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Armour v. Indianapolis: "Money Down the Sewer"

Posted By Paul J. Larkin, Jr. On June 4, 2012 @ 7:04 pm In Featured | Comments Disabled

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Not many cases involving the financing of municipal sewer construction projects are likely to raise issues that might interest the Supreme Court (or anyone else for that matter), but at least one has.  On Monday, the Supreme Court decided Armour v. Indianapolis, which rejected an Equal Protection Clause challenge to the decision by the city of Indianapolis to alter how it would finance such projects.

At one time, Indianapolis funded sewer projects by charging the affected property owners, who could pay their bill in a lump sum or by installments (with interest).  Indianapolis later changed its approach, using flat fees and bonds to fund the system.  The city council adopted an implementing ordinance, and the City Board of Public Works later enacted another resolution on the subject.  The board decided that, going forward, residents paying on the installment plan for old projects could cease making payments.  The effect of that resolution, however, was that residents who had made up-front lump sum payments would be worse off than residents who made installment payments.  Some residents who paid up front objected (I can hear them saying, “What the &*#k!? – Why don’t we get a partial refund, too!?”) and asked the city for a small rebate.  The city said no dice, so the residents sued, claiming that the city’s distinction violated the Equal Protection Clause.  In an opinion by Justice Breyer, the Supreme Court rejected that argument, finding reasonable the city’s prospective vs. retrospective distinction.  Chief Justice Roberts, joined by Justices Scalia and Alito, dissented.

The majority opinion is simple and straightforward.  The Court started by discussing how to analyze the constitutionality of this distinction.  It turns out that the law on this subject is well settled.  When a court reviews a law regulating the economic relationship between parties or, like a tax, between them and the government, the justices usually pat the legislature on the head, say “Good dog!,” and give the legislature a treat.  By contrast, when a court reviews a law that discriminates against someone on the basis of race or because a person has exercised a constitutional right, the justices ordinarily stand with their arms akimbo, say “Bad dog!,” and send the legislature to its cage without any supper.  Economic classifications, including distinctions drawn by a tax code, almost always receive the former treatment, and, according to the majority, this case was no different.  Resolving the case therefore required no heavy lifting.  The majority thought, “Hey, all we have to do is identify a justification that (barely) passes the laugh test – how about, avoiding the administrative costs of calculating refunds or other adjustments? – and, like Jackie Gleason used to say, ‘Away we go.’”  And so they did.

Not so the Chief.  He took exception with the city’s refusal to grant the lump-sum payers a partial rebate because he found inadequate the city’s justifications—viz., “the desire to avoid administrative hassle and the fiscal challenge of giving back money that it wanted to keep” (internal punctuation omitted).  That first justification was insufficient, he said, because state law required all costs to be apportioned equally among the affected parties and because there is no codicil to the 14th Amendment guaranteeing equal protection of the law “‘unless it’s too much of a bother.”” Besides, the city already has the information, so all that the bureaucracy needs to do is “cut the checks and mail them out.”  As for the city’s second defense – “We want to keep the money,” a defense that the majority did not embrace – the Chief’s response was both concise and tart: “‘Fiscally challenging’ gives euphemism a bad name.”

The Armour case is a minnow in a sea where whales like the Obamacare and Arizona immigration cases are swimming.  Few people will be affected by the decision; fewer will read it; fewer still will care.  But even small cases can teach us a big lesson.

The justices in the majority and the dissent are all intelligent, sophisticated people, so that everyone knew what was going on here.  Like any other legislative body, the city didn’t put the lump sum payments into Al Gore’s “lockbox”; the city spent them.  The city was savvy enough, however, to realize that this argument had all the charm of an untipped waiter, and offered a second defense.  Channeling any large bureaucracy, the city threw up the argument that a refund program would impose needless administrative burdens on city employees (read: require us to do something that we don’t want to do), which is sufficient to avoid making the payments.  After offering the second defense, the city ducked, because the second defense can’t fly if you don’t buy the first one.  That is, if the city does not have a right to keep the money, then it can’t defend against returning it by saying that it will be costly to follow the law.

The majority bought it.  The majority did so by considering the city’s defenses in reverse order.  The majority agreed with the city that it might be costly to return the money, so the city was entitled to keep it.  That, the majority concluded, was enough of a rational basis for allowing the distinction to stand.

Chief Justice Roberts was not so easily bought off.  In his view, the city could not treat lump-sum payers and installment-payers differently just because the former made the bad choice to pay in advance.  Essentially, he said that, unlike the soup Nazi, the government must justify its distinctions with reasons, not diktats.

It is comforting to believe that judges know that what is really behind a government decision.  It would be even more comforting to have them tell us what they know.  Despite what the majority said, this case is not about administrative burdens.  The Chief explained why, using specifics; the majority avoided the specifics and spoke in generalities.  The reality was that Indianapolis got its paws on money and didn’t want to let it go, because it was already spent.  Indianapolis didn’t pass an ordinance stiff-arming the lump-sum payers; the city let the bureaucracy handle the dirty job.  But Indianapolis might as well have written an ordinance in neon over city hall saying, to borrow from Dante, “Abandon hope of a refund all ye who send money here.”  At least that would have been honest.

Like anyone who has stood in line at the DMV, the majority knuckled under to the Man.  Perhaps, the justices in the majority dreamt of the day when our ancestors stormed the barricades protesting the King’s arbitrary rule.  But dreams aren’t real, unlike bureaucracy, which is real.  Painfully real.  Like everyone else who lives in modern-day America’s sometimes maddening, always mind-numbing, bureaucratic state, the justices in the majority kept their mouth shut and decided not to fight city hall.

As I said at the outset, Armour is a small potatoes case.  It may never appear in a law school case book, a law review, or anything larger than a blog.  But it does contain a lesson, which is this:  The public treasury, whether in Washington or in Indianapolis, is a black hole.  Nothing escapes, because it might cost a farthing to return that money to its rightful owner.  And, according to the Supreme Court, that is a constitutionally sufficient reason to let the government keep whatever it can grab.  It would have been nice to read a debate about whether that is a legitimate way to run a railroad.  Unfortunately, only three members of the Court were willing to enter into that debate.


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