Bonney v. Indiana Finance Authority

• Decision Date: 20 June 2006
• Docket Number: No. 71S00-0606-CV-204.,71S00-0606-CV-204.
• Citation: 849 N.E.2d 473
• Parties: Steve BONNEY, John Gibson, Anita Gibson, Tom Pietrzak, Randy Nace, Clarinda Nace, June Nace, and the Citizens Action Coalition of Indiana, Inc., an Indiana not for profit Corp., Appellants (Plaintiffs below), v. INDIANA FINANCE AUTHORITY, Statewide Mobility Partners, LLC, ITR Concession Company, LLC, the Indiana Department of Transportation, Mitchell E. Daniels, Governor of Indiana, and Tim Berry, Treasurer of Indiana, Appellees (Defendants below).
• Court: Indiana Supreme Court

849 N.E.2d 473

Steve BONNEY, John Gibson, Anita Gibson, Tom Pietrzak, Randy Nace, Clarinda Nace, June Nace, and the Citizens Action Coalition of Indiana, Inc., an Indiana not for profit Corp., Appellants (Plaintiffs below), v. INDIANA FINANCE AUTHORITY, Statewide Mobility Partners, LLC, ITR Concession Company, LLC, the Indiana Department of Transportation, Mitchell E. Daniels, Governor of Indiana, and Tim Berry, Treasurer of Indiana, Appellees (Defendants below).

No. 71S00-0606-CV-204.

Supreme Court of Indiana.

June 20, 2006.

COPYRIGHT MATERIAL OMITTED

James P. Fenton, Alan VerPlanck, Kathryn A. Brogan, Fort Wayne, for Appellants.

William N. Stant, James Alexander Tanford, Rudolph Wm. Savich, Bloomington, for Amicus Curiae.

Phillip R. Scaletta, Michael A. Wukmer, Indianapolis, for Appellees Indiana Finance Authority.

Steve Carter, Attorney General, Thomas M. Fisher, Solicitor General, Julie A. Hoffman, Deputy Attorney General, Indianapolis, for Appellees Indiana Department of Transportation, Mitchell E. Daniels, Governor of Indiana, and Tim Berry, Treasurer of Indiana.

Jeffrey C. McDermott, Libby Y. Mote, Indianapolis, for Appellees Statewide Mobility Partners and ITR Concession.

Michael A. Howard, Noblesville, for Amicus Curiae Indiana Association of Cities & Towns.

ON PETITION TO TRANSFER PURSUANT TO INDIANA APPELLATE RULE 56(A).

BOEHM, Justice.

The plaintiffs contend that the 2006 law commonly referred to as the "Major Moves" legislation violates several provisions of the Indiana Constitution. The trial court determined that:

1) the claims raised in most counts of the complaint in this case are governed by the Public Lawsuit Statute;

2) the plaintiffs' challenges presented no substantial issue, and therefore the Public Lawsuit Statute requires that a bond be posted before the claims governed by that Statute may proceed;

3) the claims raised in Counts IV and VIII were severable from the remainder of the complaint and were not governed by the Public Lawsuit Statute; and 4) the amount of the potential loss to the public from the pendency of this lawsuit was approximately $1.9 billion.

Accordingly, the trial court ordered that the Public Lawsuit portions of the complaint be dismissed unless the plaintiffs posted a bond in that amount.

The plaintiffs appeal that order, raising five issues. They contend that this lawsuit is not subject to the Public Lawsuit Statute for two reasons:

1) the Indiana Finance Authority is not a "municipal corporation" as that term is used in the statute; and

2) the statute applies only to acquisitions, not dispositions, of public works.

Plaintiffs also contend that even if the Public Lawsuit Statute applies to their claims, that statute permits a lawsuit to go forward without a bond if the plaintiffs present substantial issues for trial. Plaintiffs contend they have presented three substantial challenges to House Enrolled Act 1008 under the Indiana Constitution:

1) the provisions granting funding to seven counties constitute "special" legislation in violation of Article IV, Section 23;

2) the provisions for the proceeds of the lease of the Indiana Toll Road to be applied to purposes other than retirement of "public debt" violate Article X, Section 2; and

3) the exemption of the Toll Road from property taxes violates the requirement of Article X, Section 1 that the system of taxation be "uniform and equal" subject only to exemptions for specified purposes.

The first two contentions turn solely on the language of the Public Lawsuit Statute, and we conclude that the General Assembly intended the statute to apply to lawsuits such as this. We also conclude that no substantial issue is raised by the plaintiffs' three contentions that HEA 1008 violates the Indiana Constitution. The trial court's decision as to the severability of counts IV and VIII is not challenged on appeal. Accordingly, we affirm the order of the trial court.

Facts and Procedural History

The Indiana Toll Road runs through the seven Indiana counties along Michigan's southern border. The road is a major artery connecting Chicago and points west with destinations in the Northeast. It was originally constructed in the 1950s by the Indiana Toll Road Commission, which is a predecessor of one of several statutory entities that were consolidated to form the Indiana Finance Authority (IFA) in 2005. As a result of that consolidation, IFA is the current owner of the road.

In 2005 IFA began to explore leasing the Toll Road to a private entity and ultimately it solicited bids from potential lessees through an auction process. The ITR Concession Company LLC (ITR) submitted the highest bid of $3.8 billion. The transaction was contingent upon authorizing legislation, and Governor Daniels signed House Enrolled Act 1008 (HEA 1008), popularly known as "Major Moves," into law in late March 2006. On April 12, 2006, ITR and IFA executed the "Indiana Toll Road Concession and Lease Agreement." Pursuant to its terms, IFA agreed to terminate the current lease to the Indiana Department of Transportation (INDOT) and to lease the toll road lands and facilities to ITR for a term of seventy-five years. ITR agreed to pay rent in the amount of $3.8 billion to be paid in full on the date of closing.

HEA 1008 includes a number of provisions addressing the use of the lease proceeds. The Act directs that any lease proceeds first be applied to retire IFA's existing bond debt and to pay any expenses incurred by IFA in connection with the execution and performance of the lease. After payment of these obligations, IFA is to allocate $500 million to a "Next Generation Trust Fund" and the remainder to a "Major Moves Construction Fund." The Next Generation Trust Fund is a charitable trust created by the Act to fund long-term road, highway, and bridge projects. Money in the Major Moves Construction Fund is allocated first in specific amounts to the seven counties that the Toll Road traverses. The five counties at the eastern end of the Toll Road (Steuben, LaGrange, Elkhart, Saint Joseph, and LaPorte) are each to receive $40 million. Lake and Porter counties each would receive a smaller allocation because these two counties are members of the Northwest Indiana Regional Developmental Authority, which receives separate distributions totaling $120 million. The Act also provides that total distributions from the Major Moves Fund for projects or purposes benefiting the seven northern counties may not be less than 34% of the lease proceeds after two adjustments. The Act allocates $179 million to the state highway fund for preliminary engineering, purchase of right-of-ways, or construction of highways and bridges, and $150 million to the motor vehicle highway account. In addition to these specific required allocations, the Act authorizes additional distributions from the Major Moves Fund to the state highway fund for funding any project in INDOT's transportation plan. Based on testimonial evidence presented by the defendants, the trial court made a factual finding that the largest portion of the Major Moves money is allocated to INDOT to complete its ten-year plan, which includes upgrades to U.S. Highway 31, and construction of the Ports to Ports Road, the Hoosier Heartland Highway, and the Interstate 69 extension into southern Indiana.

On April 12, 2006 the plaintiffs filed their complaint in St. Joseph Superior Court seeking a declaratory judgment and a permanent injunction invalidating HEA 1008 on a variety of state constitutional grounds. The complaint named as defendants the IFA, Mitch Daniels, in his official capacity as Governor of Indiana, Tim Berry, in his official capacity as Treasurer of Indiana, INDOT, ITR, and Statewide Mobility Partners, LLC (SMP).¹ Under section 9.1(g) of the Lease Agreement IFA made the following representation and warranty to ITR:

There is no action, suit or proceeding, at law or in equity, or before or by any Governmental Authority, pending nor, to the best of IFA's knowledge, threatened against the IFA, which would have a Material Adverse Effect on (i) the operations of the Toll Road or (ii) the validity or enforceability of this Agreement.

If there is any such litigation pending on June 30, 2006, the date of closing, and the failure to close is not attributable to ITR, the Lease Agreement authorizes ITR to terminate the Agreement and seek indemnification from IFA for any losses occasioned by IFA's breach of this warranty.

Expressing concern that the plaintiffs' complaint might trigger section 9.1(g) of the Lease Agreement, the defendants petitioned the court to certify the plaintiffs' complaint as a public lawsuit under Indiana's Public Lawsuit Statute or alternatively to dismiss the complaint. After a hearing held May 11 and 15, 2006, the court issued an order certifying as a public lawsuit Counts I, II, III, V, VI, and VII and the portion of Count IV challenging the establishment of local construction funds and the transfer of highway operations. The court required plaintiffs to post a bond to cover anticipated damages and costs of the public lawsuit to the defendants if the defendants ultimately prevail. The amount of the bond was set at $1.9 billion,² and the plaintiffs were required to post the bond within ten days of the order or risk dismissal with prejudice of their certified counts. The court concluded that the portion of Count IV challenging provisions of HEA 1008 related to the proposed construction of Interstate 69 and Count VIII were severable from the remaining claims and therefore did not threaten the validity of the Act or Lease Agreement. These were permitted to proceed without bond.

Plaintiffs appealed the order to the Court of Appeals on June 5, 2006. The same day, on defendants' motion, this Court accepted jurisdiction over the appeal under Indiana Appellate Rule 56(A).

Complaints challenging the Act and the Lease Agreement were filed by other plaintiffs in LaPorte and Brown...