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Wilson v. Walther

Supreme Court of Arkansas

October 5, 2017



          Mike Wilson; and Ogles Law Firm, P.A., by: John Ogles for appellant.

          Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: M. Samuel Jones III, for appellee.

          ROBIN F. WYNNE, Associate Justice

         Appellant Mike Wilson filed this illegal-exaction suit in the Pulaski County Circuit Court alleging that certain acts of 2015, which appropriated funds from the Arkansas General Improvement Fund (GIF) to eight planning and development districts, are unconstitutional. The circuit court granted summary judgment in favor of the defendants. Wilson now appeals, and the defendants have cross-appealed the circuit court's rulings in Wilson's favor on standing and mootness. For the reasons set out below, we reverse and remand on direct appeal, and we affirm on cross-appeal.

         On February 12, 2016, Wilson, a resident and taxpayer of Jacksonville, Pulaski County, filed an illegal-exaction complaint under article 16, § 13 of the Arkansas Constitution. Named as defendants were Larry Walther, Director of the Arkansas

         Department of Finance and Administration; Andrea Lea, State Auditor; Dennis Milligan, State Treasurer; and Central Arkansas Planning and Development District, Inc. (CAPDD).[1]Wilson alleged that Act 514, [2] Act 551, [3] Act 612, [4] Act 619, [5] Act 622, [6] Act 654, [7] Act 786, [8] and Act 818[9] of 2015 violate amendment fourteen's prohibition on special or local legislation and article 5, § 29's requirement that an appropriation's purpose be "distinctly stated." The challenged acts appropriate funds from the GIF for grants to eight multi-county planning and development districts that collectively encompass the entire state. Each act contains the following language:

SECTION 1. APPROPRIATION - GENERAL IMPROVEMENT PLANNING AND DEVELOPMENT GRANTS. There is hereby appropriated, to the Department of Finance and Administration - Disbursing Officer, to be payable from the General Improvement Fund or its successor fund or fund accounts, for grants to planning and development districts, the following[.]

         For each of the eight planning and development districts throughout the state, appropriations "in a sum not to exceed $1, 000, 000" were listed in Section 1 of each act, except that the sum of $8, 000, 000 was listed in Act 818, bringing the total amount appropriated to each district to $15 million.

         Wilson alleged that on September 13, 2015, the State defendants had disbursed to CAPDD the sum of $2, 987, 500 pursuant to Act 1146 of 2015[10] and that of that sum CAPDD had made grants in the amount of $440, 000 as of the date of the complaint. According to Wilson, in the 2015 General Assembly, each member of the Senate was allocated $285, 000 and each member of the House was allocated $70, 000 for expenditure from the GIF; this money is awarded to grant applicants by the CAPDD board of directors only with the express approval of individual legislators. Wilson further alleged that "[i]n purpose and effect, the Defendant Central Arkansas Planning and Development District, Inc. simply acts as a money-laundering machine for individual legislators for the sole purpose of evading the force of the constitutional prohibitions and decisions of the Supreme Court."

         Wilson sought temporary and permanent injunctions preventing the defendants from making or approving disbursements from the GIF under the acts; declaratory judgment that the acts are unconstitutional, void, and of no effect; an order directing CAPDD to refund $2, 987, 500 plus interest to the state treasury; and attorney's fees and costs. In an amended complaint, Wilson added an allegation that the defendants had violated Arkansas Code Annotated section 14-166-205 (Repl. 1998), which sets out conditions with which planning and development districts must comply to receive state funds.

         After the circuit court denied his motion for temporary restraining order or preliminary injunction, Wilson filed a motion for summary judgment; the State defendants filed a motion for summary judgment that included arguments that Wilson lacked standing and the complaint should be dismissed for mootness. CAPDD filed a motion for summary judgment in which it adopted and incorporated the State defendants' summary-judgment motion and brief and argued that there was no private right of action against a private nonprofit corporation for illegal exaction. After responses and replies were filed, the circuit court entered an order finding that Wilson had standing and that his request for declaratory and injunctive relief was not moot, and granting summary judgment in favor of the defendants on the merits. This appeal and cross-appeal followed.

         At the outset, we note that appellant Mike Wilson previously obtained relief in an illegal-exaction lawsuit challenging the constitutionality of various direct appropriations by the General Assembly. In Wilson v. Weiss, 368 Ark. 300, 245 S.W.3d 144 (2006) (Wilson I), this court held that a $400, 000 appropriation to the City of Bigelow for "infrastructure, sewer, and streets" violated amendment fourteen's prohibition against special or local legislation. After a final order was obtained for the remaining acts challenged, in Wilson v. Weiss, 370 Ark. 205, 258 S.W.3d 351 (2007) (Wilson II), this court held that the following appropriations were unconstitutional under article 5, § 29 (requiring that a distinct purpose be stated in an appropriations bill) and amendment fourteen (prohibiting special or local legislation): $50, 000 for "state assistance" to the Cleburne County Library; $20, 000 for "state aid" to the Jacksonville Museum of Military History; and $10, 000 for "state assistance" to the Reed's Bridge Preservation Society, Inc. In addition, an appropriation of $300, 000 to the City of Jacksonville, Arkansas, "for costs associated with the construction, renovation, and equipping of a library, " was held to violate amendment fourteen. Wilson contends that the present system was devised to allow legislators to continue to direct GIF money locally following this court's rulings in Wilson I and Wilson II.

         I. Cross-Appeal [11]

         A. Standing

         On cross-appeal, the State argues that this court should affirm summary judgment to the cross-appellants because Wilson lacked standing to bring an illegal-exaction suit. Article 16, § 13 of the Arkansas Constitution provides: "Any citizen of the county, city, or town may institute suit in behalf of himself and all others interested, to protect the inhabitants thereof against the enforcement of any illegal exactions whatever." An illegal exaction is defined as any exaction that either is not authorized by law or is contrary to law. Brewer v. Carter, 365 Ark. 531, 534, 231 S.W.3d 707, 709 (2006). In a "public funds" illegal-exaction case such as the one before us, the plaintiff contends that public funds generated from tax dollars are being misapplied or illegally spent. See Bowerman v. Takeda Pharm. U.S.A., 2014 Ark. 388, at 4, 442 S.W.3d 839, 842. As a general rule, we have explained that citizens have standing to bring a "public funds" case because they have a vested interest in ensuring that the tax money they have contributed to a state or local government treasury is lawfully spent. Brewer v. Carter, 365 Ark. 531, 534, 231 S.W.3d 707, 709 (2006). This court has explained:

[T]he only standing requirements we have imposed in public-funds cases is that the plaintiff be a citizen and that he or she have contributed tax money to the general treasury. Id. We have not required the plaintiff to trace his or her individual tax contribution to the tax money that is allegedly being spent in an illegal manner, nor have we required the plaintiff to establish a significant tax contribution to the state treasury. Id. Hence, in public-funds cases we have given the word "interested" as used in article 16, section 13, a very broad construction.

Bowerman, 2014 Ark. 388, at 5, 442 S.W.3d at 842-43 (citing Ghegan & Ghegan, Inc. v. Weiss, 338 Ark. 9, 991 S.W.2d 536 (1999)).

         Here, the public funds at issue were appropriated under the challenged acts, and funds were allocated in the General Improvement Distribution Act of 2015 (Act 1146 of 2015), which established the 90th Session Projects Account (the Account) within the GIF. Pursuant to Act 1146, the Account is composed of the following: unobligated and unallocated money remaining in the GIF; general revenue funds remaining in the General Revenue Allotment Reserve Fund; interest earned on State Treasury fund balances; special revenues credited to the GIF from estate taxes as set out in Arkansas Code Annotated section 19-6-301(171) (Repl. 2016); any available balance remaining in the 89th Session Projects Account of the GIF; and any funds provided by the Arkansas Attorney General that were received by the State from settlement agreements or as designated by court order. The State argues that Wilson lacks standing because the only tax dollars contained in the Account are estate taxes, which Wilson had not paid. The State's focus on the word "tax" in Act 1146 is misplaced. The money in the GIF include general revenue funds, which consist of tax money, including sales and use taxes, individual income taxes, and cigarette taxes. See Ark. Code Ann. § 19-6-201 (general revenues). The fact that some of these are "carryover" funds does not detract from the fact that they were originally tax dollars. McCafferty v. Oxford Am. Literary Project, Inc., 2016 Ark. 75, 484 S.W.3d 662, is inapposite because the university's cash funds at issue in that case were not generated or arising from taxation but instead were derived from campus operations (housing, bookstore, food-services, etc.). This court has consistently required that the funds at issue in a public-funds illegal-exaction case come from taxes or implicate the state or local treasury. See McCafferty, 2016 Ark. 75, at 5, 484 S.W.3d at 665 (citing cases). We are satisfied that the funds at issue in this case are derived from taxes and implicate the state treasury such that Wilson, as a taxpayer, has standing.

         We affirm the circuit court's ruling that Wilson has taxpayer ...

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