JMCB, LLC v. Bd. of Commerce
336 F. Supp. 3d 620
M.D. La.2018Background
- JMCB, LLC (plaintiff) sued the Louisiana Board of Commerce & Industry, the Louisiana Department of Economic Development (State Defendants), and Sabine Pass Liquefaction, LLC (SPL) seeking to nullify an Industrial Ad Valorem Tax Exemption Contract that granted SPL an ad valorem (property tax) exemption for an LNG facility.
- Plaintiff alleges SPL applied as an "addition to an existing manufacturing establishment" though no existing manufacturing plant was at the project site when the Board considered the application, and that SPL’s process (freezing natural gas) does not meet the constitutional definition of "manufacturing establishment."
- LDED initially questioned whether SPL’s described process qualified as "manufacturing" and requested more detail; SPL (via consultant materials) submitted process descriptions and technical webpage materials describing gas treatment and multi-stage refrigeration to produce LNG.
- The Board approved a front-end contract in 2011 for an estimated $6 billion investment; project completion reports later updated investment/tax-benefit figures and portions of the facility became operational by 2016.
- SPL moved to dismiss the Amended Complaint under Rule 12(b)(6); Plaintiff opposed on procedural estoppel grounds and otherwise, and requested leave to amend if dismissal were granted. The Court granted SPL’s motion, dismissed without prejudice, but allowed leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does SPL's facility qualify as a "manufacturing establishment" under La. Const. art. VII, §21(F)? | SPL's process is merely freezing natural gas and thus does not "work raw materials into wares suitable for use." | SPL (and exhibits) show treatment and multi-stage refrigeration producing LNG — a usable product — meeting the constitutional definition. | Court: SPL's submitted materials demonstrate the facility qualifies as a manufacturing establishment; plaintiff's contrary conclusory allegations fail. |
| Did the Board act arbitrarily or capriciously in approving the exemption? | Board ignored inadequacy of SPL's application and improperly granted exemption. | Board asked for more detail, considered additional materials; its decision is entitled to deference and was not arbitrary. | Court: Plaintiff failed to plead or show arbitrary/capricious conduct; State's discretion was not abused. |
| Does it matter that SPL applied as an "addition" when the project was a "new" facility? | Mislabeling renders the Contract void because application mischaracterized project. | Article VII, §21(F) authorizes exemptions for both new establishments and additions; mischaracterization in application does not invalidate the Contract. | Court: Distinction is legally immaterial here; no statute/regulation nullifies the Contract for this reason. |
| Procedural: Can SPL (an "indispensable" party) move to dismiss the entire complaint while State Defendants previously suggested plaintiff had a cause of action? | Plaintiff: State Defendants acknowledged plaintiff stated a claim; SPL, as indispensable party, cannot seek dismissal of the whole complaint and should be estopped. | SPL: State never conceded the sufficiency of allegations; any defendant may move to dismiss and a successful defense inures to similarly situated co-defendants. | Court: Rejected plaintiff's estoppel/procedural objection; SPL may move to dismiss and its successful arguments apply to all defendants. |
Key Cases Cited
- Lormand v. U.S. Unwired, Inc., 565 F.3d 228 (5th Cir. 2009) (pleading standard: factual matter must raise reasonable expectation discovery will reveal elements of claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (court need not accept conclusory allegations)
- Robinson v. Ieyoub, 727 So.2d 579 (La. Ct. App. 1998) (interpreting constitutional definition of "manufacturing establishment")
- State ex rel. Kohler's Snowite Laundry & Cleaners v. State Bd. of Commerce & Indus., 17 So.2d 899 (La. 1944) (state board discretion in tax-exemption contracts and review limited to arbitrary/capricious standard)
- Bunge N. Am., Inc. v. Bd. of Commerce & Indus. & La. Dep't of Econ. Dev., 991 So.2d 511 (La. Ct. App. 2008) (taxpayer challenge to Board action and standing discussion)
- Lewis v. Lynn, 236 F.3d 766 (5th Cir. 2001) (Rule 12(b)(6) defense inuring to benefit of similarly situated co-defendants)