CHICAGO -- The Minnesota Supreme Court has affirmed a lower court's dismissal of a suit that challenged the state's ability to issue bonds to assist Northwest Airlines, clearing the way for the state to proceed.
In a 7-to-0 vote, according to an advance copy of the decision released yesterday, the state's highest court upheld the Minnesota Court of Appeals ruling that affirmed a lower district court's dismissal of the suit.
The Ramsey County District Court in April had dismissed the suit because the plaintiffs, a Bloomington, Minn., couple, did not comply with a court order to file a $30 million surety bond.
Under Minnesota law, a judge can order a plaintiff to file a surety bond if a lawsuit against a government entity could result in costly delays.
"The failure of the plaintiffs to file the requisite bond properly resulted in the dismissal of their action with prejudice," Chief Justice A.M. Keith wrote.
The suit claims that a state law permitting Minnesota and the Minneapolis/St. Paul Metropolitan Airports Commission to issue $620 million of bonds to assist Northwest's expansion plans violates a state constitutional ban on public taxation for a private purpose.
The state has delayed the issuance of up to $350 million of general obligation bonds to finance the construction of Northwest maintenance facilities in Duluth and Hibbing until the suit is resolved. In April, the airports commission sold $270 million of revenue bonds to assist the airline.
Following the appellate court's ruling, the plaintiffs petitioned the state high court in July to review the case. At that time state Attorney General Hubert Humphrey 3d requested that the court clarify the constitutional issues raised by the suit.
The 3-to-0 appellate decision released in June did not preclude similar lawsuits in the future and raised concerns about the law that permits the state to issue bonds to assist the Eagan, Minn.-based airline.
However, the supreme court in its ruling yesterday did not address the constitutional issues of the case and instead criticized the appellate court for raising those concerns.
Keith wrote that "the appellate court's opinion far exceeded the bounds of appropriate appellate review."
David Knodell, attorney for the plaintiffs, said he was disappointed with the ruling. He said the supreme court decision leaves the constitutional question "an open issue."
"The supreme court says that the court of appeals was not wrong, but that they shouldn't have said anything." Knodell said. "You know darn well that these issues will come up again."
Cyndy Brucato, spokeswoman for Gov. Arne Carlson, said the supreme court decision "lifts a cloud" from legal questions about the state's ability to issue bonds for the airline. She said the ruling was "one step" in enabling the state to proceed with its plans to issue bonds to assist Northwest.
She added that the remaining obstacle for the state's bond issue is Northwest's ability to work out financial issues that may affect its solvency.
Jay Abrams, a director at Standard & Poor's Corp., said the state supreme court decision appeared to be a positive ruling for the state, "absent any other developments."
"It looks like [the decision] will allow the project to once again move forward," Abrams said, referring to the state's plans to issue bonds for Northwest.
Jamie Burr, vice president and assistant director in the public finance legal analysis group at Moody's Investors Service, said, "Anything that reduces the likelihood of unnecessary litigation is a positive development."