Opinion ID: 3033600
Heading Depth: 4
Heading Rank: 3

Heading: Limiting Plaintiffs’ State Taxpayer Claims

Text: Plaintiffs contend that the district court erred when it denied Plaintiffs’ right to “seek invalidation of . . . OHA in toto.” Arakaki IV, 299 F. Supp. 2d at 1122. Although the parties have stipulated that the legislature has appropriated monies from the General Fund to OHA, the district court held that “to the extent . . . OHA programs rely on funds other than tax money, Plaintiffs do not have state taxpayer standing to challenge those programs,” id. at 1123-24, including home land lease revenues, payments of settlements, and bond revenues. Arakaki II, 299 F. Supp. 2d at 1100-01. The issue Plaintiffs raise is this: Does a taxpayer have standing to challenge government spending if the funds actually challenged did not accrue as a result of taxes? While we think that to state the question is nearly to answer it, the parties have not located any case directly on point. The answer, 11880 ARAKAKI v. LINGLE nevertheless, is implicit in the Supreme Court’s limited recognition of taxpayer standing. As we have discussed, in order to satisfy the case or controversy provision of Article III, a federal plaintiff must demonstrate an injury in fact, a causal relationship between the injury and the conduct complained of, and that the injury can be redressed. Lujan, 504 U.S. at 560. The whole theory of taxpayer standing is that if the suit is successful, the court will enjoin the spending which will relieve the plaintiff’s tax burden. The Court has hesitated to recognize federal taxpayer standing because any effect on federal spending may only remotely affect the parties’ tax bill. As the Court wrote in Frothingham v. Mellon, a federal taxpayer’s “interest in the moneys of the Treasury . . . is shared with millions of others . . . and the effect upon future taxation, of any payment out of the funds, is so remote, fluctuating and uncertain, that no basis is afforded for [judicial review].” 262 U.S. at 487. If the “remote[ness]” and “uncertain[ty]” of the remedy was so great that the taxpayers did not have Article III standing, it only stands to reason that the taxpayer would lack standing if the “effect upon future taxation” was nil because taxes were not involved at all. See Flast v. Cohen, 392 U.S. 83, 92 (1968) (“the petitioner in Frothingham was denied standing not because she was a taxpayer but because her tax bill was not large enough:”); LAURENCE H. TRIBE, AMERICAN CONSTITUTIONAL LAW 421 (3d ed. 2000) (“[A]n individual may have a sufficient interest, in his or her capacity as a taxpayer, to challenge spending programs of the taxing government, on the theory—or, more candidly, the fiction—that a successful suit against such a program can result in some decrease in the litigant’s taxes.”). [11] In Flast, 392 U.S. at 102, the Court emphasized that “a taxpayer will be a proper party to allege the unconstitutionality only of exercises of congressional power under the taxing and spending clause of Art. I, § 8, of the Constitution. It will not be sufficient to allege an incidental expenditure of tax ARAKAKI v. LINGLE 11881 funds in the administration of an essentially regulatory statute.” Id. at 102. A taxpayer must demonstrate “a measurable appropriation or disbursement of . . . funds occasioned solely by the activities complained of.” Doremus, 342 U.S. at 434. In a series of cases, the Court rejected taxpayer standing in circumstances in which no tax expenditures were involved, even though the challenged program, if found unconstitutional, might have saved the public fisc. In Valley Forge College, for example, the plaintiffs complained of a transfer of surplus government property to a religiously affiliated college. The Court held that the plaintiffs lacked standing as federal taxpayers: “the property transfer about which [plaintiffs] complain was not an exercise of authority conferred by the Taxing and Spending Clause . . . [but] an evident exercise of Congress’ power under the Property Clause . . . . Respondents do not dispute this conclusion, and it is decisive of any claim of taxpayer standing.” 454 U.S. at 480 (citations omitted). See also Schlesinger, 418 U.S. at 228; United States v. Richardson, 418 U.S. 166, 174-75 (1974). [12] Our cases follow this principle consistently. In Doe, we held that taxpayers lacked standing to challenge the practice of sponsoring prayers at high school graduation because “Doe identifie[d] no tax dollars that defendants spent solely on the graduation prayer, which is the only activity that she challenges.” 177 F.3d at 794. The fact that the school district expended funds for graduation generally was irrelevant to the standing inquiry. Similarly, in Cammack, we held that Hawaii taxpayers had standing to challenge a Hawaii statute making Good Friday a state holiday. We specifically found that the complaint sufficiently alleged that “state and municipal tax revenues fund the paid holiday for government employees” and that the “actual expenditure of tax dollars” stated “the necessary injury.” 932 F.2d at 771, 772; see also Cantrell v. City of Long Beach, 241 F.3d 674, 683 (9th Cir. 2001) (“To establish standing in a state or municipal taxpayer suit under Article III, a plaintiff must allege a direct injury caused by the expenditure of tax dollars.”). 11882 ARAKAKI v. LINGLE If we permitted Plaintiffs to challenge OHA’s programs across the board, irrespective of the origin of the funding, it would greatly expand the effect of their taxpayer standing to programs that they would not otherwise have standing to challenge. Given the care with which the Supreme Court has looked at taxpayer injury and redressability, we cannot go so far. See, e.g., Allen, 468 U.S. at 751-53; see also Lujan, 504 U.S. at 560. Plaintiffs object to the district court’s disallowing its standing to challenge three sources of OHA funding: (1) funds received from the Hawaiian home lands trust, (2) funds received through a settlement of prior claims, and (3) bonds issued to secure the settlement. By law twenty percent of “all funds derived from the public land trust” are dedicated to the use of OHA. HAW. REV. STAT. § 10-13.5. The funds OHA receives from the trust, which are apparently largely rents, are first paid into Hawaii’s General Fund and then paid to OHA. See Arakaki II, 299 F. Supp. 2d at 1100. The district court found that this was simply an “administrative ‘pass-through’ ” and concluded that because these are dedicated funds, the fact that the funds pass through the General Fund is irrelevant. We agree with the district court that Plaintiffs, as taxpayers, may not challenge the expenditure of such non-tax revenues. Plaintiffs’ challenge to funds paid in settlement is more complicated. In 1993, the legislature appropriated more than $135 million to OHA’s trust fund to settle past claims. The district court questioned whether, as taxpayers, Plaintiffs could challenge the settlement since it would “nullify[ ] a settlement reached years earlier” and “would be tantamount to having the court review the wisdom, at any time, of every legislative decision, regardless of when made, to settle a case rather than to litigate it.” Id. at 1100 & n.10. The district court’s concerns are well-stated, but we do not need to go so far as to hold that taxpayers may never challenge a legislature-ordained settlement. ARAKAKI v. LINGLE 11883 The provenance of the settlement at issue here is quite unusual. As we have pointed out, when Hawaii created the OHA, it allocated to OHA twenty percent of “all funds derived” from the public land trust. HAW. REV. STAT. § 1013.5. The statute, however, did not define the term “funds,” and it was not clear what OHA was entitled to receive. In 1983, OHA’s trustees filed suit against various state officials, claiming that OHA had not received its twenty percent share of “funds,” specifically settlements concerning lands in the public trust. On appeal, the Hawaii Supreme Court ruled that the term “funds” was so ambiguous that the court could not resolve the intra-government dispute, and it declined judgment because of the state’s political question doctrine. Trustees of Office of Hawaiian Affairs v. Yamasaki, 174-75, 737 P. 2d 446, 458 (Haw. 1987). In response, the Hawaii Legislature amended Section 10-13.5, substituting the word “revenue” for “funds.” Act 304, § 7, HAW. SESS. LAWS 947, 951 (1990). In 1993, the legislature appropriated $136.5 million to OHA in settlement of OHA’s claims from 1980 through 1991. Id. § 8, HAW. SESS. LAWS at 951; Act 35, § 3, HAW. SESS. LAWS 41 (1993).4 Whatever the revenue origins of the $136.5 million allocated in 1993, the legislature paid these funds as compensation for revenues that OHA did not receive between 198091 that were generated by the public land trust. Since the original revenues were not tax-based, Plaintiffs lack standing to challenge these expenditures. [13] For similar reasons, Plaintiffs cannot challenge the bonds issued by the state to fund these settlements. Whether some tax monies are used to service or repay the bonds, the bonds fund a settlement of land revenues owed to OHA. We affirm the district court’s ruling that Plaintiffs may not chal- 4 In Office of Hawaiian Affairs v. State, 31 P.3d 901 (Haw. 2001), the Hawaii Supreme Court ruled that the 1990 amendments to Section 10-13.5 conflicted with federal law. Under Hawaii law, Section 10-13.5 was reverted to its pre-amendment language. Thus, the current version of Section 10-13.5 again reads “funds.” 11884 ARAKAKI v. LINGLE lenge these funds paid in settlement and financed through general bonds.