Source: https://casetext.com/case/consolidated-rail-corp-v-town-of-hyde-park
Timestamp: 2020-02-21 10:02:09
Document Index: 262223875

Matched Legal Cases: ['§ 306', '§ 11503', '§ 489', '§ 489', '§ 489', '§ 489', '§ 489', '§ 1292', '§ 101', '§ 11503', '§ 489', '§ 11503', '§ 1292', '§ 3']

Consolidated Rail Corp. v. Town of Hyde Park, 47 F.3d 473 | Casetext
Consolidated Rail Corp. v. Town of Hyde Park
Generally, courts will find that the numerosity requirement has been satisfied when the class comprises forty…
CSX Transp. v. N.Y. State Office of Real Prop
The New York State taxing scheme that is the subject of this appeal has been contested for nearly ten years.…
Full title:CONSOLIDATED RAIL CORPORATION, PLAINTIFF-APPELLEE, v. TOWN OF HYDE PARK;…
47 F.3d 473 (2d Cir. 1995)
holding that "numerosity is presumed at a level of 40 members"
Nos. 2025 to 2029, Dockets 94-7226, 94-7228, 94-7234, 94-7238 and 94-7240.
James K. Riley, Pearl River, N Y (O'Connell Riley, of counsel), for defendant-appellant North Rockland Central School Dist.
Gregory G. Fletcher, Memphis, TN (Heiskell, Donelson, Bearman, Adams, Williams Caldwell; Loselle Greenawalt Kaplan Blair Adler, James N. Blair, of counsel), for plaintiff-appellee.
Consolidated Rail Corporation ("Conrail") is an interstate railroad that operates in New York State and elsewhere. Conrail filed this suit against the New York State Board of Equalization and Assessment and several tax-assessing and tax-collecting jurisdictions under § 306 of the Railroad Revitalization Act and Regulatory Reform Act of 1976 ("4-R Act"), currently codified at 49 U.S.C. § 11503. That section prohibits discriminatory taxation of railroads by states and their municipal subdivisions. Following substantial increases in its real-property tax assessments, triggered by the expiration of a law that provided an enhanced railroad ceiling, Conrail moved in the district court for a preliminary injunction against further assessment, levy, or collection of discriminatory ad valorem taxes in New York. The district court granted the preliminary injunction on conditions, and also granted Conrail's motion to certify a defendant class. For the reasons set forth below, we affirm both rulings.
Conrail is an interstate carrier by rail that owns taxable rail-transportation property subject to ad valorem taxation in New York State. Its New York property is scattered among the assessing jurisdictions of some 309 towns, villages, cities, and counties across the state. Upon assessment determinations made by these 309 assessing jurisdictions, over 700 collecting jurisdictions — cities, towns, villages, school districts, and special districts — levy real property taxes that Conrail is required to pay annually. The assessments of Conrail's property made by each assessing district are based on, or at least affected by, valuations determined by the New York State Board of Equalization and Assessments ("SBEA").
Under New York's statutory system, the real-property tax assessments for Conrail's properties are legally and technically determined by the assessors for the municipalities that have assessing functions where the Conrail properties are located. NYRPTL § 489cc. In practical effect, however, the "railroad ceilings" that are determined by the SBEA become the actual assessments for Conrail's property in the vast majority of assessing jurisdictions in the state.
The NYRPTL provides for railroads a partial tax exemption known as the railroad ceiling. Under this exemption, the SBEA, a state agency, establishes a ceiling for the assessment of a railroad's property in each individual assessing jurisdiction; above that ceiling the owner of the railroad property is exempt from real property taxes. Thus, if a local assessor assessed a particular Conrail property at $100,000 and the "railroad ceiling" for that property was determined by the SBEA to be $90,000, Conrail would be exempt from any taxes that were based on the excess $10,000 of assessment. This railroad ceiling legislation is found in NYRPTL §§ 489-dd(4) and 489-ee, et seq. The method for calculating the railroad ceilings is specified by statute. NYRPTL §§ 489-ee through 489-jj. These calculations are made by the SBEA and are, in part, a function of local property values set in each assessing jurisdiction by local assessors. This is because one component of the ceiling is the state equalization rate for each assessing jurisdiction. NYRPTL § 489-ee(3).
For most properties, values are determined by local assessors. Railroad properties, however, receive special treatment in New York. In order to determine the railroad ceiling — the maximum amount at which a local jurisdiction may assess its railroad properties — the SBEA undertakes to evaluate all rail-transportation properties throughout the state — assessing district by assessing district. To do this it determines the local reproduction cost, which is sum of the reproduction costs less depreciation, and then adds to it the value of the land. This figure the SBEA treats as the true market value.
Finally, the railroad ceiling for each assessing jurisdiction is calculated by multiplying the full taxable value of Conrail's rail-transportation property in that jurisdiction by the state equalization rate for that jurisdiction. The railroad ceiling thus computed represents the highest assessed value that an assessing jurisdiction may apply to Conrail's property. NYRPTL § 489dd(4).
Conrail did not dispute the assessments on its properties up to the amounts that had been assessed in 1992 — before the enhanced railroad ceiling expired. After the increases, however, Conrail brought this action and moved for a preliminary injunction against the further assessment, levy, or collection of the disputed portion of its 1993 tax bills that were payable beginning January 31, 1994, i.e., the amounts that exceeded what the levies would have been if based on the 1992 assessment levels. Conrail also moved to certify a defendants's class under F.R.C.P. 23.
The district judge also found that pursuant to F.R.C.P. 23(b)(3), a class action is superior to any other method for a fair and efficient adjudication of the controversy, because the interests of any individual member in controlling its defense is minimal; in any event, however, the court indicated that any member of the class was free to opt out of the class and intervene as a party so as to be able to present its own defense. (We were told by counsel on this appeal that no one had opted out and that the time to do so had expired.)
We note first that an interlocutory order granting a preliminary injunction is appealable under 28 U.S.C. § 1292(a)(1).
Traditionally and generally, "[a] preliminary injunction may issue if the plaintiff demonstrates irreparable harm, and either a likelihood of success on the merits, or sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in its favor". Polymer Technology Corp. v. Mimran, 975 F.2d 58, 61 (2nd Cir. 1992) (citations omitted). We review the granting of a preliminary injunction for abuse of discretion. Id.
The purpose of the Railroad Revitalization and Regulatory Reform Act of 1976 was to "provide the means to rehabilitate and maintain the physical facilities, improve the operations and structure, and restore the financial stability of the railway system in the United States". Pub.L. 94-210 § 101(a); see Burlington Northern R. Co. v. Oklahoma Tax Com'n., 481 U.S. 454, 457, 107 S.Ct. 1855, 1857-58, 95 L.Ed.2d 404 (1987); Union Pacific R. Co. v. Public Utility Com'n., 899 F.2d 854, 857 (9th Cir. 1990). As applied to this case the 4-R Act provides, in relevant part, as follows:
We note that while subsection (b) of the statute requires that there be no discrimination at all between railroad property and other commercial and industrial properties in the ratios of their assessments, subsection (c) denies the railroad any remedy unless it proves that its own ratio exceeds the other properties' ratio by at least 5%. While the issue has not been focussed on so far in this case, there has been some dispute in the case law as to whether the 5% refers to 5% of the railroad's ratio, or to 5% of the ratio for the other properties, or to five percentage points between the two ratios. See, e.g. Ogilvie v. State Bd. of Equalization, 657 F.2d 204 (8th Cir. 1981); Southern Ry. v. State Bd. of Equalization, 712 F. Supp. 1557, 1565-66 (N.D.Ga. 1988); Arkansas-Best Freight System, Inc. v. Cochran, 546 F. Supp. 904 (M.D.Tenn. 1981); and Louisville and Nashville R. Co. v. Louisiana Tax Commission, 498 F. Supp. 418 (M.D.La. 1980).
If Conrail's figures are correct, therefore, the 129% ratio of "true market value" to "assessed value" of Conrail's railroad property in New York is far in excess of the ratio for corresponding commercial and industrial property and therefore violates the 4-R Act. Of the four figures underlying this determination three are not seriously in dispute: Conrail's assessed valuation, and the assessed and true market values of other commercial and industrial properties. All of those figures Conrail takes from defendants' records. The major controversy is over the fourth figure in the calculation — the true market value of Conrail's property.
This controversy stems primarily from the difference in appraisal methods. The SBEA had used the "cost approach" method for determining true market value, while Conrail's experts have applied both the "income capitalization method" and the "stock and debt" method. However, even if defendants' true market value of $974 million is accepted, the resulting ratio for Conrail would be 63% ($580 assessed value ÷ $924 true market value = 63%), and this, too, would be a violation of the 4-R Act.
Defendants also argue that the railroad ceiling is not an "assessment" within the meaning of the 4-R Act. An "assessment" under the 4-R Act is defined as a "valuation for a property tax levied by a taxing district." 49 U.S.C. § 11503(a)(1).
In New York, railroads are entitled to a partial tax exemption, known as the railroad ceiling, codified as NYRPTL § 489aa et seq. The railroad ceiling represents the maximum assessed value at which railroad property may be taxed, and it is calculated by the SBEA as follows: RATIO FACTOR ECONOMIC FACTOR
1) Determine AVERAGE RAILWAY REVENUES for most recent five years. 2) Determine AVERAGE RAILWAY EXPENSES for most recent five years. 3) Calculate the RATIO to the nearest thousandth of one percent. RATIO = AVERAGE EXPENSES ÷ AVERAGE REVENUES 4) Determine ECONOMIC FACTOR from statutory table, interpolating to nearest tenth of one percent. 1.0 or more 20% .9 40% .75 or less 100% 5) Determine LOCAL REPRODUCTION COST for each assessing unit: a = (Cost of reproduction new) — (depreciation of RR real property other than land) b = (value of land) + (value of rights in land) c = LOCAL REPRODUCTION COST = a + b 6) Determine STATE EQUALIZATION RATE for each assessing jurisdiction. STATE EQUALIZATION RATE = assessed value ÷ full market value. 7) Calculate TAXABLE VALUE: TAXABLE VALUE = LOCAL REPRODUCTION COST x ECONOMIC FACTOR 8) Calculate RAILROAD CEILING: RAILROAD CEILING = TAXABLE VALUE x STATE EQUALIZATION RATE [49] One of the key elements in computing the railroad ceiling is the state equalization rate, which represents the ratio of total assessed values of taxable real property in an assessing unit to the total of SBEA's estimates of market values of those properties. The SBEA determines the equalization rate periodically for each assessing unit in the state.
We recognize that as a formal matter each assessing district makes its own determination of the final assessed value for Conrail's property in the district. Whatever assessment is fixed is then used by each taxing district to calculate local taxes charged to Conrail. The record shows, however, a widespread adoption of the railroad ceilings fixed by the SBEA. The vast majority of assessing units apparently make no separate, independent valuations of Conrail's property in fixing the local assessed value. Instead, they simply adopt the ceiling calculated by the SBEA. Realistically, therefore, when the SBEA determines the railroad ceiling for the 309 assessing districts in the state that include Conrail property, it is in practical effect determining Conrail's actual assessments in 80% of those districts. Consequently, for the great majority of assessing jurisdictions the railroad ceiling fixed by the SBEA is "a valuation for a property tax" that will be "levied by a taxing district." It therefore fits the statute's definition of an "assessment". 49 U.S.C. § 11503(a)(1).
On the record before us it appears — from the marked increase in assessments that occurred when the enhanced railroad ceiling lapsed as well as from the state's own evaluation of the true market value of Conrail's properties — that the disparity in ratios substantially exceeds the 5% tolerated by the 4-R Act. We therefore conclude that the district court did not err in determining that there was reasonable cause to believe that the 4-R Act was violated or was about to be violated. Nor did the district court abuse its discretion in granting a preliminary injunction, conditioned as it was on financial protections to the defendant taxing districts. We therefore affirm the order of the district court granting the preliminary injunction.
Defendants-appellants North Rockland Central School District, Erie County, and the City of Rochester challenge the district court's certification of the defendant class. They claim that Conrail failed to demonstrate commonality, typicality, and adequacy of representation — three of the four requirements of F.R.C.P. 23(a).
An order granting or denying class certification is not itself appealable. Gardner v. Westinghouse Broadcasting Co., 437 U.S. 478, 98 S.Ct. 2451, 57 L.Ed.2d 364 (1978). However, a court of appeals that has jurisdiction over one appealable order may simultaneously exercise pendent appellate jurisdiction over an otherwise non-appealable order, ( Port Authority Police Benevolent Association Inc. v. Port Authority of New York and New Jersey, 698 F.2d 150, 153 (2d Cir. 1983)), although acceptance of pendent jurisdiction is discretionary. General Motors Corp. v. Gibson Chemical Oil Corp., 786 F.2d 105, 108 (2d Cir. 1986). Here, the district court's order granting a preliminary injunction, which is an appealable order under 28 U.S.C. § 1292(a), provides us directly with appellate jurisdiction; we also have discretion under the doctrine of pendent appellate jurisdiction to review the district court's related order certifying the defendant class, and in the circumstances of this important case we choose to exercise that discretion.
F.R.C.P. 23(a) specifies that
Although plaintiff classes are certified more frequently, we have held that the above requirements apply equally to plaintiff and defendant classes. See Marcera v. Chinlund, 595 F.2d 1231, 1237 (2d Cir. 1979), vacated on other grounds, 442 U.S. 915, 99 S.Ct. 2833, 61 L.Ed.2d 281 (1979).
In the State of New York there are over 700 tax-collecting jurisdictions to which Conrail pays taxes, and those taxes are based in part on assessed valuations imposed by over 300 assessing jurisdictions. To the extent that there are common issues affecting the defendants, individual adjudications of Conrail's claims would be unnecessarily expensive and time-consuming, and enormously burdensome on the courts. A group of this size would make the joinder of individual members as named defendants impracticable. See In re Drexel, 960 F.2d at 290. Because numerosity is presumed at a level of 40 members (1 Newberg On Class Actions 2d, (1985 Ed.) § 3.05), whether viewed as 700 tax-collecting jurisdictions or 300 assessing jurisdictions, the number of defendants vastly exceeds this threshold. Numerosity is therefore satisfied.
Rule 23(a)(3) is satisfied "when each class member's [defense] arises from the same course of events, and each class member makes similar legal arguments to [defend against the plaintiff's allegations]". In re Drexel, 960 F.2d at 291.
The arguments advanced by those who oppose having a defendants' class offer the firmest proof that the requirement of F.R.C.P 23(a)(3) is satisfied. The proffered defenses are typical to all members of the proposed defendants' class: 1) each locality plays a different role in assessing and collecting taxes from Conrail; 2) each assessing entity acts independently to determine property values; 3) some defendants are just collecting entities and have no role in the assessment scheme; and 4) the key issue does not involve individual taxing entities, but stems from the SBEA's interpretation of how to calculate the railroad ceiling.
F.R.C.P. 23(a)(4) does not require a willing representative, merely an adequate one. Where there are legal issues common to the class, the representative who defends his own interests will also be protecting the interests of the class. Marcera v. Chinlund, 595 F.2d at 1239.
Although most class certifications deal with a plaintiff class, we think that under the circumstances of this case the district court properly exercised its authority to certify a defendant class. Unlike a plaintiff class, where the named plaintiffs willingly choose to litigate as class representatives, the designated representatives in a defendants' class do not choose to be sued. The district court, however, appropriately granted the designated representatives — the named defendants together with the 10 highest tax collectors in the defendant class — an opportunity to present reasons why they should be excluded as representatives.
Therefore, we are satisfied that in defending their own interests, the designated representatives will adequately and fairly protect the interests of the remaining class members in compliance with F.R.C.P. 23(a)(4).
5. F.R.C.P. 23(b)(3).
In order to obtain certification of a class under Rule 23, the moving party must establish not only that the putative class satisfies all four requirements of section (a), discussed above, but also that it fits within at least one of the categories specified in section (b). In re Drexel, 960 F.2d at 290. As the district court found, this case fits within subsection (b)(3), which states:
Conrail asserts that the class certification also meets the criteria under F.R.C.P. 23(b)(1) and (2). However, it is not necessary to consider these claims since F.R.C.P. 23(b) requires satisfaction of only one.
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