NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

No. 22-2675

_________________

APEX CONSTRUCTION COMPANY, INC.,

Appellant

v. 

UNITED STATES VIRGIN ISLANDS

________________

No. 22-2676

_________________

BLUEWATER CONSTRUCTION, INC.,

Appellant

v. 

UNITED STATES VIRGIN ISLANDS

_________________

No. 22-2677

_________________

MSI BUILDING SUPPLIES, INC.,

Appellant

v. 

UNITED STATES VIRGIN ISLANDS
2

_________________

No. 22-2678

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UNITED CORPORATION,

Appellant

v. 

UNITED STATES VIRGIN ISLANDS

_________________

No. 22-2679

_________________

IMPEX TRADING INTERNATIONAL, INC.,

Appellant

v. 

UNITED STATES VIRGIN ISLANDS

_________________

No. 22-2680

_________________

B&B MANUFACTURING, INC.,

Appellant

v. 

UNITED STATES VIRGIN ISLANDS

_________________

On Appeal from the District Court

of the Virgin Islands

(D.C. Nos. 3-21-cv-00039, 3-21-cv-00040, 3-21-cv-00041,

3-21-cv-00043, 3-21-cv-00044, and 3-21-cv-00052)

District Judge: Honorable Robert A. Molloy
3

________________

Argued May 26, 2023

Before: RESTREPO, McKEE, and SMITH, Circuit Judges

(Opinion filed: August 17, 2023)

Joseph A. DiRuzzo, III [ARGUED]

Daniel M. Lader

DiRuzzo & Company

401 East Las Olas Boulevard

Suite 1400

Fort Lauderdale, FL 33301

Counsel for Appellants

Michael R. Francisco, Esq. [ARGUED]

Office of Attorney General of Virgin Islands

Department of Justice

34-38 Kronprindsens Gade

GERS Complex, 2nd Floor

St. Thomas, VI 00802

Counsel for Appellee

________________

OPINION*

________________

McKEE, Circuit Judge.

Appellants sued the United States Virgin Islands seeking refunds of excise taxes

they alleged were levied in violation of the Dormant Commerce Clause. The District 

Court held that the tax comity doctrine applied to Appellants’ suits and granted the 

USVI’s motions to dismiss. Because we agree with Appellants that the tax comity 

* This disposition is not an opinion of the full Court and under I.O.P. 5.7 does not 

constitute binding precedent.
4

doctrine does not apply to these tax refund suits, we will reverse the District Court’s 

order granting dismissal, and remand for further proceedings.1

I.

“[T]he comity doctrine applicable in state taxation cases restrains federal courts 

from entertaining claims for relief that risk disrupting state tax administration.”2In Fair 

Assessment in Real Estate Association, Inc. v. McNary, taxpayers brought a damages 

action pursuant to 42 U.S.C. § 1983, seeking actual and punitive damages for the 

overassessment of property taxes.

3 They claimed that the state tax system was 

unconstitutional and that the tax comity doctrine should not apply.4 They argued “that 

damages actions are inherently less disruptive of state tax systems than injunctions or 

declaratory judgments, and therefore should not be barred by” the comity doctrine.5 The 

Supreme Court disagreed and held that tax comity applied to § 1983 damages actions6

because they “would be fully as intrusive as the equitable actions that are barred by 

principles of comity.”

7

1 We have jurisdiction under 28 U.S.C. § 1291. “Because the extension or denial of 

comity is discretionary, we review this issue by the abuse of discretion standard.”

Remington Rand Corp.-Delaware v. Bus. Sys. Inc., 830 F.2d 1260, 1266 (3d Cir. 1987). 

Underlying legal questions, however, are subject to do novo review. Grode v. Mut. Fire, 

Marine & Inland Ins. Co., 8 F.3d 953, 957 (3d Cir. 1993).

2 Levin v. Com. Energy, Inc., 560 U.S. 413, 417 (2010).

3 454 U.S. 100, 106 (1981). In addition, Petitioner Fair Assessment in Real Estate 

Association, a nonprofit corporation formed by taxpayers, also sought actual damages for 

expenses it incurred in seeking to obtain equitable property assessments for its members. 

Id.

4 454 U.S. at 105–06, 113

5

Id. at 113.

6

Id. at 116.

7

Id. at 113.
5

Relying on Fair Assessment, the USVI contends that the District Court properly 

held that the tax comity doctrine bars Appellants’ suits. Appellants contend that the tax 

comity doctrine does not apply to the Virgin Islands and even if does, it should not apply 

here because they bring tax refund suits instead of § 1983 damages actions. We agree 

with the District Court that the tax comity doctrine generally applies to the Virgin 

Islands, but we disagree that it applies to these specific tax refund suits.

We recognize that “[t]he [comity] doctrine reflects ‘a proper respect for state 

functions,’”8and that “[a]s a territory, the Virgin Islands does not share the same 

sovereign independence as the states of the union.”9 However, “[w]hile federalism 

principles do not apply directly as a result of the Virgin Islands’ sovereignty, sensitivity 

to the division between federal and territorial power in this area seems appropriate, given 

Congress’s choice to treat Virgin Islands law—including its taxation regime—with much 

of the independence of state law.”10

In Bluebeard’s Castle, Inc. v. Government of the Virgin Islands, we addressed 

whether the federal court had subject matter jurisdiction over a challenge to the Virgin 

Islands property tax assessment.11 At the time we decided Bluebeard, Virgin Islands 

property tax law was governed by a “hybrid” scheme of federal and local law.12 After 

considering that the Virgin Islands is not a sovereign but that Congress has generally 

8 Levin v. Com. Energy, Inc., 560 U.S. 413, 421 (2010) (quoting Fair Assessment, 454 

U.S. at 112).

9 Cooper v. Comm’r, 718 F.3d 216, 219 (3d Cir. 2013).

10 Bluebeard’s Castle, Inc. v. Gov’t of Virgin Islands, 321 F.3d 394, 401 (3d Cir. 2003).

11 Id. at 396.

12 Id. at 400.
6

chosen to apply principles of sovereignty to the Virgin Islands, we held in Bluebeard that 

principles of federalism did not apply because of the hybrid nature of the property tax

scheme.13 In reaching this holding, however, we stated that “jurisdiction in the District 

Court is improper” when there is “a purely local tax question.”

14 Thus, in Bluebeard, we 

implied that federalism principles, including the tax comity doctrine, would be applicable 

to purely local tax matters such as the Virgin Islands’ excise tax.

Thereafter, in Edwards v. HOVENSA, LLC, we concluded that the Erie doctrine 

and the Rules of Decision Act were applicable to the District Court of the Virgin Islands 

because “[w]e s[aw] no reason not to incorporate the federalism principles applicable 

throughout the circuit into our relationship with the Virgin Islands courts.”15 In Kendall v. 

Russell, we also extended principles of federalism to the Virgin Islands when we held 

that Younger abstention applies to the Virgin Islands.16 Similar to tax comity, Younger

abstention serves: “(1) to promote comity, ‘a proper respect for state functions,’ by 

restricting federal courts from interfering with ongoing state judicial proceedings and (2) 

to restrain equity jurisdiction from operating when state courts provide adequate legal 

remedies for constitutional claims and there is no risk of irreparable harm.”17 Based on 

the teachings of Bluebeard, Edwards, and, Kendall, we conclude that the tax comity 

doctrine generally applies to the USVI. However, that does not end our analysis because 

13 Id. at 402.

14 Id. at 401–02.

15 497 F.3d 355, 360–61 (3d Cir. 2007).

16 572 F.3d 126, 130 n.3 (3d Cir. 2009).

17 PDX N., Inc. v. Comm’r New Jersey Dep’t of Lab. & Workforce Dev., 978 F.3d 871, 

882 (3d Cir. 2020) (quoting Sprint Commc’ns, Inc. v. Jacobs, 571 U.S. 69, 77 (2013)).
7

although the tax comity doctrine generally applies to the Virgin Islands, it does not apply

to the specific tax refund suits at issue here.

Unlike in Fair Assessment, Appellants did not bring § 1983 damages actions; 

rather, they each opted to file a tax refund suit under V.I. Code Ann. tit. 33, § 1692.18

Appellants argue that bringing § 1692 tax refund suits instead of § 1983 damages actions 

“takes this case out of Fair Assessment’s ambit,”

19 and therefore the tax comity doctrine 

does not apply here. They are correct.

In Quackenbush v. Allstate Insurance Company, the Supreme Court clarified that 

Fair Assessment was a narrow holding only pertinent to § 1983 damages actions.20 The 

Quackenbush Court explained: “To be sure, we held in Fair Assessment . . . that a federal 

court should not entertain a 42 U.S.C. § 1983 suit for damages based on the enforcement 

of a state tax scheme but we have subsequently indicated that Fair Assessment was a case 

about the scope of the § 1983 cause of action, not the abstention doctrines.”21 The Court

further explained that “the power to dismiss under the . . . abstention doctrines derives 

from the discretion historically enjoyed by courts of equity.”22 And, most importantly, the 

18 Section 1692 provides for the filing of a claim for refund “in any court for the recovery 

of any internal revenue tax alleged to have been erroneously or illegally assessed or 

collected” only after “a claim for refund or credit has been duly filed with the Director [of 

the Virgin Islands Bureau of Internal Revenue].” V.I. Code Ann. tit. 33, § 1692(a).

19 Reply Br. 8.

20 517 U.S. 706, 719 (1996).

21 Id. (citations omitted). Despite this pronouncement, the Quackenbush Court made clear 

that it had “no occasion to resolve what additional authority to abstain might be provided 

under [its] decision in Fair Assessment.” Id. at 731. Our decision here does not foreclose 

comity for all tax claims—it only forecloses comity for Appellants’ claims seeking a tax 

refund under these circumstances.

22 Id. at 727–28 (citation omitted).
8

Court reiterated that “federal courts have the power to dismiss or remand cases based on 

abstention principles only where the relief being sought is equitable or otherwise 

discretionary.”23

Quackenbush thus instructs that the District Court should only abstain from 

deciding Appellants’ tax refund suits pursuant to the tax comity doctrine if the relief 

sought—a tax refund—is “equitable or otherwise discretionary.”24

Actions seeking a tax refund have traditionally been viewed as actions at law that 

are not cognizable in a court of equity.25 “It has been held uniformly that the illegality or 

unconstitutionality of a state or municipal tax or imposition is not of itself a ground for 

equitable relief in the courts of the United States.”26 Accordingly, the Supreme Court has 

on several occasions rejected suits brought in equity to enjoin the collection of allegedly 

unconstitutional state or municipal taxes because there was an adequate remedy at law—

pay the taxes and then bring suit to recover the alleged unconstitutional payments.

27 For 

instance, in Singer Sewing Machine Company of New Jersey v. Benedict, the Supreme 

Court rejected the taxpayer’s equitable suit to enjoin the collection of allegedly 

23 Id. at 731; see also Borowski v. Kean University, 68 F.4th 844, 855 (3d Cir. 2023)

(explaining that after Quackenbush “dismissal of a damages claim on abstention grounds 

is no longer permissible”).

24 Id.

25 See Fair Assessment, 454 U.S. 100, 126–28 (Brennan, J., concurring). 

26 Boise Artesian Hot & Cold Water Co. v. Boise City, 213 U.S. 276, 282 (1909); see also 

Matthews v. Rodgers, 284 U.S. 521, 525–26 (1932) (“[T]his Court has uniformly held 

that the mere illegality or unconstitutionality of a state or municipal tax is not in itself a 

ground for equitable relief in the courts of the United States.”).

27 Singer Sewing Mach. Co. of New Jersey v. Benedict, 229 U.S. 481, 484–88 (1913); 

Henrietta Mills v. Rutherford Cnty., N.C., 281 U.S. 121, 125–28 (1930); Matthews, 284 

U.S. at 526–30.
9

unconstitutional taxes.

28 The state statute provided “if the taxes in question were illegal 

and void, as asserted, the company had a remedy at law. It could pay them, and, if the 

commissioners refused to refund, have its action against the county to recover back the 

money.”29 Because a tax refund is not an equitable remedy,

30 the District Court could not 

rely on the doctrine of tax comity to abstain from hearing Appellants’ suits here unless 

the remedy of a tax refund is considered discretionary.

28 Singer, 229 U.S. at 483–84, 488.

29 Singer, 229 U.S. at 487 (emphasis added); see also Dows v. City of Chicago, 78 U.S. 

108, 112 (1870) (explaining that except in “special circumstances” a taxpayer had a 

“remedy at law” to recover unlawfully paid taxes—“[i]f the tax was illegal, the plaintiff 

protesting against its enforcement might have had his action, after it was paid, against the 

officer or the city to recover back the money, or he might have prosecuted either for his 

damages.”).

30 The USVI provides three supplemental authorities: Bull v. United States, 295 U.S. 247 

(1935); Anniston Mfg. Co. v. Davis, 301 U.S. 337 (1937); and United States v. Jefferson 

Elec. Mfg. Co., 291 U.S. 386 (1934), which it contends support that “a tax refund should 

be treated as an equitable remedy.” Appellee’s June 5, 2023 Rule 28(j) Letter. These 

authorities, however, fail to rebut the Supreme Court’s treatment of tax refunds as a 

remedy at law. In Bull, the statute of limitations prevented the taxpayer from bringing a 

tax refund action. 295 U.S. at 259. To prevent double taxation of the taxpayer, the Court 

held that the taxpayer could proceed on a claim for equitable recoupment; it did not, 

however, hold that a tax refund is an equitable remedy. Id. at 261–63. Anniston also did 

not hold that a tax refund is an equitable remedy; rather, it merely stated that “[w]ith 

respect to the refunding of processing taxes, a special and exclusive administrative 

procedure” required an administrative hearing “in accordance with [the rules of evidence]

applicable in courts of equity of the District of Columbia.” 301 U.S. at 343–44. Lastly, in 

Jefferson, the Court only commented that “statutes providing for refunds and for suits on 

claims . . . proceed on the same equitable principles that underlie an action in assumpsit 

for money had and received.” 291 U.S. at 402; but cf. Flora v. United States, 362 U.S. 

145, 153 (1960) (rejecting the argument that a suit to recover taxes was “identical to the 

common-law action of assumpsit for money had and received”). It did not suggest or 

examine whether a tax refund is an equitable remedy.
10

Our precedent establishes, however, that a tax refund is not a matter of discretion

because it is a legal remedy:

31

The granting of legal remedies . . . has not traditionally been subject to the 

court’s discretion. Accordingly, given the ‘virtually unflagging obligation to 

exercise the jurisdiction given them’ by Congress, a district court may not 

abstain . . . and dismiss the complaint when the remedy sought is legal rather 

than discretionary.”32

Because a tax refund is neither an equitable nor discretionary remedy, the District Court 

erred when it held that the tax comity doctrine applied to Appellants’ tax refund suits and 

dismissed them on that basis.

II.

Because the tax comity doctrine does not apply to Appellants’ tax refund suits, we 

will reverse the District Court’s order granting the USVI’s motions to dismiss, and 

remand for further proceedings consistent with this opinion.

31 See Singer, 229 U.S. at 487; Dows, 78 U.S. at 112.

32 Feige v. Sechrest, 90 F.3d 846, 850 (3d Cir. 1996) (citation omitted).