Relevant Document:Opinion
Judge Jack Davis II of the Seventh Judicial Circuit of Illinois today entered an order denying Illinois Policy Institute CEO John Tillman’s
petition for leave to file a two-count taxpayer action against public officials in Illinois seeking to enjoin the disbursement of public funds in service of bonds issued by the state in 2003 and 2017. The suit sought to challenge the issuance of more than $16 billion of the 2003 GO pension funding bonds and 2017 GO income tax proceed bonds, of which $14.3 billion remained outstanding between the two issuances as of the filing of the complaint. In a statement provided to Reorg and addressed further below, Tillman says he will appeal the decision.
Judge Davis writes that “to allow the filing of the Complaint would result in an unjustified interference with the application of public funds.” Moreover, the judge says that the petitioner asks the court to address a “non-justiciable political question” and to “substitute its judgment for the Illinois Legislature some two decades after it occurred.” Judge Davis states that it would be both “improper” and a violation of the separation of powers for the court to do so.
Therefore, the judge concludes,“[t]he court rejects Tillman’s invitation,” holding that reasonable grounds do not exist for filing the proposed complaint.
The opinion states that “while at this stage of the litigation the court is to determine whether or not reasonable grounds exists for filing the suit, that issue cannot be meaningfully addressed without a review of the language of the 2003 and 2017 laws to find whether specific purpose(s) for appropriations are stated.” In light of this, the opinion considers the relevant law, with the court ultimately finding that the Legislature stated “with reasonable detail” the specific purposes for the issuance of the bonds and assumption of the debt. Additionally, the court states that the law also appropriately describes the objectives to be accomplished by enactment of the legislation.
The court states that “[d]espite Tillman striving mightily to do so, he cannot ignore the plain language of the statutes in question.” The court describes Tillman’s proposed complaint as “chock-full of conclusory and argumentative statements” describing the financial condition of the state that are “irrelevant and which the court must disregard.” Moreover, Judge Davis states that Tillman’s petition “resembles far more of a political stump speech than it does a legal pleading.”
In a footnote, Judge Davis acknowledges that Tillman is an Illinois taxpayer but also addresses the inclusion of Warlander Asset Management LP as a plaintiff in the draft complaint and points out that Warlander is not an Illinois taxpayer. Judge Davis points out that, according to the proposed complaint, Warlander is the beneficial owner of $25 million of Illinois GO bonds. The order observes that while Warlander’s action “purports to be a bondholder action in that it claims the payments the complaint seeks to stop will impair Illinois' ability to service its bonds and will reduce the present market value of its bonds,” Warlander also has “a separate financial interest in this litigation.”
The issue of Warlander’s “separate financial interest” was raised by
amici Nuveen and AllianceBernstein LP, which beneficially hold about $2 billion principal amount of GO bonds, including more than $600 million principal amount of the challenged 2003 and 2017 GO bonds. The
amici also opposed the petition and raised concerns over Warlander’s ownership of credit default swaps in excess of its nominal $25 million bond position. At the Aug. 15
hearing, counsel for Tillman confirmed that Warlander’s investments included credit default swaps in the challenged bonds.
Tillman said in a statement emailed to Reorg that he would appeal and that it was “premature for the Court to decide the case on the merits at the petition stage.”
In full, his statement said: “I strongly disagree with the Court’s decision, will appeal and am confident that I will prevail. It was premature for the Court to decide the case on the merits at the petition stage. Moreover, I disagree with the court’s conclusion that whether general obligation bonds have a specific purpose is a purely political question. The Illinois supreme court has ruled that the judiciary is in fact required to determine whether a challenged purpose is specific or not, and has done so on other occasions.”
A spokeswoman for Gov. J.B. Pritzker, in a statement emailed to Reorg, said: “The administration is pleased that the judge repudiated this sham lawsuit brought on by the same far-right actors whose pathological desire to bankrupt the state brought us four years of devastation under Bruce Rauner.”
Warlander, the state attorney general’s office and
amici Nuveen and AllianceBernstein LP did not immediately return requests for comment on the order.