Bhgdn, LLC v. Minnesota

• Decision Date: 24 February 2009
• Docket Number: Civil No. 08-4474(DSD/FLN).
• Citation: 598 F.Supp.2d 995
• Parties: BHGDN, LLC, Plaintiff, v. State of MINNESOTA and the Honorable Gene Hugoson, Commissioner of Agriculture, and Steve Ernest, in their Official and Individual Capacities, Defendants.
• Court: U.S. District Court — District of Minnesota

598 F.Supp.2d 995

BHGDN, LLC, Plaintiff, v. State of MINNESOTA and the Honorable Gene Hugoson, Commissioner of Agriculture, and Steve Ernest, in their Official and Individual Capacities, Defendants.

Civil No. 08-4474(DSD/FLN).

United States District Court, D. Minnesota.

February 24, 2009.

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Norman J. Baer, Esq., Mark D. Wisser, Esq., Steven M. Pincus, Esq. and Anthony, Ostlund, Baer, Louwagie & Ross, Minneapolis, MN, for plaintiff.

Kimberly J. Middendorf, Assistant Attorney General, Nathan J. Hartshorn, Assistant Attorney General, St. Paul, MN, for defendants.

ORDER

DAVID S. DOTY, District Judge.

This matter is before the court on defendants' motion to dismiss. Based upon a review of the file, record and proceedings herein, and for the following reasons, the court grants defendants' motion.

BACKGROUND

This action challenges the constitutionality of a 2008 amendment to Minnesota Statutes § 41A.09. The Minnesota legislature enacted § 41A.09 in 1986 to establish the Ethanol Development Fund ("Fund"), which gave eligible ethanol producers a fifteen-cent-per-gallon subsidy. The Fund was later reclassified as an appropriation and the Minnesota Commissioner of Agriculture ("Commissioner") became responsible for making the subsidy payments. The subsidy was increased to twenty cents per gallon in 1995.

Gopher State Ethanol ("Gopher") became an ethanol producer in 2000 and began receiving the subsidy. In 2003, however, the state legislature appropriated only enough funds for the Commissioner to make subsidy payments of thirteen cents per gallon. As a result, the Minnesota legislature amended § 41A.09 to provide for later payments to be made to subsidy-eligible ethanol producers as funds became available to make up the seven-cent-per-gallon deficiency ("deficiency payments").

Gopher ceased ethanol production on May 11, 2004, and filed for bankruptcy on August 11, 2004. As a result of the bankruptcy proceedings, Gopher's eligibility for deficiency payments was ultimately transferred to plaintiff BHGDN, LLC ("BHGDN") on December 21, 2005. The Commissioner acknowledged BHGDN's right to Gopher's deficiency payments on December 27, 2005,¹ and made payments accordingly.

The Minnesota legislature amended § 41A.09 in 2008 to prohibit the Commissioner from making deficiency payments "to an entity that no longer produces ethanol on a commercial scale at the location for which the entity qualified for producer payments, or to an assignee of the entity" ("2008 amendment"). Minn.Stat. § 41A.09, subdiv. 3a(h). BHGDN stopped receiving deficiency payments soon thereafter.

On July 3, 2008, BHGDN brought this action against the State of Minnesota, Gene Hugoson ("Hugoson")—the Minnesota Commissioner of Agriculture—and Steve Ernest ("Ernest")—the Finance and Budget Director for the Minnesota Department of Agriculture. BHGDN asserts claims against the State, and Hugoson and Ernest in their official capacities, seeking a declaration that the 2008 amendment violates the United States and Minnesota Constitutions, and an injunction requiring Hugoson and Ernest to make future deficiency payments to BHGDN. BHGDN also asserts claims under 42 U.S.C. § 1983 against Hugoson and Ernest in their individual capacities. Defendants move to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and 12(b)(6) for failure to state a claim.

DISCUSSION

I. Standard of Review

A court must dismiss an action over which it does not have subject matter jurisdiction. See Thomas v. Basham, 931 F.2d 521, 522-23 (8th Cir.1991). A court will also dismiss an action for failure to state a claim if the allegations show on the face of the complaint that there is some insuperable bar to relief. Benton v. Merrill Lynch & Co., 524 F.3d 866, 870 (8th Cir.2008) (citation omitted). The factual allegations in the pleadings are accepted as true and viewed in the light most favorable to the nonmoving party. Hastings v. Wilson, 516 F.3d 1055, 1058 (8th Cir.2008); see also Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990) ("The nonmoving party receives the same protections [for facial attacks under Rule 12(b)(1)] as it would defending against a motion brought under Rule 12(b)(6).").

II. State and Official Capacity Claims

A. State Sovereign Immunity

Defendants argue that the doctrine of state sovereign immunity divests the court of subject matter jurisdiction over BHGDN's claims against the state and its officers in their official capacities. That doctrine derives from the Eleventh Amendment and prohibits an individual from suing a state regardless of the relief sought unless a state consents to suit or immunity is abrogated by the United States Congress. See U.S. Const. amend. XI; Klingler v. Dep't of Revenue, 455 F.3d 888, 893 (8th Cir.2006) (citing Hans v. Louisiana, 134 U.S. 1, 15, 10 S.Ct. 504, 33 L.Ed. 842 (1890)); see also In re SDDS, Inc., 97 F.3d 1030, 1035 (8th Cir.1996) (sovereign immunity extends to suits against states for all forms of relief); Egerdahl v. Hibbing Cmty. Coll., 72 F.3d 615, 619 (8th Cir.1995) (consent and congressional act exceptions). A federal court must dismiss an action barred by the Eleventh Amendment for lack of subject matter jurisdiction. See Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 64-65, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996); see also Fed.R.Civ.P. 12(h)(3). In this case, the State has not consented to BHGDN's suit and no congressional act abrogates the State's sovereign immunity. Therefore, the court lacks subject matter jurisdiction over BHGDN's claims against the State.

An individual, however, may sue a state official to obtain prospective relief provided "such officer has some connection with the enforcement of the act." See Reprod. Health Serv. of Planned Parenthood of St. Louis Region, Inc. v. Nixon, 428 F.3d 1139, 1145 (8th Cir.2005) (citing Ex Parte Young, 209 U.S. 123, 161, 28 S.Ct. 441, 52 L.Ed. 714 (1908)); Nix v. Norman, 879 F.2d 429, 432 (8th Cir.1989) (state officials may be sued for declaratory and injunctive relief). This exception to a state's sovereign immunity does not permit recovery of past damages. See Heartland Acad. Cmty. Church v. Waddle, 427 F.3d 525, 530 (8th Cir.2005) (citing Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 102-03, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984)). Nevertheless, an award of prospective relief that has an ancillary effect on a state's treasury is not prohibited. See Am. Re-Ins. Co. v. Janklow, 676 F.2d 1177, 1181 (8th Cir.1982) (citing Quern v. Jordan, 440 U.S. 332, 337, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979) (internal quotations omitted)).

BHGDN does not request past damages from the state officials for deficiency payments it has not received since the 2008 amendment. Rather, BHGDN seeks only a declaration that the 2008 amendment is unconstitutional and an injunction requiring that future discretionary payments be made in accordance with § 41A.09 before the amendment. Such relief is properly characterized as prospective and the court has subject matter jurisdiction over BHGDN's claims against Hugoson and Ernest in their official capacities. Accordingly, the court grants the State's motion to dismiss for lack of subject matter jurisdiction but denies the state officials' motion to the extent that BHGDN seeks prospective relief.

B. Constitutional Claims

BHGDN seeks a declaration pursuant to 28 U.S.C. § 2201(a) that the 2008 amendment violates the federal and state constitutions. Specifically, BHGDN asserts that enforcement of the 2008 amendment violates its right to equal protection and substantive due process. BHGDN further maintains that enforcement of the amendment violates the United States Constitution's prohibition on impairment of contracts and the Supremacy Clause, and the Minnesota Constitution's proscription of laws "embrac[ing] more than one subject."

1. Equal Protection

BHGDN first argues that the state officials' enforcement of the 2008 amendment violates its equal protection rights because the amendment, though stated in neutral terms, effectively applies only to preclude BHGDN's receipt of deficiency payments. The Equal Protection Clause of the Fourteenth Amendment provides that no state shall "deny to any person within its jurisdiction the equal protection of the laws."² U.S. Const. amend. XIV, § 1. Where a state action does not involve a suspect classification or a fundamental right, a plaintiff must prove that it was treated differently by the government than similarly situated entities and that the different treatment was not rationally related to a legitimate government objective. See Koscielski v. City of Minneapolis, 435 F.3d 898, 901 (8th Cir. 2006) (citing City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439-40, 105 S.Ct. 3249, 87 L.Ed.2d 313 (1985)). To demonstrate unequal treatment, a plaintiff must prove similarity to other individuals or entities receiving favorable treatment. Id. (citing Carter v. Arkansas, 392 F.3d 965, 968-69 (8th Cir.2004)).

BHGDN alleges that the 2008 amendment singled it out for treatment different from other companies that produced ethanol during the time that subsidies were not paid in full. BHGDN, however, is not similarly situated to such companies because the other companies apparently all continue to produce ethanol. Rather, BHGDN is similarly situated to companies that produced ethanol and were at one time eligible for deficiency payments but have since gone out of business. BHGDN does not allege that other such entities exist or are being treated differently. Therefore, BHGDN has not alleged treatment different from other similarly situated entities.

Moreover, assuming BHGDN could demonstrate discriminatory treatment, the 2008 amendment was rationally related to a legitimate government objective. The stated goal of the Fund was to increase the production of ethanol in...