Police Officers Are Entitled to Qualified Immunity
Introduction: Kong v. City of Burnsville, is a case involving qualified immunity, a subject that is a lot in the news. Local government officials are trying to decide how to protect the doctrine of qualified immunity, while others are trying to abolish this court created doctrine, which protects police officers. A very strong dissent this case illustrates the clash of ideas that come into play while we debate whether or not qualified immunity needs to be abolished or modified. The opinion written by Judge Benton is a masterpiece that reverses a district court decision denying qualified immunity and found that the officers were also entitled to official immunity under Minnesota law, a defense similar to Missouri law.
Facts and Procedure: At 6:16 a.m. on March 17, 2016, dispatch alerted officers Taylor Jacobs and John Mott about “suspicious activity” in a McDonald’s parking lot. The dispatcher said a man had been parked there for over half an hour, “jumping up and down inside his car,” “waving a knife back and forth.” The dispatcher added it was unknown if he was alone in the car. The sun had not risen when officers Jacobs and Mott arrived around 6:22 am at the McDonald’s. It faced the frontage road and the four-lane highway; weekday traffic moved steadily, interrupted by stop signs on the frontage road and stoplights on the highway.
Kong sat in the driver’s seat, windows rolled up, rocking back and forth, slashing a large knife through the air in front of him. The officers pointed their firearms and flashlights at him, repeatedly shouting “drop the knife” and “let me see your hands.” Officer Jacobs told Kong he was under arrest. Kong did not comply or cease his “abnormal” motions. Both officers later stated that, at the scene, they thought Kong was high on methamphetamines. Officer Lynrae Tonne arrived, parking in the space facing Kong’s car to block him in from the front. Kong continued to “occasionally burst into frantic fits of gyrations and knife waving.” Awaiting backup, the officers discussed what to do next. Officer Jacobs called for a medic to be staged nearby. He also asked if anyone was “laying down or hurt or injured in the back” of Kong’s car. The officers could not see through the fogged back windows. Officer Jacobs said, “I’m just afraid he’s got a gun in the car.”
McDonald’s customers continued to drive through, immediately behind Kong’s car. The officers’ body cameras recorded 13 vehicles moving through the parking lot during the encounter with Kong. Officer Jacobs moved his vehicle behind Kong’s car to block him in (also slowing the drive-through traffic).
Officer Mott radioed that any additional units should completely block off traffic entering the parking lot. Sergeant Maksim Yakovlev arrived, parking his vehicle at the frontage entrance, lights flashing, but not completely blocking it. Officer Jacobs told him Kong was “contained,” but the officers should consider breaking a window and tasing him in case “he hops out of that car.” Sergeant Yakovlev suggested they “figure out if he’s by himself there first.” Officer Jacobs then broke Kong’s back passenger window, instructing the others, “Look for any guns.” Officer Jacobs next broke Kong’s front passenger window. The officers repeatedly yelled, “Drop the knife.” Kong did not respond. Officer Jacobs yelled, “Taser, taser,” firing his taser at Kong. Id. Kong squealed—high pitched, distressed. He did not drop his knife or stop bouncing up and down in his seat. Kong then swung his knife closer to the broken passenger-side window where officer Jacobs stood. Jacobs tased him again. Kong fell back in his seat.
Right after the second tasing, Kong stumbled out the driver-side door, falling to the pavement. He quickly stood up, knife in hand, and began running across the parking lot toward the frontage road and highway, away from the officers and McDonald’s. Within seconds, officers Mott, Jacobs, and Yakovlev shot him from the back and side, firing at least 23 bullets. Fifteen bullets hit Kong, killing him instantly around 6:29 am.
As the officers fired their guns, a customer’s vehicle exited the parking lot about 30 feet away. Kong ran in the general direction of the vehicle, although not at it in particular. Kong ran toward the frontage road and highway. During the shooting, a few cars passed by along the frontage road, 100 feet away. Steady traffic continued on the highway beyond.
The Trustee sued the City of Burnsville and officers Yakovlev, Mott, and Jacobs. The Trustee asserts claims under (1) 42 U.S.C. § 1983 for excessive force and (2) Minnesota law for negligent failure to follow Burnsville police department policies. The district court denied the defendants’ motion for summary judgment and qualified immunity.
Defendant’s appealed to the 8th Circuit.
Analysis – Legal Framework for Qualified Immunity: The officers assert qualified immunity against the Section 1983 claim. The Court noted that under the law the officers are entitled to qualified immunity unless (1) the facts show a violation of a constitutional right, and (2) the right was clearly established at the time of the misconduct.
First, the Court examines the legal framework to examine the excessive force claim. Qualified immunity is a fact intensive inquiry involving split second decisions by officers who may be acting in a very rapidly situation about the amount of force required to bring the situation under control. Besides particular attention to the facts it is necessary to consider “…the severity of the at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether he is actively resisting arrest or attempting to evade arrest by flight.”
The reasonableness of the officers’ actions “must be judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight,” allowing for judgments made, in circumstances that are tense, uncertain, and rapidly evolving, about the amount of force that is necessary in a particular situation. Qualified immunity “protects all but the plainly incompetent or those who knowingly violate the law.”
Application of Law to Facts: In determining if qualified immunity applied the Court applied a meticulous fact intensive fact inquiry focusing on the need to make split second decisions in a chaotic situation, in order to protect the public, while using deadly force. Case law does not make it clear the officers could not use deadly force. It was reasonable to believe under the circumstances (the facts) that Kong could kill or seriously injure officers or others.
“While pointing their handguns at Kong’s car, the officers continually warned each other about “crossfire” hitting an officer or citizen, in or out of a vehicle, by firing at the wrong angle. If the officers waited, a car might block their line of fire or bystanders get too close for them to fire. In fact, a bullet that missed Kong lodged in the bumper of a vehicle pulling out of the parking lot 30 feet away. When Kong began running through the occupied parking lot, toward the frontage road and highway, the officers “were forced to make a split-second judgment in circumstances that were tense, uncertain, and rapidly evolving.”
The Court also sustains the state law defense of official immunity since the officers were exercising their judgment. Kong v. City of Burnsville, (8th Cir., 19-1101, 05/29/20)
Comment Howard: Judge Benton paints a beautiful picture, with very fine strokes, tied to the record, showing all of the interactions that were going on while the officers tried to bring this matter under control while making split second decisions. Seemingly the officers did everything possible to disarm Kong, who clearly was having some sort of mental breakdown. This opinion would be my #1 choice if I was drafting an argument to support qualified immunity. As I said earlier it is a masterpiece.
The dissent also does a good job of arguing against qualified immunity. Even though our natural reaction is to vigorously defend qualified immunity to protect police officers we need to recognize things are changing and out of all of the current chaos new ground may be plowed, whether we like or not.
Some Fundamentals of Drafting and Examining Ballot Titles
Introduction: Periodically, as local government attorney’s, we are asked to draft and review ballot titles that will be submitted to the voters. Pippens v. Ashcroft, provides a good framework for this task, even though it involves the State of Missouri.
Facts and Procedure: The General Assembly passed Senate Joint Resolution 38 (“SJR 38”), in 2019, which proposes amendments to the Missouri Constitution concerning legislative redistricting, campaign contribution limits, and lobbyist gifts. SJR 38, amends the constitutional amendment approved by the voters in November of 2018. The ballot title submitted with the proposed constitutional amendment was drafted by the General Assembly and will appear on the November 3, 2020, general election ballot as Amendment No. 3, as modified by the Courts opinion in this case.
A group of eight Missouri citizens (the “Challengers”) filed suit against the Secretary of State and other State officials in the Circuit Court of Cole County to challenge the official summary statement for SJR 38 drafted by the General Assembly. The circuit court agreed with the Challengers that each of the three bullet points in the official summary statement was unfair and insufficient; the circuit court rewrote the summary statement, and certified to the Secretary of State an alternative statement for inclusion on the ballot, which was challenged by filing an appeal with the Western District.
Analysis: The western District noted that the 2018 Amendment to the Missouri Constitution to create an independent reapportionment body gained some national interest after being mentioned by the United States Supreme Court as a forward way of dealing with reapportionment, while the United States Supreme Court bowed out of partisan fights over reapportionment. In other words, reapportionment is a political issue no longer subject the jurisdiction of the United States Supreme Court, leaving the battleground over this contentious issue to the states.
The legislature drafted the Amendment No. 3 and prepared the ballot title, which read as follow:
Shall the Missouri Constitution be amended to:
- Ban all lobbyist gifts to legislators and their employees;
- Reduce legislative campaign contribution limits; and
- Create citizen-led independent bipartisan commissions to draw state legislative districts based on one person, one vote, minority voter protection, compactness, competitiveness, fairness, and other criteria?
Requirements for Fair Ballot Title :The Western District noted that ballot title must provide enough information to make the voter aware of the subject and purpose of the initiative and allow the voter to make an informed decision as to whether to further investigate the initiative. The language must fairly summarize the proposal in a way that is impartial and does not deceive or mislead voters. The use of broad, over-inclusive language is acceptable and does not run contrary to the requirements that the summary be a concise statement using language neither intentionally argumentative nor likely to create prejudice either for or against the proposed measure. The omission of proposed changes will not render the ballot summary insufficient, if they are not central features of the proposed amendment. The Western District concluded sometimes it is necessary for the ballot title to provide a context reference that will enable voters to understand the effect of the proposed change.
The Challenge to the Ballot Title: With the above principles in mind the Western District examined the ballot title to determine if it was an impartial, intelligible, and accurate summary of the central purpose and effects of the proposed measure.
The Challengers contended that first bullet of the summary is insufficient and unfair because SJR 38 merely “reduce[s] the five-dollar limit on de minimis gifts to zero,” while leaving in place exceptions to the gift restrictions for unpaid lobbyists, and the exception for “gifts [to legislators or their staffs] and those related to them by blood or marriage. This was determined to be inaccurate because it did not eliminate all gifts but was easily corrected by the Western District deleting the word “all” from the ballot title.
With respect to the second bullet the Court concluded that it could stand as written because it did reduce campaign contributions.
The third bullet, however was misleading because it failed to inform voters that SJR 38 eliminated the office of the Nonpartisan State Demographer, which was Missouri’s primary defense against partisan gerrymandering, while falsely claiming that the Commissions would be ‘independent,’” when the commissions “would in fact comprise individuals with partisan interests who were hand-selected by the State’s political parties and elected officials.” The elimination of the office of Nonpartisan State Demographer, was central and one of the primary features of the redistricting process adopted by voters in 2018; therefore, the third bullet in the ballot title did not accurately reflect the purpose of the Amendment and had to be rewritten to show that adoption of the amendment would eliminate the post of Nonpartisan State Demographer and replace it with a bipartisan commissions. The western District rewrote the ballot title as follows:
“Shall the Missouri Constitution be amended to:
- Ban gifts from paid lobbyists to legislators and their employees;
- Reduce legislative campaign contribution limits;
- Change the redistricting process voters approved in 2018 by: (i) transferring responsibility for drawing state legislative districts from the Nonpartisan State Demographer to Governor-appointed bipartisan commissions; (ii) modifying and reordering the redistricting criteria.”
In identifying deficiencies in a ballot summary, the Western District modified the existing language in the most limited fashion possible as required by case law and did not revise the order of the bullet points. Pippens v. Ashcroft, (WD83963. 08/31/20)
Comment Howard: The legal framework for examining ballot titles is well established. Municipal attorneys would do well to follow these guidelines. We learned that it is better to have a broad sweeping statement, which will usually be upheld rather than narrow language, which if not precise can easily be struck, if the language does not accurately describe the ballot title. I also felt strongly that the Court should have kept the order of the bullet points certified by the trial court; after all the central idea of the legislative ballot was to leave the voters in the dark about the real purpose. The first two bullet points are simply window dressing to get the voter to bite without reading the heart of the proposal.
In Case of First Impression Western District Holds That Under Missouri Law Probable Cause Supporting A Criminal Charge For One Crime Does Not Foreclose A State-Law Malicious Prosecution Claim As To Other Charges.
Facts and Procedure: Several police officers from the City of Columbia police department (Officers) were conducting a routine business check at the Fieldhouse, a bar in downtown Columbia, Missouri, when an altercation occurred between Daniels and Brock Gettemeier, a Fieldhouse bouncer. Daniels and the Officers disagreed about how the altercation arose, developed, and progressed and as to whether Daniels acted aggressively. Some of the Officers responded to the altercation, and a fight broke out. During the fight, one of the Officers was struck in the face and responded by using his Taser on Daniels.
Daniels was arrested and, he was charged by information with three offenses: (1) Class B misdemeanor of trespass in the first degree under § 569.140;1 (2) Class A misdemeanor of assault of a law enforcement officer in the third degree under § 565.083; and (3) Class A misdemeanor of resisting arrest under § 575.150.
The assistant prosecuting attorney assigned to the case entered a nolle prosequi showing a docket entry to that effect. Daniels subsequently filed a federal lawsuit in the U.S. District Court for the Western District of Missouri against the Officers, and others, asserting claims for violation of Daniels’s constitutional rights in connection with his arrest. Daniels’s federal complaint also asserted state-law claims for battery, conspiracy to commit battery, false imprisonment, malicious prosecution, and conspiracy to commit malicious prosecution.
The federal district court granted summary judgment in favor of all defendants on all of Daniels’s federal claims, finding that probable cause existed for Daniels’s arrest for resisting arrest under federal standards and, alternatively, that the Officers were entitled to qualified immunity and that the use of force was objectively reasonable. The federal court declined to exercise supplemental jurisdiction over Daniels’s state-law claims, instead dismissing them without prejudice.
Following dismissal of his federal lawsuit, Daniels filed a petition in the underlying action, asserting state-law claims for malicious prosecution, false imprisonment, battery, and negligent supervision. The Officers moved for summary judgment on all four claims, asserting collateral estoppel/issue preclusion, res judicata/claim preclusion, qualified immunity, official immunity, and failure to state a claim upon which relief may be granted. With respect to malicious prosecution, the Officers challenged two essential elements of Daniels’s prima facie case, termination of the criminal prosecution in his favor and probable cause to initiate the prosecution. Sergeant Cornman also challenged the additional element that she did not instigate the prosecution of Daniels.
The trial court held a hearing on the Officers’ motions. Following the hearing, the court granted summary judgment in the Officers’ favor on all claims, without entering findings of facts or conclusions of law or otherwise indicating why it granted the motion. Daniels appealed to the Western District.
Analysis – Malicious Prosecution Claim: First, the Court listed the elements necessary to prove a malicious prosecution case:
“(1) the commencement or prosecution of the proceedings against [him]; (2) its legal causation or instigation by [the Officers]; (3) its termination in [Daniels’s] favor; (4) the absence of probable cause for such proceedings; (5) the presence of malice therein; and (6) damages by reason thereof.”
The plaintiff must prove each one of the elements of malicious prosecution by strict and clear proof, otherwise the claim fails. Daniels argued that the trial court erred in granting the motion for summary judgment because there were issues of material fact concerning whether or not the prosecution was terminated in his favor and whether or not the officers had probable cause to instigate the prosecution. Malicious prosecution actions are not favored in the law as public policy supports uncovering and prosecuting crime; therefore, courts require strict compliance with the requisite elements.
Was the Prosecution Terminated In Daniels Favor: Daniels argued that the underlying criminal charges against him were terminated in his favor when the prosecutor nolle prosequi the charges in the plaintiffs’ favor. The Officers argued in addition to the nolle prosequi of the charges there must be proof that the dismissal is coupled with the intent of the prosecutor to finally abandon the prosecution. Daniels argued that the prosecutor testified that he did not have any intent to refile the charges but could do so at any time within the SOL but would not, unless there was some new evidence. Daniels argued that the intent of the prosecutor was a fact question; therefore, summary judgment was not appropriate. The Court agreed and remanded the case to the trial court for further action.
Daniels further argued that a finding of probable cause to prosecute him on the resisting arrest, did not preclude his malicious prosecution claim on the other two charges, trespass and assault of a law enforcement officer. The Western District Court deviated from the federal rule finding that under Missouri law that probable cause supporting a criminal charge for one crime does not foreclose a state-law malicious prosecution claim as to other charges. The Western District, in a case of first impression, concluded, that the evidence supporting the resisting arrest charge showed there was a significant factual dispute; therefore, it remanded the case for further proceedings, citing the general rule that “…the majority of other courts that have addressed this issue have required probable cause for each offense before denying a claim for malicious prosecution for lack of probable cause.” Daniels v. Terranova, (WD82785, 08/18,20)
Comment Howard: Malicious prosecutions cases have been a rarity but this case exponentially increases the likelihood that we will be seeing a lot more of these cases. My experience has been that it is very common for a prosecutor to nolle prosequi, without giving this a second thought. In addition, whether or not the prosecutor intended to abandon further prosecution, is a fact question that depends on the intent of the prosecutor. Good luck in getting untangled from this mess. This combined with the elimination of the federal rule, by now requiring that each case stand on its own with respect to proof of probable cause is a double whammy creating the likelihood we will see more of these cases. FN #11 makes a very important point in that the standard for probable cause to arrest is different from probable cause to institute charges.
Probable cause to prosecute “…is reasonable cause and may be defined as the existence of such a state of facts as would warrant an ordinarily cautious and prudent person in the belief that the accused was guilty of the offense charged.” This is determined at the time when charges are filed.
Political Signs And Home Owners Regulation:
The September 14, 2020, Edition of Missouri Lawyers Weekly has an interesting article on limitations on the display of political signs subject to Home Owner Association rules by Candace Johnson and Stephen Davis citing 2018 legislation by the General Assembly. Interesting and well worth the read.
All Deputy Sheriffs Are Policy Makers And May Be Dismissed By New Sheriff For Supporting Opponent In Election
Facts and procedure: The Christian County Commission scheduled a special election on August 4, 2015, to elect a new sheriff after Sheriff Joey Kyle resigned from office after pleading guilty to violating federal law. Four candidates ran for sheriff in the general election, including Brad Cole (Republican candidate) and Keith Mills (independent candidate). Mills was the only candidate who was employed by the Sheriff’s Office.
Between Kyle’s resignation and the election, Dwight McNiel served as the interim sheriff. As the only internal candidate, Mills had the support of many of the Sheriff’s Office’s employees. Deputy Sheriff Robert Curtis publically endorsed Mills. In support of Mills, Curtis talked to people, knocked on doors, handed out literature, posted on Facebook, and put up a yard sign at his residence. Like Curtis, Deputy Sheriff Tim Bruce also publically supported Mills for sheriff. In support of Mills, Bruce posted on Facebook, told friends and family to vote for Mills, and loaned Mills a flatbed trailer for Mills to use in a public parade. Bruce also told three or four people in the Sheriff’s Office that “[i]f you elect Brad Cole[,] you’re trading one crook for another.” Bruce and Cole did not get along. Bruce “never made any bones about [his] feelings for Brad Cole.”
One week before the election, McNiel told Bruce that he “need[ed] to be on the right side to keep [his] job and the right side is Brad Cole.” One of McNiel’s interim command staff members, Steve Haefling, made “similar comments 2 or 3 times about supporting the right candidate for 2 to 3 weeks before the election.” And, prior to the election, Cole would come to the Sheriff’s Office and meet with the interim staff, after which “the interim staff would state that the deputies had a one in four chance of keeping their jobs.” Cole won the election and the day after the election Bruce called Cole to discuss his employment. Bruce was concerned about his job based on what McNiel and Haefling had told him. Bruce told Cole that he had supported his opponent, Mills. He also asked Cole about the rumor that Cole was going to fire employees who had supported Mills. Cole replied that he would not fire Bruce.
Cole assumed the duties of sheriff and terminated both Curtis and Bruce. At that time, Curtis was a sergeant supervising the Sheriff’s Office’s information technology department, and Bruce worked as a detective. Cole knew both Curtis and Bruce had supported Mills at the time that he fired them. Both Curtis and Bruce had been promoted to their respective positions of sergeant and detective by Cole’s predecessor just months prior to their termination.
Bruce and Curtis filed Section 1983 complaints alleging that Cole, the newly elected sheriff, discharged them for political reasons in violation of their First Amendment rights. Cole argued that political loyalty is an appropriate requirement under Missouri law; therefore, he did not violate Bruce’s and Curtis’s constitutional rights in discharging them. The district court denied qualified immunity for Cole and he appealed to the 8th Circuit.
Analysis: A three judge panel overruled the district court concluding that deputy sheriffs in Missouri hold policy making positions for which the political loyalty is necessary, adopting the position of the 4th and 11th Circuits.
Missouri sheriffs are elected and the “interplay between the voters, the sheriff and his policies, and the role of deputies in implementation of policy” demonstrates “that political affiliation and loyalty to the sheriff are appropriate job requirements.” Missouri deputy sheriffs, are at-will employees, who assist the sheriff in the performance of his duties are liable for their deputies’ actions and are the sheriffs alter egos. Curtis and Bruce, in their role as Missouri deputy sheriffs, held “policymaking positions for which political loyalty is necessary to an effective job performance; therefore, the Sheriff could dismiss them because of their political activity, which did not violate their constitutional right of free speech. Curtis v. Christian County, (8th Cir., 19-1213, 06/26/20)
Comment Howard: This case took me by complete surprise. So far as I can tell it seems like this case is completely under the radar. There was no attempt to reconcile what the deputies actually did to determine if they were engaged in run of the mill law enforcement work or if they actually make policy. It is hard to see how this helps lift the quality of law enforcement making it look more like a good old boys’ network.
Comment Ragan: This is an issue that should be addressed. Missouri law limits who is eligible to be a county sheriff by imposing certain requirements such as a minimal number of hours in law enforcement training. This means that the people who can run are probably already in law enforcement and probably work in their local sheriff’s department. Missouri law and this ruling resticts the ability of people who are qualified to participate in democracy because they would fear retribution for asserting their constitutional rights. An essential aspect of democracy is to encourage participation with the belief that competition and participation produce the best form of government. Decisions and laws that limit participation and competition are harmful to ensuring the public gets the best representation.
Language In Agreements Absolve County From Liability For Parking Garage Bond
Facts and Procedure:The following is a typical revenue bond issue for the development of parking lot as the financing vehicle using The Industrial Development Authority of Platte County (“Development Authority). Of interest is language used to protect the County from being required to pay for the parking garages from County funds.
The Development Authority issued the Zona Rosa Revenue Bonds in the amount of $32,200,000 in 2007. The Zona Rosa Bonds refunded the outstanding amount of the series 2003 bonds (which was $18,610,000) and provided funding for the construction of parking garages at Zona Rosa Town Center (“Zona Rosa”), an outdoor shopping mall located in Platte County, Missouri.
The Financing Agreement is a fully integrated contract (complete statement of the bargain made by the parties), which provides the source of revenue used to pay the principal and interest on the Zona Rosa Bonds. The County is a first-class county without a charter government, governed by a County Commission composed of three elected commissioners. Districts I and II are special taxing districts formed under state law to support transportation-related retail projects like the parking garages at Zona Rosa. Pursuant to the Financing Agreement, the Zona Rosa Bonds are paid from revenues generated by a 1% sales tax collected by Districts I and II on retail sales within their respective boundaries, which includes Zona Rosa. The County does not control or operate Districts I or II since they are distinct legal entities that collect the 1% sales tax at Zona Rosa.
In addition to the 1% sales tax, Trustee and Zona Rosa Development, Inc., (“Developer”) executed a Developer Guaranty Agreement under which Developer was obligated to post a $500,000 Letter of Credit that could be drawn on by the Trustee as security for the Zona Rosa Bonds. Under Sections 3.10 and 4.10 of the Financing Agreement Districts I and II were to guarantee the availability of the Letter of Credit and, as necessary, post it themselves if the Developer failed to post or maintain it. Under the Trust Indenture, the Development Authority also established a $3.1 million Reserve Fund which could be used for payment on the Zona Rosa Bonds.
Shortfalls occurred in the payment of the Zona Rosa Bonds. Until 2017, the Developer used its own private funds to cover the annual shortfall in revenue for payment on the Zona Rosa Bonds. On or about November 16, 2017, the Trustee drew on the $500,000 Letter of Credit originally posted by the Developer. The Trustee informed the County that the Letter of Credit had been drawn on but did not make demand on the County to pay the Zona Rosa Bonds. On November 29 and December 13, 2017, the Trustee made a written demand to the Developer to replenish the Letter of Credit but the Developer did not comply. In February 2018, Trustee notified Developer that legal action would be taken if a replacement Letter of Credit was not in place by April 2018. Trustee also demanded that Districts I and II replace the Letter of Credit. The Letter of Credit was not replaced by the Developer or Districts I and II. In September 2018, the Developer sold its interest in Zona Rosa to Monarchs Sub, LLC (“Monarchs”). Trustee made demand on Monarchs to replace the Letter of Credit but Monarchs did not comply. Trustee did not take any legal action against Developer, Monarchs, or Districts I and II but did inform the Bondholders that these entities were in default.
On September 24, 2018, approximately a year after drawing on the Letter of Credit, Trustee sent the County written notice of default under the Financing Agreement threatening to sue the County unless it issued a binding written commitment to pay the revenue shortfall on the debt service due December 1, 2018. The Trustee also sent the County written notice of the default threatening to sue unless the County issued a binding written commitment to pay the revenue shortfall on the debt due December 1, 2018.
The County filed a petition for declaratory relief against Trustee and the Development Authority seeking declaration of its legal obligations with respect to the Zona Rosa Bonds pursuant to the Financing Agreement. Prior to filing its answer, Trustee filed a petition for temporary restraining order requesting that the court order the County to pay the full amount of the appropriation made by the County in its 2018 budget regarding the Zona Rosa Bonds. On November 30, 2018, the court held a hearing on Trustee’s petition for a temporary restraining order at which Trustee stated that the amount of the shortfall on the was $765,390.95. The trial court denied Trustee’s petition for a temporary restraining order but ordered the County to reserve $765,390.95 for purposes of this litigation, which the County designated as restricted funds within its general reserve fund.
The County filed a motion for summary judgment. Trustee filed an opposition to the County’s motion for summary judgment and cross-motion for summary judgment. The trial court entered its Judgment in favor of the County finding that the County was not liable on the Zona Rosa Bonds as the County did not promise to make payments on the Zona Rosa Bonds in the Financing Agreement. The Trustee appealed to the Western District.
Analysis:The Court noted that this was a simple contract dispute and that the questions were a matter of law. In reviewing the Financing Agreement the Court noted the following key provisions:
• Section 2.2. The County was required to budget and appropriate, specifically with respect to the Agreement, moneys sufficient to pay the Appropriation Amount for the next succeeding Fiscal Year and deliver written notice to the Trustee no later than 15 days after the commencement of its Fiscal Year stating whether or not the County Commission has appropriated funds in an amount equal to the Appropriation Amount estimated to become due during such Fiscal Year.
• Section 2.3. The Finance Agreement stated that “it being the intention of the County that the decision to appropriate or not to appropriate under this Agreement shall be made solely by the County Commission and not by any other official of the County.”
• Section 2.4. “The parties hereto acknowledge and agree that the Appropriation Amount shall constitute currently budgeted expenditures of the County and shall not in any way be construed or interpreted as creating a liability or a general obligation or debt of the County in contravention of any applicable constitutional or statutory limitations or requirements concerning the creation of indebtedness by the County, nor shall anything contained herein constitute a pledge of the general credit, tax revenues, funds or moneys of [the] County. The County’s obligations under this Agreement shall be from year to year only, and shall not constitute a mandatory payment obligation of the County in any ensuing Fiscal Year beyond the then current Fiscal Year.
Based upon the above provisions, the Court held that Agreement clearly and unambiguously provided that each year the Auditor will include a payment for the Zona Rosa Bonds in its proposed budget or appropriation request and pursue all available appeals in the event it is not approved. Consistent with the language of Section 2.2, Section 2.3 expressly provides that it is the intent of the County that the County Commission solely decides whether “to appropriate or not appropriate.” Similarly, Section 2.4 clearly and unambiguously provides that the Appropriation Amount constitutes a budgeted expenditure and not a liability. Section 2.4 also expressly provides that the County is not pledging County money. There is no promise to pay expressed in any of these provisions. In fact, the provisions repeatedly state that the decision whether to pay or not is entirely up to the County Commission and provides directives to take in the event the County Commission does not approve the proposed appropriation. Judgment affirmed. Platte County v. UMB Bank, (WD83232, 08/25/20)
Comment Howard: When reviewing development agreements where funds are to be paid for by revenues from the project and where there is no intent of the governmental body to obligate funds of the governmental agency make sure that the above language that is bolded or a variation thereof is approved by the bond attorney and is included in the financing agreement.