Korn v. State of Delaware Auditor of Accounts R. Thomas Wagner, Jr.

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Justia Opinion Summary

Plaintiff, a Delaware taxpayer, asserted claims against defendant, the State of Delaware Auditor of Accounts, for claims related to defendant's alleged noncompliance with 29 Del. C. 2906(f), which stated, in part, that the "Auditor of Accounts shall conduct postaudits of local school district tax funds budget and expenditures annually" and for claims related to defendant's alleged violation of Delaware's Freedom of Information Act (FOIA), 29 Del. C. ch. 100., by failing to provide plaintiff with copies of certain employee time sheets which he duly requested. The court held that it lacked subject matter jurisdiction over the audit claims and the FOIA claims must be dismissed because of plaintiff's failure to exhaust administrative remedies.

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 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. 6149-VCN MEMORANDUM OPINION Date Submitted: September 1, 2011 Date Decided: September 7, 2011 Ronald G. Poliquin, Esquire, The Law Firm of Ronald G. Poliquin, P.A., Dover, Delaware, Attorney for Plaintiff. Frank N. Broujos, Esquire and Judy Oken Hodas, Esquire, Department of Justice, Wilmington, Delaware, Attorneys for Defendant. NOBLE, Vice Chancellor I. BACKGROUND1 Plaintiff Richard Korn is a Delaware taxpayer residing in Wilmington, Delaware. Defendant R. Thomas Wagner, Jr., is the State of Delaware Auditor of Accounts. The Plaintiff asserts claims against the Defendant based upon two distinct sets of factual circumstances. The first group of 29 Del. C. claims relates to the D § 2906(f), which Auditor of Accounts shall conduct postaudits of local school district tax funds budget and expenditures annually The Defendant conducted these audits annually from the time of his appointment in 1989 through 2002. The Defendant stopped conducting these audits annually in 2003, and, again according to the Plaintiff, as a result, theft and fraud of approximately $49,000,000 at several school districts went undetected. Second, the Plaintiff alleges that the Defendant violated Freedom of Information Act2 ( FOIA ) by failing to provide the Plaintiff with copies of Office of the Auditor employee time sheets which he duly requested. 1 The factual background is based on allegations in the first amended verified complaint 2 29 Del. C. ch. 100. 1 II. CONTENTIONS The Plaintiff seeks, first, a declaratory judgment that failure to perform annual local school district compliance audits is a violation of 29 Del. C. § 2906(f), and, second, preliminary and permanent injunctions directing the Defendant to perform these audits annually (the s . Additionally, the Plaintiff requests a declaratory judgment of FOIA, together with an injunction and a writ of mandamus directing the Defendant to disclose the timesheets (the s . The Defendant contends that dismissal of the Complaint is appropriate under Court of Chancery Rules 12(b)(1) and 12(b)(6) for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted.3 III. ANALYSIS A. Audit Claims The Defendant argues that the Audit Claims must be dismissed because this Court lacks the subject matter jurisdiction necessary to adjudicate them. The Court of Chancery is a court of limited jurisdiction and lacks subject matter jurisdiction where there is an adequate remedy at 3 Before oral argument, the Defendant agreed to waive the previously raised defense that for insufficient service of process. 2 law.4 The primary issue at the core of the Audit Claims is one solely of statutory interpretation, simple as this interpretation may be. Such issues ution by the Superior Court, and declaratory relief is available to the same extent as it is [in the 5 Since declaratory relief of the type sought here could be obtained, if at all,6 in the Superior Court, there is an adequate remedy at law for both the 4 10 Del. C. § 342. Reeder v. Wagner, 2007 WL 3301026, at *1 (Del. Ch. Nov. 1, 2007); Reed v. Brady, 2002 WL 1402238, at *3 n. 7 (Del. Ch. June 21, 2002), , 818 A.2d 150 (Del. 2003) (TABLE). 6 Beyond the issue of this C is the question of whether the Plaintiff has standing to bring these claims. The Plaintiff asserts both individual and taxpayer standing in the Complaint. A plaintiff suing as a citizen must show that he or she an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) 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; and (3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a , 838 A.2d 1103, 1110 (Del. 2003) (quoting Society Hill Towers O , 210 F.3d 168, 175-76 (3d Cir. 2000)). Generally, a plaintiff must prove that his or her interest in the controversy is different from the interest of the public at large. See Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1382 (Del. 1991). 5 Plaintiff has not alleged he has suffered any unique harm as result of the alleged misconduct that is distinguishable from the harm suffered by the general public. Furthermore, the alleged harm, theft of school district funds, is remote from the alleged misconduct. There are no allegations that the Defendant participated in any fraud or theft. At 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 succeed in any of these aims is unknowable. For this same reason, it appears speculative that the alleged injury would be redressed by a decision in the Pla challenges either to expenditures of public funds or use o 3 Reeder v. . Clearly the availability of a declaratory judgment from the Superior Court suffices as an ,7 a Furtherm declaratory judgment is injunction claims.8 D force and effect of a final judgment or decree. 9 Additionally, aside from a conclusory allegation,10 nothing in the Complaint alleges or suggests the Defendant, an elected State official, would act in defiance of a Superior Court order. Since an adequate legal remedy is available for all of the Pla Audit Claims, this Court lacks subject matter jurisdiction over them. Accordingly, the Audit Claims will be dismissed but may be transferred to the Superior Court in accordance with 10 Del. C. §1902. Wagner, 974 A.2d 858, 2009 WL 1525945, at *2 (Del. 2009) (TABLE) (quoting v. Town of Middletown, 2006 WL 205071 (Del. Ch. Jan. 18, 2006)). As in Reeder, the Plaintiff here seeks not to enjoin the misuse of public funds or land, but to obtain an advisory opinion adopting his interpretation of the law. See id. As such, it is unlikely that taxpayer standing is available. While the Court notes the foregoing, it withholds judgment on the question of standing, as these claims are disposed of on other grounds. 7 Br. at 9-11. 8 See Reed, 2002 WL 1402238 at *3. 9 Id. (quoting 10 Del. C. § 6501). 10 See Pl 4 B. FOIA Claims The Plaintiff alleges that the Defendant violated 29 Del. C. §10003 by refusing to provide the Plaintiff with the requested time sheets. The Defendant argues that the Plaintiff has failed to exhaust available administrative remedies, and the Plaintiff acknowledges that dismissal on this ground is appropriate. Under 29 Del. C. § 10005, a citizen alleging a FOIA violation must seek an administrative review before filing suit in court when the Attorney General is obligated to represent the public body with the sought-after public records pursuant to 29 Del. C. § 2504.11 In such a case, the person denied access to public records must present a petition and all supporting documentation to the Chief Deputy Attorney General, who must then render a written determination declaring whether a violation has occurred. Only after , may the petitioner or public body appeal the matter to the Superior Court.12 By 29 Del. C. § 2504, the Attorney General is obligated to represent the Auditor of Accounts in suits brought against him in his official capacity. The Complaint fails to allege that the Plaintiff first petitioned the Attorney General and received an unfavorable administrative determination. 11 12 29 Del. C. §§ 10005(b) & (e). Id. 5 The Plaintiff acknowledges his failure to exhaust administrative remedies requires dismissal. IV. CONCLUSION As set forth above, this Court lacks subject matter jurisdiction over the Audit Claims, failure to exhaust administrative remedies. An implementing order will be entered. 6