WASHINGTON — A U.S. appeals court this fall will take up a lawsuit that challenges the use of toll revenues to back bonds for the Washington Metrorail’s Silver Line extension to Dulles International Airport, potentially threatening a key funding mechanism of  the project.

The U.S. Court of Appeals for the Federal Circuit will weigh whether using revenues from the Dulles Toll Road to pay for more than $2 billion in debt to fund the Silver Line constitutes an illegal tax, according to an attorney representing two Northern Virginia residents who filed the suit against the Metropolitan Washington Airports Authority in April of last year.

The U.S. District Court for the Eastern District of Virginia last July dismissed the suit brought by John Corr and John Grigsby, who contended using tolls to pay for something unrelated to the construction or maintenance of the Dulles Toll Road is effectively a tax levied by the MWAA. Because the authority is not an elected body, they argued that the practice violates the U.S. and Virginia constitutions.

In its ruling against Corr and Grigsby, the lower court concluded that the two lacked standing to file the complaint because the question of the tolls is a “generalized grievance, shared in substantially equal measure by all or a large class of citizens.” Courts have previously ruled that such issues are best left to other branches of government, U.S. District Judge Anthony J. Trenga said in his opinion.

Trenga further ruled that Corr and Grigsby could not claim that the tolls are a tax because use of the road is optional and the revenues fund transportation improvements in the same corridor, rather than going into a general fund.

But Robert Cynkar, an attorney at Cuneo, Gilbert & LaDuca LLP who represents Corr and Grigsby, argued that using tolls for the toll road would be a fair user fee. Using them for anything else “just doesn’t cut it,” he said in an interview, adding, “That’s a tax, by any measure.” The plaintiffs will likely appeal to the Supreme Court if necessary, he warned.

The MWAA’s brief, filed by its general counsel Philip Sunderland and Hunton & Williams LLP attorney Stuart Raphael, urged the appeals court to uphold the lower court on many of the same grounds. Corr and Grigsby are “just two of thousands” of toll road users, and courts shouldn’t rule about such a broad measure, the authority argued.

“Anyone paying a single toll could have raised the same generalized claims about MWAA’s governance structure and use of toll revenues. These generalized grievances are more appropriately committed to the representative branches,” the brief said.

Sunderland said the case challenges “the same generic principle” already litigated several times since the funding plan took shape in 2006. A Richmond circuit court ruled in 2008 in Gray et al. v. Virginia Secretary of Transportation that the tolls were not an illegal tax under the Virginia Constitution, and Parkridge 6 LLC v. U.S. Department of Transportation, was dismissed by an appeals court in 2011.

Sunderland said he thinks a ruling against the MWAA is unlikely because Corr and Grigsby have many hurdles to clear, particularly on the question of jurisdiction. Appeals from the Eastern District of Virginia generally go to the U.S. Court of Appeals for the Fourth Circuit, he said, but the suit was filed in the Federal Circuit. The Federal Circuit has jurisdiction over complaints against the U.S. government, but MWAA is not the federal government, he said.

The suit filed by Corr and Grigsby argues that the MWAA is an arm of the federal government because three of its 13 members are appointees of the president. Five are appointed by the Virginia governor, three by the District of Columbia mayor and two by the Maryland governor.

If the appeals court rules in favor of the plaintiffs, it could interfere with the Silver Line project. The project’s funding seemed to fall in line last week, when Loudoun County, Va., agreed to contribute $270 million.

“If the court were to reach that conclusion,” without providing some way of making the current funding arrangement acceptable, Sunderland said, “it would be a problem.” The MWAA would also appeal, if it were to lose, he said.

Cynkar said the court will probably hear oral arguments in October. No date has been set.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.