WASHINGTON -- The U.S. Supreme Court yesterday declined to review a landmark decision by the Virginia Supreme Court last November that vindicated the issuance of lease and appropriation-backed bonds in the state.

Marcia P. Dykes, the taxpayer-complainant in the Virginia case, appealed to the U.S Supreme Court in April on grounds that the Virginia court violated federal due process requirements with its extraordinary decisions to rehear and then reverse a ruling it rendered only six months earlier.

The U.S. Supreme Court did not rule on the merits of Ms. Dykes's arguments in declining to take the case. She accused the Virginia high court of not following established procedures for rehearing cases and "rigging" the rehearing panel to produce an opinion favorable to the bond market and Virginia issuers.

The Virginia court decision at issue found that lease and appropriation-backed bonds are not debt and, therefore, do not require the approval of voters under the Virginia constitution. It reversed an April 1991 ruling that had found such bonds to be the equivalent of debt, in part because they are viewed that way by credit agencies and investors.

Because the state and its localities are heavily dependent on lease and appropriation-backed financings, the April decision had brought a number of planned issues to a halt and called into question more than $2 billion of outstanding financings within the state. Also struck down was a $330 million appropriation-backed road issue proposed by the Northern Virginia Transportation District Commission that Ms. Dykes had challenged.

The threat to state finances prompted Gov. L. Douglas Wilder and other state officials to make a strenuous appeal to the court for a rehearing of the case. Last June, the court granted the rehearing and, in an extraordinary move without explanation, withdrew its April opinion.

The April opinion had been decided on a 5-to-1 vote by a panel that included a retiring justice and a temporary appointee, both of whom sided with the majority. One of the seven justices that make up the state's supreme court was absent. The sole dissenter in that opinion was Chief Justice Henry Carrico.

The November decision, by contrast, was decided on a 4-to-3 vote by seven permanent members of the court. The three members who strongly dissented from the later opinion were the only remaining justices on the court among the five who voted for the April decision.

Ms. Dykes charged that the change in the court's make-up was deliberately manipulated by the chief justice to produce the narrow November ruling and amounted to "jury tampering." She said the public widely perceives the second ruling to have been "rigged" to produce a result more favorable to the state's establishment.

"These arbitrary actions of the Virginia Supreme Court strike at the heart of the public's faith in the integrity of the judicial system and are the sort of arbitrary exercise of the powers of government" that are prohibited under the U.S. Constitution's due process provision.

In addition, she alleged that the court did not follow its own procedures for granting the rehearing. Rehearings in most states are granted only when a court's decision has been overruled by a higher court, contained misstatements of fact, or created a conflict with existing laws and case precedents, she said.

Despite the requirement that new factors come to light in a rehearing, Ms. Dykes said, none of the arguments used by the state were new to the case. Justice Henry Whiting, who had penned the April decision, said in a strong dissent to the November ruling that "a rehearing of this case has produced no arguments which were not made and considered" in the April ruling.

But state officials urged the U.S. Supreme Court to deny Ms. Dykes's petition on the grounds that most of the questions she raised, such as those involving the rehearing procedures and selection of judges, were concerns to be decided by the state and its courts.

"There is no basis for this court to review the decision of the Supreme Court of Virginia, which pertained solely to state law," said William G. Broaddus of McGuire, Woods, Battle & Boothe. Mr. Broaddus is the former state attorney general who argued the November case on behalf of the state.

In the appeal to the U.S. Supreme Court, he was representing the Northern Virginia Transportation District Commission.

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.