CHICAGO - The Minnesota Supreme Court late Monday agreed to review a state appeals court ruling on a lawsuit that challenges the state's ability to issue bonds to assist Northwest Airlines.

MaryKay Milla, spokeswoman for Minnesota Attorney General Hubert Humphrey 3d, said the state's highest court agreed to hear the case on an "expedited" basis, adding that it could render a decision in October or November.

"It has been our goal to get all the legal issues resolved as quickly as possible," Ms. Milla said.

The suit claims that the 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.

In June, the Minnesota Court of Appeals upheld a Ramsey County district court's dismissal of the suit. It did so on the grounds that the plaintiffs, a Bloomington, Minn., couple backed by Minnesotans for Constitutional Law, did not comply with the lower court's order to file a $30 million surety bond with the court.

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.

In July, the couple petitioned the state high court to review the case, while Mr. Humphrey requested that the court clarify the constitutional issues of the suit.

Mr. Humphrey contended that the decision by the appeals court could affect the marketability of the bonds expected to be issued by the state to assist Northwest. The appeals court decision did not preclude similar lawsuits in the future and questioned the viability of the law that permits bonds issued by the state and airports commission to help Northwest.

In a concurring opinion, Appeals Court Judge Gary Crippen wrote that the appeals court decision cast a "legal cloud" over all bonds sold under the state law in question.

Ms. Milla said the state expected the high court to rule on both the constitutional and procedural issues of the case.

However, David Knodell, the attorney for the couple who filed the suit, said he expected the court to rule only on the procedural issue of whether or not the surety bond was required.

Meanwhile, state officials have said plans to issue up to $350 million of tax-exempt bonds for the construction of Northwest's maintenance facilities in Duluth and Hibbing will remain on hold until the suit is ultimately resolved.

Up to $175 million of the tax-exempt bonds would carry the state's general obligation pledge. Rating agency officials have said the issue would mark the first time a state has given its GO pledge to benefit a major airline.

Northwest Airlines has maintained that it is prepared to proceed with construction of the facilities as soon as the suit is resolved.

After the suit was dismissed by the district court in April, the airports commission sold $270 million of taxable bonds and lent the proceeds to Northwest to refinance its debt. In addition, the commission also lent the airline $45 million for bond reserves from the commission's construction fund.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.