Jackie Nichols v. City of Rehoboth Beach

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

No. 15-3979

______

JACKIE NICHOLS,

Appellant

v.

CITY OF REHOBOTH BEACH;

SAM COOPER, Mayor of Rehoboth;

SHARON LYNN, City Manager of Rehoboth

______

On Appeal from the United States District Court

for the District of Delaware

(D. DE No. 1-15-cv-00602)

District Judge: Honorable Gregory M. Sleet

______

Argued April 7, 2016

Before: FISHER, COWEN, and RENDELL, Circuit Judges.

(Filed: September 7, 2016)

David L. Finger, Esq. [ARGUED]

Finger & Slanina

1201 Orange Street

One Commerce Center, Suite 725

Wilmington, DE 19801

Counsel for Appellant

Max B. Walton, I, Esq. [ARGUED]

Connolly Gallagher

267 East Main Street

Newark, Delaware 19711

Matthew F. Boyer, Esq.

Ryan P. Newell, Esq.

Arthur G. Connolly, III, Esq.

Connolly Gallagher

1000 West Street

The Brandywine Building, Suite 1400

Wilmington, DE 19801

Counsel for Appellees

______

OPINION OF THE COURT

______

FISHER, Circuit Judge.

Jackie Nichols is a resident, property owner, and

taxpayer in the City of Rehoboth Beach, Delaware. Rehoboth

Beach held a special election—open to residents of more than

six months—for approval of a $52.5 million bond issue, and

the resolution passed. Nichols voted in the election. She then

filed this civil action challenging the election and the resultant

issuance of bonds. The District Court found that Nichols

2

lacked standing and dismissed the case. The sole issue on

appeal is whether Nichols had, as she claims, municipal

taxpayer standing to make such a challenge. Because Nichols

has failed to show an illegal use of municipal taxpayer

funds—and therefore cannot establish standing on municipal

taxpayer grounds—we will affirm the District Court’s Order.

I.

A.

The facts of this case are simple. On April 27, 2015,

the Board of Commissioners of Rehoboth Beach adopted a

resolution proposing the issuance of up to $52.5 million in

general obligation bonds to finance an ocean outfall project.

The resolution followed an initial resolution and a public

hearing, as required by Section 40(d)-(e) of Rehoboth

Beach’s City Charter. Pursuant to the City Charter, Rehoboth

Beach held a special election on June 27, 2015, to determine

whether it was authorized to borrow funds to finance the

project. Rehoboth Beach expended municipal funds on the

special election: first, before the election, it used taxpayer

funds to place a full-page advertisement in a local newspaper

urging the voters to “Vote Yes” in favor of the proposed

outfall project; second, the costs of the special election were

paid from the Rehoboth Beach treasury.

The Rehoboth Beach City Charter governs the voting

procedures for special elections. Section 40(h) of the Charter

states the following:

At the said Special Election, every owner or

leaseholder, as defined in this Charter, of

property, whether an individual, partnership or

corporation, shall have one vote and every

person who is a bona fide resident of the City of

Rehoboth Beach, but who is not an owner or

3

leaseholder, as defined in this Charter, of

property within the corporate limits of the City

of Rehoboth Beach and who would be entitled

at the time of holding of the said Special

Election to register and vote in the Annual

Municipal Election if such Annual Municipal

Election were held on the day of the Special

Election shall have one vote whether or not

such person be registered to vote in the Annual

Municipal Election.

Charter of Rehoboth Beach § 40(h) (1963),

http://charters.delaware.gov/rehobothbeach.pdf. Section 40

does not define the term “bona fide resident,” but Section 7 of

the Charter, which deals with the manner of holding annual

elections, defines the term “resident” as “an individual

actually residing and domiciled in the City of Rehoboth

Beach for a period of six months immediately preceding the

date of the election.” Id. § 7(d).

At the special election, Rehoboth Beach accepted only

voters who were either property owners or who had been

residents for a minimum of six months. Corporations and

other artificial entities that owned property in Rehoboth

Beach were also permitted to vote. Nichols alleges that

persons who owned several parcels of property in Rehoboth

Beach through the ownership of artificial entities were

granted one vote for each parcel owned. She further alleges

that those who qualified as residents and who owned property

were granted two votes. The votes of the special election were

tallied, and the majority of eligible voters approved the

issuance of the general obligation bonds—637 votes to 606

votes. Nichols is a property owner in Rehoboth Beach and

voted in the special election.

4

B.

Nichols filed this action 19 days after the special

election vote took place. About a month later, she filed a four-

count amended complaint against the City of Rehoboth

Beach, Sam Cooper (mayor of Rehoboth Beach), and Sharon

Lynn (city manager of Rehoboth Beach). In Counts I and II of

the amended complaint, Nichols alleged that Rehoboth Beach

violated the Fourteenth Amendment by requiring voters to

live in, or hold property in, Rehoboth Beach for six months

before being entitled to vote as residents. In Count III, she

alleged that Rehoboth Beach violated the Fourteenth

Amendment by allowing property owners to vote more than

once. Count IV was a pendent state law claim for “exceeding

authority” in which Nichols alleged that Rehoboth Beach had

violated Delaware law by purchasing the newspaper

advertisement encouraging voters to support the issuance of

bonds.

Rehoboth Beach filed a motion to dismiss Nichols’s

amended complaint, arguing, among other things, that

Nichols lacked standing because, as a resident and property

owner, she had voted in the election and had thus suffered no

injury. The District Court issued a memorandum opinion and

order granting Rehoboth Beach’s motion and dismissing the

case for lack of subject matter jurisdiction. The District Court

explained:

The court agrees with Defendants that Nichols

lacks standing. Initially, the court agrees with

Defendants that Nichols is not contesting the

expenditure of tax funds, but the legality of the

Special Election. Second, the court notes that

Nichols suffered no particularized injury as a

result of the Special Election. Nichols is a

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property owner in the city and had the right to

vote in the Special Referenda Election. Thus,

she lacks the concrete personal injury necessary

to bring suit. As a result, the court lacks the

subject matter jurisdiction to hear this action.

(App. 19–20.) Having concluded that it lacked subject matter

jurisdiction, the District Court did not address any of

Rehoboth Beach’s remaining arguments. Nichols timely

appealed.

II.

“We have jurisdiction pursuant to 28 U.S.C. § 1291

over a dismissal for lack of subject matter jurisdiction, and

our review for lack of subject matter jurisdiction is plenary.”

Swiger v. Allegheny Energy, Inc., 540 F.3d 179, 180 (3d Cir.

2008).

III.

Nichols argues that the District Court misperceived her

allegations and that she has standing—not as a voter but as a

municipal taxpayer. She presents two bases upon which we

could find that she has municipal taxpayer standing to bring

her case. First, she argues that she has standing to challenge

the $52.5 million in municipal debt incurred by an allegedly

unlawful special election. Second, she contends that she has

standing to challenge Rehoboth Beach’s use of municipal

funds to hold the special election and to purchase a

newspaper advertisement in support of that election.

Nichols’s first argument fails because she has not challenged

the expenditure of the $52.5 million, merely the special

election that approved the issuance of the bonds. Her second

argument fails because she has not alleged a direct link

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between the expenditure of municipal funds and the

challenged aspect of the municipal action and because those

expenditures were de minimis.

A. Municipal Taxpayer Standing

“Article III of the Constitution limits the judicial

power of the United States to the resolution of Cases and

Controversies, and Article III standing enforces the

Constitution’s case-or-controversy requirement.” Hein v.

Freedom From Religion Found., Inc., 551 U.S. 587, 597–98

(2007) (internal quotation marks and alterations omitted).

“One of the controlling elements in the definition of a case or

controversy under Article III is standing.” Id. at 598 (internal

quotation marks and alterations omitted). The elements

necessary for establishing “the irreducible constitutional

minimum of standing” under Article III are as follows:

First, the plaintiff must have suffered an injury

in fact—an invasion of a legally protected

interest which is (a) concrete and particularized,

and (b) actual or imminent, not conjectural or

hypothetical. Second, there must be a causal

connection between the injury and the conduct

complained of—the injury has to be fairly

traceable to the challenged action of the

defendant, and not the result of the independent

action of some third party not before the court.

Third, it must be likely, as opposed to merely

speculative, that the injury will be redressed by

a favorable decision.

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)

(internal quotation marks, citations, and alterations omitted).

7

The Supreme Court has roundly rejected federal

taxpayer standing noting that a federal taxpayer’s interest “in

seeing that Treasury funds are spent in accordance with the

Constitution does not give rise to the kind of redressable

‘personal injury’ required for Article III standing.” Hein, 551

U.S. at 599 (explaining that an “interest in ensuring that

[federal] funds are not used by the Government in a way that

violates the Constitution” is “too generalized and attenuated

to support Article III standing”). This follows from the fact

that a federal taxpayer’s

interest in the moneys of the treasury . . . is

shared with millions of others, is comparatively

minute and indeterminable, and the effect upon

future taxation, of any payment out of the funds,

so remote, fluctuating and uncertain, that no

basis is afforded for an appeal to the preventive

powers of a court of equity.

Frothingham v. Mellon, decided with Massachusetts v.

Mellon, 262 U.S. 447, 487 (1923); see also Doremus v. Bd. of

Ed. of Hawthorne, 342 U.S. 429, 433 (1952) (reiterating that

“the interests of a taxpayer in the moneys of the federal

treasury are too indeterminable, remote, uncertain and

indirect to furnish a basis for an appeal to the preventive

powers of the Court over their manner of expenditure”).

Likewise, “state taxpayers have no standing under

Article III to challenge state tax or spending decisions simply

by virtue of their status as taxpayers.” DaimlerChrysler Corp.

v. Cuno, 547 U.S. 332, 346 (2006). Federal and state

taxpayers cannot show Article III standing based on their

status as taxpayers “because the alleged injury is not concrete

and particularized, but instead a grievance the taxpayer

suffers in some indefinite way in common with people

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generally.” Id. at 344 (internal citations and quotation marks

omitted). “In addition, the injury is not actual or imminent,

but instead conjectural or hypothetical.” Id. (internal

quotation marks omitted).

The Supreme Court has, however, allowed one form of

taxpayer standing to survive: standing based on municipal

taxpayer status. This difference in the treatment of municipal

taxpayers is justified, at least in theory, by the closeness

between the municipal taxpayer and the expenditure of

municipal taxpayer funds. As explained in Frothingham:

The interest of a taxpayer of a municipality in

the application of its moneys is direct and

immediate and the remedy by injunction to

prevent their misuse is not inappropriate. It is

upheld by a large number of state cases and is

the rule of this court. . . . The reasons which

support the extension of the equitable remedy to

a single taxpayer in such cases are based upon

the peculiar relation of the corporate taxpayer to

the corporation, which is not without some

resemblance to that subsisting between

stockholder and private corporation.

262 U.S. at 486–87. Thus, unlike a state or federal taxpayer, a

municipal taxpayer may challenge certain expenditures of

municipal funds in federal court.

Though a municipal taxpayer may, in some cases,

challenge municipal expenditures, her right to do so is not

unlimited. We have applied the “good-faith pocketbook”

requirements, articulated by the Supreme Court in Doremus,

to municipal taxpayer standing. Doremus, 342 U.S. at 434

(explaining that “a good-faith pocketbook action” is one in

which a plaintiff alleges “a direct dollars-and-cents injury”).

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The municipal taxpayer plaintiffs in Doremus challenged a

state law mandating Bible reading in public schools. 342 U.S.

at 430–31. The Supreme Court concluded that they lacked

standing as municipal taxpayers because they failed to show

that the Bible reading resulted in any direct monetary cost. Id.

at 431 (“[I]t is neither conceded nor proved that the brief

interruption in the day’s schooling caused by compliance with

the statute adds cost to the school expenses or varies by more

than an incomputable scintilla the economy of the day’s

work.”). The plaintiffs made no allegation that the Bible

reading was “supported by any separate tax or paid for from

any particular appropriation or that it adds any sum whatever

to the cost of the school.” Id. at 433. Furthermore, the

plaintiffs failed to show that the Bible reading had any impact

on their overall tax burden. Id. (“No information is given as

to what kind of taxes are paid by appellants and there is no

averment that the Bible reading increases any tax they do pay

or that as taxpayers they are, will, or possibly can be out of

pocket because of it.”). Thus, the Supreme Court made clear

in Doremus that in order for a municipal taxpayer to have

standing in federal court, she must demonstrate (1) that a

particular expenditure accompanied the allegedly illegal

practice and (2) that it put her “out of pocket.”

Accordingly, in ACLU-NJ v. Township of Wall, we

recognized that, following Doremus, plaintiffs must

“establish more than a potential de minimis drain on tax

revenues due to the [allegedly unconstitutional conduct].” 246

F.3d 258, 262 (3d Cir. 2001). In ACLU-NJ, residents of Wall

Township, New Jersey, filed a suit against the Township,

alleging that the Township’s holiday display violated the

Establishment Clause of the First Amendment. Id. at 260. The

holiday display consisted of a variety of holiday items,

including a crèche and a menorah. We observed that, even

10

though the Township “own[ed] the Nativity display, and

presumably the menorah, and the overall display [was] set up

with defendant’s support, direction and/or approval,” the

Township did not “maintain” the display. Id. at 263. As such,

we held that the plaintiffs lacked standing because they

“failed to establish an expenditure on the challenged elements

of the [holiday] display.” Id. at 263–64. The Township did

not expend funds by displaying the religious elements it

owned. A plaintiff must therefore establish a municipal

expenditure on the challenged aspect of the disputed practice

in order to have municipal taxpayer standing.

We further clarified that, even if the Township had

used its own paid employees to erect the display, or had used

Township funds to light it, we would not, without further

evidence, assume that such expenditures amounted to

anything more than de minimis expenditures. And, consistent

with Doremus, de minimis expenditures attributable to the

challenged practice are insufficient to confer Article III

standing. Therefore, a municipal taxpayer plaintiff must show

(1) that he pays taxes to the municipal entity, and (2) that

more than a de minimis amount of tax revenue has been

expended on the challenged practice itself. ACLU-NJ, 246

F.3d at 263–64; see also Doe v. Beaumont Indep. Sch. Dist.,

173 F.3d 274, 282 (5th Cir. 1999).

B. The Issuance of Bonds

As an initial observation, we agree with the District

Court that “Nichols is not contesting the expenditure of tax

funds, but the legality of the Special Election.” (App. 19–20.)

We are not faced with the question of whether Nichols would

have had standing to challenge these voting requirements

under different circumstances—e.g., in a case where she was

not permitted to vote. Certainly, as the District Court

11

recognized, Nichols was both a property owner in and a

resident of Rehoboth Beach and therefore has no basis to

challenge the voting requirements directly. Instead, Nichols

has attempted to remedy her lack of traditional “injury-in-

fact” by asserting municipal taxpayer standing. This she

cannot do. 1

In order for a plaintiff to gain access to federal court

using municipal taxpayer standing, she must show that the

municipality has actually expended funds on the allegedly

illegal elements of the disputed practice. Nichols’s argument

on appeal fails to grasp this inherent requirement, despite her

recognition that “[m]unicipal taxpayer standing is available

when there is an expenditure of municipal tax funds on an

1

Nichols waives any argument that she has standing as

a voter, see Appellant’s Br. 15 (“The particular injury was to

Ms. Nichols as a municipal taxpayer, not as a voter . . . .”),

but mentions parenthetically that “the dilution of her vote as a

result of those unlawful rules should provide an independent

ground for her standing,” id. This position is developed only

in a footnote with a brief citation to authority. Any argument

that she has standing as a voter is accordingly waived. See

John Wyeth & Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070,

1076 n.6 (3d Cir. 1997) (“[A]rguments raised in passing (such

as, in a footnote), but not squarely argued, are considered

waived.”). The Dissent “question[s] whether anyone else

would be a more suitable plaintiff to litigate . . . the ‘one

person, one vote’ claim.” Dissent, lines 284–85. We do not

pass judgment on whether Nichols would be an appropriate

plaintiff to make such a challenge since she waived her ability

to challenge the voting requirements directly.

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unconstitutional practice.” Appellant’s Br. 8. 2 Because the

$52.5 million was not spent on an illegal practice, Nichols

cannot assert municipal taxpayer standing to challenge the

expenditure.

The Dissent mischaracterizes the nature of the injury

Nichols alleged and asserts that the proposed issuance of

$52.5 million in general obligation bonds satisfies the injury

requirement. Dissent, Lines 91–93. Certainly, if $52.5 million

had been expended on an illegal practice, this would be a

different case. But Nichols did not allege that there was

anything illegal about what the $52.5 million was to be

expended on. The only expenditure that Nichols can

challenge is the cost of holding the special election—not the

resultant issuance of bonds—and, as we will explain below,

those funds would have been expended regardless of whether

the voting requirements were unconstitutional or not.

2

The cases that Nichols cites illustrate that municipal

taxpayer standing exists only in cases where plaintiffs seek to

challenge unlawful expenditures. See, e.g., Smith v. Jefferson

Cty. Bd. of Sch. Comm’rs, 641 F.3d 197, 210 (6th Cir. 2011)

(“[M]unicipal taxpayers may fulfill the injury requirement by

pleading an alleged misuse of municipal funds.”); Bd. of Ed.

v. N.Y. Teachers Ret. Sys., 60 F.3d 106, 110 (2d Cir. 1995)

(“[A] municipal taxpayer has standing to challenge allegedly

unlawful municipal expenditures.”); Cammack v. Waihee, 932

F.2d 765, 770 (9th Cir. 1991) (“[M]unicipal taxpayer standing

simply requires the ‘injury’ of an allegedly improper

expenditure of municipal funds. . . .”); see also Freedom

From Religion Found., Inc. v. Zielke, 845 F.2d 1463, 1470

(7th Cir. 1988) (“A plaintiff’s status as a municipal taxpayer

is irrelevant for standing purposes if no tax money is spent on

the allegedly unconstitutional activity.”).

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C. Municipal Expenditures

Nichols also contends that she has municipal taxpayer

standing to bring this action on the basis of two expenditures

by Rehoboth Beach: (1) the funds required to hold the special

election and (2) the funds used to purchase an advertisement

in a local newspaper. Neither of these expenditures is

sufficient to grant Nichols standing. As such, she does not

have municipal taxpayer standing to challenge the special

election, and the District Court properly dismissed her

complaint.

1.

We conclude that the expenditure of municipal funds

to hold a special election is not sufficient to establish

municipal taxpayer standing. Nichols alleged that the voting

procedures at the special election—the six-month residency

requirement and the ability of property owners to vote more

than once—violated the Fourteenth Amendment. She did not

assert that Rehoboth Beach expended funds on the allegedly

unconstitutional aspects of the special election, i.e., the voting

requirements. The special election itself would have been

held regardless of the procedures Rehoboth Beach employed.

In other words, Rehoboth Beach would have expended the

funds necessary to hold the special election even if the voting

requirements had been different.

As noted above, in ACLU-NJ, the plaintiffs could not

show that the Township expended funds on the challenged

element—the public display of religious symbols. Because

the plaintiffs failed to establish an expenditure on the

challenged elements of the holiday display, they could not

show municipal taxpayer standing. ACLU-NJ, 246 F.3d at

263–64. Here, Nichols’s concern is not that Rehoboth Beach

held a special election to approve bonds but rather that some

14

of the requirements of the special election were

unconstitutional. But the complaint fails to allege any direct

link between the expenditure of municipal funds and the

allegedly unconstitutional elements of the special election—

and this failure is fatal to Nichols’s claim. 3

2.

Rehoboth Beach’s purchase of an advertisement in a

local newspaper similarly does not support municipal

taxpayer standing in this instance. There is no dispute that

Rehoboth Beach expended municipal funds when it

purchased an advertisement alerting the public to the special

election. Again, the purported illegality of the election

procedures has nothing to do with the expenditure of funds

for the advertisement—an appropriate expenditure. The

3

Even if there were a direct connection between the

funds expended on the special election and the challenged

voting practice, we would reach the same result. That de

minimis costs were associated with the special election itself

does not give rise to Article III standing. ACLU-NJ, 246 F.3d

at 264 (requiring more than de minimis municipal

expenditures to make a “good-faith pocketbook action”). The

Dissent asserts that “the issuance of $52.5 million in

municipal bonds cannot really be compared to the trivial

amount of taxpayer money a municipality could have

possibly spent to erect and light two discrete components of a

seasonal holiday display.” Dissent, Lines 116–19. Obviously

not. But that comparison misses the mark since the $52.5

million at issue in this case was not expended on a challenged

practice. By contrast, the challenged expenditure in ACLU-NJ

was the cost of erecting and lighting the religious elements in

the holiday display, which is comparable to the expense of

holding the election here.

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advertisement simply urged eligible voters to participate.

Moreover, the cost is analogous to the types of expenses

dismissed in ACLU-NJ as de minimis—such as the cost of

electricity required to light the religious elements of a display.

Accordingly, the advertisement does not qualify as the kind

of “direct dollars-and-cents injury” required under Doremus

for “a good-faith pocketbook action.” Doremus, 342 U.S. at

434; see also Fuller v. Volk, 351 F.2d 323, 327 (3d Cir. 1965)

(“[I]n order for the taxpayer to have standing, he must show

that his position as a taxpayer is in some way affected . . . .”).

This expenditure cannot, therefore, serve as a basis for

municipal taxpayer standing.

IV.

Because Nichols does not have standing as a municipal

taxpayer, we will affirm the District Court’s dismissal of her

case for lack of subject matter jurisdiction.

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Nichols v. City of Rehoboth Beach, et al., No. 15-3979,

dissenting.

COWEN, Circuit Judge.

I must respectfully dissent. The City of Rehoboth

Beach held a special election to authorize a $52.5 million

bond issuance, which was approved—637 votes to 606 votes.

In Counts I and II of her amended complaint, Jackie Nichols

alleged that Rehoboth Beach, Mayor Sam Cooper, and City

Manager Sharon Lynn violated the Fourteenth Amendment

by requiring individuals to reside in the municipality for at

least six months in order to cast votes as Rehoboth Beach

residents. In Count III, she claimed that Defendants violated

“the ‘one person, one vote’ principle of the 14th Amendment”

by allowing “individuals one vote for each parcel of property

they owned in Rehoboth (directly or indirectly through an

entity), in addition to one vote if they also resided in

Rehoboth.” (A12.) “Count IV was a pendent state law claim

for ‘exceeding authority’ in which Nichols alleged that

Rehoboth Beach had violated Delaware law by purchasing

the newspaper advertisement encouraging voters to support

the issuance of bonds.” (Maj. Op. at 5.) Unlike the majority,

I conclude that Nichols—as a municipal taxpayer—has

Article III standing to bring her federal constitutional claims

as well as her state law cause of action. In addition, I believe

that, while she fails to satisfy the requirements for prudential

standing with respect to Counts I and II, she has prudential

standing to litigate Counts III and IV.

The majority appropriately points out that “[t]he

Supreme Court has, however, allowed one form of taxpayer

standing to survive: standing based on municipal taxpayer

1

status.” (Id. at 9.) Under the doctrine of municipal taxpayer

standing, “[t]he interest of a taxpayer of a municipality in the

application of its money is direct and immediate and the

remedy by injunction to prevent their misuse is not

inappropriate.” Frothingham v. Mellon, 262 U.S. 447, 486

(1923). “In other words, under Frothingham we presume a

municipal taxpayer’s relationship to the municipality is

‘direct and immediate’ such that the taxpayer suffers concrete

injury whenever the ‘challenged activity involves a

measurable appropriation or loss of revenue.’” United States

v. City of N.Y., 972 F.2d 464, 470 (2d Cir. 1992) (quoting

D.C. Common Cause v. Dist. of Columbia, 858 F.2d 1, 5

(D.C. Cir. 1988)). In fact, a number of judges have

questioned whether this well-established approach—which

dates back to the 1800s—is at odds with both modern

standing principles as well as the contemporary realities of

municipal financing and spending practices. See, e.g., Smith

v. Jefferson Cty. Bd. of Sch. Comm’rs, 641 F.3d 197, 221

(6th Cir. 2011) (en banc) (Sutton, J., concurring) (addressing

“tension between the municipal-taxpayer-standing doctrine

and modern standing principles”); City of N.Y., 972 F.2d at

471 (questioning Frothingham presumption given existence

of municipalities with multi-billion dollar budgets).

According to the Sixth Circuit, “municipal taxpayers are able

to rely on what would otherwise be labeled a generalized

grievance,” and they are thereby allowed “to sidestep the

‘zone of interest’ test that courts apply in other instances.”

Smith v. Jefferson Cty. Bd. of Sch. Comm’rs, 788 F.3d 580,

591 n.4 (6th Cir. 2015) (citing Smith, 641 F.3d at 222

(Sutton, J., concurring)), cert. denied sub nom. Kucera v.

Jefferson Cty. Bd. of Sch. Comm’rs, 136 S. Ct. 1246 (2016).

Yet “[t]he Supreme Court created the distinction and has

stood by it for some time, requiring lower courts like ours to

2

apply it as is.” Smith, 641 F.3d at 222 (Sutton, J., concurring)

(citing Rodriguez de Quijas v. Shearson/Am. Express Inc.,

490 U.S. 477, 484 (1984)).

I find that the District Court did not approach this

generous notion of municipal taxpayer standing with the

seriousness and care it deserves. “If standing is ‘one of the

most amorphous [concepts] in the entire domain of the public

law,’ Flast v. Cohen, [392 U.S. 83, 99 (1968)], nowhere is

this better demonstrated than in the area of municipal

taxpayer standing.” Warnock v. NFL, 356 F. Supp. 2d 535,

540 (W.D. Pa.), aff’d, 154 F. App’x 291 (3d Cir. 2005).

Nevertheless, the District Court merely cited general legal

principles governing the standing inquiry and, without a

detailed explanation, stated that it “agrees with Defendants

that Nichols is not contesting the expenditure of tax funds, but

the legality of the Special Election.” Nichols v. City of

Rehoboth Beach, C.A. No. 15-602 GMS, 2015 WL 8751180,

at *3 (D. Del. Dec. 14, 2015). Unlike the majority, the

District Court did not discuss any municipal taxpayer cases or

address the governing principles of this doctrine. The

majority, in any event, recognizes that we exercise de novo

review over the District Court’s dismissal on standing

grounds. See, e.g., Edmonson v. Lincoln Nat. Life Ins. Co.,

725 F.3d 406, 414 (3d Cir. 2013), cert. denied, 134 S. Ct.

2291 (2014). “In examining a challenge to a party’s standing,

the Court must accept as true all material allegations set forth

in the complaint and construe those facts in favor of the

nonmoving party.” Nichols, 2015 WL 8751180, at *2 (citing

Warth v. Seldin, 422 U.S. 490, 501 (1975); Storino v.

Borough of Point Pleasant Beach, 322 F.3d 293, 296 (3d Cir.

2003)). General factual allegations of injury resulting from

the defendant’s actions may be sufficient at the motion to

3

dismiss stage. See, e.g., Lujan v. Defenders of Wildlife, 504

U.S. 555, 561 (1992).

To satisfy the standing requirements of Article III, a

plaintiff must show that: (1) he or she has suffered an injury

in fact “that is (a) concrete and particularized and (b) actual or

imminent, not conjectural or hypothetical;” (2) the injury is

fairly traceable to the defendant’s challenged action; and (3) it

is likely that the injury will be redressed by a favorable

decision. Friends of the Earth, Inc. v. Laidlaw Envt’l Servs.

(TOC), Inc., 528 U.S. 167, 180-81 (2000) (citing Lujan, 504

U.S. at 560-61). In order to meet the injury requirement, a

municipal taxpayer must establish a so-called “good-faith

pocketbook” injury. See, e.g., ACLU-NJ v. Twp. of Wall,

246 F.3d 258, 262 (3d Cir. 2001) (“[A] municipal taxpayer

may possess standing to litigate ‘a good faith pocketbook

action.’” (citing Doremus v. Bd. of Educ., 342 U.S. 429

(1952))); see also, e.g., Fuller v. Volk, 351 F.2d 323, 327 (3d

Cir. 1965) (stating that, in order to have standing, plaintiff

must show position as taxpayer is in some way affected and,

in short, that action constitutes good-faith pocketbook action).

A municipal taxpayer establishes a good-faith pocketbook

injury by showing “a measurable appropriation or

disbursement” of public funds “occasioned solely by the

activities complained of.” Doremus v. Bd. of Educ., 342 U.S.

429, 434 (1952) (citing Everson v. Bd. of Educ., 330 U.S. 1

(1947)); see also, e.g., D.C. Common Cause v. Dist. of

Columbia, 858 F.2d 1, 4 (D.C. Cir. 1988) (“One commentator

has interpreted Doremus as requiring a taxpayer to challenge

an activity involving an expenditure of public funds that

would not otherwise be made.” (citing Note, Taxpayers’

Suits: A Survey and Summary, 69 Yale L.J. 895, 922

(1960))).

4

According to Nichols, she has an interest as a

municipal taxpayer in challenging “the unlawful incurring of

municipal debt by issuing bonds to be repaid from tax funds.”

(Appellant’s Brief at 11 (footnote omitted).) She also points

to the Defendants’ use of taxpayer funds to purchase a

newspaper advertisement and to conduct the special election.

I believe that the proposed issuance of $52.5 million in

general obligation bonds—based on an election conducted

pursuant to allegedly unconstitutional voting rules and

decided by a mere thirty-one votes—satisfies the injury

requirement. Likewise, this bond issuance meets the

causation and redressability prongs. Because Nichols thereby

has Article III standing to pursue her federal constitutional

claims, I need not—and do not—consider whether the

election expenditures likewise meet these standing

requirements. In addition, I conclude that the use of taxpayer

money to purchase an advertisement in a local newspaper

satisfies the requirements for Article III standing with respect

to Nichols’s state law cause of action.

The proposed bond issuance constitutes a “good-faith

pocketbook” injury. In ACLU-NJ v. Township of Wall, 246

F.3d 258 (3d Cir. 2001), two taxpayers challenged on

Establishment Clause grounds the inclusion of a crèche and a

menorah in a holiday display erected near the entrance to the

township’s municipal building, id. at 260. We determined

that the plaintiffs failed to carry “their burden of proving an

expenditure of revenues to which they contribute that would

make their suit ‘a good-faith pocketbook action.’” Id. at 264

(quoting Doremus, 342 U.S. at 434). The Court explained

that, even if we were to assume that the display was erected

by paid municipal employees, “there is no indication that the

5

portion of such expenditure attributable to the challenged

elements of the display would have been more than the de

minimis expenditure that was involved in the Bible reading in

Doremus [in which the teacher or school principal was

responsible for the readings].” Id. at 264 (citing Doremus v.

Bd. of Educ., 71 A.2d 732, 733 (N.J. Super. Ct. 1950); Doe v.

Madison Sch. Dist. No. 321, 177 F.3d 789, 794 (9th Cir.

1999) (en banc)). Similarly, the ACLU-NJ Court refused to

assume that the township expended more than a de minimis

amount of money to light the display’s religious elements. Id.

After all, the display also featured an evergreen tree,

decorated urns, and candy can banners. Id. at 260. However,

the issuance of $52.5 million in municipal bonds cannot

really be compared to the trivial amount of taxpayer money a

municipality could have possibly spent in order to erect and

light two discrete components of a seasonal holiday display.

This appeal instead implicates millions of dollars in debt

“backed by the full faith and credit of the issuing

municipality” and payable “by tax revenue.” In re Smurfit-

Stone Container Corp., 425 B.R. 735, 737 n.2 (Bankr. D. Del.

2010) (citing Greenberg, Municipal Sources: Some Basic

Principles and Practices, 9 Urb. Law. 340-41 (1977)). Such

indebtedness clearly represents a measurable liability or

encumbrance of the municipality. Given the nature of the

relationship between a municipality and municipal

taxpayers—“which is not without some resemblance to that

subsisting between stockholder and private corporation,”

Frothingham, 262 U.S. at 487 (citing 4 Dillon, Municipal

Corporations § 1580 et seq (5th ed.))—this liability in turn

constitutes a burden on the taxpayers themselves, see, e.g.,

Crampton v. Zabriskie, 101 U.S. 601, 609 (1879) (“[I]t would

seem eminently proper for courts of equity to interfere upon

the application of the taxpayers of a county to prevent the

6

consummation of a wrong, when the officers of those

corporations, assume, in excess of their powers, to create

burdens upon property-holders.”).

According to the majority, Nichols “has not challenged

the expenditure of the $52.5 million, merely the special

election that approved the issuance of the bonds.” (Maj. Op.

at 6.) Purportedly, “[b]ecause the $52.5 million was not spent

on an illegal practice, Nichols cannot assert municipal

taxpayer standing to challenge the expenditure.” (Id. at 13.) I

nevertheless believe that an expenditure of taxpayer money

specifically “approved” by a special election conducted under

unconstitutional voting rules constitutes “an illegal practice.”

These two components—i.e., the expenditure and the election

approving the expenditure—should not be severed in the

manner suggested by the majority. After all, the legality of

the bond issuance itself depends on the special election and

its outcome—which, in this case, was decided by thirty-one

votes. Could an expenditure really be considered anything

other than “an illegal practice” where the requisite election

approving the expenditure itself violated “the ‘one person,

one vote’ principle of the 14th Amendment” as well as basic

constitutional principles governing voter residency

requirements? (A12.)

Federal “municipal taxpayer” cases also indicate that

Nichols satisfies the injury requirement with respect to the

proposed bond issuance and the underlying special election.

ACLU-NJ had already been fully litigated on the merits, and

the plaintiffs accordingly had the burden of proving their

standing “‘in the same way as any other matter on which the

plaintiff bears the burden of proof, i.e., with the manner and

degree of evidence required at successive stages of the

7

litigation.’” ACLU-NJ, 246 F.3d at 261 (quoting Lujan, 504

U.S. at 561). This matter comes to us on a motion to dismiss.

As the District Court acknowledged, we must accept as true

all material allegations set forth in the complaint, and general

factual allegations of injury may be sufficient at this early

stage of the litigation. See, e.g., Lujan, 504 U.S. at 561;

Warth, 422 U.S. at 501. In addition, I have already

highlighted the generous nature of the municipal taxpayer

standing doctrine. In fact, a municipal taxpayer need not

show there is a likelihood of any resulting savings that will

inure to his or her benefit, see, e.g., City of N.Y., 972 F.2d at

466, or “a net loss to the municipal fisc,” Smith, 641 F.3d at

212 (citing, inter alia, ACLU-NJ, 246 F.3d at 262). In

Crampton v. Zabriskie, 101 U.S. 601 (1879), the Supreme

Court concluded that county taxpayers had standing to

challenge a bond issuance on the grounds that the issuance

violated a state statute limiting the county’s total expenditures

to the amount of money it raised by taxes, id. at 607-09. We

similarly should permit a taxpayer to challenge a bond

issuance on the grounds that it is based on an election

conducted in an unconstitutional manner.

As Nichols points out, a number of state supreme

courts have held that municipal taxpayers possessed the

requisite standing to challenge the issuance of bonds on the

grounds of underlying electoral illegalities. Relying on the

United States Supreme Court’s ruling in Crampton, the

Virginia Supreme Court of Appeals stated that, “[w]henever a

citizen and taxpayer is confronted with the proposition that an

illegal election for the issuance of bonds has been held and

the issuance of the bonds will result in the imposition of an

illegal tax burden upon him, he has the right to proceed either

in equity to enjoin the issuance of the bonds . . . or to proceed

8

by filing a petition in the pending matter.” Appalachian Elec.

Power Co. v. Town of Galax, 4 S.E.2d 390, 392 (Va. 1939).

The Idaho Supreme Court concluded that a municipal

taxpayer could contest the result of a special bond election—

and the official declaration of the election result—on the

grounds that several identified persons were permitted to vote

even though they were not qualified to do so (and that,

without these votes, the proposition would not have passed).

Henley v. Elmore Cty., 242 P.2d 855, 856-57 (Idaho 1952).

More recently, Maine’s highest court allowed a taxpayer to

challenge a municipality’s attempt to incur debt based on

what the taxpayer believed was an unlawful recounting of

previously rejected absentee ballots. McCorkle v. Town of

Falmouth, 529 A.2d 337, 337-39 (Me. 1987). Even

Defendants acknowledge that the McCorkle and Henley

courts allowed the respective taxpayers to “challenge

municipality’s vote count.” (Appellees’ Brief at 16 n.9

(citing Henley, 242 P.2d at 857; McCorkle, 529 A.2d at

338).) If a municipal taxpayer has standing to challenge the

vote count, why wouldn’t he or she have the right to

challenge the constitutionality of the basic rules the

municipality used to decide who may vote—and how many

votes they may cast? 1

1

While we should approach state court case law

applying standing principles with some caution, see, e.g.,

Rocks v. City of Phila., 868 F.2d 644, 647 (3d Cir. 1989)

(rejecting plaintiffs’ argument that “we should apply

Pennsylvania case law respecting the broad rights of

municipal taxpayers to sue local government agencies”), I

find that these bond election opinions have special

significance given the fact that neither the majority nor

Defendants themselves cite to any contrary federal (or even

9

Likewise, Nichols’s pendent state law claim

constitutes a good-faith pocketbook action. The majority

compares the expense of buying a single newspaper

advertisement with the potential de minimis costs of erecting

and lighting the religious elements of the seasonal holiday

display at issue in ACLU-NJ. However, the taxpayers’

Establishment Clause claim implicated the purported costs of

erecting and lighting the crèche and menorah—as opposed to

what the township may have spent to erect and light the

display in its entirety. In contrast, Nichols does not merely

challenge some minor component of a municipal expenditure.

She instead alleged that it was the purchase of the newspaper

advertisement itself that violated Delaware state law.

According to her amended complaint, “Rehoboth, utilizing

taxpayer funds (on information and belief), caused to be

published in a local newspaper a full-page advertisement

exhorting people to ‘Vote Yes,’ i.e., in favor of the proposed

outfall project, and presenting a one-sided view of the project,

without affording opponents the opportunity by means of that

financed medium to present their side.” (A12-A13.) “The

expenditure is not within Rehoboth’s express or implied

power and so is unlawful.” (A13.) While it may not have

cost the municipality and its taxpayers that much money to

purchase a single advertisement, “‘[m]unicipal taxpayer

standing simply requires the “injury” of an allegedly

state) case law that specifically consider whether a taxpayer

has standing to challenge a bond issuance based on purported

irregularities in the bond election. This case law also appears

to be consistent with the generous doctrine of taxpayer

standing recognized by the United States Supreme Court. See

Appalachian Elec. Power Co., 4 S.E.2d at 392 (quoting

Crampton, 101 U.S. at 609).

10

improper expenditure of municipal funds’” (Maj. Op. at 13

n.2 (quoting Cammack v. Waihee, 932 F.2d 765, 770 (9th

Cir. 1991))). See, e.g., D.C. Common Cause, 858 F.2d at 9

(“Although the factual record on this allegation is sparse, we

think appellees have made a sufficient showing to avoid

dismissal for lack of standing. The District spent $7,000 in

the 1984 campaign [to influence the outcome of an initiative],

which is evidence that it may do so again.” (citation

omitted)).

“Injury is only the first part of the standing analysis;

the plaintiff must also establish that the challenged action

caused the injury and that the injury would be redressed by a

favorable decision.” Id. at 5 (citing Allen v. Wright, 468 U.S.

737, 751 (1984)). Defendants insist that, “[b]ecause the

Delaware General Assembly adopted the voting requirements

contained in the City’s Charter, the ‘causation’ prong is not

satisfied because the challenged conduct is not caused by the

City, rather it is ‘th[e] result [of] the independent action of

some third party not before the court’—the State.”

(Appellees’ Brief at 21 (quoting Lujan, 504 U.S. at 560-61).)

In fact, Defendants repeatedly attempt to shift the focus—and

blame—from themselves to the State of Delaware.

Nevertheless, it was Defendants’ choice to undertake a

special election, to enforce the allegedly unconstitutional

voting rules set forth in the City Charter, and to incur millions

of dollars in municipal debt on the basis of what turned out to

be a closely contested election. “[G]overnment officials are

not bound to follow state law when that law is itself

unconstitutional. Quite the contrary: in such a case, they are

bound not to follow state law.” Carhart v. Steinberg, 192

F.3d 1142, 1152 (8th Cir. 1999), aff’d, 120 S. Ct. 2597

(2000). Nichols likewise seeks only prospective relief, and

11

the doctrine of qualified immunity does not apply to such

claims. See, e.g., Hill v. Borough of Kutztown, 455 F.3d 225,

244 (3d Cir. 2006).

More generally, I find that Plaintiffs satisfy both the

causation and redressability elements. As the majority notes,

“municipal taxpayer standing simply requires the ‘injury’ of

an allegedly improper expenditure of municipal funds.”

Cammack v. Waihee, 932 F.2d 765, 770 (9th Cir. 1991). In

this case, the “injury” consists of a proposed multi-million

dollar bond issuance—which was based on a special election

decided by a mere thirty-one votes pursuant to voting rules

that allegedly violated the Fourteenth Amendment. In turn,

the federal judiciary could provide redress by, inter alia,

enjoining Defendants from issuing any bonds if they fail to

conduct an election that complies with the United States

Constitution. 2 With respect to the state law claim, Nichols

specifically alleged an improper expenditure of funds—the

purchase of a newspaper advertisement presenting a one-

sided view of the proposed project—which could be remedied

by declaratory or injunctive relief. See, e.g., D.C. Common

Cause, 858 F.2d at 9 (“Appellees’ injury—the District’s

2

While Defendants take issue with Nichols’s failure to

raise her objections until after the special election took place,

they do not cite to any case specifically holding that the

respective plaintiffs lacked standing because they failed to

object before the election or took too long to file their lawsuit

(and, in two of the decisions they cite, the courts actually

determined that the plaintiffs possessed standing, see Fulani

v. Hogsett, 917 F.2d 1028, 1030 (7th Cir. 1990); Soules v.

Kauaians for Nukoli Campaign Comm., 849 F.2d 1176, 1179

(9th Cir. 1988)).

12

future misuse of public funds [to influence the outcome of

initiatives]—will be redressed by an injunction prohibiting

such expenditures.”).

Having determined (unlike the majority) that Nichols

possesses standing under Article III to pursue her

constitutional and state law claims, I must also consider

whether she satisfies the requirements for prudential standing.

In Rocks v. City of Philadelphia, 868 F.2d 644 (3d Cir. 1989),

several city taxpayers and residents “asserted an equal

protection violation resulting from the application of minority

business enterprise participation requirements (‘MBE’) to a

city construction project,” id. at 645. We agreed with the

district court that these plaintiffs—as municipal taxpayers—

had Article III standing. Id. at 648. However, “[t]he question

is whether these appellants have sustained a proximate,

individual, and addressable injury, based solely upon their

status as municipal residents and taxpayers.” Id. Relying on

our earlier ruling in Frissell v. Rizzo, 597 F.2d 840 (3d Cir.

1979), abrogation on other grounds recognized by Amato v.

Wilentz, 952 F.2d 742 (3d Cir. 1991), the Rocks Court

concluded that the plaintiffs had not satisfied these prudential

requirements. Rocks, 868 F.2d at 648. Frissell, a

Philadelphia taxpayer, sought to enjoin the mayor from

denying customary public advertising to a newspaper in

retaliation for unfavorable news articles, although the

newspaper had not joined in the lawsuit or filed its own action

against the city. Id. “Similarly, in this case no business

enterprise or construction worker, those most likely to have

suffered injury under the challenged bid specifications, has

joined the complaint or brought suit to enjoin the city. The

appellants here are solely taxpayers, resting their claim on the

legal rights and interests of third parties, to-wit, those

13

business entities and workers not qualifying under the MBE

requirements.” Id.; see also Warnock, 356 F. Supp. 2d at 546

(“Rocks suggests that plaintiff is required to establish more

than an injury received ‘solely’ on his status as a municipal

taxpayer in order to overcome prudential standing

limitations.”).

In light of Rocks (and Frissell), I conclude that Nichols

lacks prudential standing to bring Counts I and II challenging

the imposition of a sixth-month residency requirement. But I

reach the opposite conclusion with respect to her state law

cause of action (Count IV) as well as her claim (Count III)

alleging that Defendants violated the Fourteenth Amendment

by allowing property owners to vote more than once in the

special election. On the one hand, Nichols satisfied the sixth-

month residency requirement and accordingly was allowed to

vote in the special election—which she did. No disqualified

voter, “those most likely to have suffered injury under [this

residency requirement],” has joined this litigation or filed

their own actions against Defendants. Rocks, 868 F.2d at

648. On the other hand, a rule granting multiple votes to

property owners—as well as a bond issuance based on the

outcome of a closely contested election conducted under such

a voting rule—directly affected Nichols herself. The

purchase of an allegedly illegal newspaper advertisement

similarly injured her. She accordingly need not rest her claim

on “the legal rights and interests of third parties.” Id. While

new residents disqualified from voting in the election would

appear to be the most appropriate parties to challenge the

residency requirement, I question whether anyone else would

be a more suitable plaintiff to litigate either the “one person,

one vote” claim or the pendent state law cause of action.

14

In conclusion, I would affirm the District Court’s order

in part and vacate it in part. The order would be affirmed

insofar as it dismissed Counts I and II of the amended

complaint. Otherwise, I would vacate the order insofar as it

dismissed Counts III and IV.

15