Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_16-cv-00862/USCOURTS-alnd-2_16-cv-00862-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

DONNA G. LOWERY, JOEL S. KELLY, 

III, BLAKE M. ELLIS, and SHEILA 

GARRETT, individually and on behalf of 

all others similarly situated,

Plaintiffs,

v.

IOD, INC., and CIOX HEALTH, LLC,

Defendants.

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Case No.: 2:16-CV-862-RDP

MEMORANDUM OPINION

In the words of Benjamin Franklin, “[i]n this world, nothing can be said to be certain, 

except death and taxes.” http://www.notable-quotes.com/f/franklin_benjamin.html. Plaintiffs, 

however, allege that the state sales taxes imposed by Defendants for their services are not 

inevitable, and not even lawful. They seek damages for negligent and fraudulent conduct, along 

with an injunction to prevent Defendant from imposing such taxes in the future. 

After the initial filing of this case in state court, a jurisdictional tug-of-war ensued. 

Defendants removed this action to this court under the Class Action Fairness Act (“CAFA”). 

Plaintiffs now seek remand to state court, arguing that this court lacks jurisdiction to interfere

with the collection of state taxes. While this court finds this argument unpersuasive, the court 

nonetheless concludes that there are other grounds for remand because Defendants’ basis for 

removal was improper. Accordingly, for reasons explained below, Plaintiff’s Motion to Remand 

is due to be granted.

FILED

 2016 Aug-11 PM 04:36

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:16-cv-00862-RDP Document 21 Filed 08/11/16 Page 1 of 8
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I. Factual and Procedural History

Plaintiffs, on behalf of themselves and a putative class, filed this action in the Circuit 

Court of Jefferson County, on April 14, 2016. (Doc. 1-1, p. 1). In their Complaint, Plaintiffs 

allege that Defendants, Iod, Inc. and CIOX Health, LLC, engaged in the wrongful and systematic 

charging of sales tax on their services involving the collection and reproduction of medical 

records. (Id.). Plaintiffs specifically allege that Defendants’ charge of sales taxes for their 

services violated Alabama law, which levies sales tax only upon sellers “engaging or continuing 

... the business of selling [goods] at retail” within the state of Alabama. (Doc. 1-1, pp. 3-4) 

(citing § 40-23-2(1), Ala. Code 1975). Plaintiffs assert class claims of negligence and fraud, and 

seek damages and a permanent injunction enjoining defendants from imposing such taxes in the 

future. (Id. at 7-15). 

On May 25, 2016, Defendants removed this case to this court. (Doc. 1, p. 1). As grounds 

for their removal, Defendants asserted diversity jurisdiction under CAFA. (Id. at 3) (citing 28 

U.S.C. 1332(d)). Interestingly, upon removal, Defendants moved to dismiss Plaintiffs’ claims on 

the grounds that this court does not have subject matter jurisdiction to adjudicate those claims. 

Defendants argue that Plaintiffs did not follow the requisite procedures for obtaining a sales tax 

refund under the Alabama Taxpayer Bill of Rights and Uniform Revenue Procedures Act 

(“TBOR”). (Doc. 4, p. 1) (citing Ala. Code § 40-2A-a, et seq.). 

Plaintiffs’ Motion to Remand challenges the removal, arguing that this court lacks subject 

matter jurisdiction under the Tax Injunction Act (the “TIA”), which prohibits federal courts from

interfering with the assessment, levy, or collection of a tax under state law. (Doc. 13-1, pp. 1, 5).

Case 2:16-cv-00862-RDP Document 21 Filed 08/11/16 Page 2 of 8
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II. Discussion

Federal courts are courts of limited jurisdiction that possess only that power authorized 

by the Constitution and statute. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 

(1994). It is axiomatic that this court is “‘empowered to hear only those cases within the judicial 

power of the United States as defined by Article III of the Constitution,’ and which have been 

entrusted to them by a jurisdictional grant authorized by Congress.” University of South Alabama 

v. American Tobacco Co., 168 F.3d 405, 408 (11th Cir. 1999) (quoting Taylor v. Appleton, 30 

F.3d 1365, 1367 (11th Cir. 1994)). The court has a duty to examine whether subject matter 

jurisdiction is proper in this case, even if a particular jurisdictional argument has not been raised 

by the parties. See, e.g., Delta Coal Program v. Libman, 743 F.2d 852, 854 (11th Cir. 1984); In 

re Carter, 618 F.2d 1093 (5th Cir. 1980), cert. denied, 450 U.S. 949, 101 S.Ct. 1410, 67 L.Ed.2d 

378 (1981).

The removing party has the burden of establishing subject matter jurisdiction over a case 

removed to this court. Roe v. Michelin North America, Inc., 613 F.3d 1058, 1061 (11th Cir. 

2010). “That burden goes not only to the issue of federal jurisdiction, but also to questions of 

compliance with statutes governing the exercise of the right of removal.” Parker v. Brown, 570 

F. Supp. 640, 642 (S.D. Ohio 1983) (citations omitted). Courts strictly construe removal 

statutes. City of Vestavia Hills v. Gen. Fidelity Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012) 

(citing Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999)). “[A]ll doubts 

about jurisdiction should be resolved in favor of remand to state court.” Vestavia Hills, 676 F.3d 

at 1313.

Case 2:16-cv-00862-RDP Document 21 Filed 08/11/16 Page 3 of 8
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A. Removal Of This Case Under CAFA Was Improvident

In their Notice of Removal, Defendants assert that diversity jurisdiction under CAFA is 

present in this case.

1

(Doc. 1, p. 1). Under CAFA, federal diversity jurisdiction over class 

actions exists if “the matter in controversy exceeds the sum or value of $5,000,000, exclusive of 

interests and costs, and is a class action in which . . . any member of a class of plaintiffs is a 

citizen of a State different from any defendant . . . .” 28 U.S.C. § 1332(d)(2)(A). Additionally, 

the size of the proposed class must contain at least 100 members. See 28 U.S.C. § 1332(d)(5)(B). 

In removing a case, a defendant is only required to make a plausible allegation that the 

requirements of CAFA have been met. See Dart Cherokee Basin Operating Co., LLC v. Owens, 

135 S.Ct. 547, 554 (2014). A defendant’s amount-in-controversy allegations “should be 

accepted when not contested by the plaintiff or questioned by the court.” Id. at 553. If the amount 

is challenged or questioned, evidence establishing the amount is required under Section 

1446(c)(2)(B). Id. at 554. 

Here, at first glance, Defendants’ assertions regarding the existence of diversity and the 

size of the alleged class appear to be on target. (See Doc. 1, pp. 5-6). However, the court 

questions whether the amount in controversy exceeds CAFA’s $5,000,000 jurisdictional 

threshold. Defendants concede that they are subject to potential monetary damages in the 

amount of $2,245,880.64, an amount which includes both compensatory damages and the

maximum punitive damages. (Id. at 7-9). They assert that the remainder of the threshold 

jurisdictional amount is satisfied because the cost of a permanent injunction would deprive them 

of collecting $248,183.84 annually. (Id. at 8-9). Defendants state that they collected and

 

1

In an apparent instance of Schrödinger’s Jurisdiction, Defendants argue in their Motion to Dismiss that 

this court lacks subject-matter jurisdiction over Plaintiffs’ negligence and fraud claims because they did not comply 

with the statutory procedures regarding taxpayer requests for sales tax refunds under Ala. Code § 40-2A-1. (Doc. 4,

pp. 7). It is unclear how this court may simultaneously have and lack subject-matter jurisdiction.

Case 2:16-cv-00862-RDP Document 21 Filed 08/11/16 Page 4 of 8
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remitted to the Alabama Department of Revenue $561,470.16 in sales tax revenue from January 

1, 2014 to the date of the removal. Thus, mathematically speaking, an injunction prohibiting the 

collection of the taxes at issue would have to remain in place for more than eleven years in order 

for the $5,000,000 threshold to be met.

It is, however, somewhat unclear how injunctive relief prohibiting the collection of these 

taxes would necessarily inure to Plaintiffs’ benefit for purposes of satisfying the jurisdictional 

threshold. Under Eleventh Circuit precedent, this court must consider injunctive relief’s effect

on the amount in controversy from the perspective of gains by Plaintiffs, not the cost to 

Defendants. Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1268 (11th Cir. 2000) (citing 

Ericsson GE Mobile Communications, Inc. v. Motorola Communications & Elecs., Inc., 12 F.3d 

216, 218-20 (11th Cir. 1997) (holding that “the value of injunctive or declaratory relief is the 

‘value of the object of litigation’ measured from the plaintiff’s perspective” and that “the value 

of the requested injunctive relief is the monetary value of the benefit that would flow to the 

plaintiff if the injunction were granted.”)

Of course, “courts may use their judicial experience and common sense in determining 

whether the case stated in a complaint meets federal jurisdictional requirements.” Roe v. 

Michelin N. Am., Inc., 613 F.3d 1058, 1062 (11th Cir. 2010). But a court may not engage in 

“impermissible speculation” as to the amount in controversy without any evidence on the value 

of the claims at issue in a case. Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 

2010); Lowery v. Ala. Power Co., 483 F.3d 1184, 1220 (11th Cir. 2007). 

Here, it is unclear to what extent Plaintiffs will gain from the imposition of the injunctive 

relief they seek. This is particularly true because of the advent of electronic medical records 

which are frequently and readily accessible to patients via patient portals. In light of these 

Case 2:16-cv-00862-RDP Document 21 Filed 08/11/16 Page 5 of 8
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changes in the form of medical records, any guess about the amount of future taxes that would 

not be collected as a result of an injunction would be just that – a guess, and a wholly speculative

one at that. The court declines to engage in such rank speculation. “The removal statute 

contemplates a stronger basis for jurisdiction than mere speculation.” Wozniak v. Dolgencorp, 

LLC, 2009 WL 4015577, at *2 (M.D. Fla. Nov. 19, 2009). 

For these reasons, the court concludes that Defendants have not made a sufficient 

showing that the amount in controversy in this matter exceeds the jurisdictional threshold under 

CAFA. Because Defendants have not met their burden of establishing that federal jurisdiction is 

proper, Plaintiff’s Motion to Remand is due to be granted. 

B. The Tax Injunction Act Issue Favors Remand

Plaintiff’s Motion to Remand argues that this court should remand this case under the 

TIA. “Under the TIA, district courts are prohibited from ‘enjoin[ing], suspend[ing] or 

restrain[ing] the assessment, levy or collection of any tax under State law where a plain, speedy 

and efficient remedy may be had in the courts of such State.’” Kelly v. Alabama Dep’t of 

Revenue, 638 F. App’x 884, 888–89 (11th Cir. 2016) (quoting 28 U.S.C. § 1341. “Rather than 

confer jurisdiction, the TIA ‘limits jurisdiction which might otherwise exist,’ and ‘was intended 

to prevent taxpayers from using federal courts to raise questions of state or federal law relating 

to the validity of particular taxes.’” Kelly, 638 F. App’x at 888-89 (quoting Osceola v. Fla. Dep’t 

of Revenue, 893 F.2d 1231, 1232-33 (11th Cir. 1990)). In light of its overarching purpose to 

impede federal court interference with state tax systems, the TIA has been construed broadly. Id.

(citing A Bonding Co. v. Sunnuck, 629 F.2d 1127, 1133 (5th Cir. 1980)).

However, the legislative history of the TIA does not support the notion that there is some 

sweeping prohibition that precludes any “federal court interference with all aspects of state tax 

Case 2:16-cv-00862-RDP Document 21 Filed 08/11/16 Page 6 of 8
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administration.” Hibbs v. Winn, 542 U.S. 88, 104 (2004). Nevertheless, it is sometimes 

appropriate to decline to exercise federal jurisdiction due to comity concerns, even when the Tax 

Injunction Act does not deprive the court of subject matter jurisdiction. See, e.g., Direct Mktg. 

Ass’n v. Brohl, 135 S. Ct. 1124, 1133-34 (2015) (holding that the TIA did not require dismissal 

and remanding to the lower court to determine if comity concerns nevertheless supported 

dismissal); see also Levin v. Commerce Energy, Inc., 560 U.S. 413, 424 (2010) (recognizing that 

“[t]he comity doctrine is more embracive than the T[ax Injunction Act].”). Concerns about 

comity arise from “a recognition of the fact that the entire country is made up of a Union of 

separate state governments, and a continuance of the belief that the National Government will 

fare best if the States and their institutions are left free to perform their separate functions in 

separate ways.” Fair Assessment in Real Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 112 (1981) 

(quoting Younger v. Harris, 401 U.S. 37, 44 (1971)).

Because of Defendants’ failure to establish the requisite amount in controversy, in light 

of the TIA issue presented in this case, and due to notions of comity that permeate this case, the 

court determines that this action is due to be remanded.

III. Conclusion

For the foregoing reasons, the court finds that Defendants have not satisfied their burden 

of showing that the amount in controversy in this case satisfies the court’s jurisdictional 

threshold under CAFA. Moreover, due to concerns about comity, even if this court has the power 

to entertain this action, it concludes it should not do so in favor of remanding the case to state 

court. Therefore, the case is due to be remanded to the Circuit Court of Jefferson County, 

Birmingham Division. A separate order will be entered.

Case 2:16-cv-00862-RDP Document 21 Filed 08/11/16 Page 7 of 8
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DONE and ORDERED this August 11, 2016.

_________________________________

R. DAVID PROCTOR

UNITED STATES DISTRICT JUDGE

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