Case No CI 12-2060

________________________________________________________

District Court, Lancaster County, Nebraska ________________________________________________________

Randy Thompson, Susan Luebbe, and

Susan Dunavan

Plaintiffs,

v.

Dave Heineman, Governor of Nebraska, Michael J. Linder, Director, Nebraska Department of Environmental Quality,

and Don Stenberg, State Treasurer of Nebraska Defendants.

________________________________________

Hon. Stephanie Stacy ________________________________________________________

Plaintiffs’ Brief in Opposition to Defendants’

Motion to Dismiss Plaintiffs’ Second Amended Complaint ________________________________________________________

April 26, 2013

David A Domina #11043 Brian E. Jorde, #23613 Jeremy R. Wells, #24897 DOMINALAW Group pc llo 2425 S. 144th Street Omaha, NE 68144 402-493-410

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Table of Contents

Overview ............................................................................................................................. 3

Issues ................................................................................................................................... 3

Standard of Review ........................................................................................................... 3

Argument ............................................................................................................................ 4

I. Plaintiff’s Request for Relief Preventing Enforcement of LB1161 Including Granting an Injunction Preventing Action Pursuant to the Governor’s January 22, 2013 Route Approval Letter Is Not Moot…………………………………….4

II. Plaintiff’s Request for Declaratory Judgment Declaring the Governor’s January 22, 2013 Actions Predicated upon LB1161 are Unconstitutional, Null, and Void is Not Moot………………………………………………………………6

III. Plaintiffs’ Claim that LB1161 Authorizes an Unlawful Pledge of State Credit Survives Defendants’12(b)(6) Challenge………………………………….7

Conclusion .......................................................................................................................... 9

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Overview

1. We have been here before. Defendants again move to dismiss Plaintiffs

constitutional challenges of LB1161. The Court’s December 31, 2012 Order following

significant prior briefing and argument on the issues of Plaintiffs’ standing to challenge

LB1161 determined Plaintiffs case would move forward and there is nothing new in

Defendants Brief in Support of Second Motion to Dismiss that would change the Court’s

prior findings. Therefore, we do not re-analyze the question of standing previously

resolved. Plaintiffs incorporate here rather than repeating their arguments and legal

analysis found in a) Plaintiffs’ Brief in Opposition to Defendants’ First Motion to

Dismiss (filed September 7, 2012); b) the Court’s analysis and findings in its December

31, 2012 Order; and c) Plaintiffs’ Feb 2013 Post-Hearing Brief Re Opposition to Motion

for Leave to File Second Amended Complaint (filed February 13, 2013).

Issues

2. “For the Court’s sake” (Defendants’ Brief at 4) only the new questions

raised by Defendants will be addressed:

2.1 Is relief available requesting an injunction preventing enforcement

of LB1161, including an injunction preventing action pursuant to the Governor’s

January 22, 2013 route approval letter? Second Amended Complaint at 19.5.

2.2 Is relief available requesting a Declaratory Judgment be rendered

declaring Governor Heineman’s actions of January 22, 2013, which are predicated

upon LB1161, and are not authorized by any other law, are all also

unconstitutional, null and void? Second Amended Complaint at 19.3.

2.3 Can Plaintiff’s claim LB1161 constitutes an unlawful extension of

State credit survive a Motion to Dismiss? Second Amended Complaint at 13.6.

Standard of Review

3. Defendants move to dismiss Plaintiffs’ Complaint under Neb Ct R Pldg § 6-

1112(b)(1) and 6-1112(b)(6). Each has a slightly different standard of review. “[W]hen

a motion to dismiss raises both rule 12(b)(1) [ (subject matter jurisdiction) ] and [rule

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12(b) ](6)..., the court should consider the rule 12(b)(1)... first and should then consider

the rule 12(b)(6) ... only if it determines that it has subject matter jurisdiction.” Doe v Bd

of Regents of Univ. of Nebraska, 280 Neb 492, 506-07, 788 NW2d 264, 278-79 (2010).

4. Subject Matter Jurisdiction. Defendants request dismissal under Neb Ct

R Pldg §6-1112(b)(1) for lack of subject matter jurisdiction. The defect of standing is a

defect of subject matter jurisdiction. Citizens Opposing Indus Livestock v Jefferson

County Bd. of Adjustment, 274 Neb 386, 390, 740 NW2d 362, 365 (2007). “It is a

general rule that a plaintiff must plead and prove the jurisdictional facts, [which are] the

facts which show that the court has jurisdiction of the subject matter of the action.”

Creighton-Omaha Reg'l Health Care Corp. v. Douglas County, 202 Neb 686, 689, 277

NW2d 64, 67 (1979).

5. Motion to Dismiss. “To prevail against a motion to dismiss for failure to

state a claim, the pleader must allege sufficient facts, accepted as true, to state a claim for

relief that is plausible on its face. In cases in which a plaintiff does not or cannot allege

specific facts showing a necessary element, the factual allegations, taken as true, are

nonetheless plausible if they suggest the existence of the element and raise a reasonable

expectation that discovery will reveal evidence of the element or claim.” Cent Nebraska

Pub Power & Irrigation Dist v Jeffrey Lake Dev, Inc, 282 Neb 762, 764-65, 810 NW2d

144, 147 (2011).

Argument

I. Plaintiff’s Request for Relief Preventing Enforcement of LB1161 Including Granting an Injunction Preventing Action Pursuant to the Governors January 22, 2013 Route Approval Letter Is Not Moot.

6. Plaintiffs have consistently argued for and requested an injunction

preventing enforcement of LB1161. Initial Complaint May 23, 2012 at 19.1 and 19.4.

First Amended Complaint January 14, 2013 at 19.1 and 19.4. An injunction preventing

enforcement of LB1161 would naturally include any and all acts taken under the auspice

of LB1161, such as those allowed under §7 empowering the NDEQ to conduct a pipeline

route evaluation and requiring the Governor to make a decision on the NDEQ’s

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evaluation. Though Nebraska has no statute specifically authorizing injunctive relief to

prevent enforcement of an unconstitutional statute, the judicial power of the courts

inherently authorizes issuance of such injunctions. Hubbard v EPA, 809 F2d 1, 11 n15

(DC Cir 1986) (“[T]he court’s power to enjoin unconstitutional acts…is inherent in the

Constitution itself.”); see also, Hartman v Moore, 547 US 250, 126 S Ct 1695, 1701

(2006); accord, Marbury v Madison, 5 US 137 (1803); Mitchum v Hurt, 73 F3d 30 (3d

Cir 1995). Defendants argue that Plaintiffs failure to specifically address the Governor’s

January 22, 2013 route approval decision in prior Complaints renders Plaintiffs’

injunction request moot. This logic fails in that Plaintiffs have challenged the

constitutionality of LB1161 wholesale, and sought an injunction enjoining its

enforcement since May 23, 2012.

7. Plaintiffs’ proposition remains simple. If any one of the many challenges to

the constitutionality of LB1161 are successful and LB1161 is deemed unconstitutional,

any acts taken as a result of powers or directives of LB1161 are therefore also

unconstitutional, null and void. An injunction seeking to prohibit the enforcement of an

unconstitutional statute is proper. See Let's Help Florida v. McCrary, 621 F.2d 195 (5th

Cir. 1980), judgment aff'd, 454 U.S. 1130, 102 S. Ct. 985, 71 L. Ed. 2d 284 (1982);

Burnau v. Whitten, 642 S.W.2d 346 (Mo. 1982); Ex parte Young, 209 U.S. 123, 28 S. Ct.

441, 52 L. Ed. 714 (1908) (sustaining action in federal court to enjoin state attorney

general from enforcing unconstitutional state law); see also, e.g., Briggman v. Virginia,

Dept. of Social Services, Div. of Child Support Enforcement, 526 F. Supp. 2d 590 (W.D.

Va. 2007) (under the doctrine of Ex parte Young, an individual may petition a federal

court to enjoin State officials in their official capacities from engaging in future conduct

that would violate the Constitution or a federal statute).

8. If Plaintiffs are successful, any acts of the Governor, or other Defendants,

under authority of LB1161 are inherently unconstitutional because they flow from and

are a product of an unconstitutional law. Defendants place too much significance on

Plaintiffs’ specific reference to the January 22, 2013 letter. Plaintiffs sought an

injunction preventing enforcement of LB 1161 in their initial Complaint. Complaint May

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23, 2012 at ¶ 19.4. Throughout this litigation, Plaintiffs have pled a number of

constitutional infirmities. The January 22, 2013 letter from Governor Heineman to

President Obama and Secretary of State Clinton is just the latest act by the Defendants in

carrying out the constitutionally infirm provisions of LB 1161.

9. Defendants would have the Court believe because LB1161 allows eminent

domain authority to vest in pipeline companies upon the approval of the Governor, no

further action by the State Defendants remains to be enjoined. In other words, because

this litigation was not resolved, and an injunction was not issued, prior to Governor

Heineman’s unlawful January 22, 2013 act, then the Plaintiffs are without remedy and

unconstitutional actions can stand.

10. If LB1161 is deemed unconstitutional, the Governor’s route approval is

unconstitutional and his approval as a trigger vesting eminent domain rights in pipeline

companies is also unconstitutional. If the grant of eminent domain authority is

unconstitutional no exercise of this authority is possible. If LB1161 is unconstitutional,

then all acts flowing from it, including eminent domain rights vested in a pipeline

company, are also unconstitutional. Plaintiffs have consistently argued LB1161

unlawfully delegates to the Governor the authority and responsibility of deciding who

may exercise the power of eminent domain. Original Complaint May 23, 2012 at 3.2,

13.3. This is the direct challenge to the Governor’s purported power under LB1161 to

issue a route approval letter.

II. Plaintiff’s Request for Declaratory Judgment Declaring the Governor’s January 22, 2013 Actions Predicated upon LB1161 are Unconstitutional, Null, and Void is Not Moot.

11. Defendants argue Plaintiffs’ request for declaratory judgment declaring

Governor Heineman’s actions of January 22, 2013, which are predicated upon LB1161,

and are not authorized by any other law, unconstitutional, null and void, is moot.

12. Defendants, again, ignore the fact Plaintiffs sought Declaratory Judgment

in their initial Complaint, Complaint ¶¶ 1, 5, 14, 19.1 & 19.2, and again, reference to the

January 22, 2013 letter is simply the latest act by the Defendants in carrying out the

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constitutionally infirmed provisions of LB 1161. Again, Defendants hope without

providing any authority in support, that because this litigation has not been resolved prior

to Governor Heineman’s January 22, 2013 action, then even if LB1161 is deemed

unconstitutional and stricken acts of those under the auspice of LB1161 are somehow

constitutional.

13. Defendants cite to Rath suggesting “the Court must determine whether

there is an actual controversy at the time declaratory relief is sought.” Def Br. At 6.

Plaintiff’s sought declaratory relief on May 23, 2012 and have every day since. If the

Court ultimately determines LB1161 is unconstitutional then the acts of the Governor

under LB1161 are de facto unconstitutional and the Court can declare the same. Because

this relief can be granted it is inappropriate to dismiss Plaintiffs request for declaratory

relief as moot.

III. Plaintiffs’ Claim that LB1161 Authorizes an Unlawful Pledge of State Credit Survives Defendants’12(b)(6) Challenge.

14. Neb Const Art XIII, §3 prohibits the State from pledging its credit or

loaning funds:

The credit of the state shall never be given or loaned in aid of any individual, association, or corporation, except that the state may guarantee or make long-term, low-interest loans to Nebraska residents seeking adult or post high school education at any public or private institution in this state. Qualifications for and the repayment of such loans shall be as prescribed by the Legislature. (emphasis added).

LB1161 violates this constitutional mandate.

15. “In summary, article XIII, § 3, seeks to prevent the state from loaning its

credit to an individual, association, or corporation with the concomitant possibility that

the state might ultimately pay that entity's obligations.” Japp v. Papio-Missouri River

Natural Res. Dist., 273 Neb. 779, 788, 733 N.W.2d 551, 558 (2007). Here, there is a

concomitant possibility that the State, and its taxpayers, might ultimately pay for the

costs associated with evaluating a pipeline. This is exactly what LB1161 directs. The

State will advance and pay for costs that would never have occured but for the pipeline

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companies application and request for a route determination.

16. The expenditure and extension of credit to a private pipeline company,

engaged in private business, is the exact issue underlying the purpose of Neb Const Art

XIII, § 3 and similar constitutional provisions in other states:

The purpose of this constitutional provision, which appears in some form in most states, was set forth in State v. Northwestern Mutual Insurance Co., 86 Ariz. 50, 340 P.2d 200 (1959), quoting from Thaanum v. Bynum Irr. Dist., 72 Mont. 221, 232 P. 528 (1925):

“ ‘It represents the reaction of public opinion to the orgies of extravagant dissipation of public funds by counties, townships, cities and towns in aid of the construction of railways, canals, and other like undertakings during the half century preceding 1880, and it was designed primarily to prevent the use of public funds raised by general taxation in aid of enterprises apparently devoted to quasi public purposes, but actually engaged in private business.’ 86 Ariz. at 53, 340 P.2d at 201. (Emphasis in original.)”

Haman v. Marsh, 237 Neb. 699, 719, 467 N.W.2d 836, 850 (1991). Here, there are

public funds at issue to aid an enterprise devoted to a quasi public purpose, but actually

engaged in private business. This allegation standing alone is sufficient to suggest the

Plaintiffs raise a theory upon which relief may be granted. Defendants would have the

court believe Plaintiffs at the pleading stage must prove an unlawful pledge of state credit

– this is not so.

17. Defendants cite no authority for the proposition that a government

expenditure of public funds for the benefit of a private corporation that may be

reimbursed by the private corporation subsequent to the expenditure of the public funds is

not an “expenditure.”

18. Contrary to Neb Const Art XIII, § 3, LB1161 § 7 pledges interest-free

funds and credit of the State in aid of pipeline corporations for at least sixty (60) days

under the hope the pipeline applicant later repays the State Treasury. The State’s pledge

to advance funds is clearly in aid of the corporation in that the funds and credit advanced

would otherwise be debts of the pipeline company for expenses and fees incurred during

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the route evaluation process of the companies proposed route.

19. LB1161 § 7; Neb Rev Stat § 57-1503(1)(b) provides: A pipeline carrier…shall reimburse the department for the cost of the evaluation or review within sixty days after notification from the department of the cost. The department shall remit any reimbursement to the State Treasurer…

20. Prior to a pipeline carrier being asked to reimburse the Treasurer for monies

advanced and debts paid on its behalf, such expenditures and advances must have

occurred. Therefore, unless the State is advancing its credit or funds in further aid of the

pipelines evaluation process there would be no reason to seek reimbursement.

21. In furtherance of this extension of credit LB1161 §8 appropriates

“$2,000,000 … for Program 513, to aid in carrying out the provisions of Legislative Bill

1161….” Plaintiffs challenge this unlawful expenditure and the evidence at trial will

show the total expenditures have exceeded the $2,000,000 wrongfully appropriated sum

by approximately $4,000,000. There was no prior appropriation, constitutional or

unconstitutional, of this nearly $4,000,000 additional State payment for the benefit and in

aid of a pipeline company.

22. LB1161 advances state funds and puts the state in the position of debtor to

third party service providers hired to evaluate the pipeline company’s application

exclusively in aid and sole benefit of the private pipeline corporation. In this Motion to

Dismiss setting, Plaintiffs need only “allege sufficient facts, accepted as true, to state a

claim for relief that is plausible on its face.” Cent Nebraska Pub Power & Irrigation Dist

v Jeffrey Lake Dev, Inc, 282 Neb 762, 764-65, 810 NW2d 144, 147 (2011). These facts

are so alleged.

Conclusion

23. Plaintiffs have standing to litigate this case, their requests for injunctive and

declaratory relief are not moot and they state claims upon which relief may be granted.

Plaintiffs respectfully request the Court to overrule Defendants’ Second Motion to

Dismiss, to allow this case to continue to trial, and to grant any other relief the Court

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finds just and equitable.

April 26, 2013 Randy Thompson, Susan Luebbe, and Susan Dunavan, Plaintiffs

By: David A Domina # 11043 Brian E Jorde # 23613 Jeremy R. Wells, #24897 Domina Law Group pc llo 2425 S 144th St. Omaha NE 19144-3267 402-493-4100 ddomina@dominalaw.com Plaintiffs’ Lawyers

Certificate of Service

On April 26, 2013, a copy of Plaintiffs’ Brief in Opposition to Defendants’ Motion to Dismiss Plaintiffs’ Second Amended Complaint was served by email to:

Jon Bruning, #20351 Attorney General

Katherine J. Spohn, #22979 Special Counsel to the

Attorney General

Ryan S. Post, #24714 Assistant Attorney General

2115 State Capitol Lincoln, NE 68509-8920

Tel: (402) 471-2834 Katie.Spohn@nebraska.gov

Ryan.Post@nebraska.gov