CITY OF RIVERSIDE v. STATE OF OHIO
Appellate Case No. 26024
IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT MONTGOMERY COUNTY
May 9, 2014
[Cite as Riverside v. State, 2014-Ohio-1974.]
WELBAUM, J.
Trial Court Case No. 2013-CV-4691; (Civil Appeal from Common Pleas Court)
RICHARD N. COGLIANESE, Atty. Reg. No. 0066830, ZACHERY KELLER, Atty. Reg. No. 0086930, Assistant Attorneys General, 30 East Broad Street, 16th Floor, Columbus, Ohio 43215 Attorneys for Defendant-Appellee
WELBAUM, J.
{¶ 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.
I. Facts and Course of Proceedings
{¶ 3} In August 2013, Riverside filed a complaint for declaratory judgment against the State of Ohio, alleging that
{¶ 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 civilian
{¶ 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
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.
{¶ 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
{¶ 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
{¶ 13} In September 2013, the State filed a motion to dismiss pursuant to
{¶ 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 the
II. Did the Trial Court Err in Dismissing the 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
{¶ 18} In contrast, the court noted in Bush that:
A
Civ.R. 12(B)(6) motion to dismiss for failure to state a claim upon which relief can be granted will only be granted where the party opposing the motion is unable to prove any set of facts that would entitle him to relief. Korodi v. Minot (1987), 40 Ohio App.3d 1, 3, 531 N.E.2d 318, 321. Indeed, before a court may dismiss an action under this rule, ” * * * it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery.” O‘Brien v. University Community Tenants Union (1975), 42 Ohio St.2d 242, 71 O.O.2d 223, 327 N.E.2d 753, syllabus. To make this determination, the court is required to interpret all material allegations in the complaint as true and admitted. Phung v. Waste Management, Inc. (1986), 23 Ohio St.3d 100, 102, 23 OBR 260, 262, 491 N.E.2d 1114, 1116. Bush, 42 Ohio St.3d at 80.
{¶ 19} Because the trial court used only the
{¶ 20} The Supreme Court of Ohio noted that political subdivisions generally lack standing to assert the rights of third parties. Id. Nonetheless, the court elected to follow federal decisions, which recognize an exception to the general rule “when a claimant (i) suffers its own injury in fact, (ii) possesses a sufficiently ’ “close” relationship with the person who possesses the right,’ and (iii) shows some ‘hindrance’ that stands in the way of the claimant seeking relief.” E. Liverpool at ¶ 22, quoting Kowalski v. Tesmer, 543 U.S. 125, 129-130, 125 S.Ct. 564, 160 L.Ed.2d 519 (2004).
{¶ 21} Concerning the first factor, the Supreme Court of Ohio observed that:
* * * East Liverpool suffers a direct injury to its own treasury. Indeed, the equal protection interest of East Liverpool‘s citizens concerns their interest in the city‘s treasury: if East Liverpool is deprived of its voice in determining the nature of the alternative method of apportionment, the city may have less money to furnish services to its citizens. The injury claimed by East Liverpool is intertwined with the injury claimed by its citizens. Id. at ¶ 23.
{¶ 23} Finally, regarding the “hindrance factor,” the Supreme Court of Ohio noted that:
Third, efforts by East Liverpool‘s citizens to assert their own claims have been hindered. Certain individual citizen/taxpayers of East Liverpool already tried to assert an equal protection claim, only to have it denied for lack of standing. Satow v. Columbiana Cty. Budget Comm., Columbiana App. No. 04-CO-13, 2005-Ohio-5312, 2005 WL 2450165, ¶ 8, 20-22. Specifically, the Seventh District Court of Appeals in Satow concluded that individual citizens of East Liverpool “merely allege injuries that harm the public generally and have failed to adduce personal injuries caused by the statute.” Id. at ¶ 21. Therefore, we believe that East Liverpool is the appropriate claimant under these circumstances to assert the equal protection claim on behalf of its citizens. See Craig v. Boren (1976), 429 U.S. 190, 197, 97 S.Ct. 451, 50 L.Ed.2d 397. See, also, Cincinnati City School Dist. v. State Bd. of Edn. (1996), 113 Ohio App.3d 305, 314, 680 N.E.2d 1061 (permitting school district to challenge territory transfer based on equal protection rights of students); Washington v. Seattle School Dist. No. 1 (1982), 458 U.S. 457, 102 S.Ct. 3187, 73 L.Ed.2d 896 (school district successfully challenged state ballot initiative as violating equal protection rights of students). E. Liverpool at ¶ 25.
* * * Riverside‘s broad assertions that the individuals who possess the relevant rights face hindrances, including the expenses of litigation and lack of a direct financial stake in the outcome, are insufficient to show a hindrance that stands in the way of those individuals seeking relief. Decision, Order and Entry Sustaining Defendant State of Ohio‘s Motion to Dismiss; Entry of Dismissal, Doc. #19, p. 12.
{¶ 25} We disagree with the trial court. We see no difference between the status of the citizens in E. Liverpool and the status of the citizens of Riverside. In both situations, the interest of the citizens in the treasury of the city is the same. There is also no indication that the citizens of Riverside would be any more successful in bringing suit on their own behalf than the citizens of East Liverpool were. The allegations in the complaint do not indicate that these citizens suffered any type of personal injury or that the injuries are anything other than the harm generally suffered by the public.
{¶ 26} Admittedly, the Riverside citizens did not file a complaint and have it dismissed for lack of standing. However, we do not read E. Liverpool to require such a futile gesture before a city can file suit on behalf of its citizens. The Supreme Court of Ohio did not state this type of waste of judicial resources and money would be required.
{¶ 28} We have emphasized that “Ohio is a notice pleading, not a fact pleading, state.” (Citation omitted.) Springfield v. Palco Invest. Co., Inc., 2013-Ohio-2348, 992 N.E.2d 1194, ¶ 33 (2d Dist.) We have also stressed that plaintiffs do not have to prove their cases at the pleading stage. Id. Accepting the allegations in the complaint as true, as is required for purposes of
{¶ 29} The State contends, however, that even if Riverside had standing, the dismissal should be affirmed on other grounds. First, the State argues that the tax exemption does not affect the equal protection rights of Riverside residents as a whole, because it does not treat Riverside residents themselves differently with respect to Riverside‘s municipal income tax. However, that is not the focus of the complaint. As Riverside points out, Riverside residents who work in other municipalities are required to pay tax to those municipalities, while employees and contractors who work in Riverside at WPAFB do not have to pay tax to Riverside. Furthermore, persons who work within Riverside‘s boundaries on premises other than WPAFB are subject to municipal tax, while employees and contractors who work in Riverside at WPAFB
{¶ 30} Additionally, the State argues that Riverside failed to plead a proper theory for declaratory or injunctive relief. In this regard, the State contends that the Declaratory Judgment Act does not create substantive rights, and that Riverside must identify the source of its “substantive” right to sue. Although Riverside has already indicated that its claims are being brought pursuant to the Equal Protection Clauses of the United States and Ohio State constitutions, the State argues that this is not enough.
{¶ 31} The State first notes that the Fourteenth Amendment of the United States Constitution does not allow a private right of action. Second, the State argues that the means of enforcing the Fourteenth Amendment is a claim brought under
{¶ 32} As was noted, Riverside‘s complaint requested a declaratory judgment and injunctive relief. The Declaratory Judgment Act is codified in Chapter 2721 of the Ohio
* * * [A]ny person interested under a deed, will, written contract, or other writing constituting a contract or any person whose rights, status, or other legal relations are affected by a constitutional provision, statute, rule as defined in section 119.01 of the Revised Code, municipal ordinance, township resolution, contract, or franchise may have determined any question of construction or validity arising under the instrument, constitutional provision, statute, rule, ordinance, resolution, contract, or franchise and obtain a declaration of rights, status, or other legal relations under it.
{¶ 33} Municipal corporations are specifically included as “persons” for purposes of the Declaratory Judgment Act.
{¶ 34} Constitutional challenges, including equal protection claims, have been brought in numerous other cases. See, e.g., Couchot v. Ohio State Lottery Comm., 71 Ohio App.3d 371, 373, 594 N.E.2d 42 (10th Dist.1991) (holding that the common pleas court has jurisdiction over a case requesting declaratory and injunctive relief, based on claims that a statute, as amended, which required payment of Ohio taxes by non-residents on lottery proceeds was an unconstitutional impairment of contract, violated prohibitions against retroactive laws, and denied the non-resident due process); Andreyko v. Cincinnati, 153 Ohio App.3d 108, 2003-Ohio-2759, 791 N.E.2d 1025, ¶ 1 and 18 (1st Dist.) (holding that the plaintiff had proved that “creation of two classes of nonuniformed employees seeking prior service credit - one purchasing credits at a subsidized cost and the other bearing the full cost - violated his constitutional right to the equal protection of the laws.“); and Tobacco Use Prevention & Control Found. Bd. of Trustees v. Boyce, 185 Ohio App.3d 707, 2009-Ohio-6993, 925 N.E.2d 641, ¶ 1-13 (10th Dist.), aff‘d., 127 Ohio St.3d 511, 2010-Ohio-6207, 941 N.E.2d 745 (a declaratory judgment action that alleged the unconstitutionality on various grounds of 2008 H.B. No. 544. This statute, among other things, liquidated a tobacco endowment fund and distributed the proceeds into the Ohio State treasury.)
{¶ 35} In Moore, the Supreme Court of Ohio stressed that “judges are cautioned to remember, standing is not a technical rule intended to keep aggrieved parties out of court. ‘Rather, it is a practical concept designed to insure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented.’ ” Id. at ¶ 47, quoting Fort Trumbull Conservancy, L.L.C. v. Alves, 262 Conn. 480, 486, 815 A.2d 1188 (2003) (Other citation omitted.) The court also made the following comments in Moore, which are relevant to our case:
The court of appeals in this case asserted that
R.C. 2721.03 merely represents a legislative grant of jurisdiction to Ohio courts to hear declaratory-judgment actions and that the statute does not answer the separate question of whether the plaintiff has standing to sue. Although it is true thatR.C. Chapter 2721 is the legislative source of a cause of action for declaratory relief, we do not necessarily agree that the statute does not confer standing. Indeed, standing can be created by legislation. Middletown v. Ferguson, 25 Ohio St.3d 71, 75, 495 N.E.2d 380 (1986). But aside from whether the statute itself confers standing, our cases make clear that we are generous in considering whether a party has standing. (Footnote omitted.) Moore at ¶ 48.
{¶ 36} Thus, contrary to the State‘s claims, a declaratory judgment action is not merely a procedural grant of jurisdiction to state courts, but can confer standing as well. In Moore, the Supreme Court of Ohio went on to observe that:
Our precedent also makes clear that declaratory relief is available to a plaintiff who can show that (1) a real controversy exists between the parties, (2) the controversy is justiciable, and (3) speedy relief is necessary to preserve the rights of the parties. Haig v. Ohio State Bd. of Edn., 62 Ohio St.3d 507, 511, 584 N.E.2d 704 (1992); Burger Brewing Co. v. Ohio Liquor Control Comm., 34 Ohio St.2d 93, 97, 296 N.E.2d 261 (1973). Courts have the duty to ensure that plaintiffs plead these elements for purposes of declaratory-judgment actions and that the complaint sufficiently avers injury, causation, and redressability. Thus, our generosity is tempered by an insistence on sufficiency in the pleadings. If a
party fails to establish any of the necessary showings to bring the claims, the judge must dismiss the cause. Moore, 133 Ohio St.3d 55, 2012-Ohio-3897, 975 N.E.2d 977, at ¶ 49.
{¶ 37} After reviewing the allegations in the complaint, we conclude that they comply with the above requirements. It is clear that a real controversy exists, that the controversy is justiciable, and that speedy relief is necessary to preserve the rights of the parties. Whether Riverside would ultimately prevail on the merits is not implicated in this analysis, which pertains only to whether Riverside has standing to bring the action.
{¶ 38} We also agree with Riverside that the State confuses the legal issues. Riverside is not attempting to bring a private right of action to recover a judgment against the State; instead, Riverside is attempting to challenge the constitutionality of a particular statute enacted by the General Assembly. A declaratory judgment action is the proper avenue for such challenges, and the case law cited by the State is not on point.
{¶ 39} For example, the State cites PDU, Inc. v. City of Cleveland, 8th Dist. Cuyahoga No. 81944, 2003-Ohio-3671, for the proposition that the Equal Protection Clause in the Ohio Constitution, Article 1, Section 2, is not self-executing, and does not provide courts with sufficient guidance to allow enforcement of its terms. From this, the State reasons that Riverside may not employ a declaratory judgment action because the Equal Protection Clause does not provide Riverside or its taxpayers with any substantive rights. We disagree. As was indicated, numerous cases allow actions to be filed to challenge legislation on constitutional grounds, including the fact that the statute violates the constitutional right of equal protection. The Declaratory Judgment Act is a proper vehicle for these actions.
{¶ 41} The State‘s final argument is that the dismissal was proper because the tax exemption in
A municipal corporation shall not tax any of the following:
* * *
(11) Beginning August 1, 2007, compensation paid to a person employed within the boundaries of a United States air force base under the jurisdiction of the United States air force that is used for the housing of members of the United States air force and is a center for air force operations, unless the person is subject to taxation because of residence or domicile. If the compensation is subject to taxation because of residence or domicile, municipal income tax shall be payable only to the municipal corporation of residence or domicile.
{¶ 43} This standard provides that courts in most cases will “give a large degree of deference to legislatures when reviewing a statute on an equal protection basis. A classification warrants some kind of heightened review only when it jeopardizes exercise of a fundamental right or categorizes on the basis of an inherently suspect characteristic; otherwise, ‘the Equal Protection Clause requires only that the classification rationally further a legitimate state interest.’ ” Id. at ¶ 20, quoting Nordlinger v. Hahn, 505 U.S. 1, 10, 112 S.Ct. 2326, 120 L.Ed.2d 1 (1992). The criteria for a rational basis inquiry are that:
” ‘[T]he Equal Protection Clause is satisfied so long as there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.’ ” Park Corp. at ¶ 22, quoting Fitzgerald v. Racing Assn. of Cent. Iowa, 539 U.S. 103, 107, 123 S.Ct. 2156, 156 L.Ed.2d 97 (2003), which in turn, quotes Nordlinger, 505 U.S. at 11-12.
{¶ 45} Despite this deferential standard, we decline the State‘s invitation to uphold the dismissal based solely on the content of the complaint. As an initial matter, the trial court has not yet ruled on the question of whether the law is rationally based. Riverside should also be given an opportunity to develop a more complete factual record. As one example of how this has been done, the parties in Park Corp. “agreed to submit the case on briefs and a stipulated statement of facts.” See Park Corp. v. City of Brook Park, 8th Dist. Cuyahoga No. 79410, 2002-Ohio-2246, ¶ 16, rev‘d., 102 Ohio St.3d 166, 2004-Ohio-2237, 807 N.E.2d 913. Similarly, in a case the State relies on, the trial court decided the constitutional issue only after the parties had filed competing motions for summary judgment. Pickaway Cty. Skilled Gaming, L.L.C. v. Cordray, 183 Ohio App.3d 390, 2009-Ohio-3483, 917 N.E.2d 305, ¶ 1, (10th Dist.), rev‘d., 127 Ohio St.3d 104, 2010-Ohio-4908, 936 N.E.2d 944.1 Likewise, in Moore, when the Supreme Court of Ohio reversed the dismissal of the non-resident property owners’ constitutional claims, the court stressed that:
In so holding, we intimate no opinion on the merits of the property
owners’ due process, equal protection, and police-power claims. We simply hold that the property owners have a right to pursue discovery on those claims. If they are not able to marshal facts to support their theories, summary judgment - not a motion to dismiss for failure to state a claim - is an appropriate way to resolve the declaratory-judgment action in an efficient, fair manner. Moore, 133 Ohio St.3d 55, 2012-Ohio-3897, 975 N.E.2d 977, at ¶ 55.
{¶ 46} In the case before us, a more complete factual record would assist consideration of the issues. Accordingly, Riverside‘s assignment of error has merit and is sustained.
III. Conclusion
{¶ 47} Riverside‘s sole assignment of error having been sustained, the judgment of the trial court is reversed, and this cause will be remanded for further proceedings.
FROELICH, P.J., and FAIN, J., concur.
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Richard N. Coglianese
Hon. Mary Katherine Huffman