City of Riverside v. State
| Decision Date | 09 May 2014 |
| Docket Number | Appellate Case No. 26024,Trial Court Case No. 2013-CV-4691 |
| Citation | 2014 Ohio 1974 |
| Parties | CITY OF RIVERSIDE Plaintiff-Appellant v. STATE OF OHIO Defendant-Appellee |
| Court | Ohio Court of Appeals |
(Civil Appeal from
Common Pleas Court)
OPINIONDANIEL J. BUCKLEY, Atty. Reg. No. 0003772, ADAM C. SHERMAN, Atty. Reg. No. 0076850,
JACOB D. MAHLE, Atty. Reg. No. 0080797, JESSICA K. BAVERMAN, Atty. Reg. No. 0083951,
301 East Fourth Street, Suite 3500, Cincinnati, Ohio 45202, JOHN KULEWICZ, Atty. Reg. No.
RICHARD N. COGLIANESE, Atty. Reg. No. 0066830, ZACHERY KELLER, Atty. Reg. No.
{¶ 1} Plaintiff-Appellant, City of Riverside ("Riverside"), appeals from a trial court decision granting a motion to dismiss that was filed by Defendant-Appellee, State of Ohio. Riverside contends that it complied with standing requirements for bringing its action, and that the trial court erroneously applied an improper standard in ruling on the motion to dismiss.
{¶ 2} We conclude that the trial court erred in finding that Riverside lacked standing to bring its action. The allegations in the complaint, taken as true, satisfy the requirements for third-party standing. Accordingly, the judgment of the trial court will be reversed.
{¶ 3} In August 2013, Riverside filed a complaint for declaratory judgment against the State of Ohio, alleging that R.C. 718.11(H)(11) violates the Equal Protection Clauses of the United States and Ohio State constitutions. R.C. 718.11(H) exempts certain individuals who work on Wright Patterson Air Force Base ("WPAFB") from municipal taxation.
{¶ 4} In the complaint, Riverside alleged that in 1994, the Village of Riverside had merged with Mad River Township to create Riverside. As a result of the merger, parts of WPAFB were physically located within Riverside. These parts included the area of WPAFB formerly known as Page Manor, the National Museum of the United States Air Force, and a portion of what is known as "Area B."
{¶ 5} In 2005, a court decision held that the merger was valid, and that Riverside could levy its municipal income tax, which was 1.5%, on civilian employees and civilian contractors working on the parts of WPAFB that were located within Riverside. In April 2007, Riverside obtained the names and base mail locations of all civilian employees and civiliancontractors working at WPAFB, and began attempting to collect the tax. However, the legislature then enacted R.C. 718.01(F)(11) [now R.C. 718.01(H)(11)], which exempted these employees and contractors from Riverside's municipal tax.
{¶ 6} Riverside initially filed a declaratory judgment action against the State of Ohio in the Franklin County Court of Common Pleas. In that complaint, which was filed in August 2008, Riverside alleged three grounds for invalidating R.C. 718.01(H)(11): (1) that it violated 4 U.S.C. 105 et. seq. (known as the Buck Act); (2) that it violated the Ohio and federal Equal Protection Clauses; and (3) that it violated the "one-subject rule" of the Ohio Constitution. Riverside v. State, 190 Ohio App.3d 765, 2010-Ohio-5868, 944 N.E.2d 281, ¶ 2 (10th Dist.2010)(Riverside I). The trial court granted summary judgment to Riverside on the first and third grounds, and held the statute unconstitutional. However, the court denied summary judgment to Riverside on the equal protection claim. In this regard, the court of appeals noted that:
With respect to the city's equal protection argument, however, the [trial] court concluded that summary judgment was inappropriate. The record contained insufficient facts to determine whether the city had standing to assert an equal protection claim. Nevertheless, discussing the city's equal protection argument as if standing existed, the court also stated, "While * * * in a full hearing with appropriate evidence being presented, it is possible that the State's argument on equal protection [asserting a rational basis for the statute] would fail, this court cannot say that summary judgment should be granted to [the city] on this issue." Riverside I at ¶ 5, quoting from the trial court decision.
{¶ 7} On appeal, the Tenth District Court of Appeals reversed the trial court's grant of summary judgment. The court concluded that R.C. 718.01(H)(11) did not conflict with the Buck Act, because the Buck Act allowed states to extend taxes to persons residing in or carrying on business in federal areas. Rather than taxing, however, the State had simply decided not to exercise its jurisdiction to tax, and had not undermined the Act's effect. Id. at ¶ 19-33. In addition, the court of appeals rejected the application of the one-subject rule. The court reasoned that "provisions in appropriations bills directly related to taxation and revenue generation have survived one-subject scrutiny[,]" and the restriction on Riverside's ability to generate income had "a direct effect on the state's funding for the city." Id. at ¶ 44-45.
{¶ 8} The Tenth District Court of Appeals refused to consider the standing issue because the trial court had not ruled on the matter or on the merits of the equal protection argument. Accordingly, the court remanded the case to the trial court for further resolution. Id. at ¶ 58.
{¶ 9} According to the State, Riverside subsequently dismissed the action in Franklin County without prejudice, and filed a second action in federal district court. Riverside then stipulated to dismissal of that action due to lack of subject matter jurisdiction. However, Riverside's complaint did not make any allegations about the prior actions.
{¶ 10} In the complaint filed in Montgomery County Common Pleas Court in August 2013, Riverside alleged that the action against the State was being brought on behalf of three groups: (1) Riverside's taxpaying residents who receive the benefit of city services that are funded in part by municipal income tax, and are negatively impacted by R.C. 718.01(H)(11)'s prohibition on collection of municipal tax; (2) individuals working within Riverside's boundarieson premises other than WPAFB who are subject to Riverside's income tax; and (3) Ohio citizens who are federal employees not working at WPAFB and who are subject to the municipal income tax of the municipality in which they work.
{¶ 11} Paragraph 22 of the complaint discusses Riverside's standing to assert the right of these citizens. This paragraph alleges that Riverside had suffered an injury-in-fact by being prohibited from collecting the tax; that Riverside possesses a sufficiently close relationship to these Ohio citizens; and that these citizens face hindrances to bringing suit. The hindrances alleged include: (1) the expense of litigation; (2) lack of incentive due to the high cost of litigation and the lack of a direct financial stake on the part of each individual plaintiff; and (3) the threat of sanctions that could be levied against the plaintiffs.
{¶ 12} Riverside asked for a declaration that R.C. 718.01(H)(11) violates the Equal Protection Clauses of the federal and state constitutions by arbitrarily and capriciously granting tax exemptions to employees and contractors working at WPAFB, while denying the exemption to similarly-situated Ohio citizens. Riverside also requested injunctive relief.
{¶ 13} In September 2013, the State filed a motion to dismiss pursuant to Civ.R 12(B)(1) and (6). The State alleged that Riverside was not entitled to bring equal protection claims against the State, and that Riverside failed to set forth a viable theory of relief on substantive grounds. In addition, the State alleged that Riverside lacked standing to bring claims on behalf of the identified Ohio citizens and that the tax exemption satisfied rational basis scrutiny.
{¶ 14} After reviewing the memoranda filed by the parties, the trial court sustained the State's motion to dismiss. The court's decision was based solely on the conclusion that thehindrances alleged by Riverside failed to constitute sufficient hindrances under relevant legal authority. Riverside appeals from the judgment dismissing its complaint.
{¶ 15} Riverside's sole assignment of error states that:
Where the City of Riverside Alleged Each Element of the Third-Party Standing Doctrine and Specific Facts in Support of Each Element, the Trial Court Erred in Dismissing the Complaint.
{¶ 16} Under this assignment of error, Riverside contends that it alleged the appropriate elements necessary to establish third-party standing in Ohio, and that the trial court erroneously applied a more stringent standard than notice pleading requires. In response, the State argues that the allegations in the complaint are limited and vague. The State also argues that even if the complaint adequately pleads third-party standing, the dismissal was correct in view of other reasons for dismissal that the State raised in the trial court.
{¶ 17} The State's motion was made pursuant to Civ.R. 12(B)(1) and (6), which are based, respectively, on "lack of subject matter jurisdiction" and "failure to state a claim upon which relief can be granted." "The standard of review for a dismissal pursuant to Civ.R. 12(B)(1) is whether any cause of action cognizable by the forum has been raised in the complaint." State ex rel. Bush v. Spurlock, 42 Ohio St.3d 77, 80, 537 N.E.2d 641 (1989). (Citations omitted.) However, "[t]he trial court is not confined to the allegations of the complaint when determining its subject-matter jurisdiction pursuant to a Civ.R. 12(B)(1) motion to dismiss, and it may consider material pertinent to such inquiry without converting the motioninto one for summary judgment." Southgate Development Corp. v. Columbia Gas Transmission Cor...
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