Source: http://openjurist.org/715/f2d/522
Timestamp: 2016-02-07 17:33:11
Document Index: 202156452

Matched Legal Cases: ['§ 1341', '§ 1983', '§ 1362', '§ 26', '§ 26', '§ 11503', '§ 2403', '§ 11503']

715 F. 2d 522 - Southern Railway Company v. State Board of Equalization HomeFederal Reporter, Second Series 715 F.2d.
Both Congress and the federal courts have acknowledged that the ability to administer fiscal affairs via taxation free of interference from the federal judiciary is of primary importance to a state's economical well-being. Federal courts had long practiced abstention or its equivalent in deference to this state interest by the time Congress passed the Tax Injunction Act, 28 U.S.C. § 1341. See, e.g., Matthews v. Rodgers, 284 U.S. 521, 52 S.Ct. 217, 76 L.Ed. 447 (1932); First National Bank v. Board of Commissioners, 264 U.S. 450, 44 S.Ct. 385, 68 L.Ed. 784 (1924); Singer Sewing Machine Co. v. Benedict, 229 U.S. 481, 33 S.Ct. 942, 57 L.Ed. 1288 (1913); Boise Artesian Hot & Cold Water Co. v. Boise City, 213 U.S. 276, 29 S.Ct. 426, 53 L.Ed. 796 (1909). The Tax Injunction Act was intended to codify this pre-existing federal equity practice and to ensure more uniform adherence to the underlying principles of comity by erecting a jurisdictional bar to supplement the existing equitable restraint. See generally United Gas Pipe Line Co. v. Whitman, 595 F.2d 323 (5th Cir.1979).11
The equitable doctrine has not been replaced by section 1341. Since enactment of the provision courts have applied an equitable policy of non-interference to suits involving state taxes when the suits are not specifically within section 1341. See, e.g., Fair Assessment in Real Estate Association v. McNary, 454 U.S. 100, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981); Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943); United Gas Pipe Line. The justification given by courts for refusing to hear state tax cases outside the literal scope of section 1341 involves a determination that congressional intent counsels the expansion followed by a decision that equitable restraint is appropriate under the circumstances.12 See California v. Grace Brethren Church, 457 U.S. 393, 412-13, 416-17, 102 S.Ct. 2498, 2510-11, 2512-13, 73 L.Ed.2d 93 (1982); Fair Assessment, 454 U.S. at 107 & n. 4, 109-10, 102 S.Ct. at 181 & n. 4, 182-83; Rosewell v. LaSalle National Bank, 450 U.S. 503, 522-27, 101 S.Ct. 1221, 1234-36, 67 L.Ed.2d 464 (1981); Great Lakes, 319 U.S. at 300-01, 63 S.Ct. at 1074; United Gas Pipe Line, 595 F.2d at 326.
Section 11503 suits differ from ordinary taxpayer suits in that the potential class of section 11503 plaintiffs is limited to rail carriers. Exercise of federal jurisdiction thus will not transform the district court into " 'a source of appellate review of all state property tax classifications.' " Fair Assessment, 454 U.S. at 114, 102 S.Ct. at 185 (quoting Fair Assessment in Real Estate Association v. McNary, 478 F.Supp. 1231, 1234 (E.D.Mo.1979)). There are, however, other concerns. A judicial appraisal of valuation techniques could well affect the state's choice of future assessment methods. Further, although the railroads are relatively few in number and tend to pool their litigation efforts their combined tax bill is substantial. "During the pendency of the federal suit the collection of revenue under the challenged law might be obstructed, with consequent damage to the State's budget ...."13 California v. Grace Brethren Church, 457 U.S. at 410, 102 S.Ct. at 2509 (quoting Perez v. Ledesma, 401 U.S. 82, 128 n. 17, 91 S.Ct. 674, 699 n. 17, 27 L.Ed.2d 701 (1971)). Litigation of section 11503 claims could also allow the railroads to "escape the ordinary procedural requirements imposed by state law." Id.
"[A] court should not defer the exercise of jurisdiction under a federal statute unless it is consistent with that intent." Patsy v. Board of Regents, 457 U.S. 496, 501-02, 102 S.Ct. 2557, 2560-61, 73 L.Ed.2d 172 (1982). The legislative history of section 11503 demonstrates that Congress intended to carve out an exception not only to the Tax Injunction Act, but also to the underlying doctrine of equitable restraint in the narrow area of discriminatory taxation of railroads. Congress meant to guarantee a federal forum for railroad suits, and only an exemption from abstention in all its forms would accomplish this purpose. Since Congress has spoken, it is not our province to alter the balance Congress struck in providing a federal forum for rail carrier claims of tax discrimination under section 11503.
Fair Assessment in Real Estate Association v. McNary, 454 U.S. 100, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981), does not require a different result. In a suit for damages under section 1983 of the Civil Rights Act of 1871, 42 U.S.C. § 1983, taxpayers claimed that disparate assessment of their newly improved real property deprived them of equal protection and due process of law. Section 1983 ordinarily provides an immediate federal forum for citizens whose constitutional or federal rights allegedly have been denied by any state despite the presence of an adequate state forum. See McNeese v. Board of Education, 373 U.S. 668, 83 S.Ct. 1433, 10 L.Ed.2d 622 (1963); Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961). Viewing the case as a clash between "two divergent lines of [statutory] authority," 454 U.S. at 105, 102 S.Ct. at 180, the Supreme Court ruled that the principle of comity together with section 1341 require abstention in the face of jurisdiction under section 1983.
Moe v. Confederated Salish & Kootenai Tribes, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976), exemplifies an instance in which a jurisdictional statute properly took precedence over the equitable restraint doctrine and its statutory counterpart, section 1341. The Supreme Court gave effect to a district court decision enjoining Montana's collection of certain vendor licensing and sales taxes from Indian merchants. In deciding that abstention in the case was improper the Court relied on a jurisdictional statute, enacted ten years earlier, which reflected a congressional intent to provide Indian nations with a federal forum for certain civil actions. See 28 U.S.C. § 1362. Neither the statute nor its legislative history mentions any exemption from the Tax Injunction Act. The Court concluded however that the statute conferred jurisdiction despite the command of the Tax Injunction Act because the statute, as construed, extended to the tribes the common law exception to section 1341 which allows the United States and its instrumentalities to sue in federal court to complain of "unconstitutional state exactions." 425 U.S. at 470-74, 96 S.Ct. at 1639-42 (quoting Department of Employment v. United States, 385 U.S. 355, 358, 87 S.Ct. 464, 467, 17 L.Ed.2d 414 (1966)).
The railroads in this case as the Indian groups in Moe are beneficiaries of recently enacted nonexclusive grants of jurisdiction. Both groups reside near the center of the concern underlying the federal policy reflected in the laws enacted. The particular case which the railroad carriers press here bears more directly on the narrow situation contemplated by Congress than does the cause in Moe on the much broader grant of section 1362. See Moe, 425 U.S. at 473, 96 S.Ct. at 1641. The express words of exemption contained in the legislative history of section 11503 are a further recommendation not present in Moe against abstention.14 We conclude that the recent, specific expression of congressional intent and national policy reflected in section 11503 requires federal district courts to hear section 11503 cases brought before them. We find that the district court in abstaining abused its discretion, reverse and remand to district court for consideration on the merits.15
Section 306 of the 4R Act was originally codified in the Interstate Commerce Act at 49 U.S.C. § 26c. Although the Act became law on February 5, 1976, the effective date of section 306 was set for three years after that date to give the states time to bring their property tax laws into conformity with the Act. Pub.L. No. 94-210, 90 Stat. 31, 54 (1976) (originally codified at 49 U.S.C. § 26c(2)(b)). In the intervening period the Revised Interstate Commerce Act of 1978, Pub.L. No. 95-473, 92 Stat. 1337 (1978) recodified subtitle IV of the Interstate Commerce Act placing section 306 of the 4R Act at 49 U.S.C. § 11503. 92 Stat. at 1337, 1445-46. Despite the recodification's major changes in the wording of section 306 the stated legislative purpose of the Revised Interstate Commerce Act was to make changes in terminology and style without causing any substantive change. H.R.Rep. No. 1395, 95th Cong., 2d Sess. 9-10, reprinted in 1978 U.S.Code Cong. & Ad.News 3009, 3018-19. See also H.R.Rep. No. 1395 at 8, reprinted in 1978 U.S.Code Cong. & Ad.News at 3017 (letter of Edward F. Willett, Jr., Law Revision Counsel, placed in the report by Committee Chairman Rodino):
(emphasis in original). We shall read section 11503 in light of section 306 and the legislative history resolving ambiguities in favor of the original language. Cf. Atchison, T. & S.F. Ry. v. Lennen, 640 F.2d 255, 258 (10th Cir.1981). The approach fulfills the purpose of the recodification which was to attain uniformity within the title and reduce awkward and obsolete terms without affecting the substance of any previously enacted statutes.
In its answer to the railroads' complaint the state board challenged the constitutionality of section 11503. Consequently the United States requested and was granted leave to intervene pursuant to 28 U.S.C. § 2403(a) (1976) in order to defend the Act. After the United States intervened the state board abandoned its direct attack on the Act's constitutionality. This abandonment is, however, partial. The state board still argues that under Moses Lake Homes, Inc. v. Grant County, 365 U.S. 744, 81 S.Ct. 870, 6 L.Ed.2d 66 (1961), a federal court cannot constitutionally grant the relief mandated by the Act
In his report and recommendation the hearing examiner discussed section 306 of the 4R Act but found it inapplicable because "[t]he railroads offered no evidence of the prevailing level of assessment of commercial and industrial property in the State as a whole or in any county. Absent such evidence the prevailing level of assessment for such property as a discrete class is presumptively at 40% of value. Hardin v. Reynolds, 189 Ga. 534, 6 S.E.2d (1939). Hence, the discrimination prohibited by 49 U.S.C. § 11503 has not occurred." Thus the hearing examiner based his recommendation of equalization, which the state board refused to adopt, not on federal law but on state law. We further note that section 11503 may shift the burden to the state to show that all other commercial and industrial property was properly assessed after presentation of the sales assessment ratio showing the railroad's assessment value exceeded that of all other property. See Clinchfield R.R. v. Lynch, 700 F.2d 126, 132-34 (4th Cir.1983). Regardless of the possibility of burden shifting, where a more specific ratio study is unavailable, a general ratio such as the one used by the railroads in this case showing a five percent assessment discrepancy is a sufficient ground for jurisdiction although not necessarily conclusive of the actual discrepancy existing or the measure of relief to be granted if adequately rebutted by the state board. See Clinchfield R.R. v. Lynch, 527 F.Supp. 784 (E.D.N.C.1981), aff'd, 700 F.2d 126 (4th Cir.1983)
The fact that the state proceeding was still in progress when appellants sued in federal district court does not affect the district court's jurisdiction. See, e.g., Colorado River Water Conservation Dist., 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976); Ramos v. Lamm, 639 F.2d 559, 565 (10th Cir.1980), cert. denied, 450 U.S. 1041, 101 S.Ct. 1759, 68 L.Ed.2d 239 (1981). The state board argues that the railroads should be confined to the state forum because that is where they chose to raise the section 11503 claim. The railroads argue that, under Missouri Pacific Railroad v. Tax Division, 504 F.Supp. 907 (E.D.Ark.1980), they feared their section 11503 claim would otherwise be deemed waived. The combination of the election of remedies doctrine advanced by the state board and the possibility of waiver under Missouri Pacific would effectively deprive federal courts of jurisdiction to hear section 11503 cases contrary to congressional intent. Cf. Alexander v. Gardner-Denver Co., 415 U.S. 36, 48-50, 94 S.Ct. 1011, 1019-1020, 39 L.Ed.2d 147 (1974) (Title VII cause of action not forfeited by arbitration of grievance under nondiscrimination clause of collective bargaining agreement). Although we need not decide the waiver issue we conclude that the railroads are not barred from advancing their claims by the doctrine of election of remedies and may proceed in federal court despite raising the identical claims in a state proceeding. This result will serve the principles of comity by encouraging railroads to bring all their tax claims first in the state tribunal. This may, if effective relief is forthcoming, eliminate the necessity for federal adjudication
The district court concluded that restrictions on the power of federal courts to assess or levy taxes under Moses Lake Homes, Inc. v. Grant County, 365 U.S. 744, 81 S.Ct. 870, 6 L.Ed.2d 66 (1961), "seriously restrict the measure of relief available in the district court." Congress disagrees. See, e.g., S.Rep. No. 630, 91st Cong., 1st Sess. 1, 12-13 (1969). Although the issue is not directly before us and is not necessary to our decision, we believe Moses Lake Homes is distinguishable. If, prior to a state assessment, a district court enjoins the assessment of property in excess of a certain judicially determined value the court is not assessing a tax. It is still incumbent upon the state's taxing agency to formally assess the rail property at some value within the terms of the district court's injunction. Even were Moses Lake Homes applicable we believe the court's equity powers are sufficient to grant substantial and effective relief when dealing with the discriminatory tax as an entirety. The court's equity powers are also sufficient to eliminate the incentives to engage in protracted litigation either party might otherwise have
The other two categories are Pullman-type abstention and Younger-type abstention. Under the Pullman category, abstention may be appropriate where the resolution of a federal constitutional question properly before the federal court "is dependent upon, or may be materially altered by, the determination of an uncertain issue of state law." Harman v. Forssenius, 380 U.S. 528, 534, 85 S.Ct. 1177, 1181, 14 L.Ed.2d 50 (1965); Railroad Comm'n v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). Abstention in a Pullman situation "may be proper in order to avoid unnecessary friction in federal-state relations, interference with important state functions, tentative decisions on questions of state law, and premature constitutional adjudication." Harman, 380 U.S. at 534, 85 S.Ct. at 1182. Younger -type abstention counsels against intervention by federal courts to restrain state criminal or quasi-criminal proceedings. E.g., Huffman v. Pursue, Ltd., 420 U.S. 592, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1974); Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971)
Under Tax Injunction Act jurisprudence the central focus of the federal inquiry has been the adequacy of the state remedy. Id. It is obvious from the statutory language that this is the only possibility of gaining federal jurisdiction in a case falling within section 1341. See, e.g., Tully v. Griffin, Inc., 429 U.S. 68, 73-74, 97 S.Ct. 219, 222-223, 50 L.Ed.2d 227 (1976)
When the district court decided this case there was only one other court which had directly addressed the abstention issue. The other court abstained. Missouri Pac. R.R. v. Tax Div., 504 F.Supp. 907 (E.D.Ark.1980). Since that time there have been several more. To our knowledge none other than the district court in this case has chosen to abstain. See Burlington N.R.R. v. Bair, Civ. No. 83-100-A (S.D.Iowa filed June 17, 1983); Atchison, T. & S.F. Ry. v. Arizona, 559 F.Supp. 1237, 1248-49 (D.Ariz.1983); Trailer Train Co. v. State Bd. of Tax Comm'rs, No. IP 82-45-C (S.D.Ind. Nov. 3, 1982); Southern Pac. Transp. Co. v. California, No. C 81-4848 SW (N.D.Cal. Sept. 1, 1982); Atchison, T. & S.F. Ry. v. Lennen, 552 F.Supp. 1031, 1037-38 (D.Kan.1982) (disapproving the result reached by the district court in this case)