which concerned the Court of Appeals, namely the way in which it “singles out Sunrise by name for special monitoring by the ACLU and Americans United, ” thereby denying Sunrise a chance to clear its name and imposing reputational harm on Sunrise with respect to alleged unconstitutional activities which have never been proven.

         The Amendment makes a significant alteration to the agreement as originally written with respect to the treatment of Sunrise. Section 3 was deleted entirely and replaced with provisions which do not mention Sunrise, [7] and which purport to apply to “any Agency” rather than only Sunrise. This was the only change to the agreement made by the Amendment. Indeed, the Amendment recites that “The Parties desire to amend the Settlement Agreement to eliminate any ‘singl[ing] out' of or potential reputational harm to Sunrise by uniformly applying the same monitoring triggers and rules to all Agencies, as set forth in this Amendment.”[8] Thus the Amendment seeks to comport with dicta in Pedreira II at p. 872 that “A decree that did not, directly or indirectly, single out Sunrise in the matter would stand on different ground than the decree as it comes to us here.” It therefore appears to this court that the original Settlement Agreement is no longer operative, as it has been superseded by operation of the Amendment.

         Since the point of the remand was to consider the original agreement as a consent decree for, among other things, fairness to Sunrise in light of the special monitoring requirement applicable only to Sunrise, a provision now deleted by the Amendment, we deem it unnecessary to perform a fairness analysis of the Settlement Agreement in its original form. While we must, of course, respect the mandate of the Court of Appeals, to do so would be to perform a futile act.

         What is before us is the Settlement Agreement, as amended. It has been brought before us via the plaintiffs' current motion.[9]

         I. Analysis

         Presently unable to secure the cooperation of the Commonwealth defendants despite the terms of the Amendment requiring them to do so, the plaintiffs filed their own motion seeking voluntary dismissal with prejudice of the action and approval of the Settlement Agreement, as amended, as a consent decree.[10] Sunrise and the Commonwealth defendants pose a number of arguments in opposition to the court's consideration of the amended agreement.[11]

         A. Beyond the Mandate

         Sunrise argues that this court cannot consider the Amendment, as it falls outside the mandate of the Sixth Circuit that we consider the consent decree presented to us on remand. To consider the newly-minted consent decree, Sunrise urges, is to deviate from the letter and the spirit of the Court of Appeals decision. For a number of reasons, we reject this argument.

         First, the Amendment created a new agreement, superseding the original. This court is not foreclosed from considering it, as a lower court may consider ...

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