Korn v. State of Delaware, et al.

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IN THE SUPERIOR COURT OF DELAWARE IN AND FOR NEW CASTLE COUNTY RICHARD KORN, Plaintiff, v. STATE OF DELAWARE, AUDITOR OF ACCOUNTS, R. THOMAS WAGNER, JR., IN HIS OFFICIAL CAPACITY AS STATE AUDITOR, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) C.A. No. N11C-11-039-WCC Submitted: June 4, 2012 Decided: September 28, 2012 On Defendant s Motion to Dismiss GRANTED OPINION Ronald G. Poliquin, Esquire c/o James Liguori, Esquire; Liguori & Morris, 46 The Green, Dover, DE 19901. Attorney for Plaintiff Richard Korn. Peter O. Jamison, III, Esquire, and Frank N. Broujos, Esquire. 820 N. French Street, Wilmington, DE 19801. Attorneys for Defendant State of Delaware, Auditor of Accounts, R. Thomas Wagner, Jr., in his official capacity as State Auditor. CARPENTER, J. Petitioner and New Castle County taxpayer Richard Korn alleges State of Delaware Auditor of Accounts R. Thomas Wagner, Jr. has failed to audit New Castle County school districts for several years, as required by statute. Korn seeks a writ of mandamus compelling the Auditor to comply with the statute while Defendant moves to dismiss Korn s petition. For the reasons discussed below, Defendant s Motion to Dismiss is hereby GRANTED. BACKGROUND Petitioner Richard Korn is a resident and taxpayer of New Castle County, Delaware. Defendant State of Delaware Auditor of Accounts, R. Thomas Wagner, Jr., ( Wagner ) has served as Delaware s Auditor since 1989. Korn alleges that, since 2003, Wagner has failed to perform compliance audits of New Castle County school districts as required by 29 Del. C. § 2906(f), and that this dereliction has allowed fraud and theft to go undetected in several school districts, resulting in multimillion losses of taxpayer dollars.1 Korn seeks a declaratory judgment against Wagner for his alleged noncompliance with 29 Del. C. § 2906(f), a writ of mandamus directing Wagner to 1 See 29 Del. C. § 2906(f) ( The Auditor of Accounts shall conduct postaudits of local school district tax funds budget and expenditures annually. ). 2 perform his duties per 29 Del. C. § 2906(f), and costs and attorney fees. Wagner moves the Court to dismiss Korn s petition. STANDARD OF REVIEW Wagner moves the Court to dismiss Korn s petition on the grounds of untimely and insufficient service of process, lack of subject matter and personal jurisdiction, and failure to state a claim upon which relief may be granted.2 Where, as here, a motion to dismiss has been presented at a preliminary stage of the proceedings, the Court must determine with reasonable certainty that no set of facts can be inferred from the pleadings upon which the plaintiff could prevail.3 The Court must also give the plaintiff the benefit of all reasonable inferences that can be drawn from the pleadings.4 DISCUSSION 1. Service of Process5 According to Wagner, the Court lacks personal jurisdiction because Korn did not properly serve this action s summons and complaint within 120 days of its filing.6 To address this issue, some procedural background is helpful. Korn 2 See Super. Ct. Civ. Rules 4(j), 12(b)(1), 12(b)(2), 12(b)(5), and 12 (b)(6). Diam ond State Tel. Co . v. Univ. of D elawa re, 269 A.2d 52 , 58 (Del. 1970). 4 In re USACafes, L.P. Litig., 600 A.2d 43 , 47 (Del. Ch. 1991). 5 Super. Ct. Civ. Rules 4(j) and 12(b)(4). 6 See Super. Ct. Civ. R. 4(f)(1)(IV) (requiring service to be made on governmental organization by delivering copy of summons, complaint, and affidavit to chief executive officer thereof); Super. Ct. Civ. R. 4(j) (m andating dismissal o f complaint no t served upon defendant within 120 d ays of filing if plaintiff cannot show good cause for such late service). 3 3 initially filed this case in the Court of Chancery; however, the Court of Chancery dismissed Korn s complaint for lack of subject matter jurisdiction, noting that he could transfer the action to the Superior Court within 60 days of the Court of Chancery s decision.7 The Court of Chancery dismissed Korn s complaint on September 7, 2011, giving Korn until November 7, 2011 to transfer the action.8 The docket reflects that Korn s initial filing was transferred from the Court of Chancery to the Superior Court on November 5, 2011. The accompanying Case Information Statement includes the Civil Case Code designation of CCHA, indicating Transfer from Chancery. Korn also notes in the complaint filed with this Court that his case was transferred from the Court of Chancery, and Korn attached the Court of Chancery s decision to his complaint. Wagner insists Korn s complaint has not been transferred but is, instead, an entirely new action. Only if Wagner is correct does service of process become an issue because a party is not required to refile its complaint after the case has been transferred . . . much less serve that complaint again on parties that were before the original court. 9 Based on the docket and the pleadings before it, the Court finds that Korn s complaint was timely transferred from the Court of Chancery to the 7 Korn v. W agn er, No. 614 9-VCN , 2011 W L 4357 244, at *2 (Del. Ch. Sept. 7, 2011). Sixty days from Septemb er 7, 2011 is November 6 , 201 1. Because Novembe r 6, 20 11 fell on a Sunda y, however, Korn could file the following weekday, on Novemb er 7, 2011. Super. Ct. Civ. R. 6(a). 9 Maloney-Refaie v. Bridge at School, Inc., 958 A.2d 87 1, 881-82 (D el. Ch. 2008). 8 4 Superior Court. To the extent the docket reflects the creation of a new case filing, such reference is simply an administrative action by court staff that does not affect the timeliness of the Plaintiff s complaint. As a result, Korn was not required to serve Wagner a second time and, therefore, Wagner s argument to dismiss Korn s petition for improper service of process must fail.10 2. Standing a. Taxpayer Standing11 Wagner next urges the Court to dismiss Korn s petition, arguing that Korn does not have standing to pursue his complaint. To establish standing, a plaintiff must show that he has suffered an injury in fact an invasion of a legally protected interest which is concrete and particularized, actual and imminent, causally connected to the challenged action of the defendant, and likely redressed by a favorable decision.12 Generally, a plaintiff must show that his interest in a controversy is different from the interest of the public at large.13 The Court of Chancery mentioned this issue in its review of Korn s case, noting that Korn s allegations appear to fall short of the minimum requirements 10 Nonetheless, the Court commends Ko rn for attempting a second service on Wa gner, as reflected by the writ issued in December 2011 and returned non est invetus. 11 See Super. Ct. C iv. R. 12 (b)(2 ) (add ressing m otions to dism iss for lack of persona l jurisdiction). 12 Dover H istorical Soc y v. Dover P lanning Co mm n, 838 A.2d 11 03, 1110 (Del. 2003). 13 Stuart Kingston, Inc. v. Robinson, 596 A.2d 13 78, 1382 (Del. 1991). 5 for standing for several reasons.14 First, the Court of Chancery noted that Korn has not alleged he has suffered any harm distinguishable from the harm suffered by the general public.15 This Court agrees. Even assuming Korn s remaining arguments are true, Korn s interest in compelling Wagner to comply with 29 Del. C. § 2906(f) is no different from that of any other taxpayer. Additionally, the Court of Chancery noted that the harm Korn complains of theft of school district funds is only tenuously related, if at all, to Wagner s alleged failure to audit the school districts.16 In fact, Korn does not accuse Wagner of participating in fraud or theft.17 Rather, Korn argues that Wagner s inaction led to the misappropriation of taxpayer funds.18 Aside from his own conclusory statements, however, Korn offers no evidence of a causal connection between these events. Finally, the Court of Chancery commented on the slight chance that a judgment in Korn s favor would redress the harm he alleges, stating that [a]t best, an audit performed after money has been spent may detect or deter theft, or may lead to a recovery of misappropriated funds, though the extent to which it will 14 Korn v. Wagner, No. 6149 -VCN , 2011 W L 4357 244, at *1 n.6 (Del. Ch. Sept. 7, 2011). Id. 16 Id. 17 See Answ er ¶ 4 ( [T]he co mpla int s allegatio ns do not co ncern the defendant s direct illegal spending . . . . ). 18 Id. 15 6 succeed in any of these aims is unknowable. 19 Korn is not asking the Court to compel a retrospective audit of the school districts in order to right some specific wrong; more accurately, Korn is asking the Court to slap Wagner s wrists for his alleged failure to comply with 29 Del. C. § 2906(f) in order to influence Wagner s compliance with the statute in the future. This, however, would amount to an advisory opinion of the Court, which is an inappropriate response to any request for declaratory judgment.20 Even if these reasons were insufficient to deny Korn standing, Delaware reserves taxpayer standing for a narrow set of claims involving challenges either to expenditures of public funds or use of public lands. 21 This case involves neither; Korn only challenges Wagner s jeopardizing the safeguarding of State funds. 22 Further, as previously discussed, Korn concedes that Wagner never 19 Korn , 2011 W L 4357 244, at *1 n.6 (Del. Ch. Sept. 7, 2011). See Ackerman v. Stemerman, 201 A.2d 173 , 175 (Del. 196 4) ( [T ]he D eclaratory Judgm ent Ac t is not to be used as a means of eliciting advisory opinions from the courts. There must be in existence a factual situation giving rise to immediate, or about to become immediate, controversy between the parties. The court to entertain jurisd iction of the cause must be co nvince d that the actual co ntroversy in all proba bility would result in litigation sooner or later. ). 21 Reeder v. Wagner, No. 435, 200 8, 2009 W L 1525 945, at *2 (Del. June 2, 2009). 22 Answer ¶ 4 . Korn cites City of Wilm ington v. Lord, 378 A.2d 635 , 637 (Del. 197 7) to suppo rt his argument that a taxpayer has standing to sue when public funds are not properly safeguarded. Korn misreads Lord. In Lord, the Sup reme Court of D elaware only held that a taxpayer has standing to sue to enjoin the unlawful expenditure of public money . . . regardless of any showing of special damages. Id. Thus, the Supreme Co urt focused on whether a taxpayer had to show special damages to establish standing and not whether a taxpayer may sue when public funds are not properly safeguarded. 20 7 spent public funds in contravention of the law. 23 By Korn s own admission, therefore, he does not have standing to bring this suit as a plaintiff taxpayer. b. Declaratory Judgment Act Standing24 Because Korn seeks declaratory relief, he must demonstrate that an actual controversy exists to establish standing.25 To do this, Korn must satisfy the following conditions: (1) the complaint must assert a controversy involving Korn s rights; (2) the controversy must be one asserted against an individual who has an interest in contesting the claim; 26 (3) the controversy must be between parties whose interests are real and adverse, and (4) the issue involved must be ripe for judicial determination.27 Here, the issue is whether Wagner s alleged inaction implicates any of Korn s rights. Title 29, chapter 29 of the Delaware Code provides that the auditor shall conduct postaudits of local school district tax funds budget and expenditures annually. 28 In an attempt to frame this duty as one directly involving the Plaintiff, Korn asserts it is a mandatory right to all school district 23 See Answ er ¶ 4 ( [T]he co mpla int s allegatio ns do not co ncern the defendant s direct illegal spending . . . . ). 24 See Super. Ct. Civ. R. 12(b)(1) (addressing motions to dismiss for lack of subject matter jurisdiction), Rollins Int l, Inc. v. Int l Hydronics Corp., 303 A.2d 66 0, 663 (De l. 1973) (interpreting Declaratory Judgment Act for jurisdictional purposes ). 25 Cartan za v. Dep t of Natural Res., No. 2641 -MG , 2009 W L 1065 54, at *2 (Del. Ch. Jan. 12, 2009). 26 Id. 27 Id. 28 29 Del. C. § 2906 (f). 8 taxpayers that their local district tax funds in each individual school district be audited on an annual basis. However, the Court is not convinced that the statute creates an obligation owed to an individual taxpayer nor is sufficient to create a private right of action.29 The Court of Chancery s decision in O Neill v. Town of Middletown30 is instructive. In O Neill, citizen-plaintiffs challenged the decision of the Delaware Department of Transportation not to require a site-specific traffic impact study as purportedly mandated by statute.31 Like Korn in this case, the plaintiffs in O Neill argued in favor of a general right of judicial review enabling private parties to challenge governmental conduct whenever a plaintiff can demonstrate noncompliance with the law. 32 The Court of Chancery addressed this argument in an implied private right of action analysis, asking whether the statutory text evinced a legislative intent to give the plaintiffs a private right and a private remedy against the government.33 The Court of Chancery noted that it was especially reluctant to imply causes of actions under statutes that create duties on 29 Pet. ¶ 7. No. 106 9-N, 2006 W L 2050 71 (Del. Ch. Jan. 18, 2006 ). 31 Id. at *1. 32 Id. at *7. 33 Id. at *19. 30 9 the part of persons for the benefit of the public at large. 34 The same is true in this litigation. Although 29 Del. C. § 2906(f) defines the duties of a state office constitutionally35 created for the benefit of Delaware taxpayers, the statute is insufficient to give taxpayers a private cause of action or a private remedy against the auditor. While the Plaintiff may have a general interest in seeing a governmental agency comply with the law, the statute at issue is far too broad and vague to permit a finding of an implied right of action. 36 The statute Korn seeks to enforce a statute under the same title as those discussed in O Neill is wholly concerned with duties of the auditor and does not directly or by implication create an enforceable right for school district taxpayers or the school districts themselves.37 Because it does not involve Korn s rights, the action here is without a controversy and cannot stand under the Declaratory Judgment Act. 34 Id. at *21 (quoting Cannon v. Univ. of Chicago, 441 U.S. 677 , 690 n. 13 (1979 )). See Del. Const. art. III §21 (establishing office of Auditor of Accounts). 36 Id. at *21. 37 See id. at *20, 22 (finding 29 Del. C. §§ 910 3, 9203, and 92 04 give plaintiffs neither implied private right of action nor private remedy against government because statutes focus, not on individuals protected or entities regulated, but on agency doing regulating). 35 10 3. Sovereign Immunity38 Under the doctrine of sovereign immunity, the state may not be sued without its consent, and the state may only waive or limit its immunity by act of the General Assembly.39 The Defendants insist that the doctrine of sovereign immunity bars Korn s claims because Korn has not demonstrated that the legislature has waived sovereign immunity with respect to the performance of the auditor s duties. Korn insists that sovereign immunity does not shield state officials illegal acts impacting the protection of taxpayer funds, and that, furthermore, sovereign immunity is not implicated when the plaintiff brings suit for the benefit of the state.40 In making this argument, it appears the Plaintiff s assertion is based upon the Supreme Court decisions which have allowed taxpayer standing in actions involving challenges either to expenditure of public funds or use of public funds. Unfortunately for the Plaintiff, this suit involves neither. Korn s argument against the application of sovereign immunity is further flawed because, even if Korn prevails, his suit will in no obvious way benefit the state. The Court of Chancery recognized this, finding that it appears speculative 38 See Super. Ct. Civ. R. 12(b)(1) (addressing motions to dismiss for lack of subject matter jurisdiction); Janowski v. Div. of State Police Dep t of Safety and Hom eland Sec., No. 08C-03-037(RBY), 2009 WL 537 051 , at *2 (D el. Sup er. Feb. 27 , 200 9) ( Subject matter jurisdiction includes sovereign immunity cases. ). 39 Doe v. Cates, 499 A.2d 11 75, 1176 -77 (Del. 1985). 40 Answer ¶ 6. 11 that the alleged injury would be redressed by a decision in the Plaintiff s favor. 41 There is nothing here to imply or even suggest that the State has waived its sovereign immunity status and the Court finds it would shield the state officials and agency from suit. CONCLUSION The Court acknowledges the dissonance between Wagner s alleged inaction and 29 Del. C. § 2906(f). However, the rules of civil procedure and sovereign immunity do not allow the Court to consider Korn s complaint. Korn s status as a New Castle County taxpayer gives him a voice with which to protest about government officials who neglect their duties, but that voice should be directed to the General Assembly or the electorate and not the courts. Wagner has offended none of Korn s rights; therefore, there is no controversy for the Court to consider in this case. For the foregoing reasons Wagner s Motion to Dismiss is hereby GRANTED. IT IS SO ORDERED. /s/ William C. Carpenter, Jr. Judge William C. Carpenter, Jr. 41 Korn v. Wagner, No. 6149 -VCN , 2011 W L 4357 244, at *1 n.6 (Del. Ch. Sept. 7, 2011). 12

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