Pierce v. Ducey

965 F.3d 1085

Michael PIERCE, Plaintiff-Appellee,

v.Douglas A. DUCEY, in his capacity as Governor of the State of Arizona, Defendant-Appellant.

No. 19-17071

United States Court of Appeals, Ninth Circuit.

Submitted July 10, 2020^* Seattle, Washington

Filed July 21, 2020

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.

Before: Jacqueline H. Nguyen and Patrick J. Bumatay, Circuit Judges, and Richard Seeborg,^** District Judge.

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. 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, 40 S.Ct. 75, 64 L.Ed. 128 (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, 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).

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 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 redressed by a favorable judicial decision." Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (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, 112 S.Ct. 2130, 119 L.Ed.2d 351 (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, 112 S.Ct. 2130 ). 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, 118 S.Ct. 1777, 141 L.Ed.2d 10 (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 to have standing. See Thole v. U.S. Bank N.A. , ––– U.S. ––––, 140 S. Ct. 1615, 1619–21, ––– L.Ed.2d –––– (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...