A hint of clarity on Arkansas’ sovereign immunity issue

by Justin Allen (JAllen@wlj.com) 921 views 

The Arkansas Supreme Court recently issued another opinion related to the state’s sovereign immunity dilemma and it provides some measure of clarity on the issue. Maybe. Sort of.

As noted in my prior opinion piece on the issue, in the Board of Trustees v. Andrews, the Court held that the General Assembly cannot waive the state’s immunity from lawsuit. As a result, the state cannot be sued even when the law says it can be sued.

That ruling has caused great concern for the future of what many consider worthy lawsuits against the state, such as violations of the Freedom of Information Act, tax challenges, illegal exaction, Lake View-style challenges and challenges under the Administrative Procedures Act. Indeed, some of those concerns have been borne out by two recent rulings in Pulaski County Circuit Court dismissing actions based on the Administrative Procedures Act based on the Court’s ruling in Andrews.

Last Thursday, the Court gave us more to consider on the issue in Walther v. Flis Enterprises. That case involved a challenge to a tax assessment made by the state against Flis Enterprises, which operates Burger King franchises in Arkansas. Such challenges are common and are authorized by statute.

While the Flis case was nearing oral argument, the Court issued the ruling in Andrews. As a result, the state notified the Court of its plan to discuss Andrews and sovereign immunity in the Flis case. That led the Court to ask the parties to submit briefs on the eve of the oral argument addressing whether the Court can even consider sovereign immunity since the state didn’t raise it as a defense at the trial court level.

Four of the justices – Justices Rhonda Wood, Courtney Goodson, Sean Womack and Special Justice Lee Watson – agreed that sovereign immunity is an affirmative defense that must be raised at the trial court level in order to benefit from it. In Flis, the state didn’t raise it below, so the lawsuit by Flis against the state wasn’t barred.

Justices Robin Wynne and Karen Baker, in separate opinions, disagreed with the majority. Both of them believe that if the Legislature cannot waive sovereign immunity, then neither can another branch of government, such as the executive branch through the Department of Finance & Administration. As she did in Andrews, Justice Baker also expressed her frustration with the confusion caused by the ruling. Specifically, she wrote that the status of the law regarding sovereign immunity is now “in complete disarray” and “incomprehensible.”

Justice Josephine Hart issued a dissenting opinion noting that sovereign immunity wasn’t raised below and that that the majority created the issue by asking for the briefs. However, she doesn’t unequivocally state, as the majority did, that sovereign immunity must be raised at the trial court level. That leaves some uncertainty but it seems likely Justice Hart agrees with the majority that the state can “waive” it by not raising it below.

It is also worth noting that Justices Wynne and Hart believe sovereign immunity doesn’t apply when a taxpayer challenges the assessment and pays the amount in dispute. So, we know there are two justices who would create one exception to the ruling in Andrews.

So, where does that leave us?

Gov. Asa Hutchinson recently told Talk Business & Politics that the state shouldn’t have blanket sovereign immunity and state agencies may not assert it without obtaining his approval. Presumably, this means many of the types of lawsuits identified earlier in this article will be able to proceed due to the state’s decision to forego asserting sovereign immunity as a defense. Such a process will mitigate the impact of Andrews for the time-being.

However, many legal and political observers are of the belief that the Constitution should be amended to address the situation and provide clarity. It seems unlikely that will be done as an initiated process in 2018, but will more likely be considered as a Legislative referral in 2019, which would appear on the ballot in 2020 if referred.

I expect the Andrews opinion will be subject to additional “clarification” by the Court in the coming months and years. On that note, since the Chief Justice didn’t participate in the Flis case, we don’t know whether he believes immunity must be raised below. If it does come up again, and he agrees with Justices Wynne and Baker, then we will truly find out where Justice Hart falls on the issue.
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Editor’s note: Justin Allen is a partner with the Little Rock-based law firm of Wright Lindsey Jennings. He leads the firm’s governmental relations group. Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.

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