Federal Court Smacks Down County Board of Education over Opposition to Rockwool Plant in WV
May 9, 2019
Danish insulation manufacturer Roxul (a/k/a Rockwool) was induced to locate a new manufacturing facility in the Eastern Panhandle of West Virginia by local and state officials. One mechanism for doing so was a “payment in lieu of taxes” or “PILOT” agreement to which the Jefferson County Board of Education (“BOE”) was a signatory. But, when the political winds shifted and local opposition grew, the BOE acted like a petulant third-world nation and sought to walk away from its agreement. Instead, as we’ve noted in a prior article, the BOE threatened to use its eminent domain authority to acquire the site for use as a student center for a small fraction of the $49 million Rockwool has already invested in permitting and site development.
Rockwool fought back by suing the BOE in federal court, alleging that its members violated Rockwool’s federal constitutional rights by threatening to condemn the property - especially after inducing Rockwool to develop the site. By order of May 7, 2019, a federal court agreed that Rockwool would likely prevail on its claims and issued a preliminary injunction to prevent the BOE from condemning the site. In so doing, the Court blistered the BOE.
Rockwool claimed that it was deprived of substantive due process rights guaranteed by the 14th Amendment; the Equal Protection Clause of the 14th Amendment and the Takings Clause of the 5th Amendment. The Court observed that the 5th Amendment is designed primarily to ensure that “takings” of property by the government are compensated, but that the exercise of the authority to “take” property presupposes that government has a legitimate governmental objective. Likewise, the Court observed that under the Equal Protection Clause a state action is improper where a plaintiff has intentionally been treated differently from others similarly situated and there is no rational basis for the disparate treatment. On both scores, the Judge found the BOE’s action deficient.
First, while she agreed that a “taking” of the property might be for a “public use,” the judge also found that “the BOE’s actions lacked any legitimate government interest, were motivated by animus … and [undertaken] in bad faith” in violation of Rockwool’s constitutional rights. To this end, the Court observed that the BOE had “enticed” Rockwool to develop the site by executing the PILOT agreement, which provided that it would “promote the public interest … in the general welfare of the public school students in Jefferson County.” The BOE did not advance its cause by adducing testimony at the injunction hearing that despite this enticement it “had an eye on the Rockwool property for a … school center all along” - that testimony just buttressed Rockwool’s claim that the BOE was acting in bad faith.
Second, the Court found that Rockwool had been treated differently than other landowners without any rational explanation. Contrary to the careful consideration of property purchases made by the BOE in the past (where the BOE did extensive site investigation and due diligence), here the BOE has undertaken almost no investigation. Nor could it articulate how big the proposed student center would be or how many students it would serve. In essence, the Court found the BOE’s case to be a sham.
Because Rockwool would continue to suffer unrecoupable construction charges if it had to pause site development, the Court enjoined the BOE from further efforts to condemn the property. The merits of the case will be resolved at a later date, but for now it appears that the BOE is the one getting schooled.