Michael Pierce v. Douglas Ducey ( 2020 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL PIERCE, No. 19-17071
Plaintiff-Appellee,
D.C. No.
v. 2:16-cv-01538-
NVW
DOUGLAS A. DUCEY, in his capacity
as Governor of the State of Arizona,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the District of Arizona
Neil V. Wake, District Judge, Presiding
Submitted July 10, 2020*
Seattle, Washington
Filed July 21, 2020
Before: Jacqueline H. Nguyen and Patrick J. Bumatay,
Circuit Judges, and Richard Seeborg, ** District Judge.
Per Curiam Opinion
*
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
**
The Honorable Richard Seeborg, United States District Judge for
the Northern District of California, sitting by designation.
2 PIERCE V. DUCEY
SUMMARY ***
Article III Case or Controversy
Holding that the district court lacked jurisdiction, the
panel vacated the district court’s declaratory judgment
interpreting the New-Mexico Enabling Act of 1910 and
declaring that even after a 1999 amendment, the Enabling
Act continues to require congressional consent to any
changes to the Arizona state constitution affecting the
investment or distribution of assets in Arizona’s land trust
for public schools.
The panel held that the plaintiff, an Arizona citizen,
lacked Article III standing in light of his stipulation that the
only injury particular to him was his individual belief that
the state was not obeying federal law in implementing
Proposition 123, a constitutional amendment that changed
the distribution formula.
The panel further held that even if this case had initially
presented a justiciable controversy, that controversy ended
when Congress consented to the distribution formula in
Proposition 123.
The panel therefore vacated the district court’s judgment
and remanded with instructions to dismiss.
***
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
PIERCE V. DUCEY 3
COUNSEL
Anni Foster, Office of the Governor, Phoenix, Arizona;
Theodore B. Olson and Matthew D. McGill, Gibson Dunn
& Crutcher LLP, Washington, D.C.; Timothy Berg and
Emily Ward, Fennemore Craig P.C., Phoenix, Arizona; for
Defendant-Appellant.
Andrew S. Jacob, Gordon Rees Scully Mansukhani LLP,
Phoenix, Arizona, for Plaintiff-Appellee.
OPINION
PER CURIAM:
Arizona Governor Douglas Ducey appeals from the
district court’s declaratory judgment interpreting the New
Mexico-Arizona Enabling Act of 1910 (“Enabling Act”),
Pub. L. No. 61-219, 36 Stat. 557. The district court declared
that even after a 1999 amendment, the Enabling Act
continues to require congressional consent to any changes to
the state constitution affecting the investment or distribution
of assets in Arizona’s land trust for public schools. We agree
with the governor that the district court lacked jurisdiction to
enter this judgment. Therefore, we vacate and remand with
instructions to dismiss.
I.
At the time of statehood, Arizona required funds to
maintain public schools. To that end, the United States
granted the state hundreds of thousands of acres of land and
established a “permanent inviolable fund.” Enabling Act
§§ 24, 25, 27. The Enabling Act required Arizona to hold
these lands, and any funds derived from them, in trust.
4 PIERCE V. DUCEY
Id. § 28. The sale of trust assets for any purpose other than
public schools would be “deemed a breach of trust.” Id.
The Enabling Act originally required the state treasurer
to place trust funds in “safe, interest-bearing securities” and
permitted only the income from these investments to be
expended, Enabling Act §§ 25, 27, 28, lest Arizona be “lured
from patient methods . . . in the hope of a speedy prosperity,”
Ervien v. United States, 251 U.S. 41, 48 (1919). Any
disposition of trust assets that did not substantially conform
to the Enabling Act’s limitations was “null and void.”
Enabling Act § 28. The Act further provided that Arizona in
its constitution must “consent to . . . the terms and conditions
upon which [the land] grants . . . [were] made” and
“positively preclude the making [of] any future
constitutional amendment” altering these terms and
conditions “without the consent of Congress.” Id. § 20.
Over time, Congress modified the Enabling Act’s
restrictions on trust assets to reflect contemporary financial
realities. The Act has always required that trust lands be sold
for at least some minimum value: originally “three dollars
per acre,” id. § 28, but after a quarter century “their
appraised value.” Act of June 5, 1936, Pub. L. No. 74-658,
49 Stat. 1477, 1478. Two decades later, Congress allowed
Arizona to combine funds from the trust for public schools
with funds from other land trusts and invest these monies as
the state saw fit, not just in interest-bearing securities. See
Act of August 28, 1957, Pub. L. No. 85-180, 71 Stat. 457.
Because Arizona was able to spend all of the income it
earned from the trust, the trust’s corpus tended to decrease
in value over time as a result of inflation. In 1998, Arizona
voters approved amendments to the state constitution to
address this problem. As amended, the Arizona constitution
provided that the trust fund would reinvest earnings, interest,
PIERCE V. DUCEY 5
and dividends while paying out annual distributions
equivalent to the average real return over the preceding five
years. See Ariz. Const. art. 10, § 7(F)–(G) (1998). Congress
approved these changes the following year by amending the
Enabling Act. See Arizona Statehood and Enabling Act
Amendments of 1999, Pub. L. No. 106-133, 113 Stat. 1682.
The amended Act specified that trust funds “be prudently
invested on a total rate of return basis” and that
“[d]istributions . . . be made as provided in Article 10,
Section 7 of the Constitution of the State of Arizona.” 1 Id.§ 2(a).
In 2012, Arizona voters amended the state constitution
to suspend the 1998 distribution formula for eight years and
replace it with a fixed annual rate of 2.5% of the trust fund’s
average monthly market value over the preceding five
years—regardless of inflation or the fund’s actual returns.
See Ariz. Const. art. 10, § 7(H) (2012). In May 2016, the
voters passed Proposition 123, a constitutional amendment
making the 2012 change to the distribution formula
permanent and, for the next nine years, increasing the rate
from 2.5% to 6.9% of the fund’s average monthly value over
the preceding five years. 2 See Ariz. Const. art. 10, § 7(G).
1
The parties dispute whether Congress intended to reference article
10, section 7 of the Arizona Constitution as it existed in 1999 or in its
current state, however amended. In other words, did Congress merely
approve the specific distribution formula the state adopted in 1998, or
did it give the state carte blanche to tinker with the formula without
further Congressional approval? We need not reach the merits of this
dispute.
2
Because the fund’s nominal return in any given year might prove
less than 6.9% of the fund’s average monthly value over the preceding
five years, the constitutional amendment authorized the legislature to
6 PIERCE V. DUCEY
II.
The instant litigation commenced the day after the May
2016 election when Michael Pierce, an Arizona citizen, filed
a complaint against four state officials and legislators. After
obtaining counsel, Pierce amended his complaint,
substituting the governor as the defendant and claiming a
violation of the Enabling Act. 3 Other than an award of
attorney’s fees and costs, the only relief that Pierce sought
was an injunction prohibiting Arizona “from implementing
the Proposition 123 changes to Article 10, Section 7 of its
Constitution unless Congress amends the Enabling Act to
authorize or consent to such changes.”
The governor moved to dismiss on the grounds that
Pierce lacked standing and the Enabling Act did not provide
a private right of action in federal court. After the motion
had been pending for over a year, Congress consented to the
distributional changes brought about by Proposition 123.
See Consolidated Appropriations Act of 2018, Pub. L. No.
115-141, 132 Stat 348, 1128. Three days later, the district
court denied the motion to dismiss. Recognizing that
Congress’s consent mooted the case regarding “trust fund
distributions from this time forward,” the district court
concluded that the case might still be live as to the past
distributions. The court determined that the changes to the
distribution formula beginning in 2012 violated the Enabling
temporarily reduce the distribution rate to as low as 2.5% of the fund’s
average value “to preserve the safety of [its] capital.” Ariz. Const. art.
10, § 7(H).
3
Pierce also sued the State of Arizona and asserted a claim under
42 U.S.C. § 1983, but the district court dismissed Arizona on Eleventh
Amendment grounds, and Pierce acquiesced in the dismissal of his
§ 1983 claim.
PIERCE V. DUCEY 7
Act and that it would therefore need to determine “whether
the past excess trust fund distributions . . . are still
remediable or are now validated retroactively and therefore
moot also.”
Pierce informed the district court that he did not intend
to pursue the court’s theory. 4 However, the district court
permitted him to amend his complaint to seek forward-
looking relief. Pierce sought to enjoin the governor “from
implementing any changes to the Arizona Constitution that
affect the investment or distribution of the assets in the
School Trust Fund . . . until and unless Congress provides
consent to such changes” by amending the Enabling Act.
After determining that this issue presented a live
controversy, the district court entered a declaratory judgment
along the lines of the permanent injunction that Pierce had
requested.
III.
For at least two independent reasons, this case should
have been dismissed.
A.
To begin with, Pierce lacks standing to challenge either
past or future changes to the distribution formula. For a
plaintiff to have standing to litigate a case or controversy in
federal court, Article III demands that he have “(1) suffered
an injury in fact, (2) that is fairly traceable to the challenged
conduct of the defendant, and (3) that is likely to be
4
Pierce conceded that Congress’s consent to Proposition 123 was
retroactive, and his counsel represented that the 2012 changes to the
distribution formula did not harm the trust due to the stock market’s
strong performance between 2012 and 2016.
8 PIERCE V. DUCEY
redressed by a favorable judicial decision.” Spokeo, Inc. v.
Robins, 136 S. Ct. 1540, 1547 (2016).
An “injury in fact” means an invasion of the plaintiff’s
legally protected interest that, among other things, is
“concrete and particularized.” Id. at 1548 (quoting Lujan v.
Defs. of Wildlife, 504 U.S. 555, 560 (1992)). To be
“particularized,” an injury “must affect the plaintiff in a
personal and individual way.” Id. (quoting Lujan, 504 U.S.
at 560 n.1). To be “concrete,” the injury “must actually
exist”—an abstract, theoretical concern will not do. Id.Pierce stipulated that his “only alleged harm in this case
purportedly arises from his status as a citizen of the State of
Arizona.” His “allegations of irreparable harms are based
solely on [his] personal beliefs that implementation of the
2016 amendments . . . will result in greater distributions
from Arizona’s public school land trust than the distributions
permitted under the 1998 amendments.” Aside from these
beliefs, he “has not personally suffered and will not suffer
any separate, individualized injury (financial or otherwise).”
This stipulation dooms Pierce’s standing argument. He
admits that the only injury particular to him is his individual
belief that the state is not obeying federal law, but “injury to
the interest in seeing that the law is obeyed” is not concrete.
FEC v. Akins, 524 U.S. 11, 24 (1998). “Article III standing
requires a concrete injury even in the context of a statutory
violation.” Spokeo, 136 S. Ct. at 1549.
Pierce argues that he suffers a concrete injury when the
state violates the Enabling Act because he, like any Arizona
citizen, is a beneficiary of the land trust. Even if all Arizona
citizens—and not just the schools—are beneficiaries of the
trust, Pierce’s position does not improve. A trust beneficiary
must still have some personal financial stake in the outcome
PIERCE V. DUCEY 9
to have standing. See Thole v. U.S. Bank N.A., 140 S. Ct.
1615, 1619–21 (2020). Pierce acknowledges that he does
not.
B.
Even if this case had initially presented a justiciable
controversy, that controversy ended when Congress
consented to the distribution formula in Proposition 123.
When “an intervening circumstance . . . at any point during
litigation” eliminates the case or controversy required by
Article III, “the action can no longer proceed and must be
dismissed as moot.” Campbell-Ewald Co. v. Gomez, 136 S.
Ct. 663, 669 (2016) (quoting Genesis Healthcare Corp. v.
Symczyk, 569 U.S. 66, 72 (2013)).
Pierce insists that the dispute remains live, invoking the
voluntary cessation exception to mootness. It is true that “a
defendant cannot automatically moot a case simply by
ending its unlawful conduct once sued,” and such a
defendant “bears the formidable burden of showing that it is
absolutely clear the allegedly wrongful behavior could not
reasonably be expected to recur.” Already, LLC v. Nike, Inc.,
568 U.S. 85, 91 (2013) (quoting Friends of the Earth, Inc. v.
Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 190
(2000)). But the governor’s purportedly unlawful conduct
was enforcing a state constitutional provision that Pierce
contends violated federal law. The governor has not ceased
that conduct at all—he continues to enforce Proposition
123’s distribution formula. 5 The only thing to change is that
5
The parties disagree whether the governor or the state treasurer is
the state official with authority to implement the distribution formula.
We assume for the sake of argument that the governor has such authority,
but we leave open the possibility that he does not.
10 PIERCE V. DUCEY
the state constitutional provision now undisputedly accords
with the Enabling Act. And that change was brought about
by Congress, not the governor. The voluntary cessation
doctrine does not apply.
The only remaining controversy is whether, should
Arizona again alter the distribution formula, the governor
needs Congressional approval to implement the change.
This dispute “is not ripe for adjudication [because] it rests
upon ‘contingent future events that may not occur as
anticipated, or indeed may not occur at all.’” Alcoa, Inc. v.
Bonneville Power Admin., 698 F.3d 774, 793 (9th Cir. 2012)
(quoting Texas v. United States, 523 U.S. 296, 300 (1998)).
The governor cannot unilaterally amend the state
constitution; he merely executes the laws in existence. See
Ariz. Const. art. 5, § 4; id. art. 21. The “[m]ere possibility”
that future legislation will “conflict with federal law is not
sufficient for declaratory judgment jurisdiction.” Citizens
for Honesty & Integrity in Reg’l Planning. v. County of San
Diego, 399 F.3d 1067, 1068 (9th Cir. 2005).
C.
The governor argues that the district court also lacked
subject matter jurisdiction under 28 U.S.C. § 1331. In Jones
v. Brush, we held that the Enabling Act “does not give [an
Arizona citizen] any power or right of any kind or
character,” and therefore a suit by a private citizen to remedy
a breach of the land trust “[does] not arise under the
Constitution or laws of the United States.” 143 F.2d 733,
735 (9th Cir. 1944).
Pierce would distinguish Jones on the ground that the
federal issue there—whether the Enabling Act authorized
the state to call certain bonds before their due date—was
insubstantial. However, our holding did not turn on the
PIERCE V. DUCEY 11
substantiality of the federal question. We decided Jones
based on Congress’s clear expectation that only the U.S.
Attorney General can bring suit in federal court to remedy a
violation of the Enabling Act even though Arizona is free to
allow its citizens similar recourse in state court. See
Enabling Act § 28; Jones, 143 F.2d at 735.
While Jones remains good law to the extent it held that
the Enabling Act does not create a private right of action in
federal court, its characterization of the issue as
jurisdictional has been undermined by subsequent Supreme
Court precedent. See Lexmark Int’l, Inc. v. Static Control
Components, Inc., 572 U.S. 118, 128 & n.4 (2014)
(explaining that whether a particular plaintiff “falls within
the class of plaintiffs whom Congress has authorized to sue
under [a federal statute]” is an inquiry that normally “does
not implicate . . . the court’s statutory or constitutional
power to adjudicate the case,” even though “on occasion”
the Supreme Court has “treated it as effectively
jurisdictional” (quoting Verizon Md., Inc. v. Pub. Serv.
Comm’n., 535 U.S. 635, 643 (2002))). We need not resolve
this tension, since there are multiple other reasons the district
court lacked jurisdiction.
IV.
The district court adjudicated Pierce’s claim absent a
case or controversy. Therefore, we vacate its judgment and
remand with instructions to dismiss.
VACATED and REMANDED.