Wirtz v. City of South Bend

• Decision Date: 07 September 2011
• Docket Number: Cause No. 3:11–CV–325–RLM.
• Citation: 276 Ed. Law Rep. 718,813 F.Supp.2d 1051
• Parties: Roy WIRTZ, Eric Brown, Peter Reimers, and Tim DeLaney, Plaintiffs v. CITY OF SOUTH BEND, INDIANA, Defendant.
• Court: U.S. District Court — Northern District of Indiana

276 Ed. Law Rep. 718

813 F.Supp.2d 1051

Roy WIRTZ, Eric Brown, Peter Reimers, and Tim DeLaney, Plaintiffs

v.CITY OF SOUTH BEND, INDIANA, Defendant.

Cause No. 3:11–CV–325–RLM.

United States District Court, N.D. Indiana, South Bend Division.

Sept. 7, 2011.

Alexander J. Luchenitser PHV, Ayesha N. Khan PHV, Americans United for Separation of Church and State, Daniel Mach PHV, American Civil Liberties Union, Washington, DC, Gavin M. Rose, Kenneth J. Falk, ACLU of Indiana, Indianapolis, IN, for Plaintiffs.

Charles S. Leone, Leone Halpin LLP, South Bend, IN, for Defendant.

OPINION AND ORDER

ROBERT L. MILLER, JR., District Judge.

When Saint Joseph Regional Medical Center decided to vacate its 21–acre site in downtown South Bend, Indiana, a Catholic high school (St. Joseph's) was the only purchaser to step forward with solid interest in acquiring the site. St. Joseph's wanted to build a new high school on the site with athletic facilities. The high school wasn't able to negotiate the purchase of an adjacent property on which a Family Dollar store was operating. The City of South Bend purchased the Family Dollar parcel for $1.2 million, and plans to transfer the Family Dollar lot to St. Joseph's High School in exchange for opportunities to use, over the next ten years, the athletic and parking facilities that will be included at that location. Four South Bend taxpayers seek to enjoin the sale, arguing that South Bend's transfer of the property to a religious school would violate the Establishment Clause of the First Amendment to the United States Constitution, as well as Article I, sections 4 and 6, of the Indiana Constitution.

For the reasons that follow, the court finds that a transfer of the Family Dollar lot from the City to St. Joseph's High School would violate the Establishment Clause of the First Amendment to the United States Constitution, and so grants the taxpayers' motion for an injunction.

I

In the early 2000s, Saint Joseph Regional Medical Center, then a hospital and medical center located in South Bend's downtown area, decided to move out of the city. City officials began a process of what to do with the 21–acre site. St. Joseph's High School, a private Catholic high school within South Bend operated and overseen by a Catholic Diocese, expressed an interest in relocating its campus to the former Medical Center site. The school owns other land outside South Bend that was considered as a possible site for a new campus. No other potential purchaser for the Medical Center site stepped forward.

A Family Dollar store was located on a 0.591 acre lot adjacent to the Medical Center site. This store was open for business and wasn't listed for sale on the open market. The school approached the Family Dollar store owners about an acquisition, but reached no purchase agreement. The City decided in summer 2007 to encourage St. Joseph's High School to relocate to the Medical Center location. South Bend representatives approached the Family Dollar owners about buying the store so the Family Dollar parcel could form a part of a new athletic complex for the high school's proposed campus. The City wanted this athletic complex and the high school's relocation to the downtown Medical Center site for economic development and neighborhood revitalization purposes. ¹ The Medical Center site was near South Bend's East Bank Village sector, and the City believed the high school's plans would be consistent with its East Bank Village Master Plan. The high school acquired the Medical Center property and began constructing the new high school. The new school building would not be on the Family Dollar lot; parts of the football stadium, the track, and a parking lot would be on the Family Dollar lot.

The South Bend Common Council took up the proposed purchase of the Family Dollar property.² The Common Council passed an authorization ordinance on June 27, and the Mayor signed it on June 28. The City maintains an economic development income tax fund ³ comprised of county economic development income taxes that are paid to the county and then distributed into the City's economic development income tax fund.⁴ The Ordinance allocated $1.2 million from the City's economic development income tax fund for “St. Joseph Hospital area site consolidation for economic and community development investment ($1,200,000),” for the purchase of the Family Dollar store, for the lot on which the Family Dollar store sits, and for termination of the existing Family Dollar store lease. The City has taken title to the Family Dollar store property. The City always intended to transfer title to the Family Dollar property to the St. Joseph's High School. The high school, in turn, is to provide nonmonetary consideration for the property, although the precise contours of that consideration weren't fully developed until the week of August 22, 2011.

The City hasn't placed the Family Dollar property on the open market, solicited bids for it, or tried to sell it to the highest bidder, and it doesn't intend to do any of those things. The City intends to transfer title to the property to an Indiana non-profit corporation,⁵ which then will transfer the property to St. Joseph's High School. The high school will demolish the Family Dollar store and construct a football stadium and track on the property.

The high school intends to allow the South Bend community to the use the football stadium, the track, and other portions of the school campus for the next ten years on the terms and conditions outlined in an agreement for services. All parties to the transaction have approved the agreement for services, but the parties haven't yet performed their obligations under the services agreement and the City still holds title to the property. Other than what is specified in the agreement for services, no consideration for the property has been offered or will be received. The agreement for services provides that, “No participation in any religious activity shall be required of any participant in any service provided under Exhibit ‘A’ to this Agreement.” The City and St. Joseph's High School have no other agreement about using the property for religious activity or purposes.

St. Joseph's High School is spending some $35 million on the construction of its new campus. Construction of the campus began before South Bend acquired the Family Dollar property and before this suit was filed. St. Joseph's High School has several athletic teams, some of which would compete and/or practice on the property once the football stadium and track have been constructed. The high school requires all students to receive a Catholic education and to complete a certain number of credit hours in theology. The St. Joseph's High School Student–Parent Handbook for 2011–2012 provides that all school athletic practices and competitions should be preceded and/or concluded by a prayer.

The City expects to transfer the property to the non-profit corporation for eventual transfer to the school by September 15, but not before September 9, 2011. If St. Joseph's High School doesn't assume title to the property by September 15, it might be unable to finish construction of its campus by August 2012 and might incur costs associated with construction delays.

Plaintiffs Roy Wirtz, Eric Brown, Peter Reimers, and Tim DeLaney are adult residents of, and pay municipal income and property taxes to, South Bend and St. Joseph County, Indiana. Among the taxes they pay are county economic development income taxes, which are paid to St. Joseph County and then distributed into South Bend's economic development income tax fund. The plaintiffs have paid county economic development income taxes to St. Joseph County for at least the past several years. These taxpayer-plaintiffs object to the use of their taxes to benefit a religious institution such as St. Joseph's High School. The plaintiffs don't want their taxes to be used for that purpose. They seek a preliminary injunction (and a permanent injunction) barring the City of South Bend from transferring the Family Dollar property to St. Joseph's High School.

The case came before the court for hearing on the plaintiffs' preliminary injunction motion on August 31. The court inquired whether the parties wished to advance the trial on the merits, and on September 6 the parties stipulated to merging the trial on the merits with the preliminary injunction hearing, as allowed by Rule 65(a)(2) of the Federal Rules of Civil Procedure.

II

The ordinary case in which a taxpayer plaintiff seeks an injunction against action said to violate the Establishment Clause presents a variety of issues that aren't presented in this case. The plaintiffs and the City have narrowed their dispute commendably, allowing for a quicker and cleaner decision on today's motion.

The court first considers, in part II–A of this opinion, the plaintiffs' standing to sue, which, while not contested by the parties, is required for any constitutional challenge. The court then turns, in part II–B, to the parties' disagreement over precisely what legal standard is to be used in weighing the constitutionality of the Family Dollar transaction. Part II–C explains the parties' arguments, and part II–C–1 sets forth in greater detail the City's argument that the Family Dollar transaction has to be seen in the context of a broader set of transactions. In part II–C–2, the court discusses the cases on which the City placed its main reliance, including the most recent Supreme Court decision on school vouchers. In part II–C–3, the court considers the effect of the City's past contributions to development projects. Part II–C–4 of the opinions addresses whether the Family Dollar transaction has the effect of advancing or endorsing religion.

Part III addresses the plaintiffs' claims under the Indiana Constitution. Part IV of the opinion summarizes the court's ruling and sets forth the court's final order.

A

The City doesn't...