BOARD OF TRUSTEES OF THE TOBACCO USE PREVENTION AND CONTROL FOUNDATION; AMERICAN LEGACY FOUNDATION ET AL., APPELLANTS, v. BOYCE, TREASURER, ET AL., APPELLEES.
No. 2010-0118
Supreme Court of Ohio
December 22, 2010
127 Ohio St.3d 511, 2010-Ohio-6207
(Nо. 2010-0118—Submitted July 6, 2010—Decided December 22, 2010.)
PFEIFER, ACTING C.J.
{¶ 1} The issue in this case is whether certain sections of 2008 Am.Sub.S.B. No. 192 (“S.B. 192“) and 2008 Sub.H.B. No. 544 (“H.B. 544“) are constitutional. We conclude that the sections are constitutional and affirm the judgment of the court of appeals.
Factual and Procedural Background
{¶ 2} In November 1998, the Ohio attorney general entered into a master settlement agreement (“MSA“) with the largest tobacco-product manufacturers in the United States that resolved litigation to recover health-care expenses incurred by the states as a result of tobacco-related illnesses. Pursuant to the MSA, Ohio was to receive $10.1 billion in payments through 2025; there was no rеstriction on how the money could be spent.
{¶ 3} In 2000, the General Assembly enacted Am.Sub.S.B. No. 192, 148 Ohio Laws, Part V, 10767, creating
{¶ 4} On April 2, 2008, the governor and legislative leaders announced a bipartisan agreement to spend state funds to stimulate the economy. The agreement called for reallocating approximately $230 million then in the endowment fund to the stimulus package. On April 8, 2008, the General Assembly passed S.B. No. 192, which liquidated the endowment fund. On the same day, the executive director of the foundation, pursuant to a motion passed by the board of the foundation, executed a contract with American Legacy Foundаtion (“ALF“) to transfer $190 million from the endowment fund to ALF. The following day, the foundation filed a complaint against the treasurer seeking to enjoin the enforcement of S.B. 192 and asking that the statute be declared unenforceable. The board then rescinded its resolution authorizing the $190 million transfer to ALF. ALF moved to intervene as a plaintiff in the lawsuit brought by the foundation and filed a complaint requesting a declaration that H.B. 192 be declared unconstitutional and an injunction to stop the state treasurer from transferring the money in the endowment fund to the jobs fund.
{¶ 5} On May 6, 2008, the General Assembly enacted H.B. 544, which abolished the foundation аnd gave the Ohio Department of Health (“ODH“) responsibility for any residual matters, including legal obligations. Section 4 of H.B. 544 directed the state treasurer to liquidate the endowment fund, deposit the lesser of $40 million or 14.8 percent of the proceeds into the state treasury to the credit of a tobacco-use-prevention fund, and deposit the remaining proceeds from the liquidation (approximately $190 million) into the state treasury to the credit of a jobs fund. On May 9, 2008, ALF amended its complaint to contest the constitutionality of H.B. 544 as well as S.B. 192.
{¶ 6} On May 27, 2008, Robert G. Miller Jr. and David W. Weinmann, former smokers who had participаted in the foundation‘s cessation programs, filed a complaint for declaratory relief, claiming that the enactment of
{¶ 7} On August 11, 2009, the trial court entered judgment against ALF, finding that the contract between it and the foundation was invalid. The court also entered final judgment for Miller and Weinmann on their claims, finding that the endowment fund was an irrevocable trust and that the portions of H.B. 544
{¶ 8} On appeal, the court of appeals held that the endowment fund was not an irrevocable charitable trust and that appellees had no vested rights that could be violated. Tobacco Use Prevention & Control Found. Bd. of Trustees v. Boyce, 185 Ohio App.3d 707, 2009-Ohio-6993, 925 N.E.2d 641, ¶ 41-46. The court reasoned that the appellants offered no authority supporting the proposition that custodial funds, once created, cannot be abolished or transferred by the General Assembly. Id. at ¶ 34 (a custodial account is an account that is in the custody of the treasurer of the state but that is not part of the state treasury.
{¶ 9} We accepted the discretionary appeal of Miller, Weinmann, and ALF (“appellants“).
Analysis
{¶ 10} The General Assembly has plenary power to enact legislation; it is limited only by the Ohio Constitution and the Constitution of the United States.
{¶ 11} The General Assembly‘s legislative power enables it to “pass any law unless it is specifically prohibited by the state or federal Constitutions.” State ex rel. Jackman v. Cuyahoga Cty. Court of Common Pleas (1967), 9 Ohio St.2d 159, 162, 38 O.O.2d 404, 224 N.E.2d 906. See State ex rel. Poe v. Jones (1894), 51 Ohio St. 492, 504, 37 N.E. 945 (“whatever limitation is placed upon the exercise of that plenary grant of [legislative] power must be found in a clear prohibition by the
The Retroactivity Clause
{¶ 12}
“Notwithstanding any provision of law to the contrary, on the effective date of this section, the Treasurer of State shall liquidate the Tobacco Use Prevention and Control Foundation Endowment Fund created by section 183.08 of the Revised Code in a prudent manner. The Treasurer of State shall deposit into the state treasury to the credit of the Tobacco Use Prevention Fund (Fund 5BX0), which is created in section 3701.841 of the Revised Code, the lesser of $40 million or 14.8 per cent оf the proceeds from liquidation. The Treasurer of State shall deposit the remaining proceeds from liquidation into the state treasury to the credit of the Jobs Fund (Fund 5Z30), which is hereby created.”
{¶ 13} On its face, the statute applies only from the date of its enactment, not to acts, events, or cases that predate its enactment. Van Fossen, 36 Ohio St.3d at 105. In E. Liverpool v. Columbiana Cty. Budget Comm., 114 Ohio St.3d 133, 2007-Ohio-3759, 870 N.E.2d 705, ¶ 31, we stated that “when the application of a statute to the case before us involves only a prospective operation, we will not entertain a retroactivity claim under Section 28, Article II. State v. Hawkins (1999), 87 Ohio St.3d 311, 314, 720 N.E.2d 521. That doctrine bars East Liverpool‘s retroactivity claim.”
{¶ 14} The doctrine bars appellants’ claim in this case. We hаve also stated that the “retroactivity clause nullifies those new laws that ‘reach back and create new burdens, new duties, new obligations, or new liabilities not existing at the
Does H.B. 544 Affect Preexisting Property Rights?
{¶ 15} Appellants first argue that the funds held by the foundation do not belong to the state, citing former
{¶ 16} Although the General Assembly‘s plenary legislative power is expansive, it is not all-inclusive. It does not include the ability to bind future General Assemblies. “No general assembly can guarantee the continuity of its legislation or tie the hands of its successors.” State ex rel. Pub. Institutional Bldg. Auth. v. Griffith (1939), 135 Ohio St. 604, 619, 14 O.O 533, 22 N.E.2d 200. In Griffith, this court relied on State ex rel. Fletcher v. Executive Council of the State of Iowa (1929), 207 Iowa 923, 223 N.W. 737, 740, in which the Supreme Court of Iowa stated that “no General Assembly has power to render its enactment irrevocable and unrepealаble by a future General Assembly. No General Assembly can guarantee the span of life of its legislation beyond the period of its biennium. The power and responsibility of legislation is always upon the existing General Assembly. One General Assembly may not lay its mandate upon a future one. Only the Constitution can do that. * * * The power of a subsequent General Assembly either to acquiesce or to repeal is always existent.”
{¶ 17} In Section 17 of S.B. 192, 148 Ohio Laws, Part V, at 10802, the General Assembly acknowledged “the right of each General Assembly to evaluate independently the budgetary priorities of the state.” Furthermore, the creation of custodial accounts is a rather routine business.
{¶ 18} Custodial accounts have been used in a variety of circumstances without violating the Constitution or removing the funds from the reach of the General Assembly. In Griffith, we stated that although payments made by patients in state-run hospitals might be used by the Department of Public Welfare to run the hospitals it operated, those payments were “public funds, at all times subject to legislative control.” 135 Ohio St. at 619. Even if the payments were earmarked by the Department of Public Welfare to pay off bonds issued to provide money for the repair or construction of state welfare institutions, the General Assembly could default on the bonds and “divert these funds to other purpоses.” Id.
{¶ 19} In State ex rel. Hoffman Candy & Ice Cream Co. v. Defenbacher (1951), 154 Ohio St. 429, 43 O.O. 351, 96 N.E.2d 295, we examined the rotary fund of the Department of Liquor Control, the funds of which were not in the state treasury but were in the custody of the state treasurer. We noted that pursuant to statute, funds in excess of those necessary for operating the department were to “be paid into the general revenue fund.” Id. at 431. Appellants also argue that once the General Assembly appropriated the funds to the foundation fund, the funds were spent and thus were beyond the reach of subsequent legislation. This argument makes sense only if the foundation is a trust, which we conclude it is not. It is axiomatic than an appropriation to a state agency is not an expenditure; thus appropriation of money to the foundation does not place the money beyond the reach of the General Assembly.
{¶ 20} Appellants also argue that by allowing the money in the endowment fund to be invested in corporate stocks, the General Assembly intended that the fund not be considered state money because the Constitution prohibits the investment of state funds in corporate stocks. Although this argument is plausible, the better explanation is that the General Assembly allowed unexpended funds to be invested in stocks because it knew that expenditures in the biennium would be significantly less than the appropriation. Generally, state funds must be spent within the biennium in which they are appropriated, and thus cannot be invested in corporate stocks, which are long-term investments. Investing the money in the endowment fund in corporate stocks allows the
{¶ 21} Several states have passed constitutional amendments preventing the reallocation of funds that were allocated from the proceeds of the MSA to tobacco-usе cessation and prevention.
{¶ 22} Appellants have compared the foundation with various state pension plans. They argue that the foundation and the pension plans are similar, but they are not. The endowment fund is not intended for the benefit of named beneficiaries; the pension plans allocate funds for the benefit of named benefiсiaries. The retirement boards were given authority to establish separate legal entities to hold funds, see, e.g.,
{¶ 23} There is a long-standing principle in American law that “[n]o person has a vested interest in any rule of law, entitling him to insist that it shall remain unchanged for his benefit.” New York Cent. RR. Co. v. White (1917), 243 U.S. 188, 198, 37 S.Ct. 247, 61 L.Ed. 667. See Fuller, The Morality of Law (1964) 60 (if reliance on existing law made a person “secure against any change in legal rules, the whole body of our law would be ossified forever“). No irrevocable trust was created; indeed, no trust was created. Instead, we conclude that a state agency was created in 2000 and was abolished in 2008. We conclude that the law enacted in 2000 did not create a right that was terminated by H.B. 544 and, therefore, that H.B. 544 is not an unconstitutionally retroactive law.
Contract Clauses
{¶ 24}
{¶ 25} Appellants make two contract-clause arguments. The first is that because the foundation is a trust, reallocating the funds appropriated to the endowment fund is a violаtion of a trust contract. We reject this argument based on our conclusion that the foundation is not a trust.
{¶ 26} The second argument addresses the attempt by the foundation to place funds beyond the reach of the General Assembly by transferring approximately
{¶ 27}
{¶ 28}
{¶ 29} The trial court and the court of appeals concluded that the board had violated
Other Considerations
{¶ 30} The question whether it is wise to enact legislation is not the same question as whether the legislation is constitutional. Bd. of Health v. Greenville (1912), 86 Ohio St. 1, 20, 98 N.E. 1019. Several amici curiae filed briefs in this case. Some of them argued that the funds at issue would be better used for the original intended purpose (tobacco cessation) than the current intended purpose (jobs stimulus), and several argued the converse. None of those arguments concerns a court of law. The General Assembly has plenary legislative power.
Conclusion
{¶ 31} We affirm the judgment of the court of appeals.
Judgment affirmed.
LUNDBERG STRATTON, O‘CONNOR, O‘DONNELL, and LANZINGER, JJ., concur.
GALLAGHER and HARSHA, JJ., concur separately.
SEAN C. GALLAGHER, J., of the Eighth Appellate District, sitting for BROWN, C.J.
WILLIAM H. HARSHA, J., of the Fourth Appellate District, sitting for CUPP, J.
GALLAGHER, J., concurring.
{¶ 32} I concur in the majority decision and agree that the General Assembly retained the power to reallocate the tobacco settlement money by enacting 2008 Sub.H.B. No. 544 and 2008 Am.Sub.S.B. No. 192. I write separately to more closely address the issues surrounding the actions of the General Assembly in creating the Tobacco Use Prevention and Cessation Trust Fund and whether such actions created a trust. In my view, the General Assembly arguably intended to create a trust and to irrevocably appropriate funds to that trust for antitobacco efforts. Though the purpose was noble, the efforts were ultimately unsuccessful.
{¶ 33} Under the statutory scheme that was enacted, the Tobacco Use Prevention and Control Foundation was appointed as trustee of the endowment fund. Former
{¶ 34} The endowment fund was created solely from state funds that were set aside to be administered for the purpose of reducing tobacco use by Ohioans, with an emphasis on certain populations. The funds were public and were to be used for a specified public purpose for the benefit of all Ohioans. Although appellants may have directly benefited from the programs that were created, the enabling statutes did not specify any person or entity as the beneficiary of the funds or create any private property interest. “This key element is lacking in many state funds that set aside mоney for a specific purpose and are ‘trust funds’ in name only. * * * The existence of named beneficiaries is what transforms the Fund from money set aside for a purpose into a formal trust.” Wisconsin Med. Soc., Inc. v. Morgan, 2010-WI-94, 787 N.W.2d 22, ¶ 69-70. The funds were state funds, and because no protected third-party property interests were created, they were subject to the legislature‘s plenary power over state money. See Arizona Farm Bur. Fedn. v. Brewer (Nov. 12, 2010), Ariz.App. No. 1 09-0756, 2010 WL 4542393 at *7. Further, although the funds were placed outside the state treasury and were dedicated to a particular use, the nature of the funds as state money was not altered, and the funds were not removed frоm legislative control. See A.B.A.T.E. of Illinois, Inc. v. Giannoulias (2010), 401 Ill.App.3d 326, 341 Ill.Dec. 109, 929 N.E.2d 1188.
{¶ 35} I believe that this is not a case where the General Assembly sought to encumber funds and bind future legislatures. Rather, the General Assembly failed to establish a proper trust to place the funds beyond the reach of subsequent legislation. Had a proper trust been created, no two-year encumbrance problem would exist.
{¶ 36} There is no doubt that many Ohioans stood to benefit from the antitobacco programs that were funded by the endowment fund. Though the result may seem unfair to some, the acts of the legislature were permissible and are not constitutionally infirm.
LUNDBERG STRATTON, J., concurs in the foregoing opinion.
HARSHA, J., concurring.
{¶ 37} Once the legislature initially placed the proceeds from the master settlement agreement (“MSA“) between the state and the tobacco-product manufacturers into the state treasury,
{¶ 38}
{¶ 39} Under former
{¶ 40} The legislature then appropriated money from this fund into an endowment fund. See former
{¶ 41} In State ex rel. Rothbacher v. Herbert (1964), 176 Ohio St. 167, 27 O.O.2d 48, 198 N.E.2d 463, Katharina Rothbacher owned a savings deposit in a savings and loan company. The company dissolved, and all unclaimed deposits, including Rothbacher‘s deposit, were placed in a “regular account,” i.e., an account of funds held in trust by the state treasurer, subject to the order of the superintendent of building and loan associations. Id. at 167. Subsequently, the state auditor, pursuant to statute, had the funds transferred into the General Revenue Fund. Id. at 168. Rothbacher then sought a writ of mandamus to compel the state treasurer to return her money. Id. at 168.
{¶ 42} This court denied the writ, holding that Rothbacher‘s funds were initially held in the regular account, subject to the order of the superintendent, and required no prior appropriation by the General Assembly. Id. at 169. But once the funds were transferred and becаme part of the General Revenue Fund, they were no longer subject to the order of the superintendent and “could be expended only as provided by law.” Id. at 169. Therefore, the funds could not be withdrawn unless the legislature made an appropriation under
{¶ 43} In this case, the MSA funds were initially deposited into the state treasury under former
{¶ 44} Therefore, despite the fact that former
{¶ 45} If the General Assembly intended to free the settlement funds frоm the dictates of
{¶ 46} Because the funds appropriated to the endowment fund were not placed in an irrevocable public trust, the General Assembly was free tо reappropriate the money to any fund it desired. Far from being unconstitutional, 2008 Am.Sub.S.B. No. 192 and 2008 Sub.H.B. No. 544 are consistent with the constitutional mandate of
{¶ 47} I agree with the analysis of the majority opinion on the other constitutional issues raised by this appeal.
Zeiger, Tigges & Little, L.L.P., John W. Zeiger, and Stuart G. Parsell, for appellants Robert G. Miller Jr., David W. Weinmann, and American Legacy Foundation.
Richard Cordray, Attorney General, Alexandra T. Schimmer, Chief Deputy Solicitor General, and Richard N. Coglianese, Michael J. Schuler, Damian Sikora, Aaron D. Epstein, and Katherine J. Bockbrader, Assistant Attorneys General, for
Mac Murray, Petersen & Shuster and Helen Mac Murray, urging reversal for amici curiae former Attorney General Betty D. Montgomery, former Senate President Richard H. Finan, and former Director of Ohio Department of Health J. Nick Baird, M.D.
James E. Arnold & Associates, L.P.A., James E. Arnold, and R. Gregory Smith, urging reversal for amici curiae Academy of Medicine of Cleveland and Northern Ohio, American Heart Association Great Rivers Affiliate, American Lung Association, American Cancer Society Cancer Action Network, Campаign for Tobacco-Free Kids, Ohio State Medical Association, American Heart Association, American Lung Association of the Midland States, American Cancer Society Ohio Division, Association of Ohio Health Commissioners, Ohio Public Health Association, and American Medical Association.
Law Offices of Russell A. Kelm, Russell A. Kelm, and Joanne W. Detrick, urging reversal for amicus curiae Citizens’ Commission to Protect the Truth.
Bricker & Eckler, L.L.P., Anne Marie Sferra, and Daniel C. Gibson, urging affirmance for amici curiae Ohio Dental Association, Ohio Optometric Association, Ohio State Chiropractic Association, and Ohio Assoсiation of Community Health Centers.
Richard Cordray, Attorney General, and Jeannine R. Lesperance, Assistant Attorney General, urging affirmance for amici curiae President of the Ohio Senate Bill Harris and Speaker of the Ohio House of Representatives Armond Budish.
Squire, Sanders & Dempsey, L.L.P., Pierre H. Bergeron, and Thomas D. Amrine, urging affirmance for amicus curiae National Conference of State Legislatures.
Peck, Shaffer & Williams, L.L.P., Thomas A. Luebbers, and Erin A. Sutton, urging affirmance for amici curiae County Commissioners Association of Ohio, Ohio Job and Family Service Directors Association, Public Children Services Association of Ohio, and Ohio Child Support Enforcement Agency Directors Association.
Weston Hurd, L.L.P., and Daniel A. Richards, urging affirmance for amicus curiae Voices of Ohio Children.