Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-35376/USCOURTS-ca9-14-35376-0/pdf.json

Parties Involved:
Commissioners of the Port of Portland
Appellee
Bruce A. Holte
Appellee
International Longshore and Warehouse Union
Appellant
Port of Portland
Appellee
Bill Wyatt
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

INTERNATIONAL LONGSHORE AND 

WAREHOUSE UNION,

Plaintiff-Appellant,

v.

PORT OF PORTLAND;

COMMISSIONERS OF THE PORT OF 

PORTLAND, in their individual and 

official capacities; BILL WYATT, in 

his individual and official capacity; 

BRUCE A. HOLTE,

Defendants-Appellees.

No. 14-35376

D.C. No.

3:12-cv-01494-SI

CERTIFICATION 

ORDER

Filed December 27, 2016

Before: Richard R. Clifton, Mary H. Murguia,

and Jacqueline H. Nguyen, Circuit Judges.

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2 ILWU V. PORT OF PORTLAND

SUMMARY*

Civil Rights

The panel certified to the Oregon Supreme Court the 

following question:

Does a municipal corporation that holds its 

tax and non-tax revenues in the same bank 

account but that segregates the revenues 

through financial management and 

accounting techniques violate article XI, 

section 9, of the Oregon Constitution when 

the municipal corporation uses its funds to 

finance programs that benefit private 

enterprise if the programs contain neither, 

one, or both of the following two contractual 

provisions: (1) the municipal corporation 

certifies that it will not use tax revenue to 

fund the programs; (2) the program 

beneficiaries waive any right to make a claim 

against the municipal corporation’s tax 

revenue to satisfy the municipal 

corporation’s program obligations?

 * This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.

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ILWU V. PORT OF PORTLAND 3

COUNSEL

Andrew J. Ziaja (argued), Emily M. Maglio, and Robert S. 

Remar, Leonard Carder LLP, San Francisco, California, for 

Plaintiff-Appellant.

Randolph C. Foster (argued) and Jeremy D. Sacks, Stoel 

Rives LLP, Portland, Oregon, for Defendants-Appellants.

ORDER

MURGUIA, Circuit Judge:

The Oregon Constitution bars a state public entity, such 

as a municipal corporation, from “rais[ing] money for, or 

loan[ing] its credit to, or in aid of, any [] company, 

corporation or association.” OR. CONST. art. XI, § 9 

(“Section 9”). It is well-settled law in Oregon that a 

municipal corporation’s sale of revenue bonds does not 

violate Section 9’s prohibition against raising money for or 

lending credit to a private enterprise. See, e.g., Miles v. City 

of Eugene, 451 P.2d 59, 62 (Or. 1969) (“Money coming from 

revenue bonds and not from tax money does not fall within 

the prohibition.”). But what about non-revenue bond 

programs? Can an Oregon municipal corporation 

adequately protect tax revenue as Section 9 requires by 

employing accounting and financial management methods? 

Or are the structural protections of revenue bonds necessary 

to avoid running afoul of Section 9?

In this case, the Port of Portland (“Port”), an Oregon 

municipal corporation, developed, funded, and implemented 

four programs (collectively the “Programs”) to mitigate 

financial losses at the Port’s Terminal 6. The Port funded 

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4 ILWU V. PORT OF PORTLAND

the Programs out of a bank account that contained tax and 

non-tax revenue. The Port has demonstrated that, as a 

factual matter, its accounting and financial management 

systems adequately tracked, managed, and segregated the 

tax and non-tax revenues. But this court has been unable to 

find, and the parties have not identified, any Oregon case law 

that discusses whether such accounting methods may allow 

the Programs to survive Section 9 scrutiny. The financial 

management systems and contractual arrangements 

employed by the Port to fund the Programs are qualitatively 

different than the systems and arrangements used by 

municipal corporations to fund programs through the sale of 

revenue bonds. We are hesitant to expand Oregon law in a 

manner that may be contrary to Oregon’s wishes1 and in an 

important subject matter in Oregon’s history.2

 1 This case comes to us after the district court dismissed the single 

federal claim and maintained supplemental jurisdiction over the 

remaining state law claim. Once the district court dismissed the federal 

claim, the court could have declined to exercise supplemental 

jurisdiction over the remaining Section 9 state law claim. Sanford v. 

MemberWorks, Inc., 625 F.3d 550, 561 (9th Cir. 2010) (“A district court 

‘may decline to exercise supplemental jurisdiction’ if it ‘has dismissed 

all claims over which it has original jurisdiction.’” (quoting 28 U.S.C. 

§ 1367(c)(3))). This court has advised that when all federal law claims 

are eliminated before trial, the district court is “duty-bound to take 

seriously” the responsibility to decline or retain jurisdiction over any 

remaining state law claims. Acri v. Varian Assocs., Inc., 114 F.3d 999,

1001 (9th Cir. 1997) (en banc). However, the district court is not 

required to sua sponte analyze whether it should decline to exercise 

supplemental jurisdiction, id., and there is no evidence that either party 

raised the issue.

2 Constitutional provisions like Section 9 were added to state 

constitutions after local government efforts to attract private enterprise, 

mostly railroad companies, by providing tax benefits and subsidies to 

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ILWU V. PORT OF PORTLAND 5

For these reasons, pursuant to Oregon’s Uniform 

Certification of Questions of Law Act, OR. REV. STAT.

§§ 28.200–.255, we respectfully certify to the Oregon 

Supreme Court the question of law set forth in Part III of this 

order. The answer to this question of law may be 

determinative of the case pending before this court and there 

is no clearly controlling precedent in the decisions of the 

Oregon Supreme Court or Oregon Court of Appeals.

I. Background

This case arises from a labor dispute between plaintiffappellant International Longshore and Warehouse Union 

(“ILWU”) and defendant-appellee the Port over whether 

ILWU or another labor organization should have been 

assigned work related to refrigerated shipping containers at 

Terminal 6 of the Port. The dispute caused financial losses 

to the Port and to ICTSI Oregon, Inc. (“ICTSI”), which 

manages and operates Terminal 6 pursuant to a lease 

agreement with the Port. Concerned with the economic 

impact of the work slowdown, the Port approved, funded, 

and implemented four incentive and subsidy programs to 

keep Terminal 6 operating at financially sustainable levels.

Under the 2012 Carrier Program, the Port offered to 

make fixed “Program Payments” to certain carriers if they 

made a call at Terminal 6 during a four-week period. The 

Port made three payments under the 2012 Carrier Program 

totaling $175,000. The 2012 Carrier Program did not 

contain any agreement between the Port and the carriers that 

participated in the Program regarding whether or not tax 

revenue would be used to fund the Program or whether the 

 them went awry and required general taxpayers to cover the defaulted 

loans. See Carruthers v. Port of Astoria, 438 P.2d 725, 727 (Or. 1968).

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6 ILWU V. PORT OF PORTLAND

carriers could make claims against the Port’s tax revenue to 

satisfy the Port’s obligations under the Program.

The Port adopted the 2012 Rent Program on August 8, 

2012. Under the 2012 Rent Program, the Port agreed to 

reimburse ICTSI fifty percent of certain costs related to the 

labor dispute incurred by ICTSI between June 1, 2012, and 

the earliest of several possible dates or events. The amount 

was capped at $4,664,356, which was the amount of rent 

otherwise due from ICTSI. The Port and ICTSI entered into 

a supplemental agreement on October 26, 2012, under which 

ICTSI agreed that the Port had not pledged tax revenue to 

finance the 2012 Rent Program and ICTSI waived any right 

to make claims against the Port’s tax revenue to satisfy the 

Port’s obligations under the Program. The Port paid 

$2,688,672 to ICTSI under the 2012 Rent Program.

The labor dispute continued through 2012 and into 2013, 

so the Port adopted two new programs: the 2013 Carrier 

Program and the 2013 Rent Program. The 2013 Carrier 

Program was authorized by the Port Commissioners on 

January 9, 2013. The 2013 Carrier Program authorized $10 

per-container incentive payments to carriers who called on 

Terminal 6. The Program was capped at $1,000,000 and 

terminated at the end of 2013. The payments were to be 

made with non-tax revenues, specifically the rent received 

from ICTSI between 2012 and 2013. Each carrier 

participant was required to acknowledge that no tax revenue 

was used to fund the 2013 Carrier Program and to waive any 

right to make a claim against the Port’s tax revenue to satisfy 

any of the Port’s obligations under the Program. The 2013 

Carrier Program payments totaled $631,620.

Finally, the Port adopted the 2013 Rent Program on 

February 13, 2013, under which the Port agreed to make rent 

rebate payments to ICTSI in the amount of $308,333 per 

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ILWU V. PORT OF PORTLAND 7

month during 2013. The agreement stated that the sole 

source of funding for the 2013 Rent Program would be the 

annual rent payments paid to the Port by ICTSI. ICTSI 

disclaimed any right to the Port’s tax revenues to satisfy the 

Port’s rebate obligations. The 2013 Rent Program was 

capped at $3,700,000.

ILWU’s initial federal complaint alleged violations of 

42 U.S.C. § 1983 and Section 9. The district court dismissed 

the federal claim with prejudice, and proceeded on to the 

cross-motions for summary judgment with respect to the 

Section 9 claim. The district court granted summary 

judgment in favor of the Port, and ILWU filed a timely 

notice of appeal. We have jurisdiction pursuant to 28 U.S.C. 

§ 1291 and review the district court’s ruling on crossmotions for summary judgment de novo. Guatay Christian 

Fellowship v. Cnty. of San Diego, 670 F.3d 957, 970 (9th 

Cir. 2011).

II. Discussion

The most relevant case here is Carruthers v. Port of 

Astoria, 438 P.2d 725 (Or. 1968). Carruthers involved a 

Section 9 challenge to the Port of Astoria’s sale of municipal 

revenue bonds to finance the construction of facilities that 

would be used to reduce aluminum ore to aluminum. 

Carruthers, 438 P.2d at 726. The facilities were to be used 

by a private entity, the Northwest Aluminum Company, Inc. 

(“Northwest Aluminum”). Id. The Oregon Supreme Court 

ultimately ruled that the sale of revenue bonds by the Port of 

Astoria did not violate Section 9, concluding that “[t]here 

seems no way, under this proposal, . . . by which the 

taxpayers or other property of the Port may be held generally 

accountable in taxes or otherwise in the event of default.” 

Id. at 729. The court reached this conclusion for several 

reasons. First, the sale of bonds by an Oregon port to 

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8 ILWU V. PORT OF PORTLAND

construct a plant “suitable for use by any industry” was 

specifically authorized by then-applicable Oregon statutes. 

Id. at 726 (quoting OR. REV. STAT. § 777.130). The thenapplicable statute stated that bonds sold under this provision 

“shall not in any manner or to any extent be a general 

obligation of the port issuing the bonds nor a charge upon 

the tax revenues of such port, nor a charge upon any other 

revenues or property not specifically pledged thereto.” Id.

(quoting OR. REV. STAT. § 777.560). The statutory bar was 

expressly included in Northwest Aluminum’s agreement. 

Id. at 729. Additionally, Northwest Aluminum’s agreement 

stated that its obligation to pay rent was “unconditional until 

the bonds are paid in full or adequate provision has been 

made for such payment.” Id. The bonds were to be paid 

solely from the money derived from Northwest Aluminum’s 

lease of the project. Id. The agreement also created a special 

fund to receive rental and other payments by Northwest 

Aluminum and from which the Port of Astoria would pay the 

interest and principal on the bonds. Id. Lastly, Northwest 

Aluminum was required to insure the project against loss. 

Id.

The Carruthers court considered the argument that there 

may be some way to recover from the taxpayers in the event 

of a default by the Port of Astoria. Id. at 729–30. 

Specifically, Oregon law at the time permitted a creditor to 

recover against a municipal corporation if the municipal 

corporation’s officers acted negligently or the city breached 

the contract. Id. (citing Public Market Co. of Portland v. 

City of Portland, 138 P.2d 916 (Or. 1943) and Morris v. City 

of Sheridan, 167 P. 593 (Or. 1917)). But the court dismissed 

this possibility, finding that prospective bond purchasers 

would be on notice when they purchased the bonds that their 

only recourse in the event of default was against Northwest 

Aluminum. Id. at 730.

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ILWU V. PORT OF PORTLAND 9

In another important Section 9 case, the City of Eugene 

was permitted to raise funds through revenue bonds to 

jointly acquire and operate a nuclear power plant with a 

private utility. Miles v. City of Eugene, 451 P.2d 59, 64 (Or. 

1969). Just as in Carruthers, the Oregon legislature had 

authorized by statute municipal corporations to sell revenue 

bonds to raise money to fund joint power facilities. Id. at 60 

(citing OR. REV. STAT. § 225.450 et seq.). And, as in any 

sale of revenue bonds, the city’s general tax obligations were 

not exposed. Id. at 61.

Carruthers and Miles contrast with Hunter v. City of 

Roseburg, 156 P. 267 (Or. 1916). In Hunter, the Oregon 

Supreme Court invalidated the City of Roseburg’s attempts 

to issue bonds to fund the construction of a railroad that 

would be used by private railroad and lumber companies. Id. 

at 272. The city had proposed an annual tax to pay the 

interest on the bonds and a further levy to pay for the bonds 

at maturity. Id. at 268, 271. Though the court recognized 

that the project aimed to accelerate the general business of 

the community, the court concluded that the agreement was 

“inimical to article 11, [Section 9]” because it expended 

general tax revenues in support of private enterprise. Id. at 

272.

Thus, it appears to be well-settled law in Oregon that a 

municipal corporation’s sale of revenue bonds does not 

violate Section 9’s prohibition on raising money for or 

lending credit to a private enterprise, whereas a municipal 

corporation’s sale of general obligation bonds may violate 

Section 9. See Miles, 451 P.2d at 64 (concluding that Section 

9 does not prohibit a city from using funds derived from 

selling revenue bonds and distinguishing Miles and 

Carruthers from Hunter because the city in Hunter “was 

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10 ILWU V. PORT OF PORTLAND

proposing to finance the construction of a railroad with 

general obligation bonds payable from general tax levies”).

The programs in Miles and Carruthers survived Section 

9 challenges in part because the funding was derived from 

revenue bonds, which do not expose tax revenues, and 

because the programs were authorized by statute. Here, the 

Port did not sell revenue bonds to fund the Programs, and the 

Programs were not specifically authorized by statute. 

Additionally, in Carruthers, there were provisions in the 

statute and in the agreement with Northwest Aluminum that 

made clear that the bonds sold would not extend to a general 

obligation, thereby potentially exposing the Port of Astoria’s 

tax revenue. Carruthers, 438 P.2d. at 726, 729. There is no 

evidence that the 2012 Carrier Program contained a similar 

waiver, and the 2012 Rent Program added one in a 

supplemental agreement with ICTSI approximately two 

months after the 2012 Rent Program was authorized. The 

2013 Programs contained such waivers. At oral argument, 

counsel for the Port argued that the Port imposed these 

additional requirements on the later programs in an 

abundance of caution. But the distinctions between the 

programs in Miles and Carruthers and the Programs in this 

case may be significant enough for a court to conclude that 

the Port failed to implement adequate tax revenue 

protections in some or all of the Programs.

On the other hand, the Port employed various accounting 

and budgetary measures to segregate tax revenue from nontax revenue. Such accounting measures were not considered 

in Carruthers or Miles, and as far as we can tell, have never 

been considered in Oregon case law. Neither Carruthers nor 

Miles specify exactly what procedures are necessary to 

adequately protect tax revenues. It would not be 

unreasonable for a court to conclude that the financial and 

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ILWU V. PORT OF PORTLAND 11

accounting mechanisms in place—in combination with the 

tax revenue disclosures and waivers in place for the 2013 

Programs and for part of the 2012 Rent Program3—are 

enough to survive Section 9 scrutiny. But given that the 

structure of the Programs is categorically different than the 

structure of the revenue bond programs that have been the 

focus of previous Section 9 rulings by the Oregon courts, we 

conclude it is best to ask the Oregon courts to resolve 

whether the Port’s Programs adequately protected tax 

revenue as required by Section 9.

III. Question Certified to the Oregon Supreme 

Court

For the reasons stated above, we respectfully certify the 

following question to the Oregon Supreme Court:

Does a municipal corporation that holds its 

tax and non-tax revenues in the same bank 

account but that segregates the revenues 

through financial management and 

accounting techniques violate article XI, 

section 9, of the Oregon Constitution when 

the municipal corporation uses its funds to 

finance programs that benefit private 

enterprise if the programs contain neither, 

one, or both of the following two contractual 

provisions: (1) the municipal corporation 

certifies that it will not use tax revenue to 

fund the programs; (2) the program 

beneficiaries waive any right to make a claim 

against the municipal corporation’s tax 

 3 Again, we note that there was no disclosure and waiver in the 2012 

Carrier Program and for the first two months of the 2012 Rent Program.

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12 ILWU V. PORT OF PORTLAND

revenue to satisfy the municipal 

corporation’s program obligations?

We respectfully ask the Oregon Supreme Court to 

exercise its discretionary authority to accept and decide this 

question. Our phrasing of the question should not restrict the 

Oregon Supreme Court’s consideration of the issues 

involved, and “we recognize that [the Oregon Supreme 

Court] may reformulate the question.” Queen Anne Park 

Homeowners Ass’n v. State Farm Fire & Cas. Co., 763 F.3d 

1232, 1235 (9th Cir. 2014). If the Oregon Supreme Court 

declines certification, we will resolve the question according 

to our best understanding of Oregon law.

Further proceedings in this court are stayed pending 

receipt of the answer to the certified question. The clerk of 

this court shall forward a copy of this order, under official 

seal, to the Oregon Supreme Court, along with copies of all 

briefs and excerpts of record that have been filed with this 

court. The parties shall notify the clerk of this court within 

one week of any decision by the Oregon Supreme Court to 

accept or decline certification. If the Oregon Supreme Court 

accepts certification, the parties shall then notify the clerk of 

this court within one week of the issuance of that court’s 

opinion.

IT IS SO ORDERED

______________________________

Mary H. Murgia

United States Circuit Judge, Presiding

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