Part II: JobsOhio- Why the Ohio Supreme Court Should Not Abandon the Sheward Public-Right Exception

Author: Cameron Downer, Associate Member, University of Cincinnati Law Review

On November 6, the Supreme Court of Ohio heard oral arguments in the case of ProgressOhio.org, Inc. v. JobsOhio.[1] With this case, the Supreme Court of Ohio has the opportunity to reinforce or abandon the public right exception to standing. Although some people think the public-right exception should be abandoned, the exception acts as a safeguard for Ohioans. Without the public right exception, legislative acts that fundamentally alter the structure of the state government could go unchallenged; such is the case with JobsOhio.

The following rebuttal assumes the facts and background on standing laid out in Chris Tieke’s article, Part I: JobsOhio- The End of Sheward and the Public-Right Exception to Standing, on why the Supreme Court of Ohio should abandon the public right exception to standing.

Additional Background Information

The JobsOhio Act was signed into law on February 18, 2011, by Governor John Kasich. The purpose of the act is to dismantle the Ohio Department of Development and replace it with the quasi-private corporation JobsOhio. The corporation is primarily funded through state liquor sales that stem from a 25 year, 1.4 billion dollar lease.[2]

In March 2013, State Auditor Dave Yost subpoenaed records from JobsOhio to audit the proceeds from the liquor bond sales. In response, JobsOhio and Governor Kasich argued that the auditor was seeking access to records from a private corporation that did not deal with state dollars and accused Yost of overstepping his authority.[3] In reaction to the subpoena, Republican lawmakers rapidly approved a bill that prevented Yost from auditing JobsOhio. In essence, the bill designated the profits JobsOhio receives from liquor sales as “private money” and therefore out of the State’s authority to audit. Yost and Democratic lawmakers opposed the bill because, they argued, the bill changed the long-standing definitions of “public funds” and “private funds” in the Ohio Revised Code.[4]

Yost was, however, able to conduct a compliance report—essentially a mini-audit—of JobsOhio for the fiscal year of June 2011 to June 2012. [5] In his report, Yost stated that JobsOhio corporate credit cards were being used for personal expenses and that the corporation failed to document thousands of dollars in expenses. Overall, Yost found over $68,000 in questionable expenditures.[6]

More controversy arose after a report revealed that Governor Kasich and several JobsOhio board members had direct financial ties to companies that received tax credits from JobsOhio.[7] As a result of the report, the Ohio Ethics Commission stepped in and began an investigation. The commission not only found potential conflicts of interest, but also that that JobsOhio board members, who are required to disclose potential conflicts under JobsOhio policy, failed to make a single disclosure.[8]

The great question that remains is whether JobsOhio violates the Ohio Constitution, specifically, Article VIII, sections 4 and 6, which prohibits the state funding of private enterprise in order to prevent fraud, corruption, and misuse of funds.[9] Ohioans deserve an answer to that question but will not receive one if Sheward is abandoned.

Should Sheward Survive?

Yes, the Sheward public-right exception to standing is crucial to safeguard Ohioans’ right to challenge the General Assembly. A more restrictive standing requirement will prohibit some legislative acts from being challenged.[10] Furthermore, to eliminate the public-right exception due to a fear that it opens the floodgates of frivolous lawsuits is weak in light of the strong public interest in keeping it.

An Essential Safeguard

The Supreme Court of the United State’s landmark decision in Marbury v. Madison made clear that it is the role of the judiciary to determine “what the law is” and what comports with the Constitution.[11] Keeping in line with the spirit of Marbury v. Madison, the Supreme Court of Ohio in Sheward reiterated that the judiciary stands as a check on the General Assembly even in certain instances that lack traditional standing.[12] Without Sheward, the Ohio judiciary would be powerless to rule on certain legislative acts because no one could bring suit even if there was a likely constitutional violation. Therefore, Sheward standing must continue to be recognized so acts that likely violate the constitution, like JobsOhio[13], can be challenged.

By creating JobsOhio, the General Assembly dismantled the public Department of Development and shifted its responsibilities to an arm of the state government, funded by tax dollars, but whose use of funds was made “private.”  This manipulative definition change has blurred the lines between public and private funds and blocked future state audits, thereby preventing JobsOhio from being held accountable. Without the Sheward public right exception to standing, JobsOhio, and other legislative acts, would be virtually insulated from constitutional challenge, stripping both Ohioans and the judiciary of essential check on the General Assembly.[14]

The very structure of JobsOhio largely prevents the injury requirement to traditional standing from ever manifesting. Specifically, it would be hard to imagine an individual or entity being injured by a private corporation that distributes tax credits to promote economic development. The only foreseeable injury JobsOhio may inflict on Ohioans is misallocating taxpayer funds. However, this broad injury would not suffice under traditional standing which demands a personalized injury that is distinct from an injury inflicted on the general population. Therefore, the Sheward public-right exception is needed to safeguard Ohioans’ right to challenge certain legislative acts, such as JobsOhio, that are likely in violation of the Constitution and affect the general public in a way that largely prevents traditional standing.

The “Floodgates” Concern

The concern that reinforcing the Sheward public-right exception to standing will open the floodgates or “lead to a race to the courthouse”[15] is weak. Most states recognize a type of public interest standing in matters that involve great public concerns that would otherwise go unchallenged. These states, including Ohio, have not experienced clogged courts due to the exception to standing. [16] In addition, the Federal and Ohio Rules of Civil Procedure have checks in place to dispose of frivolous lawsuits. For example, if someone brings claim against a legislative act by simply stating that the act is “unconstitutional” without any particularity, a Rule 12(B)(6) motion would quickly dismiss the claim.[17] In addition, Rule 11 deters attorneys from signing complaints that have no merit through the threat of disciplinary action.[18] Therefore, the public-right exception should not be abandoned based upon the concern that the exception would lead to a flood of frivolous litigation.

Conclusion

Therefore, the Sheward public right exception needs to stay alive to lend standing to cases, such as JobsOhio, that are of great interest to the public and would otherwise be insulated from challenge under the Ohio Constitution.


[1] ProgressOhio.org, Inc. et al. v. JobsOhio et al., 134 Ohio St.3d 1416 (Ohio Ct. App. 2012).  Ohio Governor John Kasich was included as a defendant in this case.

[2]  Mark Niquette, Ohio to Get $1.4 Billion from Development Agency’s Bond Sale, Bloomberg News (Jan. 23, 2012) http://www.bloomberg.com/news/2012-01-23/ohio-will-use-1-4-billion-from-revenue-bond-sale-for-development-agency.html.

[3] Robert Higgs, JobsOhio Complies with Ohio Auditor Dave Yost’s Records Subpoena but Still Disputes Auditor’s Legal Authority, The Plain Dealer (March 19, 2013) http://www.cleveland.com/open/index.ssf/2013/03/jobsohio_complies_with_ohio_au.html.

[4] Jim Siegel, Senate Follows House in Quickly Passing Bill to Block Public Audit of JobsOhio, The Columbus Dispatch (May 31, 2013) http://www.dispatch.com/content/stories/local/2013/05/30/Yosts-asks-for-more-time-as-Senate-considers-JobsOhio-auditing-proposal.html.

[5] John Michael Spinelli, State Audit Delivers Glancing Blow to Kasich’s Jobs Group JobsOhio, The Examiner (Nov. 22, 2013) http://www.examiner.com/article/state-audit-delivers-glancing-blow-to-kasich-s-jobs-group-jobsohio.

[6]Jim Provance, Ohio Auditor Scolds Kasich Job-Creation Entity for Conflict Handling after Subpoena Fight, The Toledo Blade (Nov. 21, 2013)  http://www.toledoblade.com/State/2013/11/21/Ohio-auditor-clears-Kasich-job-creation-entity-of-financial-conflicts-after-subpoena-fight.html; See also Dan Horn and Chrissie Thompson, Audit Finds Accounting Problems at JobsOhio, The Cincinnati Enquirer (Nov. 22, 2013)
http://news.cincinnati.com/article/20131121/NEWS010801/311210053/Audit-finds-accounting-problems-JobsOhio.

[7] Henry J. Gomez, Ed FitzGerald Calls on Ohio Ethics Commission to Investigate JobsOhio for Possible Conflicts, The Plain Dealer, (Aug. 01, 2013) http://www.cleveland.com/open/index.ssf/2013/08/ed_fitzgerald_calls_on_ohio_et.html.

[8] Darrel Rowland, Ethics Commission Finds Possible Conflicts of Interest with JobsOhio Employees, (Sept. 26, 2013)
http://www.dispatch.com/content/stories/local/2013/09/25/JobsOhio-conflict-of-interest.html; See also John Patrick Carney, Potential Conflicts of Interest at JobsOhio Raise Red Flag, The Ohio House of Representatives (Sept. 27, 2013) http://www.ohiohouse.gov/john-patrick-carney/press/potential-conflicts-of-interest-at-jobsohio-raise-red-flag.

[9] Sarah Oshmer, Faster. Cheaper. Unconstitutional: Why the Public’s Subsidy of JobsOhio Violates Article VIII, Sections 4 & 6 of the Ohio Constitution, 62 Case W. Res. 919, 920-21 (2012).

[10] John Dimanno, Beyond Taxpayers’ Suits: Public Interest Standing in the States, 41 Conn. L. Rev. 639, 640 (2008).

[11] Marbury v. Madison, 5 U.S. 137 (1803).

[12] See generally Christopher M. Winter, Judicial Review—The Ohio Supreme Court Reaffirms Its Right to Declare Statutes Unconstitutional. State Ex Rel. Ohio Academy of Trial Lawyers v. Sheward, 715 N.E.2d 1062 (OHIO 1999), 31 Rutgers L.J. 1468 (2000).

[13] See generally Oshmer, supra note 9.

[14] In the case of JobsOhio, the General Assembly specifically tried to prevent a constitutional attack by inserting a statute of limitation that states, “. . . any claim asserting that [the JobsOhio Act] violates any provision of the Ohio Constitutional shall be brought in the court of common pleas of Franklin county within ninety days…” Ohio Revised Code 187.09.

[15] Chris Tieke, Part I; The End of Sheward and the Public-Right Exception to Standing?, The University of Cincinnati Law Review (Jan. 9, 2014) https://uclawreview.org/2014/01/09/part-i-the-end-of-sheward-and-the-public-right-exception-to-standing/.

[16]Dimanno, supra note 10, at 640; See also Brief for Appellants at 21-26 , ProgressOhio.org, Inc. et al. v. JobsOhio et al., 134 Ohio St.3d 1416 (Ohio Ct. App. 2012) (No. 2012-1272) (citing South Carolina, Maryland New Jersey, Arizona, Indiana, Nebraska, Washington, Utah, Colorado, Alaska, Mississippi, and Wyoming Supreme Court cases that lend a type of public-right standing).

[17] See Ohio R. Civ. P. 12(B); Fed. R. Civ. P. 12(b).

[18] See Ohio R. Civ. P. 11; Fed. R. Civ. P. 11.

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