Ran-Mar Inc. v. City of Barre, No. 378-6-02 Wncv ( Toor, J., Nov. 30, 2005)

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S TATE OF V ERMONT W ASHINGTON C OUNTY , SS

│ RAN-MAR, INC.,R & G │ PROPERTIES III, INC., et al., │ Plaintiffs, │ │ S UPERIOR C OURT v. │ Docket No. 378-6-02 Wncv │ CITY OF BARRE and OLIVER │ L. TWOMBLY, ESQ., │ Defendants │ │

RULING ON MOTION TO DISMISS AND MOTION FOR CLASS CE RTIFICATION This case arises out of the imposition of attorney ’s fees in connection with the collection of past-due property taxes. Plaintiffs Ran-Mar and R & G are taxpayers who claim that they were charged attorney’s fees without a legal basis there for. They assert claims for declaratory and injunctive relief based upon a state statute, unjus t enrichment, violation of 42 U.S.C. § 1983, and violation of the Vermont Constitution. They also se ek class certification. Defendants Barre and Twombly have moved to dismiss, and have opposed cla ss certification. Oral argument took place on October 17. Relevant Facts2

For purposes of a motion to dismiss, the court mus t determine the following question: if all facts 1 alleged in the complaint were proven, could the pl aintiff be entitled to any relief? If the answer is no, the complaint must be dismissed. In r elevant part, the facts alleged in the complaint are as follows. Ran-Mar and R&G jointly own a parcel of real estat e in Barre. At the start of 2002, they owed delinquent property taxes for the year 2001-02 . On or about January 25, 2002, the Town hired Attorney Twombly to provide legal services in connection with collecting the taxes. On or about January 31, Twombly sent Ran-Mar a letter sta ting that the property was scheduled for tax sale on March 28. Attached to the letter was a stat ement of delinquency from the Town that included a fifteen percent attorney’s fee. The fee was $542.96. The complaint alleges that this fee was charged by both the Town and Twombly, acting in concert. The letter stated that if payment was not made by February 15, the tax sale would pro ceed. On or about March 14, 2002, RanMar and R&G paid the attorney’s fee under protest. Procedural History This case was filed on June 20, 2002. It was remov ed to federal court on July 29, 2002. The federal court ultimately determined that it lac ked jurisdiction and remanded the case to this court on August 30, 2004. The reasons for the court ’s ruling were set forth in a companion case, Ran-Mar Inc. and RHD Development Co, Inc. v. Town o f Berlin, McKee, Giuliani & Cleveland, P.C. and Gloria Rice , Docket No. 1:02-cv-185 (D. Vt. 2004). The rationa le in that decision was that the federal court lacks jurisdiction over clai ms such as these because of the federal Tax Injunction Act, 28 U.S.C. § 1341.

1 The court here distinguishes between allegations o f fact and conclusory allegations of law. See, e.g ., Leeds v. Meltz , 85 F.3d 51, 53 (2d Cir. 1996).3

Defendants filed a motion to reconsider in federal court. On November 16, 2004, the case was again remanded to this court. On January 24, 20 05, the Town and Twombly renewed the motion to dismiss that had been filed at the start of the case, prior to removal. Oral argument took place on October 17, 2005. Additional memorand a were filed subsequent to the argument.

Conclusions of Law 1. The Tax Injunction Act The Town and Twombly argue that Counts 1, 3 and 4 of the complaint (all but the unjust enrichment claim) are barred by the federal Tax Inj unction Act. That statute states in relevant part: The district courts shall not enjoin, suspend or re strain the assessment, levy or collection of any tax under State law where plain, speedy and efficient remedy may be had in the courts of such State. 28 U.S.C. § 1341. Based upon principles of non-inte rference with state taxation, federal constitutional claims relating to the assessment or collection of taxes cannot proceed where state law remedies exist. National Private Truck Council v. Oklahoma Tax Commission , 515 U.S. 582, 590 (1995). The Supreme Court has gone beyond the language of the statute – which applies only to federal courts – and held that this is true whether the federal claim is brought in federal or state court. Id . at 591. 2

2 Plaintiffs argued in federal court that the Tax In junction Act did not apply here because the issue i s over “fees,” not “taxes.” The federal court rejected that argument a nd found that under the federal statute, the attorn ey’s fees constitute taxes. Without deciding whether or not i t is required to apply the federal court’s reasonin g under the “law of the case” doctrine, this court will defer to the federal court’s interpretation of the federal stat ute in this case, and will not revisit in this case the issue of whether these are “fees” or “taxes” under the federal statute.4

Based upon National Truck Council , it is clear that the federal claim brought in thi s court under 42 U.S.C. § 1983 must be dismissed, because t here are state law remedies that Plaintiffs can assert, and have asserted. 3 Defendants also argue, however, that the state law claims based upon state statute and upon the state constitution must also be dismissed under the authority of National Truck Council

. The court disagrees. The National Truck Council decision expressly stated that “[a]bsent a valid federal prohibition, state courts are free to issue injunctions and declaratory judgments under

state law.” Id . at 592 (emphasis in original). The Court made cle ar that it barred only claims seeking “declaratory or injunctive relief against a state tax pursuant to § 1983[.]” Id . Thus, the court denies the motion to dismiss the statutory an d state constitutional claims under the National Truck Council doctrine. 2. Exhaustion of Administrative Remedies Defendants go on to argue that all of the claims in this case should be barred because Plaintiffs failed to exhaust their administrative r emedies as required by statute. The statutory provisions require a taxpayer to take certain steps to challenge “the validity of some part or all of a tax.” 32 V.S.A. § 5291. Those steps include filin g a certified copy of the objections with the Town by January 15 of the year after the tax is ass essed. Id . and § 5292. The Town and Twombly thus argue that because no such filing ever occurred, this action must be dismissed. 4 The court disagrees. The issue in this case is att orney’s fees, not an assessment of taxes. As stated by our Supreme Court: Whether or not these plaintiffs may challenge the validity of the taxes previously assessed, they are entitled to raise def enses against improper or

3 While one might fairly question whether this case is an example of a “speedy and efficient” remedy, t he delays have in large part resulted from the removal to fed eral court. In any case, neither party has raised t he issue. 4 While the fact that no formal objection was filed is not a fact set forth in the complaint, the plain tiffs by their arguments have conceded this to be the case. See Plaintiffs’ Opposition to Defendants’ Renewed and Supplemental Motion to Dismiss (filed Feb. 9, 2005).5

defective actions looking to collection. These are issues outside the validity of the assessment referred to in 32 V.S.A. § § 5291 an d 5292. Dike v. McCormick , 128 Vt. 349, 350 (1970). While Defendants argue t hat Dike is distinguishable because it dealt with lack of notic e of a tax sale, the court is not persuaded. The point of Dike is a distinction between assessing the amount of t axes due and the steps that follow in its collection. Here, taxpayers do not dispute t he amount of their property taxes, or even the penalties. Instead, they challenge the add-on fees that are part of the collection process. This Dike permits them to do without exhausting administrati ve remedies. Nor is it relevant that the federal court determine d that, under federal law applicable to the federal Tax Injunction Act, the fees here would be considered a tax. That was a determination construing an entirely different statute and applyi ng federal, not Vermont, law. Under Vermont law, Dike controls. 3. The Motion for Class Certification Plaintiffs seek certification of a class consistin g of “all persons who paid ‘attorney’s fees’ to one or both of the Defendants in excess of the a mounts permitted by 32 V.S.A. § 5258, subject to the applicable statute of limitations periods.” Motion to Certify Class, p. 1 (filed June 20, 2002). Defendants argue that Plaintiffs have failed to s atisfy the requirements for class certification. The court agrees. Class certificatio n is appropriate only when, inter alia , “the class is so numerous that joinder of all members is impracti cable[.]” V.R.C.P. 23(a). Here, Plaintiffs have put forth no evidence whatsoever about the size of the potential class. The numbers proffered by Defendants in their memorandum are not in evidence, and the court therefore will not rule based6

upon them, but Plaintiffs have proffered no evidenc e whatsoever on this issue. 5 Thus, without reaching Defendants’ other arguments, the court den ies the motion for class certification. Order The court grants the motion to dismiss the claim b rought under 42 U.S.C. § 1983. The court denies the motion to dismiss the statutory an d Vermont constitutional claims. The court denies the motion for class certification. Dated at Montpelier this 30th day of November, 2005

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______________________________ Helen M. Toor, Superior Court Judge

5 It is obvious, however, that the numbers are limit ed to a limited class of Barre property owners. On its face it seems unlikely that the numbers would be substantia l.