Nichols v. City of Rehoboth Beach

• Citation: 836 F.3d 275
• Decision Date: 07 September 2016
• Docket Number: No. 15–3979,15–3979
• Parties: Jackie Nichols, Appellant v. City of Rehoboth Beach; Sam Cooper, Mayor of Rehoboth; Sharon Lynn, City Manager of Rehoboth
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

836 F.3d 275

Jackie Nichols, Appellant

v.City of Rehoboth Beach; Sam Cooper, Mayor of Rehoboth; Sharon Lynn, City Manager of Rehoboth

No. 15–3979

United States Court of Appeals, Third Circuit.

Argued April 7, 2016

Filed: September 7, 2016

David L. Finger, Esq. [ARGUED], Finger & Slanina, 1201 Orange Street, One Commerce Center, Suite 725, Wilmington, DE 19801, Counsel for Appellant

Max B. Walton, I, Esq. [ARGUED], Connolly Gallagher, 267 East Main Street, Newark, Delaware 19711, Matthew F. Boyer, Esq., Ryan P. Newell, Esq., Arthur G. Connolly, III, Esq., Connolly Gallagher, 1000 West Street, The Brandywine Building, Suite 1400, Wilmington, DE 19801, Counsel for Appellees

Before: FISHER, COWEN, and RENDELL, Circuit Judges.

OPINION OF THE COURT

FISHER

, Circuit Judge.

Jackie Nichols is a resident, property owner, and taxpayer in the City of Rehoboth Beach, Delaware. Rehoboth Beach held a special election—open to residents of more than six months—for approval of a $52.5 million bond issue, and the resolution passed. Nichols voted in the election. She then filed this civil action challenging the election and the resultant issuance of bonds. The District Court found that Nichols lacked standing and dismissed the case. The sole issue on appeal is whether Nichols had, as she claims, municipal taxpayer standing to make such a challenge. Because Nichols has failed to show an illegal use of municipal taxpayer funds—and therefore cannot establish standing on municipal taxpayer grounds—we will affirm the District Court's Order.

I.

A .

The facts of this case are simple. On April 27, 2015, the Board of Commissioners of Rehoboth Beach adopted a resolution proposing the issuance of up to $52.5 million in general obligation bonds to finance an ocean outfall project. The resolution followed an initial resolution and a public hearing, as required by Section 40(d)–(e) of Rehoboth Beach's City Charter. Pursuant to the City Charter, Rehoboth Beach held a special election on June 27, 2015, to determine whether it was authorized to borrow funds to finance the project. Rehoboth Beach expended municipal funds on the special election: first, before the election, it used taxpayer funds to place a full-page advertisement in a local newspaper urging the voters to “Vote Yes” in favor of the proposed outfall project; second, the costs of the special election were paid from the Rehoboth Beach treasury.

The Rehoboth Beach City Charter governs the voting procedures for special elections. Section 40(h) of the Charter states the following:

At the said Special Election, every owner or leaseholder, as defined in this Charter, of property, whether an individual, partnership or corporation, shall have one vote and every person who is a bona fide resident of the City of Rehoboth Beach, but who is not an owner or leaseholder, as defined in this Charter, of property within the corporate limits of the City of Rehoboth Beach and who would be entitled at the time of holding of the said Special Election to register and vote in the Annual Municipal Election if such Annual Municipal Election were held on the day of the Special Election shall have one vote whether or not such person be registered to vote in the Annual Municipal Election.

Charter of Rehoboth Beach § 40(h) (1963), http://charters.delaware.gov/rehobothbeach.pdf. Section 40 does not define the term “bona fide resident,” but Section 7 of the Charter, which deals with the manner of holding annual elections, defines the term “resident” as “an individual actually residing and domiciled in the City of Rehoboth Beach for a period of six months immediately preceding the date of the election.” Id. § 7(d).

At the special election, Rehoboth Beach accepted only voters who were either property owners or who had been residents for a minimum of six months. Corporations and other artificial entities that owned property in Rehoboth Beach were also permitted to vote. Nichols alleges that persons who owned several parcels of property in Rehoboth Beach through the ownership of artificial entities were granted one vote for each parcel owned. She further alleges that those who qualified as residents and who owned property were granted two votes. The votes of the special election were tallied, and the majority of eligible voters approved the issuance of the general obligation bonds—637 votes to 606 votes. Nichols is a property owner in Rehoboth Beach and voted in the special election.

B .

Nichols filed this action 19 days after the special election vote took place. About a month later, she filed a four-count amended complaint against the City of Rehoboth Beach, Sam Cooper (mayor of Rehoboth Beach), and Sharon Lynn (city manager of Rehoboth Beach). In Counts I and II of the amended complaint, Nichols alleged that Rehoboth Beach violated the Fourteenth Amendment by requiring voters to live in, or hold property in, Rehoboth Beach for six months before being entitled to vote as residents. In Count III, she alleged that Rehoboth Beach violated the Fourteenth Amendment by allowing property owners to vote more than once. Count IV was a pendent state law claim for “exceeding authority” in which Nichols alleged that Rehoboth Beach had violated Delaware law by purchasing the newspaper advertisement encouraging voters to support the issuance of bonds.

Rehoboth Beach filed a motion to dismiss Nichols's amended complaint, arguing, among other things, that Nichols lacked standing because, as a resident and property owner, she had voted in the election and had thus suffered no injury. The District Court issued a memorandum opinion and order granting Rehoboth Beach's motion and dismissing the case for lack of subject matter jurisdiction. The District Court explained:

The court agrees with Defendants that Nichols lacks standing. Initially, the court agrees with Defendants that Nichols is not contesting the expenditure of tax funds, but the legality of the Special Election. Second, the court notes that Nichols suffered no particularized injury as a result of the Special Election. Nichols is a property owner in the city and had the right to vote in the Special Referenda Election. Thus, she lacks the concrete personal injury necessary to bring suit. As a result, the court lacks the subject matter jurisdiction to hear this action.

(App. 19–20.) Having concluded that it lacked subject matter jurisdiction, the District Court did not address any of Rehoboth Beach's remaining arguments. Nichols timely appealed.

II .

“We have jurisdiction pursuant to 28 U.S.C. § 1291

over a dismissal for lack of subject matter jurisdiction, and our review for lack of subject matter jurisdiction is plenary.” Swiger v. Allegheny Energy, Inc. , 540 F.3d 179, 180 (3d Cir. 2008).

III .

Nichols argues that the District Court misperceived her allegations and that she has standing—not as a voter but as a municipal taxpayer. She presents two bases upon which we could find that she has municipal taxpayer standing to bring her case. First, she argues that she has standing to challenge the $52.5 million in municipal debt incurred by an allegedly unlawful special election. Second, she contends that she has standing to challenge Rehoboth Beach's use of municipal funds to hold the special election and to purchase a newspaper advertisement in support of that election. Nichols's first argument fails because she has not challenged the expenditure of the $52.5 million, merely the special election that approved the issuance of the bonds. Her second argument fails because she has not alleged a direct link between the expenditure of municipal funds and the challenged aspect of the municipal action and because those expenditures were de minimis.

A. Municipal Taxpayer Standing

“Article III of the Constitution limits the judicial power of the United States to the resolution of Cases and Controversies, and Article III standing enforces the Constitution's case-or-controversy requirement.” Hein v. Freedom From Religion Found., Inc. , 551 U.S. 587, 597–98, 127 S.Ct. 2553, 168 L.Ed.2d 424 (2007)

(internal quotation marks and alterations omitted). “One of the controlling elements in the definition of a case or controversy under Article III is standing.” Id. at 598, 127 S.Ct. 2553 (internal quotation marks and alterations omitted). The elements necessary for establishing “the irreducible constitutional minimum of standing” under Article III are as follows:

First, the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)

(internal quotation marks, citations, and alterations omitted).

The Supreme Court has roundly rejected federal taxpayer standing noting that a federal taxpayer's interest “in seeing that Treasury funds are spent in accordance with the Constitution does not give rise to the kind of redressable ‘personal injury’ required for Article III standing.” Hein , 551 U.S. at 599, 127 S.Ct. 2553

(explaining that an “interest in ensuring that [federal] funds are not used by the Government in a way that violates the Constitution” is “too generalized and attenuated to support Article III standing”). This follows from the fact that a federal taxpayer's

interest in the moneys of the treasury ... is shared with millions of others, is comparatively minute and indeterminable, and the effect upon future taxation, of any payment out of the funds, so remote, fluctuating and uncertain, that no basis is afforded for

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