Opinion ID: 1467920
Heading Depth: 1
Heading Rank: 2

Heading: Jurisdiction, Exhaustion, and Abstention

Text: Alltel asserts that the district court lacked subject matter jurisdiction under Missouri's exclusive tax remedy doctrine and exhaustion doctrine, that the constitutional justiciability requirements of ripeness and standing were not met, that Springfield failed to state a claim, and that even if the district court had jurisdiction, it should have abstained. Our resolution of this case requires us to interpret Missouri law. We review the district court's interpretation of state law de novo. We are bound by the decisions of the Supreme Court of Missouri in interpreting Missouri law. Because the Supreme Court of Missouri has not yet addressed this precise issue, we must determine what that court would probably hold if it were called upon the decide the issue. In making this determination a federal court may consider relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the highest court in the state would decide the issue. Missouri v. City of Glasgow, 152 F.3d 802, 805-06 (8th Cir.1998) (internal citations and quotation omitted). We review de novo questions of federal subject matter jurisdiction and the district court's disposition of a motion to dismiss. Canady v. Allstate Ins. Co., 282 F.3d 1005, 1012 (8th Cir.2002) (discussing subject matter jurisdiction); Breedlove v. Earthgrains Baking Cos., Inc., 140 F.3d 797, 798-99 (8th Cir. 1998) (on a motion to dismiss, [a] district court must accept the allegations contained in the complaint as true, and all reasonable inferences from the complaint must be drawn in favor of the nonmoving party (internal citation omitted)). We review the district court's decision regarding whether to abstain for abuse of discretion. Aaron v. Target Corp., 357 F.3d 768, 774 (8th Cir.2004) (the underlying legal determinations receive plenary review).
It is undisputed that the parties are diverse and that more than $75,000 is in controversy. Furthermore, we note that Cingular believes that the district court properly exercised its jurisdiction in this case. Alltel's argument that the district court did not have subject matter jurisdiction rests on the assertion that a Missouri state court would not have jurisdiction to hear this case under the Missouri exclusive tax remedy doctrine and the doctrine of administrative exhaustion, with the result that, pursuant to Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), federal subject matter jurisdiction is lacking. Even if we assume, without deciding, that the exclusive tax remedy doctrine is jurisdictional, [7] we conclude that neither doctrine would prevent a Missouri state court from exercising its jurisdiction in this case and therefore subject matter jurisdiction is not lacking.
The Missouri exclusive tax remedy doctrine requires a taxing authority to follow its tax assessment and collection procedures before a tax collection claim can be brought in court. City of St. Louis v. United Rys. Co. of St. Louis, 263 Mo. 387, 174 S.W. 78, 93 (1914) (en banc) (if a remedy is specified for the collection of a tax, it will be held to be exclusive, where no other is provided); Missouri ex rel. Hayes v. Snyder, 139 Mo. 549, 41 S.W. 216, 217 (1897). The Missouri exclusive tax remedy doctrine does not apply, however, to the question in this case because the district court was presented with the legal question of whether the tax applies to the defendants, not the factual question of how much Springfield can collect from the defendants, assuming that they are subject to the tax. See M.L. Cross, Annotation, Tax Questions as Proper Subject of Action for Declaratory Judgment, 11 A.L.R.2d 359 (Supp.2005) (outlining cases from other jurisdictions, including New York, which have similar exclusive tax remedy doctrines but allow declaratory judgments for the pure legal issue of the validity or application of a tax). Although Springfield has an administrative remedy for tax assessment and collection, the ordinance does not provide a specific or exclusive remedy for a challenge to the validity or application of the ordinance. [8] The cases cited by Alltel address only tax collection claims in which the state or local governmental entity is seeking a money judgment. See Missouri ex rel. Hayes, 41 S.W. at 217 (if the statutes of this state make special provisions for the collection of taxes against real estate, and do not apparently contemplate that any others will be necessary, the mode of collection prescribed by statute is exclusive); Missouri ex rel. George v. Dix, 159 Mo.App. 573, 141 S.W. 445, 446 (1911) (The point at issue is whether the remedy provided in the ordinance is exclusive or merely cumulative. If exclusive, an action for a money judgment for the delinquent tax will not lie, but if cumulative the present suit was properly brought, and, as the facts are undisputed, the judgment should have been for the city.); see also Missouri ex rel. Steed v. Nolte, 345 Mo. 1103, 138 S.W.2d 1016 (1940) (en banc) (identifying the procedure for fourth-class cities to collect delinquent taxes); Kansas City v. Field, 285 Mo. 253, 226 S.W. 27 (1920) (outlining cases); City of Carondelet, to Use of Reuter v. Picot, 38 Mo. 125, 1866 WL 4243, at  (Mo.1866) (cannot bring action to compel the payment of taxes unless the tax statute authorizes the action). Alltel has not pointed to any cases in which the exclusive tax remedy doctrine was used to dismiss a claim involving the legal issue of whether a tax was valid or whether it applied to a particular taxpayer. Alltel's assertion that a Missouri court would have to dismiss Springfield's claim for declaratory judgment is unfounded because the doctrine does not apply to Springfield's claim. Because there is no established precedent indicating that Springfield's claim for declaratory judgment may not be heard until after the administrative procedures for tax assessment and collection have been completed, we conclude that the doctrine would not require a Missouri court to dismiss Springfield's claim for declaratory judgment. This conclusion is supported by several cases in which Missouri courts have considered the legal issue of the validity or the applicability of a tax ordinance without requiring the exhaustion of administrative assessment and collection procedures. See Council House Redev. Corp. v. Hill, 920 S.W.2d 890 (Mo.1996) (en banc) (trial court erroneously dismissed taxpayer's claim for declaratory judgment; administrative exhaustion not required when the issue was only whether the taxpayer was exempt from taxation, not the valuation of the tax assessment); Nicolai v. City of St. Louis, 762 S.W.2d 423 (Mo.1988) (en banc) (taxpayer sought declaratory judgment that St. Louis did not have authority to tax his premises as a cat kennel; circuit court dismissed for failure to state a claim and failure to exhaust administrative remedies, but the Missouri Supreme Court reversed and issued declaratory judgment even though neither St. Louis nor the taxpayer had pursued administrative collection or appellate procedures); B & D Inv. Co., Inc. v. Schneider, 646 S.W.2d 759 (Mo. 1983) (en banc) (It is a firmly established principle that when an administrative remedy is adequate, ordinarily that remedy is exclusive.... However, the availability of an administrative remedy does not bar other remedies under all circumstances. For instance, when a taxpayer does not question the valuation of his property, but asserts it is not subject to the tax, he need not appear before the Board of Equalization but may enjoin the enforcement of the tax.); Washington Univ. v. Baumann, 341 Mo. 708, 108 S.W.2d 403 (1937) (en banc) (allowing taxpayer an injunction against the sale of property for the collection of taxes even though administrative remedies were not exhausted because the taxpayer was contractually immune from taxation, one judicial proceeding on the issue of exemption could avoid a multitude of litigations, and the taxpayer would suffer irreparable injury without the injunction); United Rys. Co. of St. Louis, 263 Mo. 387, 174 S.W. 78 (giving res judicata effect to prior federal court case that held the railroad was subject to a city tax); Holland Furnace Co. v. City of Chaffee, 279 S.W.2d 63 (Mo.Ct.App.1955) (considering claim for declaratory judgment regarding the validity of a tax ordinance). Alltel asserts that any case in which a taxpayer requested a declaratory judgment that it was not subject to a tax ordinance is inapposite because, in the case before us, Springfield is the entity seeking a declaratory judgment and is thereby attempting to avoid its own administrative procedures. We disagree. If, under the exclusive tax remedy doctrine, Missouri courts will address the pure legal issue of whether a tax applies in a particular situation before the parties complete the administrative tax assessment and collection procedures, it should not matter which party is seeking the declaratory judgment. Furthermore, we note that completing the administrative procedures in this case would be time-consuming, expensive, and ultimately unnecessary if the ordinance is held to not apply to the defendants. Additionally, the pure legal issue involved in this case is more suited for judicial determination than for administrative determination. See State Tax Comm'n v. Admin. Hearing Comm'n, 641 S.W.2d 69, 75 (Mo. 1982) (en banc) (Agency adjudicative power extends only to the ascertainment of facts and the application of existing law thereto in order to resolve issues within the given area of agency expertise. The declaratory judgment is a judicial remedy.... The declaration of the validity or invalidity of statutes and administrative rules thus is purely a judicial function. (internal citations omitted)); see also Springfield, Mo., Code §§ 70-131 through 70-157 (administrative hearings do not have formality requirements such as the rules of evidence). Accordingly, we conclude that the district court properly decided that the Missouri exclusive tax remedy doctrine did not require it to dismiss Springfield's claim for declaratory judgment on the issue of liability.
Alltel's remaining arguments regarding subject matter jurisdiction, justiciability, [9] failure to state a claim, and abstention all rest on the contention that Springfield failed to exhaust its administrative remedies. See Premium Standard Farms, Inc. v. Lincoln Twp. of Putnam County, 946 S.W.2d 234, 237 (Mo.1997) (en banc) (exhaustion of administrative remedies generally required before a court has jurisdiction unless the administrative remedy is not adequate or the controlling issue in the case is a pure legal issue). As the district court found, and as discussed above, Springfield's tax assessment and collection procedures do not provide an adequate remedy for determining whether the tax applies to the defendants. Although Alltel vigorously asserts that the administrative remedy for tax assessment and collection should be used to determine liability, the district court noted in City of Jefferson III that Alltel has refused to pay the tax and refused to file the information needed for Springfield to make a tax assessment. [10] See 2006 WL 3937243, at . Although Alltel's refusal to cooperate may not make the tax collection remedy impossible, it does highlight the inadequacy of those procedures, which would require a lengthy and expensive calculation of the tax owed before a legal determination is made whether the defendants are liable for the tax. Thus, we conclude that Springfield's administrative procedures for tax assessment and collection are not adequate to determine the issue of liability and do not represent an exclusive remedy on that issue. Furthermore, in the absence of any tax collection claim, no factual disputes remained, nor was the district court required to make any classifications or value determinations. [11] Instead, Springfield's request for a declaratory judgment presented the court with an issue of statutory interpretation. Such questions present pure legal issues and therefore satisfy an exception to the general exhaustion of remedies rule. Premium Std. Farms, 946 S.W.2d at 237-38 (permitting court to resolve a purely legal issue of whether a township had authority to impose certain regulations, even though the plaintiff had not sought a variance and therefore had not exhausted administrative remedies); City of Bridgeton v. City of St. Louis, 18 S.W.3d 107, 112 (Mo.Ct.App.2000) (question of whether zoning ordinance applied was question of law and therefore administrative remedies did not need to be exhausted before the court could determine immunity). Accordingly, we conclude that Springfield's claim for declaratory judgment satisfies at least one of the exceptions to the exhaustion doctrine. Thus, the district court had subject matter jurisdiction, the justiciability requirements are met, and the district court did not err in denying Alltel's motion to dismiss for failure to state a claim.
Alltel raises the application of the Tax Injunction Act, 28 U.S.C. § 1341, which presents a question of subject matter jurisdiction. See Burris v. City of Little Rock, 941 F.2d 717, 721 (8th Cir. 1991) (raising issue of Tax Injunction Act sua sponte). Section 1341 states that [t]he district courts shall not enjoin, suspend or restrain 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. In addition to prohibiting injunctive relief, § 1341 also bars declaratory judgment actions. Burris, 941 F.2d at 720 (citing California v. Grace Brethren Church, 457 U.S. 393, 411, 102 S.Ct. 2498, 73 L.Ed.2d 93 (1982)). The objective of § 1341 is: (1) to eliminate disparities between taxpayers who could seek injunctive relief in federal court  usually out-of-state corporations asserting diversity jurisdiction  and taxpayers with recourse only to state courts, which generally required taxpayers to pay first and litigate later; and (2) to stop taxpayers, with the aid of a federal injunction, from withholding large sums, thereby disrupting state government finances. Hibbs v. Winn, 542 U.S. 88, 104, 124 S.Ct. 2276, 159 L.Ed.2d 172 (2004) (citing the Senate Report). When Congress enacted § 1341, Congress trained its attention on taxpayers who sought to avoid paying their tax bill by pursuing a challenge route other than the one specified by the taxing authority. Nowhere does the legislative history announce a sweeping congressional direction to prevent federal-court interference with all aspects of state tax administration. Id. at 104-05, 105 n. 7, 124 S.Ct. 2276 (internal quotation omitted) (The TIA does not prohibit interference with `the operation of, or compliance with,' state tax laws; rather, § 1341 proscribes interference only with those aspects of state tax regimes that are needed to produce revenue  i.e., assessment, levy, and collection.). Accordingly, there is a crucial distinction between a plaintiff who seeks a declaratory judgment that a specific tax is unconstitutional or invalid and a plaintiff who seeks a declaratory judgment that a particular taxpayer is engaged in an activity that makes the taxpayer subject to a state or local tax. See id. at 104, 124 S.Ct. 2276 (allowing party to challenge in federal court the constitutionality of a state tax credit given to a third-party); Jefferson County v. Acker, 527 U.S. 423, 433-35, 119 S.Ct. 2069, 144 L.Ed.2d 408 (1999) (allowing federal jurisdiction over a claim brought in state court to collect state taxes and removed by defendants to federal court wherein the defendants argued that application of the tax violated federal law; the Court noted that in enacting § 1341, the state laws to which Congress referred surely do not preclude the States from enforcing their taxes in court). Alltel's citation to Orange County v. Expedia, Inc., is neither controlling nor persuasive. See 440 F.Supp.2d 1341 (M.D.Fla.2006). In Expedia, a district court dismissed a claim by a county seeking a declaratory judgment that it had the power, privilege and right to audit the Defendants regarding the [tax], and to assess and collect [the tax] due from the Defendants. Id. at 1343. The court acknowledged that the Supreme Court has sanctioned federal jurisdiction over claims by local governments seeking tax collection. Id. at 1343 (citing Acker, 527 U.S. at 433-34, 119 S.Ct. 2069). Nevertheless, without analyzing the text of § 1341, its purpose, or its legislative history, the court held that declaratory judgments sought by local governments are always barred by § 1341. Expedia, 440 F.Supp.2d at 1344. We conclude that neither the text of § 1341 nor the relevant Supreme Court holdings compel such a result. Springfield's claim in this case is distinguishable from that asserted in Expedia because Springfield is not seeking a determination of its right or power to tax telephones and telephonic services. Rather, the issue is one of statutory interpretation affecting the application of the tax, with the specific question being whether the defendants provide telephones and telephonic services and not whether the tax is valid. We find more persuasive the reasoning in Mayor & City Council of Balt. v. Vonage Am. Inc., in which a district court was faced with a situation similar to the one before us today. See 544 F.Supp.2d 458 (D.Md.2008). In Vonage, the City of Baltimore brought suit against a provider of Voice over Internet Protocol, seeking a declaratory judgment that a local tax on telecommunications applied to the provider. Id. at 461. The provider filed a counterclaim seeking a declaratory judgment that it was not subject to the tax. Id. The district court analyzed § 1341 and concluded that the provider's declaratory judgment was barred, but adopted the argument that Baltimore's claim for declaratory judgment was not barred by § 1341 because it was not a claim by a taxpayer seeking to prevent tax collection proceedings. Id. at 465-66 (citing Acker, 527 U.S. 423, 119 S.Ct. 2069, 144 L.Ed.2d 408). For the same reason, we conclude that § 1341 does not bar Springfield's claim in this case.
With regard to its abstention claim, Alltel cites Brillhart v. Excess Ins. Co. of Am., for the proposition that even if a district court has jurisdiction to enter a declaratory judgment, it is not required to exercise that jurisdiction. See 316 U.S. 491, 494, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). Brillhart does not suggest, however, that the district court in this case was required to abstain. See id. at 494-95, 62 S.Ct. 1173 (motion to dismiss based upon a pending state proceeding). With regard to Alltel's citation to a state court case filed in the Circuit Court in St. Louis County on August 28, 2006, No. 01 CC-4454, Alltel has not indicated where in the record it made the district court aware of this case. Accordingly, we accept the district court's finding that there are no parallel state court cases and rest on the district court's conclusion, after conducting a thorough analysis of the six factors that should be considered, that it need not abstain. See City of Jefferson IV, 2007 WL 1965572, at  (discussing Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 998-99 (8th Cir.2005)). Alltel also argues that the district court should have abstained under Burford v. Sun Oil Co. because timely and adequate state review was available and the case involves difficult questions of state law and public policy. See 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). Again, Alltel's argument comes down to the assertion that Springfield did not exhaust its administrative remedies. As discussed above, we agree with the district court that because there is no adequate administrative remedy for the legal issue presented in this case, exhaustion is not required. Additionally, the district court noted that early in the litigation it had inquired of the parties why the case was in federal court and heard no argument that it should abstain from hearing the case. City of Jefferson IV, 2007 WL 1965572, at ; see Evanston Ins. Co. v. Johns, 530 F.3d 710, ___, 2008 WL 2493003, at  (8th Cir. 2008). In fact, Alltel did not raise the issue of abstention until much time and effort had been invested by all parties and the district court had ruled against it. City of Jefferson III, 2006 WL 3937243, at . Accordingly, we conclude that the case was properly before the district court and the district court did not abuse its discretion by declining to abstain.