The argument over Arkansas sovereign immunity and taxpayers’ constitutional right to challenge the state

The right of Arkansas taxpayers to challenge improper use of state tax dollars is enshrined in the Arkansas constitution. But does that right belong to every Arkansan or is it reserved for only those Arkansans who can afford to pay substantial legal fees to vindicate it?

That fundamental question will lie at the center of arguments before the Arkansas Supreme Court on September 29 when the state’s highest court balances the government’s claim of constitutional sovereign immunity against a citizen’s constitutional right to challenge the state’s improper use of tax dollars.

The case originates from an illegal exaction lawsuit filed in 2018 on behalf of a group of taxpayers against the Arkansas Department of Transportation (ARDOT) and other state officials related to misspending $121 million of Amendment 91 funds on ineligible projects.

Voters approved Amendment 91 in 2012, instituting a 0.5% sales tax over 10 years to help improve over 200 miles of state highways no wider than four lanes. When those funds were instead committed to six-lane road projects in Little Rock alone, the plaintiffs filed suit and in 2020 the Arkansas Supreme Court agreed that ARDOT had impermissibly spent over $121 million dollars of taxpayer money. ARDOT was ordered to reimburse the $121 million dollars from Amendment 91 taxes that had already been spent and was prohibited from spending an additional $330 million that had been earmarked for the ineligible Little Rock projects over the coming years.

The state’s highest court has ruled and the question over the state’s use of those tax dollars is at rest. The question at hand in late September, however, involves whether the plaintiffs are required to foot the bill for the attorneys fees related to their successful challenge or whether the state should be required to pay attorney fees as mandated by the court. The state argues that plaintiffs should be denied any fee award or reimbursement, regardless of the amount, claiming that they are protected by sovereign immunity. As attorneys for the plaintiffs acting in the public interest, we disagree. The implications of this decision could have far-reaching implications.

In order to challenge improper spending of their tax dollars through an illegal exaction lawsuit, taxpayers are required to retain legal counsel to litigate a case that could, as it did here, take years to resolve. In Arkansas, the right to illegal exaction is rooted in the individual taxpayer having the ability to bring a claim. Without an authorization of attorney fees in successful cases, particularly one that benefits the state as a whole, a taxpayer is forced to undertake that expense on their own without hope for reimbursement. That would essentially mean undermining citizens’ constitutional right to challenge the state and reserving that right only for wealthy individuals or large corporate actors who can cover those expenses on their own.

The right of an individual to challenge the state is firmly grounded in our state’s constitution and history. Leading up to the Arkansas Constitutional Convention of 1874, the state’s citizens had been subject to years of excessive tax practices following the conclusion of the Civil War. With considerable indignation existing throughout the state, a constitutional convention was convened on July 14, 1874. Out of this convention, the citizens of Arkansas would be given the right and ability to bring illegal exaction cases against their state government.

Numerous Arkansas cases have allowed for attorney fees based on other exceptions where the underlying facts of the case demonstrate the creation or preservation of a common fund or the securing of a substantial benefit. In this case, instead of a majority of Amendment 91 funds paid by taxpayers across the state funding only two projects in Little Rock, those tax dollars are now supporting more local road projects in counties across Arkansas. That is what voters intended when they approved Amendment 91, and that intention was preserved by the successful challenge to the state’s misspending of those funds.

This is precisely why we must protect the constitutional rights of taxpayers to bring illegal exaction cases. The importance of ensuring that Arkansas citizens have access to attorneys for prosecuting illegal exaction cases is paramount to protecting the constitutional right of citizens. Restricting a taxpayer’s ability to fund such litigation through attorney fees affects far more than this case alone. It will limit the ability of future Arkansans to legally challenge the state’s misuse of their tax dollars in other situations for years to come.

Editor’s note: Justin Zachary is an attorney with Denton & Zachary, a Little Rock-based public interest law firm. The opinions expressed are those of the author.