Summary of a Recent
Judicial Development in
Renewable Energy

Changes to Minnesota Ethanol Subsidy Payment Regulations Upheld

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In BHGDN, LLC v. Minnesota, 598 F. Supp. 2d 995 (D. Minn. 2009), the United States District Court for the District of Minnesota dismissed the plaintiff's constitutional claims against the State of Minnesota and its officers regarding their enforcement of an amendment which prohibited ethanol subsidy payments to entities no longer producing ethanol on a commercial scale, because the plaintiff did not have a protected property interest in the payments or a guaranteed right to them and because the amendment did not impair the plaintiff's private contracts.

Background

The plaintiff, an assignee of subsidy payments from Minnesota's Ethanol Development Fund, challenged the constitutionality of an amendment to Minnesota Statutes § 41A.09 that prohibited payments "to an entity that no longer produces ethanol on a commercial scale at the location for which the entity qualified for producer payments, or to an assignee of the entity." Id. at 999. The assignor ethanol producer had previously gone out of business, and after this amendment became effective, the plaintiff-assignee had stopped receiving the payments. Id. The plaintiff brought claims against the State, as well as the Minnesota Commissioner of Agriculture and the Finance and Budget Director for the Minnesota Department of Agriculture in their official capacities, seeking a declaration that the 2008 amendment violated the United States and Minnesota Constitutions, and an injunction requiring the officials to continue making payments. Id. It also brought claims under 42 U.S.C. § 1983 against the officials in their individual capacities. Id. The defendants moved to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim. Id.

Arguments

The defendants argued that the doctrine of state sovereign immunity deprived the court of subject matter jurisdiction over the claims against the state and its officers in their official capacities. Id. at 1000.

The plaintiff argued that the amendment violated its right to equal protection and substantive due process, as well as the Contract Clause and the Supremacy Clause of the United States Constitution. Id. at 1001.

Analysis and Holdings

The court dismissed the claims against the State for lack of subject matter jurisdiction, because "the State ha[d] not consented to BHGDN's suit and no congressional act abrogate[d] the State's sovereign immunity." Id. However, the court held that it did have jurisdiction to hear the claims against the officials because an individual can sue a state official to obtain prospective relief, provided that "such officer has some connection with the enforcement of the act." Id. at 1000.

Turning to the merits of the case, the court dismissed the equal protection claim because the plaintiff did not allege treatment different from other similarly situated entities and because the amendment was rationally related to the legitimate government objective of increasing the production of ethanol in Minnesota. Id. at 1001. It also dismissed the due process claim because the plaintiff did not have a legally recognizable interest in the future payments and thus had not been deprived of any rights. Id. at 1002. The court then dismissed the Contract Clause claim, reasoning that because the contracts between the plaintiff and the assignor only guaranteed payment upon appropriation of funds by the state legislature, the legislature's failure to appropriate the funds did not impair the contracts. Id. at 1003. It likewise dismissed the Supremacy Clause claim because the plaintiff never had a right to guaranteed payments. Id. Lastly, the court held that the officials were entitled to qualified immunity because the plaintiff had not shown that any constitutional violations occurred, and therefore the court granted the officials' motions to dismiss as well. Id. at 1004.

The case was decided on February 24, 2009.