[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
NOVEMBER 26, 2007
No. 07-10521
THOMAS K. KAHN
________________________
CLERK
D.C. Docket No. 06-00084-CV-J-32-MCR
JACKSON-SHAW COMPANY,
a Texas corporation,
Plaintiff–Appellant,
versus
JACKSONVILLE AVIATION AUTHORITY,
a body politic and corporate,
Defendant–Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(November 26, 2007)
Before BIRCH and BARKETT, Circuit Judges, and KORMAN,* District Judge.
PER CURIAM:
Jackson-Shaw Company appeals from a final judgment, after a bench trial,
in favor of the Jacksonville Aviation Authority (“JAA”) on Jackson-Shaw’s suit
seeking a declaratory judgment and injunctive relief. In its Complaint, Jackson-
Shaw alleges that a development agreement (“Agreement”) between the JAA and a
private entity, Majestic Realty Company,1 violates article VII, section 10 of the
Florida Constitution, and as a result, the JAA must be enjoined from performance
under the Agreement. Specifically, Jackson-Shaw alleges that the Agreement
makes the JAA a “joint owner” with Majestic and requires the JAA to pledge to
Majestic its public credit, both of which are prohibited by article VII, section 10 of
the Florida Constitution. Because resolution of these important constitutional
questions depends on unsettled state law, we believe it prudent to certify the
questions presented here to the Florida Supreme Court.2
*
Honorable Edward Korman, United States District Judge for the Eastern District of New
York, sitting by designation.
1
The Agreement at issue in this case is between the JAA and Woodwings East
Development, LLC, a Delaware limited liability company formed by Majestic.
2
The Florida Constitution permits us to certify a question to the Florida Supreme Court if
it “is determinative of the cause and for which there is no controlling precedent of the supreme
court of Florida.” Fla. Const. art. V, § 3(b)(6); see also Stevens v. Battelle Memorial Inst., 488
F.3d 896, 904 (11th Cir. 2007). We have also previously said that “[s]ubstantial doubt about a
question of state law upon which a particular case turns should be resolved by certifying the
2
I. BACKGROUND
The JAA is a public entity responsible for the management, development,
and oversight of four airports in Duval County, Florida, including the Jacksonville
International Airport and certain public lands surrounding it. The JAA has
approximately 4000 to 6000 acres of land available for development, depending
on the configuration of possible future runways. As part of that portfolio, the JAA
owns a 328-acre unimproved lot known as Woodwings East. After negotiations
with a large-scale developer failed in the late 1990s, the JAA decided that the
highest and best use of the land would be realized through a lease of the property.
Rather than seeking bids on Woodwings East, or requesting development
proposals, or having the property appraised or marketed directly, the JAA simply
erected “For Lease” signs on the property. After seeing one of these signs on the
property, Majestic sent the JAA a proposal in March 2005 to lease the property,
and after some negotiations, the parties reached the Agreement which is the
subject of the present appeal.
The Agreement contains two major parts: an Option to Ground Lease
question to the state supreme court.” Jones v. Dillard’s, Inc., 331 F.3d 1259, 1268 (11th Cir.
2003); see also Raborn v. Menotte (In re Raborn), 470 F.3d 1319, 1324 (11th Cir. 2006); Tobin
v. Mich. Mut. Ins. Co., 398 F.3d 1267, 1274 (11th Cir. 2005) (“Where there is doubt in the
interpretation of state law, a federal court may certify the question to the state supreme court to
avoid making unnecessary Erie guesses and to offer the state court the opportunity to interpret or
change existing law.”).
3
(“Option”) and a Participating Ground Lease Agreement (“Lease Agreement”).
Under the Option, the JAA granted Majestic the right/option, for a term not to
exceed fifteen years,3 to lease the Woodwings East premises at no cost to Majestic.
If Majestic exercised the Option, the JAA would lease a portion of the Woodwings
East Option parcel to Majestic under the Lease Agreement for a sixty-five year
term.4 Majestic agreed to design, finance, construct, manage, lease, and operate
the new buildings constructed on the Lease Agreement premises, but the “net
revenue”5 produced by the leased improvements would be split evenly between the
3
In order to prevent “land banking,” the initial Option term was for five years. The term
was to be extended one year for every 100,000 square feet of income-producing properties that
Majestic constructed on the Option premises for up to fifteen years.
4
After all amendments were made to the Agreement, an updated Option and Lease
Agreement were provided to the JAA board of directors, which they approved at a September
2006 meeting. The summary of the Agreement reads as follows:
The Option to Ground Lease Agreement (Option) grants Majestic a five year
right/option to ground lease the Woodwings East premises (Option Premises).
The Option term can be extended by one (1) year for every 100,000 square feet of
commercial buildings substantially completed within the Option Premises up to
the maximum term of fifteen (15) years. Substantially completed means the roof
and exterior walls for the proposed commercial building have been completed.
The Participating Ground Lease (PGL) comes into effect when Majestic elects to
exercise the Option and take down a portion of the Option Premises. Under the
PGL JAA leases the portion of the Option Premises taken down for a lease term
of sixty-five (65) years.
5
“Net revenue” is to be determined after Majestic is reimbursed from gross revenue for
all management fees, pre-development, construction, design, maintenance, financing,
infrastructure, and other costs and “advances”—all with interest—as well as all “fixed rent” paid.
4
JAA and Majestic. However, under the terms of the Lease Agreement, the JAA
would only begin receiving its share of “net revenue” after Majestic had fully paid
off all of its costs, including development, capital, and administrative expenses.
Additionally, the JAA agreed to pay $750,000 to construct a road extension into
the parcel and to provide Majestic with up to fifty acres of “wetlands mitigation”
credit valued at $1.8 million, should it prove necessary to complete the project.
With both the 15-year option period and 65-year lease, the Agreement between
Majestic and the JAA was projected to last 80 years.
Jackson-Shaw is a large private real-estate developer and competitor of
Majestic. It owns, among many other things, a nearby parcel of land called
“Tradeport,” which it purchased from the JAA in 2005 for $109,000 an acre, at a
total price of $58,215,000. Despite its ownership of neighboring property,
Jackson-Shaw learned about the Woodwings East deal between Majestic and the
JAA only after it was reported in the news.6 Jackson-Shaw then brought suit
against the JAA, seeking declaratory and injunctive relief. The only claim
relevant to this appeal is Jackson-Shaw’s allegation that the Agreement violates
the Florida Constitution’s prohibition against a government entity becoming a
6
Jackson-Shaw contends that it never knew that the property was available in the first
place, except perhaps under short-term leases which it believed would be uneconomic. After
initiating this litigation, Jackson-Shaw submitted its own proposal to develop the parcel.
5
“joint owner” with, or giving, lending, or using credit to aid, a private corporation.
See Fla. Const. art. VII, § 10.
Following a bench trial, the district court sided with the JAA, finding that
“[w]hile reasonable persons may certainly disagree whether the JAA–Majestic
transaction is good public policy, [the JAA’s] action in approving it does not run
afoul of the Florida Constitution, Florida Statutes, or [the] JAA’s Charter.” D. Ct.
Op. at 100.
The Florida Constitution limits a public body’s ability to enter into certain
business relationships with private entities in several ways. It absolutely forbids
the state from becoming a “joint owner” of a project with a private company or
from pledging public funds and credit for the benefit of a private company absent
a paramount public purpose. Article VII, section 10 of the Florida Constitution
provides in pertinent part:
Neither the state nor any county, school district, municipality, special
district, or agency of any of them, shall become a joint owner with, or
stockholder of, or give, lend or use its taxing power or credit to aid
any corporation, association, partnership or person . . . .7
In response to Jackson-Shaw’s claims that the Agreement is unconstitutional, the
JAA argues, in part, that the Agreement is merely a long-term lease, and does not
7
The remainder of section 10 lists exceptions to the general rule. The parties have not
argued that any of these exceptions are relevant here.
6
involve joint ownership or a pledge of public credit. It specifically notes that upon
the advice of counsel—who was concerned about the Florida Constitution’s “joint
owner” prohibition—the JAA and Majestic added a term to the Agreement
guaranteeing the JAA a fixed minimum rent of $1380 per acre per year unless and
until its share of net revenue exceeded that amount.8 The JAA argues that the
addition of the fixed minimum rent component to the Agreement, which gave the
JAA a guaranteed return, negates the conclusion that it is a joint owner.
Article VII, section 10 of the Florida Constitution was adopted in 1974 to
replace an earlier provision, which stated in relevant part:
The Legislature shall not authorize any county, city, borough,
township or incorporated district to become a stockholder in any
company, association or corporation, or to obtain or appropriate
money for, or to loan its credit to, any corporation, association,
institution or individual.
Fla. Const. art. IX, § 10 (1885).9 Interpreting this predecessor provision—which
is substantially similar to the current provision except for the latter’s explicit
prohibition on the state being a “joint owner”—the Florida Supreme Court
8
The parties arrived at that figure by calculating the value of a seven-percent return on a
$16,000 per-acre value, which was the value of a nearby property that the JAA was separately
negotiating to purchase.
9
This text was originally introduced as an amendment to the Florida Constitution of
1865, and was then carried over into the 1885 Constitution. A 1968 amendment added four
exceptions.
7
explained in 1926:
The reason for this amendment was that, during the years immediately
preceding its adoption, the state and many of its counties, cities, and
towns had by legislative enactment become stockholders or
bondholders in, and had in other ways loaned their credit to, and had
become interested in the organization and operation of, railroads,
banks, and other commercial institutions. Many of these institutions
were poorly managed, and either failed or became heavily involved,
and, as a result, the state, counties and cities interested in them
became responsible for their debts and other obligations. These
obligations fell ultimately on the taxpayers. Hence the amendment,
the essence of which was to restrict the activities and functions of the
state, county, and municipality to that of government, and forbid their
engaging directly or indirectly in commercial enterprises for profit.
Bailey v. City of Tampa, 111 So. 119, 120 (Fla. 1926). In subsequent cases,
Florida courts have repeatedly emphasized that the purpose of the provision is “to
protect public funds and resources from being exploited in assisting or promoting
private ventures when the public would be at most only incidentally benefited.”
Bannon v. Port of Palm Beach Dist., 246 So. 2d 737, 741 (Fla. 1971); Dade
County Bd. of Pub. Instruction v. Mich. Mut. Liab. Co., 174 So. 2d 3, 5 (Fla.
1965) (describing the provision as one “designed to protect public monies”).
The Florida Supreme Court has only considered the question of whether the
lease of public lands to a private developer—the basic structure of the deal in this
case—creates an unconstitutional business relationship on two occasions, both of
which were over thirty years ago. In the first case, Bannon, the Port of Palm
8
Beach District entered into a long-term lease with Peanut Island Properties, Inc. in
which “[n]o bonded indebtedness or monetary obligation of any kind attached to
the Port District as a result of the lease.” 246 So. 2d at 740. The Court upheld the
constitutionality of the lease, noting that the Port District’s involvement in the
transaction was limited solely to that of a “lessor and [did] not involve any
responsibility for the financing, promotion or development of the proposed
project.” Id. at 741. Similarly, in West Palm Beach v. Williams, 291 So. 2d 572
(Fla. 1974), the City of West Palm Beach entered into a lease with West Palm
Beach Marina, a private corporation. As in Bannon, the Court upheld the lease,
finding that:
Because the constitution requires that bonds be issued, public funds
be spent and the power of eminent domain be exercised for public
uses only, any lease agreement which requires that one of the above
powers be exercised for a private use would necessarily be void.
However, when none of the above powers need be exercised in order
to proceed to the complete execution of the lease agreement,
municipalities, when holding the legislative authority to do so, can
lease public land for private uses.
West Palm, 291 So. 2d at 576 (citing Bannon, 246 So. 2d at 737). In summary, the
Court held that “where bonds are not issued, public funds are not spent, and the
power of eminent domain is not exercised in furtherance thereof, a municipality
can lease public land for private uses in accordance with legislative authority.” Id.
9
at 578.
While these two cases form the universe of Florida Supreme Court case law
involving the leasing of public land to a private developer, neither case deals with
a lease similar to the one here, nor offers much detail as to the specifics of the
leases at issue in those cases. Here, there is a question as to whether the JAA has
incurred a “monetary obligation” as the Agreement between the JAA and Majestic
obligates the JAA to construct a road and to provide credit for wetlands
mitigation. The development plan also calls for the sharing of net revenues.
Furthermore, the JAA granted Majestic the option to lease the property for fifteen
years at no cost.
II. QUESTIONS CERTIFIED
Accordingly, we respectfully certify to the Florida Supreme Court the
following questions:
1. Is the JAA a “joint owner” prohibited by article VII, section 10 of the
Florida Constitution by virtue of its obligations under the Agreement?
2. Is the JAA impermissibly pledging its “credit” under article VII, section
10 of the Florida Constitution by virtue of its obligations under the Agreement?
Our statement of the certified questions is merely suggestive and is not
meant to limit the scope of inquiry of the Florida Supreme Court as it has
discretion to examine this issue and other relevant issues. As we have previously
10
stated:
[T]he particular phrasing used in the certified question is not to
restrict the Supreme Court’s consideration of the problems involved
and the issues as the Supreme Court perceives them to be in its
analysis of the record certified in this case. This latitude extends to
the Supreme Court’s restatement of the issue or issues and the manner
in which the answers are given, whether as a comprehensive whole or
in subordinate or even contingent parts.
Miller v. Scottsdale Ins. Co., 410 F.3d 678, 682 (11th Cir. 2005) (citing Swire Pac.
Holdings, Inc. v. Zurich Ins. Co., 284 F.3d 1228, 1234 (11th Cir. 2002) (quoting
Martinez v. Rodriguez, 394 F.2d 156, 159 n.6 (5th Cir. 1968))) (alteration in
original). Additionally, an answer to one of the questions may make resolution of
the other one unnecessary. Macola v. Gov’t Employees Ins. Co., 410 F.3d 1359,
1365 (11th Cir. 2005). In order to assist the court in considering the case, the
entire record, along with the briefs of the parties, are transmitted herewith.
QUESTIONS CERTIFIED.
11