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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
_________________________________________________

ROBERT L. SCHULZ, FREDERICK J. GORMAN, and ROBERT UNGER,

- Plaintiffs,

VERIFIED COMPLAINT

- against -

Civil Action No. 98-CV-0821

NEW YORK STATE PUBLIC AUTHORITIES CONTROL BOARD,
DONNA ARDUIN, SHELDON SILVER and RONALD STAFFORD,
TRUSTEES; and THE LONG ISLAND POWER AUTHORITY,
RICHARD M. KESSEL, CHAIRMAN,

- Defendants.
_________________________________________________

Jurisdiction

1. Plaintiff Robert L. Schulz is a citizen of the United States and of New York State. He resides in this judicial district. The principal offices of the three voting members of the State Public Authorities Control Board are located in this judicial district. This court has jurisdiction under 28 USC Section 1331. The claims arise under: Article IV, Section 4 (Guarantee Clause) of the United States Constitution; the First, Ninth and Fourteenth Amendments thereto; 42 USC Section 1983; and Article VII of the New York Constitution.

2. This action is timely commenced. The action is commenced within thirty days of the Resolution by the NYS Public Authorities Control Board ("Board") authorizing the Long Island Power Authority (LIPA) to issue long-term bonds, without voter approval, in the amount of $5.238 billion, to pay the debt contracted by a private corporation, the Long Island Lighting Co. ("LILCO").

3. The relief requested herein is a preliminary injunction and a final order:

a) declaring the Resolution by the Board to be null and void as violative of plaintiffs’ First Amendment, civil right to have State defendants abide by the results of the statewide vote of the people defeating Proposition 3 on November 4, 1995, and

b) declaring the Resolution by the Board to be null and void as violative of plaintiffs’ Ninth and Fourteenth amendment, civil rights to freedom from State actions which abridge plaintiffs’ fundamental privileges and immunities, and

c) declaring the Resolution by the Board to be null and void as violative of plaintiffs’ fundamental, civil right to a government republican in form and substance, as guaranteed by Article IV, Section 4 of the U.S. Constitution, and

d) declaring the Resolution by the Board to be repugnant to Article VII, Section 11 of the New York Constitution which requires voter approval of all State debt, and

e) declaring the Resolution by the Board and the LIPA bond issue to be repugnant to Article VII, Section 7 of the New York Constitution which requires an appropriation by law before any money can be paid out of the State treasury or State funds, and

f) declaring the Resolution by the Board to be repugnant to Article VII, Section 8 of the New York Constitution which prohibits the State from giving or lending its money or its credit to or in aid of private individuals and private corporations, and

g) declaring the Resolution by the Board to be repugnant to Article VII, Section 12.5 of the New York Constitution which prohibits the State from contracting indebtedness for a period of time longer than the useful life of the object of the debt, and

h) declaring New York State Finance Law 123-b(1) to be a "door-closing" statute repugnant to the First Amendment to the U.S. Constitution, and

i) preliminarily prohibiting and enjoining the Long Island Power Authority ("LIPA") from issuing any bonds pursuant to the authority of the Board’s April 22, 1998, Resolution until the court makes a final determination of the questions presented, and

j) alternatively, in the event LIPA has already issued the bonds and is in receipt of the investors’ money, preliminarily prohibiting and enjoining LIPA from disbursing any of the proceeds from the sale of any of its bonds until the court makes a determination of the questions presented, and

k) for such other and further relief as to the court may seem just and proper.

PARTIES

4. Robert L. Schulz is a citizen-taxpayer-voter of New York State. He resides in the Town of Fort Ann, Washington County. His mailing address is 2458 Ridge Road, Queensbury, New York 12804. He is an individual taxpayer and property owner liable to pay taxes upon an assessment of more than $1,000 in the Town of Fort Ann, Washington County, and in Queensbury, Warren County, New York. He pays State income and sales tax. He is a registered voter registered to vote in the Town of Fort Ann, Washington County, New York. He voted in the last general election in New York State. He is eligible to vote in the next general election in New York State.

5. Frederick J. Gorman is a citizen-taxpayer-voter of New York State. He resides in the Town of Smithtown, Suffolk County. His mailing address is 96 Empress Pines Drive, Nesconset, NY 11767-3130. He is an individual taxpayer and property owner liable to pay taxes upon an assessment of more than $1,000 in the Town of Smithtown, Suffolk County, New York. He pays State income and sales tax. He is a registered voter registered to vote in the Town of Smithtown, Suffolk County, New York. He voted in the last general election in New York State. He is eligible to vote in the next general election in New York State.

6. Robert Unger is a citizen-taxpayer-voter of New York State. He resides in the Town of North Hempstead, Nassau County. His mailing address is 38 Windsor Road, Great Neck, New York 11021. He is an individual taxpayer and property owner liable to pay taxes upon an assessment of more than $1,000 in the Town of North Hempstead, Nassau County, New York. He pays State income and sales tax. He is a registered voter registered to vote in the Town of North Hempstead, Nassau County, New York. He voted in the last general election in New York State. He is eligible to vote in the next general election in New York State.

7. The New York State Public Authorities Control Board (the "Board") is an instrumentality of the State of New York, representing the Legislature and Executive branches. The Board has three voting members: Donna Arduin representing the Governor; Sheldon Silver representing the Assembly; and Ronald Stafford, representing the Senate.

8. The Long Island Power Authority ("LIPA") is a corporate municipal instrumentality and political subdivision of the State of New York exercising essential governmental and public powers. Richard M. Kessel is Chairman, President and Chief Executive officer. LIPA’s principal offices are located at 333 Earle Ovington Blvd., Uniondale, New York 11553.

PRELIMINARY STATEMENT

9. In 1995 the N.Y.S. Legislative and Executive gave second passage to, and placed before the voters for their approval at the general election, proposed amendments to the State Finance Article of the New York Constitution. The question was placed on the ballot as "Proposition Three."

10. Under one of the proposed amendments the people were asked to authorize public corporations of the State, such as LIPA, to contract indebtedness without voter approval and without limit, to pay debt contracted by private corporations for their non-public purposes. On information and belief, the Legislative and Executive had in mind a State takeover of the debt of the Long Island Lighting Company (LILCO), without voter approval, but were obviously restricted from doing so by Article VII, Section 11 of the New York Constitution.

11. The people overwhelmingly voted "no" on Proposition Three.

12. Irrespective of the policy declared by the voters in their "no" vote, the Legislative and Executive, through a Resolution of the Public Authorities Control Board (the "Board"), passed on April 22, 1998, authorized LIPA to contract $5.238 billion in indebtedness to pay debt contracted by LILCO for its (LILCO’s) non-public purposes.

13. LIPA has been moving quickly. On April 27, 1998, it issued a Preliminary Official Statement ("POS") for a $3 billion bond issue. The bonds were priced during the week of May 11, 1998. The "closing" on those bonds is expected on or before May 28, 1998. LIPA will price another $1.5 billion in bonds later this month. Later this year the Board is expected to authorize LIPA to issue the remaining $3 billion of the overall $8 billion program.

14. The Board’s April 22, 1998 Resolution and the proposed LIPA/LILCO deal, because they ignored the results of the people’s 1995 negative petition, are each violative of the people’s civil right to cast an effective/meaningful vote under the First amendment, thus undermining the republic and the people’s civil right to a government republican in form and substance, as guaranteed by Article IV, Section 4 of the U.S. Constitution.

15. LIPA, as an instrumentality of the State, cannot legally incur indebtedness without the prior approval by the people in a statewide referendum as required by Article VII, Section 11 of the New York Constitution.

16. The Board’s action is also violative of Article VII, Section 8 and Article VII, Section 12.5, which would appear to prohibit the State from using LIPA’s funds to purchase the outstanding shares of Preferred and Common stock of LILCO, and which prohibit LIPA from contracting indebtedness for the intended object -- an object which has no measurable useful life.

17. Plaintiffs are including a constitutional challenge to SFL 123-b(1) in this action because the State of New York has been using SFL 123-b(1) to keep this type of action out of the state courts, thereby denying the people their First Amendment civil right to petition the government for a redress of grievances.

STATEMENT OF THE FACTS

18. In 1975 the N.Y.S. Legislative and Executive adopted SFL 123-b(1), which directs the judiciary to dismiss all claims involving public borrowing, even if the plaintiff is seeking the protection of specific provisions of his or her state or federal Constitution.

19. In 1989, the N.Y.S. Legislature created the Long Island Power Authority (LIPA) to address "matters of state concern within the meaning of paragraph three of subdivision (a) of section three of Article nine of the State Constitution." See Exhibit A hereto, which is Section 1020-a of the Long Island Authority Act.

20. LIPA is "a corporate municipal instrumentality of the state...which shall be a body corporate and politic and a political subdivision of the state, exercising essential governmental and public powers." See Exhibit B hereto which is Section 1020-c of the Long Island Authority Act.

21. In 1995, by Concurrent Resolution of the N.Y.S. Senate and Assembly, the people were asked to approve proposed amendments to the New York Constitution which amendments would have allowed LIPA to contract indebtedness to pay the debt contracted by private corporations for their non-public purposes. See Exhibit C hereto which is a copy of the Concurrent Resolution with the proposed constitutional amendment. The question appeared on the statewide ballot as Proposition Three.

22. On November 4, 1995, at the general election, the people overwhelmingly voted "no" on Proposition Three. All plaintiffs were among those people who voted "no".

23. On April 22, 1998, the Public Authorities Control Board (the "Board") authorized LIPA to contract $5.238 billion indebtedness to pay debt contracted by the Long Island Lighting Company ("LILCO") for its non-public purposes. Later this year, the Board is expected to approve two additional bond issues by LIPA to complete the LILCO bailout. See Exhibit D, which is an Associated Press Report on the Board’s approval.

24. On April 27, 1998, LIPA issued a Preliminary Official Statement ("POS") to induce investors to purchase over $4.5 billion in LIPA bonds. The proceeds of the initial bond issue will be used to pay debt contracted by LILCO for its non-public purposes as follows. See Exhibit E hereto, which is a copy of selected pages from the POS:

• to pay LILCO’s obligation to pay the principal of and interest on $1.186 billion principal amount of LILCO’s outstanding first mortgage General and Refunding Bonds (the "G&R Bonds");
• to pay LILCO’s obligation to pay the principal of and interest on $2.270 billion principal amount of LILCO’s outstanding unsecured debentures (the "Debentures");
• to pay LILCO’s obligation to pay the principal of and interest on notes issued by LILCO to secure tax-exempt bonds issued on behalf of LILCO by New York State Energy Research and Development Authority (NYSERDA) outstanding in the amount of $915.7 million; · to pay LILCO’s obligation to redeem and pay $339.1 million for LILCO"s outstanding Preferred Stock;
• to pay LILCO’s obligation to pay certain customer deposits, payables and "other liabilities"; and

· to purchase the right to pay the principal of and interest on $4.5 billion in LILCO debt incurred to build the Shoreham Nuclear Power Plant.

25. It is important to note that in addition to the $339.1 million to be used to pay LILCO’s liabilities to its preferred stockholders, $2.497 billion of the proceeds of the $8 billion in bond sales will also be used to purchase all of LILCO’s common stock.

26. On information and belief, the closing on the LIPA bond issue and the closing on the LIPA/LILCO deal will take place on or before May 28, 1998.

FIRST CLAIM

THE BOARD’S ACTION IS REPUGNANT
TO THE FIRST AMENDMENT

25. The Board’s Resolution violates plaintiffs’ First Amendment right to a meaningful vote and to petition the government for a redress of grievances. The Board’s Resolution violates the Federal Voting Rights Act.

26. The N.Y.S. Legislature twice passed (in 1994 and then in 1995) and placed on the statewide ballot in 1995, Proposition No. 3 which, if approved by the voters would have amended Article VII of the N.Y. Constitution to allow public corporations such as LIPA to issue bonds to pay the debt contracted by private corporations for their non-public purposes.

27. The State’s voters said "no", overwhelmingly. Plaintiffs were included with those who voted no.

28. Now, our elected officials have the effrontery to do what the voters of this state specifically denied them the right to do. Our elected officials have authorized LIPA to issue more than $5 billion to pay the debt contracted long ago by LILCO for its (LIPA’s) non-public purposes.

29. The Board’s Resolution violates plaintiffs’ First Amendment right to a meaningful vote and to petition the government for a redress of grievances. The Board’s Resolution violates the Federal Voting Rights Act.

SECOND CLAIM

THE BOARD’S ACTION IS REPUGNANT TO
ARTICLE IV SECTION 4 OF THE U.S. CONSTITUTION
AND TO THE 9TH AND 14TH AMENDMENTS THERETO

30. The United States Constitution reads in relevant part: "The United States shall guarantee to every state in this union a republican form of government...." Article IV, Section 4 U. S. Constitution "No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." Section 1, Clause 2 Fourteenth Amendment U.S. Constitution "The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people." Ninth Amendment U.S. Constitution

31. Defendants are charged with violating Article IV, Section 4 and the Ninth and Fourteen Amendments by willfully disregarding the results of the statewide vote on Proposition 3 in 1995 and by willfully setting aside the will of the people as now expressed in Article VII of the New York Constitution.

32. Section 1, Clause 2 of the Fourteenth Amendment furnishes a guarantee against any encroachment by the state upon fundamental rights which belong to every citizen as a member of society. U.S. v. Cruikshank, La. 1876, 92 U.S. 554. The Board’s Resolution and the LIPA/LILCO deal represent such an encroachment.

33. The Fourteenth amendment’s provision that no state shall make or enforce any law which shall abridge privileges or immunities of citizens of the United States, nor deprive any person of life, liberty or [money] property without due [constitutional] process of law are limitations on the power of the States. Peoples Cab Co. v Bloom, D.C. PA 1971, 330 F. Supp. 1235, affirmed 472 F.2d 163. The Board acted outside its power in passing the Resolution.

34. The purpose of the Fourteenth Amendment, Section 1, Clause 2, 28 USC Section 1331 and the civil rights statute, 42 USCA Section 1983, are to preserve and enforce, as against state action, those rights, privileges and immunities secured by the constitution and the laws. Golden v Biscayne Bay Yacht Club, C.A. Fla. 1976, 530 F.2d 16, certiorari denied 97 S. Ct. 186.

35. The adoption of section 1, clause 2 of the Fourteenth Amendment implied that there are matters of fundamental justice that the citizens consider so essentially an ingredient of human rights as to require restraint on action on behalf of any state that appears to ignore them. Orleans Parish School Bd. v Bush, C.A. La. 1957, 242 F.2d 156, Certiorari denied 77 S.Ct. 1380.

36. The Ninth Amendment and Section 1, Clause 2 of the Fourteenth Amendment are designed to protect plaintiffs from invasion of their rights, privileges and immunities by the federal and state governments respectively. Schatte v Int’l Alliance of Theatrical Stage Emp. et. al., D.C. Cal 1947 70 F. Supp. 1008, affirmed 165 F.2d 216 Certiorari denied 68 S.Ct. 1018.

37. In the constitution and laws of the United States the word "citizen" is generally, if not always used in a political sense to designate one who has the rights and privileges of a citizen of the State or of the United States and it is so used in Section 1, Clause 2 of the Fourteenth Amendment. Baldwin v Franks, Cal 1887, 7 S.Ct. 656. Plaintiffs are citizens of the United States and of New York State.

38. Amendments 1 to 8 to the U.S. Constitution were intended as restrictions upon the federal government, but Section 1, Clause 2 of the Fourteenth Amendment constitutes a limitation upon the States. Beauregard v Wingard, D.C. Cal. 1964, 230 F. Supp. 167.

39. Protection of life, liberty, and property rests primarily with the states, and Section 1, Clause 2 of the Fourteenth Amendment furnishes an additional guaranty against any encroachment by the States upon those fundamental rights which belong to citizenship, and which the State Governments were created to secure. The privileges and immunities of the citizens of the United States are indeed protected by it. In re Kemmler, ____ N.Y.1890, 10 S.Ct. 930.

40. The action that is the subject of this lawsuit is violative of the will of the people as expressed in the United States and New York State Constitutions and is thus violative of one of our most basic constitutional principles, "Governments are instituted among men, deriving their just powers from the consent of the governed." Declaration of Independence.

41. Defendants have violated Article IV, Section 4 by attempting to acquire power by seizing it without the consent of the people.

42. Plaintiffs, as citizens-taxpayers-voters of New York State, are strong State’s rights advocates who believe the federal court should not interfere with the policies, programs and activities of the government of any state. However, if the State turns a blind eye toward the U.S. and N.Y. Constitutions, making a mockery of the phrase republican form of government, then plaintiffs are forced to turn to the federal courts to nullify the obnoxious policies, programs or activities as violative of the federal guarantee clause and the federal privileges and immunities clause.

43. It is to be expected, given the element of "politics" in any state’s system of governance, that policies, programs and activities that will abridge the privileges and immunities of citizens of the United States residing in that state, will develop under the color of state law. If unchecked, however, such a practice can and would lead to willfully wayward states and to the dissolution of the Union.

44. Thus, one of the most welcome and important roles of the federal court is, in the interest of the Union, to protect the privileges and immunities of all its citizens from tyranny in any of its forms, especially governmental tyranny, no matter where in the Union it is found and challenged.

45. Most reluctantly and unfortunately, from the viewpoint of State’s rights, New York State plaintiffs are forced to turn to the federal courts for protection against governmental tyranny in the State of New York.

46. The purpose of Section 4 of Article IV, which guarantees to every state a republican form of government, is to protect the people against aristocratic and monarchical innovations, and to prevent the States from abolishing a republican form of government, in which the government governs based only upon the consent of the governed. See Van Sickle v Sharrahan, 1973, 511 P.2d 223, 212 Kan. 426.

47. The term "state" in section 4 of article IV is used in the idea of a people or political community as distinguished from a government, and is used in its geographical sense. See Texas v White, Tex. 1869, 74 U.S. 700. Not even the people, acting through their elected representatives, can convert their system of governance from a republic form of government.

48. By the constitution, a republican form of government is guaranteed to every state in the Union and the distinguishing feature of that form is the right of people to choose their own officers for governmental administration, and pass their own laws in virtue of the legislative powers reposed in representative bodies, whose legitimate acts may be said to be those of the people themselves; but, while the people are thus the source of political power, their governments, national and state, have been limited by written constitutions. See In re Duncan, Tex. 1891. 11 S. Ct. 573.

49. Section 4 of Article IV guarantees to every state in the Union a republican form of government, and every sentence and provision of the New York Constitution evidences principles of that form of government (including Articles VII, VIII, and X) declaring and guaranteeing liberties of the people. See Harris v Shanahan, 1963. 387 P2d 771, 192 Kan.183.

50. The right to a "republican form of government" is a substantial right. It has always been held to be within the protection of the courts.

51. The courts, as the final interpreters of the Constitution, pass upon the constitutional powers of the legislatures and executives of the nation, and of the states. When called upon, they must exercise their function and determine the validity of the acts of a State so far as they effect the constitutional rights of the citizens or the powers of the national government. Schulz v Williams, 44 F.3d 48 (2nd Cir. 1994).

52. The unconstitutionality of the acts of a state are equally within the jurisdiction of the courts, whether they be acts of the legislature or executive department or of the people themselves, adopting their constitutions or amending them.

53. Plaintiffs reliance on the "privileges and immunities" and "guarantee" clauses is supported by law and logic.

54. Logically, these two clauses are designed to reign in what plaintiffs refer to as "willfully wayward states". A very brief historical analysis confirms plaintiffs’ right to rely on these two clauses to restrain their State, which they argue has willfully become wayward.

55. In 1787, a full ten years after the sovereign people of the colony of New York created their government by adopting the New York State Constitution, New Yorkers agreed to become part of the Union of States and to distribute more of their power to those who would be responsible for running the day-to-day affairs of the Union. In so doing, the sovereign people of the State of New York agreed to the "one for all, all for one" principles enunciated in the federal Constitution, particularly in Article IV, Section 4 (the guarantee clause) and, later, in Section 1, Clause 2, of the Fourteenth Amendment thereto (the privileges and immunities clause).

56. These two clauses (as well as the Ninth and Tenth Amendments), give the federal judicial department the jurisdiction, on petition by any citizen of the United States residing in any one of the states, to protect that citizen from tyrannical governmental action designed and administered by a willfully wayward State government.

57. In light of the human frailties of the love of power and money, plus the propensity of those wielding governmental power to innovate, it is entirely possible, in these United States, that, over time, the republicanism in one State would become a matter of form over substance, thus denying its true meaning and original intent. It is possible, in other words, for the people of a State to have a constitution which, by design: recognizes the people as the absolute sovereignty; obviously has the people distributing the power to govern; the distributed power is, by design, sufficient to govern but insufficient to oppress; this power is distributed to three (by design) independent and co-equal branches.

58. However, notwithstanding these arrangements, it is possible for that State’s Constitution to be routinely ignored by those in the Executive, Legislative and Judicial branches as the branches cooperate in a "we know better" constructive conspiracy to govern in contravention to, and without respect for, the will of the people as expressed in the State Constitution, particularly when it comes to issues of public power, public debt and the use of tax revenues for purposes that are largely private.

59. It is possible in such a situation: for the people to lose control of their government; for governmental dependency to displace individualism, self-reliance and private charity; for the public debt to become overburdensome and oppressive; and, as in the case of N.Y.S., for the level of government-imposed taxes and fees to become the highest in the nation, eating out 50% or more of a laborer’s wages; and, for the State to drop from its position as a leading creditor state to a debtor state with the lowest credit rating in the Union.

60. Finally, it is possible for the forces in power to stay in power by making it virtually impossible for the people to achieve governmental reform through the use of the ballot. This is possible by restricting ballot access to those chosen by those forces -- the leading political parties -- particularly in a situation where the State Constitution is silent on the subject of ballot access. In such case, whoever controls ballot access controls the governors, the legislators and the judges. This vise-like control is exacerbated if the judges owe their advancement within the Judicial Department to the good will of the Governor and the Legislature, rather than to the people. Also, whoever controls ballot access controls the delegates to the State Constitutional convention.

61. It can be fairly stated that the situation portrayed in this list of "possibilities" is not an Orwellian fantasy; rather it fits the hand of government in New York State like a glove -- and the hand of government, being human, likes it that way and wants to keep it that way.

62. The Union now has, in New York, a willfully wayward state. We have three branches and a State Constitution, but for all intents and purposes, we do not have a constitutional republic – government based on the consent of the people as expressed in the State Constitution. The two major political parties are, in effect, the government of New York State and through their control over ballot access they control the governors, the legislators and the judges, many of whom have, since 1977, shown a propensity to turn a blind eye toward the will of the people as expressed in the Constitution of the State of New York. Moreover, the last (1967) constitutional convention was stacked with and controlled by delegates representing the three branches of the government and the state’s two major political parties. Small wonder the people rejected its product. It provided no discernible needed reforms.

63. By careful design, the "guarantee" clause and the "privileges and immunities" clause establish standards that are inescapable and that speak to the problem of the willfully wayward state. They mean no state will be permitted to scorn our most basic "founding" constitutional principles: government deriving their just powers from the consent of the governed; the separation of powers; checks and balances; maximum possible individual liberty and personal freedom; the pursuit of happiness; the right to petition and to free elections; equal protection of the law; and, no taking of property, including money property, through taxes and fees, without constitutional due process.

64. Seven states discovered this when they sought to go their own way and secede from the Union, bringing about the civil war.

65. The courts of New York, rather than defending these basic rights have been finding against them. The federal court constitutes the U.S. citizen’s last line of defense against the actions of a willfully wayward state, short of civil disobedience or violence.

66. The court has jurisdiction in claims against state officials who act without delegated power. The Executive, Legislative and Judicial branches are acting in ways that are repugnant to the United States and New York Constitutions. Plaintiffs’ claims are, in effect, ultra vires claims that rest on the defendants lack of delegated power; the State defendants are, in fact, constitutionally prohibited from engaging in the challenged behavior.

67. Plaintiffs are not claiming error in the exercise of delegated powers.

68. The court has jurisdiction under 28 USC Section 1331 and 1343(3) to determine claims against state officials for alleged violations of the federal Constitution. Florida Dept. Of State v Treasure Salvors, Inc., 458 US 697.

69. The court also has jurisdiction under 42 USC Section 1983. An unconstitutional act is "void", and, therefore, does not "impart to [the officer] any immunity from responsibility to the supreme authority of the United States." Ex Parte Young, 209 US123, 160. Since the State could not authorize the actions complained of, each State defendant was "stripped of his official or representative character and [was] subjected in his person to the consequences of his individual conduct." Id.

THIRD CLAIM

THE BOARD’S ACTION IS REPUGNANT TO
ARTICLE VII, SECTION 11 OF THE N.Y. CONSTITUTION

70. The New York Constitution reads in relevant part: "no debt shall be hereinafter contracted by or in behalf of the state, unless such debt shall be authorized by law, for some single work or purpose, to be distinctly specified therein. No such law shall take effect until it shall, at a general election, have been submitted to the people, and have received a majority of all the votes cast for and against it at such election...." Article VII, Section 11 New York Constitution

71. The Board’s Resolution and the LIPA Bond issue are repugnant to Article VII, Section 11 of the New York Constitution. Voter approval is required.

72. The Legislative and Executive cannot suspend Article VII, Section 11 of the Constitution and rule, instead, by the Board’s Resolution of April 22, 1998, a Resolution that is obnoxious to Article VII, Section 11. Schulz V State Of New York, 193 Ad2d 171 (1993) 84 Ny2d 231 (1994) Is Not Dispositive

73. None of the following cases are dispositive: Wein v City of New York, 36 NY2d 610; Quirk v Municipal Assistance Corporation for the City of New York, 41 NY2d 644; Schulz v State of New York, 193 AD2d 121 (1993), affirmed 84 NY2d 231 (1994), cert denied __ US __ 115 S.Ct. 936 (1995) ("Schulz I").

74. In Schulz I plaintiffs challenged Chapter 56 of the Laws of 1993 as being violative of the debt-limiting provisions of Article VII, Section 11, Article X, Section 5 and Article VII, Section 8. The Courts dismissed the Article VII, Section 11 claim on the merits but dismissed the Article X, Section 5 and Article VII, Section 8 claims for lack of citizen-taxpayer standing under SFL 123-b(1), not for lack of constitutional standing.

75. Chapter 56 L93 authorized the N.Y.S. Thruway Authority and the Metropolitan Transportation Authority to issue $6 Billion in tax-supported, long-term bonds. The borrowed money was to be used to pay for various State and NYC projects and activities. The money was to come from a dedicated revenue fund under the care and management of the State Comptroller and, if necessary, from the general fund.

76. Chapter 56 L93 included two disclaimers: (1) that payments by the State to the two Authorities of the money needed by the Authority to service the bonds "was subject to the annual appropriation of the Legislature;" and (2) that the debt of the Authorities was not the debt of the State or any municipality of the State.

77. In Schulz I the courts ruled, in effect, that due to the disclaimers, the State was only "morally obligated" to make the payments to the two public corporations (i.e., that the debt was not "legally enforceable") and, therefore, the debt of the public corporations was not the debt of the State.

78. However, this case is distinguishable from Schulz I, extinguishing any stare decisis defense. Debt incurred by LIPA would, in fact, be legally enforceable. Any bonds issued by LIPA would not be State "appropriation risk" bonds as was the case of Chapter 56 L93. LIPA’s POS does not include the disclaimer that payment of debt service would be "subject to the annual appropriation of the Legislature." This alone distinguishes the instant case from Schulz I and should bar any dismissal on the basis of stare decisis.

79. There is another legal argument which clearly extinguishes any stare decisis argument. That is, a holder of a bond issued by LIPA could legally force the State to make good on the terms of the LIPA bonds, which provide, in effect, that:

• LIPA is a corporate municipal instrumentality of the State...which shall be a body corporate and politic and a political subdivision of the State, exercising essential governmental and public powers." LIPA was created by the State Legislature, and is under the Control of the State’s Public Authorities Control Board,
• LIPA was created to address matters of "State concern."
• LIPA, therefore, is obviously incurring debt "on behalf of the State."

80. NY Constitution Article VII, Section 7 reads in relevant part:

"No money shall ever be paid out of the State treasury or any of its funds, or any of the funds under its management, except in pursuance of an appropriation by law...."

81. NY Constitution, Article VII, Section 16 reads in relevant part:

"The Legislature shall annually provide by appropriation for the payment of the interest upon and installments of principal of all debts or refunding debts created on behalf of the State...If at any time the Legislature shall fail to make any such appropriation, the Comptroller shall set apart from the first revenues thereafter received, applicable to the general fund of the State, a sum sufficient to pay such interest, installments of principal...and shall so apply the moneys thus set apart." (Plaintiffs’ emphasis).

82. A holder of a LIPA bond who did not receive payment when due would only have to sue for a writ of mandamus to compel the Legislature and the Comptroller to perform their duty as provided in the NY Constitution and Chapter 517 L86.

83. Based on the above, the bonds of LIPA will be legally enforceable public debt, making the Resolution of the Board and the LIPA bond issue subject to the debt limiting provisions of the NY Constitution.

84. The Resolution and the LIPA bond issue are repugnant to the NY Constitution Article VII, Sections 7, 8, 11 and 12.5

FOURTH CLAIM

THE BOARD’S ACTION IS REPUGNANT TO
ARTICLE VII, SECTION 7 OF THE NY CONSTITUTION

85. Article VII, Section 7 of the New York Constitution reads in relevant part:

"No money shall ever be paid out of the state treasury or any of its funds, or any of the funds under its management; except in pursuance of an appropriation by law...." Article VII, Section 7 NY Constitution

86. In violation of Article VII, Section 7 of the NY Constitution, money derived from the sale of electricity and under the care and management of the State Comptroller, is to be paid to LIPA, without submitting to the requirement for appropriations by law, twice a year, every year, for thirty years or more, there to be used to service the debt obligations of the LIPA.

87. Article VII, Section 7 was not at issue in Wein I or in Schulz I. Wein I was a challenge to the New York City Stabilization Reserve Corporation ("SRC"), a public corporation established by Chapter 594 of the Laws of 1974. The questions raised, presented and determined in Wein I did not involve Article VII, Section 7 due to the fact that payments to the SRC by the City and the State were subject to appropriation. In fact, Wein I is recognized as a modern benchmark case on the merits of "appropriated debt."

88. It is important to note that when the Legislature replaced the SRC with the Municipal Assistance Corporation ("MAC"), the Legislature carried over the requirement for appropriations by law prior to any payments to MAC by the State Comptroller.

89. Schulz I was a challenge to the Transportation Bond Act, Chapter 56 of the Laws of 1993, which authorized the Thruway Authority and the MTA to issue tax-supported bonds. The questions raised, presented and determined in Schulz I did not involve Article VII, Section 7 due to the fact that payments by the State to the Thruway Authority and the MTA were subject to annual appropriations by the Legislature.

90. The Board’s Resolution and the LIPA bond issue are repugnant to Article VII, Section 7 of the N.Y. Constitution.

91. The Legislature cannot suspend Article VII, Section 7 of the Constitution and rule, instead, by the Board’s Resolution of April 22, 1998, a resolution that is obnoxious to Article VII, Section 7.

FIFTH CLAIM

THE BOARD’S ACTION IS REPUGNANT TO ARTICLE VII,
SECTION 12.5 OF THE NEW YORK CONSTITUTION

92. The Constitution reads in relevant part:

"No debt shall be contracted for a period longer than that of the probable life of the work or purposes for which such indebtedness is to be contracted...." Article VII, Section 12.5 N.Y. Constitution

93. The Board’s Resolution authorized LIPA to contract debt for a period of thirty years. The money is to be used to pay the debt contracted by LILCO and to purchase the preferred and commons stock of LILCO shareholders. Neither "work or purpose" has a measurable useful life within the meaning of Article VII, Section 12.5 of the N.Y. Constitution.

94. The Board’s action is repugnant to Article VII, Section 12.5 of the N.Y. Constitution.

SIXTH CLAIM

THE BOARD’S ACTION IS REPUGNANT TO
ARTICLE VII, SECTION 8 OF THE N.Y. CONSTITUTION

95. The New York Constitution reads in relevant part:

"The money of the State shall not be given or loaned to or in aid of any private corporation or association, or private undertaking...." Article VII, Section 8 NY Constitution

96. Defendants intend to use the proceeds of bonds issued by LIPA (which are the monies of the State) in aid of LILCO, by paying off LILCO’s debt and by purchasing LILCO’s stock from its preferred and common shareholders.

97. The Board’s action is repugnant to Article VII, Section 8 of the N.Y. Constitution.

SEVENTH CLAIM

SFL 123-b(1) IS REPUGNANT TO THE FIRST AMENDMENT
TO THE U.S. CONSTITUTION AND, THEREFORE, ARTICLE IV,
SECTION 4 OF THE U.S. CONSTITUTION AND TO THE 9TH
AND 14 AMENDMENTS THERETO

98. SFL 123-b(1) reads:

"1. Notwithstanding any inconsistent provision of law, any person, who is a citizen taxpayer, whether or not such person is or may be affected or specially aggrieved by the activity herein referred to, may maintain an action for equitable or declaratory relief, or both, against an officer or employee of the state who in the course of his or her duties has caused, is now causing, or is about to cause a wrongful expenditure, misappropriation, misapplication, or any other illegal or unconstitutional disbursement of state funds or state property, except that the provision of this subdivision shall not apply to the authorization, sale, execution, or delivery of a bond issue or notes issued in anticipation thereof by the state or any agency, in anticipation thereof by the state or any agency, instrumentality or subdivision thereof or by any public corporation or public benefit corporation." (plaintiffs’ emphasis). State Finance Law 123-b(1)

99. Public debt and reckless fiscal behavior by State and local governments in New York did, in fact, cause the deep and widespread fiscal collapses of 1837 and 1867, resulting in great public indignation and the public demand for and approval, beginning in 1846, of various debt-limiting and fiscal control provisions of the N.Y. Constitution, now set forth in Article VII (State Finances), Article VIII (Local Finances) and Article X (Corporations).

100. However, in 1975, the Legislature and the Executive adopted a law [State Finance Law Section 123-b(1)] which, in its plain language and effect, denies citizen-taxpayers the right to defend those debt-limiting provisions of the Constitution by specifying that citizens shall not be allowed to maintain a lawsuit if the subject matter deals with public debt -- i.e., the "authorization, sale, execution or delivery of a bond issue or notes issued in anticipation thereof by the State or any agency, instrumentality or subdivision thereof, or by any public corporation or public benefit corporation."

101. The Judicial branch has been honoring SFL 123-b(1) in its decisions. By doing so, it has allowed the Executive and the Legislative branches to change the people’s Constitution. The Unified Court System of New York, citing SFL 123-b(1) and Wein v Comptroller, 46 NY2d 394 (1979), has now been routinely dismissing all constitutional challenges to public debt issuances by State and local agencies.

102. The Judiciary has, in fact, and without exception, refused to address the issue of the constitutionality of SFL 123-b(1) when repeatedly requested to do so in formal proceedings. Petitioners have asked the Unified Court System to strike down SFL 123-b(1) as a violation of the people’s fundamental, constitutional right to petition the government for a redress of grievances, particularly with respect to constitutional violations. The Unified Court System of New York has, thereby, been denying persons the exercise of their constitutional rights. Rather than "separate powers" the Unified Court System of New York has, in effect, been cooperating with the Legislative and Executive branches in unlawfully suspending and altering the people’s Constitution.

103. The Executive and the Legislative, secure in their belief that they could continue to operate behind the shield of SFL 123-b(1), with the help of the Judiciary, have been incurring public debt at an alarming rate, even to pay operating costs of government agencies, to fund operating deficits of government agencies, and to balance the budgets of government agencies, all without voter approval and in violation of other important debt-limiting provisions of the NY Constitution.

104. To accomplish their borrowing objectives, the Executive and the Legislative branches often create public corporations to issue the bonds, but routinely use public taxpayer funds to pay obligations of those public corporations without voter approval. This practice has become known as "back-door borrowing."

105. In violation of the plain language of debt-limiting provisions of the Constitution, the Legislative and the Executive branches have been authorizing scores of cities, towns, counties and school districts to issue long-term debt to fund operating costs, operating deficits and to otherwise balance their budgets.

106. Reliance on borrowed money to fund operating costs and operating deficits, including the repair and maintenance of existing facilities, has now become a common practice for the Executive and Legislative branches.

107. Such practices have caused New York State to lose its early 1960’s position as a strong creditor State to become a weak debtor State with the lowest credit rating of all States.

108. The Rockefeller administration started the decline principally through its creation of and the use of tax-supported debt issued by the Urban Development Corporation; the Carey administration contributed to the decline principally through its creation of and the use of tax-supported debt issued by the Municipal Assistance Corporation of New York City; and the Cuomo administration contributed to the decline principally through the creation of and the use of tax-supported debt by the Local Government Assistance Corporation as well as by the Thruway Authority, the Urban Development Corporation and the Metropolitan Transportation Authority.

109. Unconstitutionally incurred public debt is largely responsible for the fact that the people of New York State are the most heavily taxed people in the nation and the taxes have become overburdensome and oppressive.

110. The Legislature and the Executive are in the process of using one of the newest public corporations (the Long Island Power Authority) to issue up to $10 billion in long-term debt to pay the debt contracted by the Long Island Lighting Company (a private corporation) for its non-public purposes, including paying off all the private investors in LILCO and paying off billions of dollars of debt owed by LILCO, which action only exacerbates the tax and credit burden of the entire State. Such an act is repugnant to various provisions of the New York Constitution. However, SFL 123-b(1), in violation of Petitioners’ fundamental federal right to petition the government for a redress of grievances, "closes the door" to a review by the Unified Court System of any complaint by any citizen seeking to assert those constitutional rights.

111. Last year the Legislature and the Executive adopted Chapter 16 of the Laws of 1997, creating the "New York City Transitional Finance Authority" for the purpose of issuing $7.5 billion in public debt, because the City of New York has reached its constitutional debt limit. The act became effective on March 5, 1997. Under "Legislative findings and declaration," Chapter 16 of the Laws of 1997 reads, "It is further found and declared that authorization for this transitional finance authority to issue debt shall be temporary;...that a constitutional amendment should be proposed to update the calculation of the City’s debt limit...and that the power of the authority to issue bonds (other than refunding bonds) shall expire upon the enactment of such constitutional amendment." In other words, the Legislature and the Executive have decided to increase the level of public debt above the constitutional debt limit, and to continue doing so until the Constitution enables them to increase the debt above the current constitutional debt limit. Such an act is repugnant to more than one provision of the New York Constitution. However, SFL 123-b(1), in violation of Petitioners’ fundamental right to petition the government for a redress of grievances, "closes the door" to a review by the Unified Court System of any complaint by any citizen seeking to assert those constitutional rights.

112. By their actions the Legislature and Executive are saying that it does not matter what prohibitions or restrictions the NY Constitution places on the Legislature and the Governor when it comes to authorizing the incurrence of public debt because the Legislature and the Executive, through the adoption, in 1975, of the exception language in State Finance Law 123-b(1), have removed the ability of all citizen-taxpayers to effectively assert those constitutional rights in the Judicial branch.

113. Respondents’ behavior demonstrates that the Legislature and the Executive have, in fact, changed the Constitution by merely adopting a law. This conclusion forces yet another conclusion: that the government of New York State has, thereby, seized the ultimate power from the people and is saying to the people that while there is a "government republican in form" (it has three branches and a Constitution), it lacks substance, and the people and their Constitution do not have to be honored or respected by those wielding governmental power in New York State.

114. This, of course, is palpable nonsense and smacks of treason under our system of governance and petitioners ask this Court to declare the exception language in SFL 123-b(1) to be unconstitutional, null and void.

115. SFL 123-b(1) represents, in effect, the equivalent of a series of amendments to the constitution’s of the United States and of the State of New York. The problem, of course, is that these amendments were not approved by the United States Congress nor by two-thirds of the State legislatures nor, in the case of the amendments to the New York Constitution, by the voters of New York State.

116. With respect to the United States Constitution, the exception language of SFL 123-b(1) strips Petitioners:

• of their First Amendment right to petition the government for a redress of grievances after the State has acted in a way that is repugnant to certain provisions of the U.S. and N.Y. Constitutions;
• of their guarantee of a republican form of government, as provided by Article IV, Section 4, if they are residing in New York State; of their Fourteenth Amendment right against state laws that abridge these privileges and immunities; and
• of their Fifth Amendment right against a taking of their money property through taxes and fees without "constitutional due process".

117. With respect to the New York State Constitution, the exception language of SFL 123-b(1) strips Petitioners:

• of their fundamental right, as provided by Article I Section 9.1, to petition the government for a redress of grievances when the State acts in a way that is repugnant to certain provisions of the U.S. and New York Constitutions;
• of their constitutional protection against the payment of moneys out of the state treasury or funds under the care and management of the State Comptroller without an appropriation by law as guaranteed by Article VII, Section 7;
• of their constitutional protection against debt incurred by the State to fund operating costs as provided by Article VII, Section 12;
• of their constitutional protection against debt incurred by local governments to fund operating deficits, as provided by Article VIII, Section 2;
• of their constitutional protection against the use of State credit in aid of bond-issuing public corporations and Authorities, as provided by Article VII, Section 8;
• of their constitutional protection against the use of the credit of local governments in aid of bond-issuing public corporations, as provided by Article VIII, Section 1;
• of their constitutional protection against the use of State or local government tax revenues to fund any part of any debt obligations of bond-issuing public corporations or Authorities, as provided by Article X, Section 5;
• of their constitutional guarantee of municipal debt limitations as provided by Article VIII, Section 4; and
• of their constitutional protection against the use of public funds borrowed to subsidize private corporations as provided by Article VII, Section 8.

This Federal Question Was Not Determined In Schulz v NYS Unified Court System, et al.

118. Plaintiffs’ SFL 123-b(1) claim was presented to the federal court (US District Court for the Northern District of New York) in Robert Schulz et al. v New York State Unified Court System et al. 96-CV-373. ("Schulz II"). Petitioners’ complaint challenged the constitutionality of SFL 123-b(1) under the First and Fourteenth Amendments to the US Constitution and under Article IV, Section 4 of the US Constitution. The case was dismissed without reaching the merits. A copy of the court’s decision is attached hereto as Appendix A. The decision was appealed to the Second Circuit which affirmed on other grounds. A copy of the decision by the Second Circuit is attached hereto as Appendix B. A petition for a Writ of Certiorari was filed with the U.S. Supreme Court who decided not to hear the case.

This Case Falls Within The Exception To
The General Sovereign Immunity Rule

119. In Schulz II, petitioners were able to convince the Court of Appeals that the District Court erred in dismissing the case on the grounds of judicial immunity. However, the Court ruled that petitioners’ "claims against the New York Courts and the New York State Legislature were properly dismissed on the ground of immunity...Pennhurst State School & Hospital v Halderman, 486 [sic] U.S. 89,99 (1983)."

120. The instant case falls within the exception to the sovereign immunity rule. It is true, the sovereign immunity principle is a constitutional limitation on the federal judicial power established in Article III of the Constitution. Generally, the Eleventh Amendment bars a suit against State agencies and officials when the State is the real, substantial party in interest, regardless of whether the suit seeks damages or injunctive relief.

121. However, in Ex parte Young, 209 US 123, the U.S. Supreme Court reconciled competing interests when it vindicated the supreme authority of federal law while at the same time preserving to an important degree the States’ constitutional immunity. In Young, the Court recognized an important exception to the general rule that states have constitutional immunity from federal judicial power: a suit challenging the federal constitutionality of a state officials’ action is not one against the state and, therefore, is not barred by the Eleventh Amendment.

122. The instant case falls within the exception recognized in Young: plaintiffs’ suit challenges the federal constitutionality of SFL 123-b(1). The exception in SFL 123-b(1) is a "door-closing" state statute that is repugnant to the First Amendment of the United States Constitution.

123. Unlike petitioners in Pennhurst, petitioners in the instant case are not asking the federal court to order State officials to conform their conduct to state law. Rather, petitioners are asking the federal court to order State officials to conform their conduct to the supreme federal law -- the basis of Young.

124. An enactment which is violative of the federal constitution is "void", and, therefore, does not impart to any State agency or official any immunity from responsibility to the supreme authority of the United States. Young at 160.

This Case Does Not Involve The "Speech And Debate Clause"

125. In Schulz II, the lower Court ruled that petitioners’ claims against the New York State Legislature and its leadership (Senate Majority Leader Bruno and Assembly Speaker Silver) were properly dismissed because "Legislators generally enjoy absolute immunity from Section 1983 liability for official conduct ‘within the sphere of legitimate legislative authority.’ Tenny v Brandhove, 341 U.S. 367, 376 (1951)."

126. The Second Circuit affirmed on the basis of Tenny. However, Tenny was an intra- legislative, "Speech and Debate" case. In Tenny the issue was whether a State Legislature Committee’s inquiry may fairly be deemed within its province, no matter what the motives of the individual legislators. The Tenny Court held that, "To find that a committee’s investigation has exceeded the bounds of legislative power it must be obvious that there was a usurpation of functions...The present case does not present such a situation...we conclude only that here the individual defendants of the legislative committee were acting in a field where legislators traditionally have power to act...." Tenny at 378, 379.

127. In Tenny, the Court made clear that while legislators are immune from liability for what they do or say in legislative proceedings, a legislature may not acquire a power by an unwarranted extension of the privilege and immunity from liability for acts done within the sphere of legislative activity. In other words, Tenny does not bar a legislator’s right to complete freedom in "Speech and Debate"; however, it does cast a shadow upon the enactment of legislation that is outside of the purview of the legislature, such as an enactment repugnant to any constitutional provision. The instant case involves a constitutional challenge to an enactment of the New York State Legislature. The enactment of laws that are repugnant to the federal Constitution, as with SFL 123-b(1), does not fall within the "sphere of legitimate legislative activity."

128. By its ruling, the Second Circuit has, in effect, extended the privilege of legislators to be free from all civil process ("claims for declaratory or equitable relief, as well as for monetary damages") for what they do or say in legislative proceedings to what the entire body of legislators does in enacting laws, even if by that enactment they acquire a power(s) that is not legitimately theirs.

129. With all due respect, the Second Circuit had apparently misconstrued the facts and the law of Schulz II. A State legislature is not immune from claims for declaratory relief if and when it acts to acquire power and to oppress.

130. Mr. Justice Black, concurring in Tenny, wrote that while "legislators are immune from legal responsibility for intra-legislative statements and activities," the California Legislature is not immune to civil process and can be sued "on the ground that the resolution creating the committee or the committee’s actions under it were unconstitutional, null and void." Tenny at 380. Mr. Justice Black, concurring, (Tenny at 381), wrote, "Unfortunately, it is true that legislative assemblies, born to defend the liberty of the people, have at times violated their sacred trusts and become the instruments of oppression."

131. In Schulz II, the Second Circuit appears to have misconstrued Supreme Court of Va. v Consumers Union, 446 US 719 (1980). In Consumers Union the United States Supreme Court did, in fact, say, "Although Tenny involved an action for damages under Section 1983, its holding is equally applicable to Section 1983 actions seeking declaratory or injunctive relief." (Petitioners’ emphasis). However, the Supreme Court was merely stating that the Speech and Debate Clause protects legislators from all civil process (even declaratory judgment actions) for what they do or say in legislative proceedings. This doesn’t mean, however, that State legislatures are immune from civil process for declaratory relief when they enact laws, such as SFL 123-b(1), by which they acquire power and oppress.

132. The Legislature is not immune from the instant challenge -- a challenge which seeks a declaration that the exception in SFL 123-b(1) is unconstitutional, null and void. This is a proceeding against a finished law (a final product), not against legislators involved in the legislative process. Through SFL 123-b(1) the legislature has acquired the power to limit the citizen-taxpayers’ natural right to petition the government, to access the courts and to prohibit/restrict the power of the State and its municipalities to incur public debt.

Petitioners Have Standing To Challenge
The Constitutionality of SFL 123-b(1)

133. Petitioners believe it is important to note that standing to maintain constitutional challenges involving economic harm appears to be based as much on court policy as on a constitutional foundation. Flast v Cohen, 392 US 83, 93. "Justiceability is…not a legal concept with fixed content or susceptible of scientific verification. Its utilization is the resultant of many subtle pressures…." Flast at 95, quoting from Poe v Ullman, 367 US 497, 508 (1961). The doctrine of justiceability "has become a blend of constitutional requirements and policy considerations." Flast at 97 quoting from Barrows v Jackson, 346 US 249, 255. "There is no absolute bar to judicial review by taxpayers challenging allegedly unconstitutional taxing and spending programs." Flast at 101.

134. In Lujan v Defenders of Wildlife, 504 US 555, 119 L Ed 2d 351, 364-365 (1992), the Court summarized the general rule for standing in federal court, in taxpayer actions or otherwise: 1) these plaintiffs; 2) must show injury in fact; 3) that is concrete and particularized; 4) and actual or imminent, not conjectural; 5) caused by an invasion; 6) of legally protected interests. Pro-se petitioners do, in fact, meet these criteria.

135. Before petitioners address their standing in the terms set down in Lujan, petitioners argue that because this case involves the constitutionality of a "door closing" statute, it should receive policy considerations similar to those given by the Seventh Circuit in another case involving a door closing statute: Czerkies v Department of Labor, 73 F 3d 1435, 1441-42 (1996). Czerkies appears to stand for the proposition that plaintiffs (like those in the instant case) asserting actual or imminent and particular economic harm, may challenge entire statutory schemes for unconstitutionality. "It is distasteful to suppose that an administrative agency would claim to receive from Congress by sheer inadvertence a license to ignore the Constitution…Our decision in Marozsan [852 F.2d 1469 (7th Cir. 1988)(en banc)] emphasized the presumption against denying all judicial remedies for violations of the Constitution by federal agencies, noting the anomalous consequences of such a denial…The anomalies would be even greater here because Marozsan at least had an administrative appellate remedy…Czerkies has no appellate remedies of any kind. Consequences are not irrelevant to the interpretation of statutes…Confining constitutional challenges to systems or general rules or practices of the agencies would lighten the judicial workload -- but not enough to outweigh the interest in allowing persons some forum in which to assert their constitutional rights." Czerkies, 1441-1442.

136. Ruling on such a door closing statute (that is, one purportedly precluding judicial review of an administrative decision, in Czerkies, regarding workman’s compensation claims), the Seventh Circuit decided firmly that unless Congress explicitly precludes judicial review of constitutional claims (and such a preclusion would certainly bear a heavy burden of judicial scrutiny), statutes may not preclude such review of such claims.

137. Here, we are faced with the most distasteful situation where the entire judicial department of the State of New York is claiming to have received from the Legislature a license to ignore the Constitution and to disallow persons some forum -- any forum -- in which to assert their constitutional rights regarding the incurrence of public debt.

138. While this is more of a "right to petition," "privileges and immunities" and "guarantee clause" case than a taxpayer action, petitioners’ action is, nonetheless, a "good faith pocketbook action" in which petitioners allege a "direct and particular [economic] interest," quoting Doremus v Bd. Of Educ. Of Hawthorne, 342 US 429, 434-35 (1952).

139. In Flast v Cohen, 392 US 83 (1968), the Court held that since the plaintiffs’ constitutional (First Amendment Establishment Clause) challenge was made with respect to a program involving a substantial expenditure of tax funds, and since the establishment clause operated as a specific constitutional limitation upon the exercise by Congress of its taxing and spending powers, the plaintiffs had standing to invoke a federal court’s jurisdiction for an adjudication on the merits.

140. In the instant case, petitioners’ constitutional challenge was made with respect to a State statute which instructs the Judiciary to dismiss any case involving "the authorization, sale execution or delivery of a bond issue or notes issued in anticipation thereof by the State or any agency, instrumentality or subdivision thereof or by any public corporation or public benefit corporation." SFL 123-b(1). This statute, being enforced by the Judiciary, has led to a very substantial incurrence of public debt (actual as well as threatened and potentially protracted). The challenge goes indirectly to the substantial expenditure of tax funds to service or guarantee that debt. The federal rights upon which this case is based (Separation of Powers, First and Fourteenth Amendment right to petition, Fifth Amendment right against taking of money property through taxes and fees without constitutional due process, and Article IV’s guarantee of state powers based upon the consent of the governed) guarantee a State government harnessed to the constitutional will of the governed and operate as specific constitutional limitations upon the exercise by the New York Legislature of its debt-incurring, taxing and spending powers. Therefore, citizen-taxpayer-petitioners have standing to invoke the federal court’s jurisdiction for an adjudication on the merits because of the federal questions involved. They have successfully met the two-pronged nexus test established by Flast.

141. Petitioners’ actual injury as a result of SFL 123-b(1) is concrete, measurable and substantial. As the Record demonstrates, since 1978 the Unified Court System has dismissed, for lack of standing to sue under SFL 123-b(1), constitutional challenges to legislative and executive enactments of laws authorizing the incurrence of public debt in the form of principal and interest in an amount greater than $40 billion dollars.

142. Petitioners’ threatened injury as a result of SFL 123-b(1) is concrete, measurable and substantial: the State has created the Long Island Power Authority (LIPA) and is threatening to enact a law authorizing LIPA to incur tax-supported State debt in the form of principal and interest in an amount of about $16 billion dollars to take over the Long Island Lighting Co., in violation of debt-limiting restrictions of the New York Constitution; the State has just enacted a law establishing the New York City Transitional Finance Authority to incur tax-supported debt in the form of principal and interest in an amount of $15 billion, in violation of specific debt-limiting provisions of the NY Constitution; the State is threatening to enact a law authorizing the incurrence of tax-supported debt in the form of principal and interest in an amount of about $2 billion to relocate Yankee Stadium and to renovate sixteen other sports facilities on behalf of private, professional sports organizations, in violation of debt-limiting restrictions of the New York Constitution; the State is threatening to incur billions of dollars in tax-supported debt to prevent the State Dormitory Authority from defaulting on its debt.

143. The actual and threatened concrete injury is approaching $100 billion, and the list goes on because the State knows that its position is impregnable: it can safely incur public debt through any of a number of processes without constitutional challenge. The door is, indeed, closed. The per-capita taxpayer injury is clearly substantial without any relief in sight.

144. Unless the Court permanently enjoins the further enforcement of the exception under SFL 123-b(1), the State (now obviously out of control) will mortgage substantially more of petitioners’ tax dollars.

145. It is widely known that the citizen-taxpayers of New York State are the most heavily taxed (combined state and local taxes and fees) people in the nation. This is significantly the result of State and local borrowing practices since the adoption of SFL 123-b(1) in 1975.

146. It is widely known that since 1975, New York State’s credit rating has dropped to lowest of all the states according to one of the two major credit-rating agencies (the other rates New York as next to last). It is widely known that since 1975, New York’s (unconstitutional) "back-door borrowing" -- defended by SFL 123-b(1) -- has resulted in the highest per capita debt-burden in the nation. It is widely known that the State’s tax-supported General Fund Budget is approximately $32 billion and that about $3 billion of that is needed just to service current State debt (to say nothing about local debt, which, in the past, the State has stood behind). It is widely known that many cities and counties have begun to borrow to fund operating costs and operating deficits.

147. The Legislature and the Executive are supposed to be harnessed to the State constitutional will of the governed who (because of the concrete economic hardships suffered by the people in the 1800’s as a result of State and local borrowing practices) have added specific, public-debt limiting restrictions to the State Constitution.

148. By the exception to SFL 123-b(1) the Legislature is acquiring power by, in effect, changing the State Constitution to eviscerate all of its debt-limiting restrictions. It thinks it has closed the door against significant judicial review since a lack of standing precludes a court from reaching the merits, whether the merits involve constitutional questions or not.

149. In the instant case, the burden of public debt is the logical nexus between the taxpayers status asserted by petitioners and the claims sought to be adjudicated.

150. Petitioners’ injury is concrete and substantial.

151. Petitioner’ injury as taxpayers is caused most directly by the substantial incurrence of State and local debt, the resultant low credit rating and the higher interest rate that must be paid for money the government is forced to borrow. Petitioners injury as taxpayers is caused, indirectly, by an oppressive burden of taxes and fees as the State and its municipalities raise the money needed to pay debt-service and for everything else they need or want to do.

152. The State’s power to tax and spend is not directly the issue. Petitioners’ challenge goes directly to the States authority to make and enforce the "door-closing" statute in question and, indirectly, to the power of the State and its municipalities to incur public debt in ways that are repugnant to the debt-limiting restrictions of Articles VII, VIII and X of the New York Constitution.

SFL 123-B (1) Is An Unconstitutional "Door Closing" Statute

153. Petitioners seek to nullify the exception language in New York State Finance Law 123-b(1), because it is a "door closing" statute -- a statute designed to close the door to constitutional protection and due process. By its enforcement, petitioners have been prevented from petitioning State and local governments if the matter involves the issuance of public debt, even though the challenged action is clearly repugnant to the plain language of the public-debt-limiting restrictions of the New York Constitution.

154. SFL 123-b(1) renders meaningless eight debt-limiting provisions of the New York Constitution. It is a dangerous statute -- in the extreme. If petitioners cannot obtain judicial review of obvious violations of the State Constitution by the Legislative and Executive branches, what is the purpose of judicial review at all? What is the purpose of the Constitution?

155. Obviously, the exception in SFL 123-b(1) is designed to bar petitioners from challenging the state’s unconstitutional borrowing practices, principally those that violate the people’s fundamental debt-limiting protections as found under articles VII, VIII and X of the New York Constitution.

156. The exception in SFL 123-b(1) is designed to bar petitioners from exercising their fundamental right to petition the government for a redress of their grievances by accessing the courts.

157. The petition clause of the First Amendment is of paramount importance. It was inspired by the same ideals of liberty and democracy that resulted in the First Amendment freedoms to speak, publish and assemble. McDonald v Smith, N.C. 1985, 105 S. Ct. 2787. Right of access to courts is but one aspect of right to petition. California Motor Transport Co. v. Trucking Unlimited Cal. 1972, 92 S. Ct. 609. SFL 123-b(1) abridges that right.

158. The filing of a lawsuit carries significant constitutional protection, implicating the First Amendment right to petition the government for redress of grievances and the right of access to the courts. Hoeber for and on Behalf of N.L.R.B. v Local 30, United States, Tile & Composition Roofers et al (Pa) 1991, 939 F.2d 118. SFL 123-b(1) abridges these rights and is unconstitutional. The First Amendment protects the right to petition of persons whose activities are genuinely aimed at procuring favorable governmental action, as is the case here. LeBlanc-Sternber v Fletcher, S.D.N.Y. 1991, 781 F.Supp.261. The right to petition government for a redress of grievances is a specific, natural right guaranteed by the First Amendment, Boling v National Zinc Co., D.C. Okl. 1976 435 F. Supp, 18. See also U.S. v State of Mich., D.C. Mich. 1978, 460 F. Supp. 637 The right of petition guaranteed by the First Amendment has been extended so as to prevent its denial by the States. Richards Furniture Corp. v Bd. of County Com’rs of Anne Arundel County. (1963) 196 A.2d 621, 223 Md. 249. SFL 123-b(1) denies petitioners their right to petition.

159. Due process right to access to the courts and the right to petition officials and courts for redress of grievances are fundamental rights which cannot be invaded without justification by a compelling state interest. Morales v Turman, D.C. Tex, 1971, 326 F. Supp. 677. Respondents have offered no justification much less a compelling justification for the exception in SFL 123-b(1).

160. The purpose of the Fourteenth Amendment, Section 1, Clause 2 is to preserve and enforce, as against state action, those rights, privileges and immunities secured by the constitution. Golden v Biscayne Bay Yacht Club, C.A. Fla. 1976, 530 F.2d 16, certiorari denied 97 S. Ct. 186. The First Amendment right to petition the government for a redress of grievances has been incorporated into the Fourteenth Amendment and is therefore applicable to the States. Nicholson v Moran, D.R.I 1993, 835 F. Supp. 692. The adoption of section 1, clause 2 of the Fourteenth Amendment implied that there are matters of fundamental justice that the citizens consider so essentially an ingredient of human rights as to require restraint on action on behalf of any state that appears to ignore them. Orleans Parish School Bd. v Bush, C.A. La. 1957, 242 F.2d 156, Certiorari denied 77 S.Ct. 1380. Section 1, Clause 2 of the Fourteenth Amendment is designed to protect petitioners from invasion of their rights, privileges and immunities by the federal and state governments respectively. Schatte v Int’l Alliance of Theatrical Stage Emp. et. al., D.C. Cal 1947 70 F. Supp. 1008, affirmed 165 F.2d 216 Certiorari denied 68 S.Ct. 1018.

161. In the constitution and laws of the United States the word "citizen" is generally, if not always used in a political sense to designate one who has the rights and privileges of a citizen of the State or of the United States and it is so used in Section 1, Clause 2 of the Fourteenth Amendment. Baldwin v Franks, Cal 1887, 7 S.Ct. 656. Petitioners are citizens of the United States and of New York State.

162. The right to sue and defend in the courts is the alternative of force, and it is one of the highest and most essential privileges of citizenship. Chambers v Baltimore etc. R. Co. Ohio 1907, 28 S. Ct. 34. SFL 123-b(1) strips petitioners of that privilege and is, therefore, unconstitutional.

163. Section 1, Clause 2 of the Fourteenth Amendment furnishes an additional guarantee against any encroachment by the state upon fundamental rights which belong to every citizen as a member of society. U.S. v. Cruikshank, La. 1876, 92 U.S. 554. SFL 123-b(1) is such an encroachment.

164. The Fourteenth amendment’s provision that no state shall make or enforce any law which shall abridge privileges or immunities of citizens of the United States, nor deprive any person of life, liberty or [money] property without due [constitutional] process of law are limitations on the power of the States. Peoples Cab Co. v Bloom, D.C. PA 1971, 330 F. Supp. 1235, affirmed 472 F.2d 163. Respondents acted outside of their power in making and enforcing SFL 123-b(1).

165. Amendments 1 to 8 to the U.S. Constitution were intended as restrictions upon the federal government, but Section 1, Clause 2 of the Fourteenth Amendment constitutes a limitation upon the States. Beauregard v Wingard, D.C. Cal. 1964, 230 F. Supp. 167.

166. The right to petition the government for a redress of grievances and the other rights enumerated in Amendments 1 to 8 are the privileges and immunities of citizens of the United States; they are secured by the Constitution. U.S. v Hall, C.C. Ala. 1871, 3 Chicago Leg.N.260, 26 Fed.Cas. No.15, 282. SFL 123-b(1) is unconstitutional.

167. Protection of life, liberty, and property rests primarily with the states, and Section 1, Clause 2 of the Fourteenth Amendment furnishes an additional guaranty against any encroachment by the States upon those fundamental rights which belong to citizenship, and which the State Governments were created to secure. The privileges and immunities of the citizens of the United States are indeed protected by it. In re Kemmler, ____ N.Y. 1890, 10 S.Ct. 930. SFL 123-b(1) is abrogated.

CONCLUSION

168. Based on the above, plaintiffs respectfully request an order granting the relief requested under paragraph 3 above.

DATED: May 21, 1998

ROBERT L. SCHULZ Pro Se 2458 Ridge Road Queensbury, NY 12804 (518) 656-3578

FREDERICK J. GORMAN Pro Se 96 Empress Pines Drive Nesconset, NY 11767-3130 1-800-833-2250

ROBER UNGER Pro Se 38 Windsor Road Great Neck, NY 11021 (516) 829-8356