Opinion ID: 2360207
Heading Depth: 1
Heading Rank: 8

Heading: The Standard for Determining the Petition

Text: Petitioners argue that the Court erred in concluding that extraordinary circumstances are to be determined under the standard set forth in Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), and Barry v. American Tel. & Tel. Co., 563 A.2d 1069, 1073 (D.C.1989). The Court is of the opinion that it applied the correct standard to this case, as the Court will now attempt to explain. D.C.Code § 47-3307 provides: No suit shall be filed to enjoin the assessment or collection by the District of Columbia or any of its officers, agents, or employees of any tax. The petitioners do not dispute that this statute applies to the present action. The plain language of the statute admits of no exceptions. Nevertheless, our Court of Appeals, following the lead of the United States Supreme Court in interpreting a federal statute with similarly clear language [1] , has created a limited exception to this absolute prohibition. In District of Columbia v. Green, 310 A.2d 848 (1973), the first case in which the Court of Appeals had occasion to apply the District of Columbia statute, the court relied on Miller v. Standard Nut Margarine Co., 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422 (1932), in pointing out that the trial court had found the facts of this case to be so exceptional and extraordinary as to merit equitable relief. The court quoted Standard Nut as follows: [W]here complainant shows that in addition to the illegality of an exaction in the guise of a tax there exist special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence, a suit may be maintained to enjoin the collector.... 310 A.2d at 852 (quoting 284 U.S. at 509, 52 S.Ct. 260). The special and extraordinary circumstances found by the trial court in Green were that the taxing authorities, deceitfully, did not inform the petitioning taxpayers that the level of their assessments had been changed until after the time by which they could have pursued an administrative remedy, thereby rendering their administrative remedy useless. Id. at 852-53. Green thus appears to hold that the court has jurisdiction to entertain a suit for an injunction against the assessment of a tax where the assessment is both invalid and the taxpaying plaintiffs have had no administrative remedy by which to challenge the tax. In relying on Standard Nut and, in addition, Allen v. Regents of Univ. Sys., 304 U.S. 439, 58 S.Ct. 980, 82 L.Ed. 1448 (1938), the court in Green failed to mention Williams Packing, supra, decided after Standard Nut. In Williams Packing, the court concluded that not only must a plaintiff seeking an injunction show the inadequacy of a legal remedy, he must also show that under no circumstances could the Government ultimately prevail. 370 U.S. at 7, 82 S.Ct. 1125. The court made clear the policy underlying this standard. The government is entitled to the prompt collection of taxes. The purpose of the anti-injunction statute is to preserve this right by prohibiting a court from interfering with the collection of taxes, requiring the determination of the legality of the tax to be determined in a refund suit. Id. But if it is clear that under no circumstances could the government prevail in a refund suit, the purposes of the anti-injunction statute would not be served by declining jurisdiction, if equity jurisdiction otherwise exists. For in that instance, the exaction is merely in `the guise of a tax'. Id. (quoting Standard Nut, 284 U.S. at 509, 52 S.Ct. 260). The court concluded: We believe that the question of whether the Government has a chance of ultimately prevailing is to be determined on the basis of the information available to it at the time of suit. Only if it is then apparent that, under the most liberal view of the law and the facts, the United States cannot establish its claim, may the suit for an injunction be maintained. Otherwise, the District Court is without jurisdiction, and the complaint must be dismissed. To require more than good faith on the part of the Government would unduly interfere with a collateral objective of the Act  protection of the collector from litigation pending a suit for refund. And to permit even the maintenance of a suit in which an injunction could issue only after the taxpayer's nonliability had been conclusively established might in every practical sense operate to suspend collection of the ... taxes until the litigation is ended. Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 299, 63 S.Ct. 1070, 87 L.Ed. 1407 Thus, in general, the Act prohibits suits for injunctions barring the collection of federal taxes when the collecting officers have made the assessment and claim that it is valid. Snyder v. Marks, 109 U.S. 189, 194, 3 S.Ct. 157, 27 L.Ed. 901. Id. at 7-8, 82 S.Ct. 1125. In Bob Jones Univ. v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974), the Court comprehensively reviewed its prior interpretations of the anti-injunction statute. It pointed out that during the first half-century of the existence of the statute, the Court gave it literal force, without regard to the character of the tax, the nature of the pre-enforcement challenge to it, or the status of the plaintiff. Id. at 742, 94 S.Ct. 2038 (citations omitted). Although dicta and holdings in some cases suggested that there might be extraordinary circumstances permitting a departure from a literal interpretation, the court limited those departures to special circumstances outside the pre-enforcement context. Thus, the Court's first departure from a literal reading of the act produced a prompt correction in course. Id. at 743, 94 S.Ct. 2038 (citing Graham v. Dupont, 262 U.S. 234, 43 S.Ct. 567, 67 L.Ed. 965 (1923)). The court in Bob Jones then discussed Standard Nut and Allen, supra, which followed Standard Nut. Standard Nut, according to the court in Bob Jones, set forth a new definition of the extraordinary and exceptional circumstances test. Under the new interpretation, which virtually equated those circumstances to long-held equity doctrine, the concept of extraordinary and exceptional circumstances was reduced to the traditional equitable requirements for the issuance of an injunction. Id. at 744, 94 S.Ct. 2038. Standard Nut was thus a significant deviation from precedent ...[;] it effectively repealed the Act, if read literally, and led directly to the Court's re-examination of the requirements of the Act in Williams Packing, the second time the court has undertaken to rehabilitate the Act following debilitating departures from its explicit language. Id. at 744-45, 94 S.Ct. 2038. Williams Packing switched the focus of the extraordinary and exceptional circumstances test from a showing of the degree of harm to the plaintiff absent an injunction to the requirement that it be established that the Service's action is plainly without a legal basis. The court in essence read Standard Nut not as an instance of irreparable injury but as a case where the Service had no chance of success on the merits. Id. at 745, 94 S.Ct. 2038. The Court of Appeals decision in Barry v. American Tel. & Tel. Co., 563 A.2d 1069 (D.C.1989), must be read against the background of the foregoing development of the law in the Supreme Court. In Barry, telecommunications companies challenged a gross receipts tax, and the trial court granted a preliminary injunction restraining collection of the tax. It held that equitable relief was warranted in light of the circumstances attendant to the imposition, retroactively, of a new tax enacted as emergency legislation. 563 A.2d at 1072. It later issued a declaratory judgment holding that both the retroactive and prospective provisions of the legislation violated the Due Process Clause because of overly burdensome costs of compliance, that the legislation violated the Commerce Clause because [the tax] impose[d] [was] unfairly apportioned and not fairly related to the services provided in the District, and that application of the Act's provisions result[ed] in double taxation. Id. The trial court, relying on Green, found that extraordinary circumstances existed because the plaintiffs showed irreparable harm, a likelihood of success on the merits, a strong argument invoking public policy, and an inadequate remedy. Id. at 1075 n. 15. In denying a motion to dismiss, it found that the novel and historic turn of events  that is, the restructuring of the telecommunications industry and the imposition of the gross receipts tax in response to that event  constituted sufficiently exceptional and extraordinary circumstances. Id. The Court of Appeals reversed these judgments, holding that the trial court lacked jurisdiction to entertain the suits because of the anti-injunction provisions of D.C.Code § 47-3307 (1987). It held that [a]lthough the language in Green guided the decision below, ... the proper standard for determining whether equitable relief may be obtained against the collection of any tax requires: ( l ) a finding that under no circumstances could the Government ultimately prevail, and (2) that equity jurisdiction otherwise exists, that is, proof of irreparable injury and inadequacy of the legal remedy. Barry, 563 A.2d at 1075 (quoting, Williams Packing, 370 U.S. 1, 6-7, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962) (citations omitted)). In so holding, the court refused to follow Green and the case on which it relied, Standard Nut. The court observed that Green itself noted that the `jurisdictional points [were] not pressed with vigor..., each of the parties preferring a decision on the merits,' and that it `simply point[ed] out' that it accepted the trial court's finding of `exceptional and extraordinary circumstances.' The court in Barry therefore [did] not deem the Green court's reference to Standard Nut to have enunciated a substantive [standard] to be followed thereafter in determining jurisdiction over cases involving injunction against the collection of taxes. Id. (footnote omitted). It is clear that Barry brought the law in the jurisdiction exactly into line with the law established by the Supreme Court. As the Supreme Court in Williams Packing unequivocally gutted the `special and extraordinary circumstances' exception created in Standard Nut, Barry, 563 A.2d at 1076, so the court in Barry limited Green to the compelling equities of that particular case. Id. at 1075. The law in this jurisdiction, as in federal jurisdiction, is that the taxpayer, in addition to meeting well established criteria for invoking equity power, must prove that the government has no chance of success on the merits. Id. at 1076. Under Barry, therefore, the anti-injunction statute is given almost literal effect. Id. Petitioners argue that the court in District of Columbia v. Eastern Trans-Waste of Maryland, Inc., 758 A.2d 1 (D.C.2000) rejects the Williams Packing & Navigation Co./Barry as the exclusive test for determining the existence of `extraordinary circumstances.' If that is the case, the court, in this Court's opinion, has returned the law to the sort of debilitating departures from the explicit language of the anti-injunction statute that the Supreme Court disapproved in Bob Jones. But this Court does not believe that the court in Eastern Trans-Waste did reject the Barry standard. In Eastern Trans-Waste, the District imposed a permit requirement, and fees, on waste collection businesses that collected waste in the District of Columbia. One of those businesses filed suit seeking an injunction against enforcement of the legislation, including collection of the fees it required. The trial court granted a temporary restraining order and later granted partial summary judgment in favor of the plaintiff. The pertinent part of its holding was that a fee imposed on solid waste facilities violated the Commerce Clause insofar as it applied to waste originating in and destined for disposal outside the District, if it was processed in the District for less than 24 hours. See 758 A.2d at 7. The trial court did not address the anti-injunction statute because the District did not raise it. On appeal, the District argued, in its responsive and reply brief, that the Court lacked jurisdiction because of the anti-injunction statute. In addressing this argument, the Court of Appeals began as follows: ... [T]wo inquiries are necessary ( l ) Do the exceptions to the bar against jurisdiction under § 47-3307 apply in this case? (2) Has the District waive(d) the anti-injunction statute by not raising it prior to the filing of its responsive and reply brief. Id. at 12-13. The exceptions, it said, are: 1) a finding that `under no circumstances could the Government ultimately prevail,' and 2) that `equity jurisdiction otherwise exists,' that is, proof of irreparable injury and inadequacy of the legal remedy. Id. at 13, quoting Barry and Williams Packing. It later noted that in Barry we laid down the rightly stringent standard quoted above for invocation of equitable relief. Id. at 14 n. 22. Given the foregoing comments, there is no doubt that the standards established in Barry continue to govern the issue of whether or not a court has jurisdiction to entertain a suit to enjoin the assessment or collection of taxes (or, for that matter, to issue a declaratory judgment that an assessment or collection is illegal). The issue on which Eastern Trans-Waste turned was not whether the plaintiff had satisfied those standards; the court explicitly held that it had not when it said that we are unable to say that `under no circumstances could the Government ultimately prevail.' Id. at 13. The issue rather was whether the District could waive application of the anti-injunction statute. (It clearly had done so by not raising the issue until its responsive and reply brief in the Court of Appeals.) The Court made this clear when, after concluding that one of the two necessary prongs of the Williams Packing test had not been met, it turn[ed] ... to [its] second inquiry: Has the District, or could it, effectively waive[d] the anti-injunction statute by not raising it prior to the filing of its responsive and reply brief? Id. at 13. In its ensuing discussion, the Court, noting its own as well as federal cases, stated that this court has never explicitly held that § 47-3307 is not subject to waiver or estopppel. Id. (footnote omitted). It distinguished Barry, observing that while it correctly laid down a stringent standard, it did not otherwise absolutely bar[ ] the door to any consideration whatever of waiver or estoppel, should the court be faced with uniquely `exceptional and stringent' circumstances. Id. at 14 n. 22. It then went on to find extraordinary and stringent, indeed unique circumstances, not present in Barry, compelling it to find that the District could waive the application of the statute. Those circumstances are discussed at page 14 of the opinion, and need not be detailed here. The court said: We emphasize that it is the combination of circumstances, not any individual aspect, that is controlling. For example, the District is not empowered to waive the statute in any normal sense of that word, and a trial or appellate court has the right to raise the statutory bar sua sponte. Here, however, we have a complete failure by the District, the very entity whose fiscal operations the statute is intended to protect, to raise the issue for an extraordinary extended period of time and even then only by way of a reply brief in an appellate court. Similarly, the fact that the trial court has neared a judgment on the substantive merits would not itself be sufficient, any more than it was in the cited case. The anti-injunction statute is subject to strict construction and, and only the rarest combined circumstances can warrant its equitable override. Id. at 13-14 n. 24. The foregoing makes plain that only in the context of considering whether the jurisdictional issue could be waived did the Court feel it necessary to address and determine whether extraordinary and stringent, indeed unique circumstances existed. Those circumstances, plus the Court's finding that the trial court had not abused its discretion in finding in favor of the plaintiff on the standard preliminary injunction factors, see id. at 14-18, enabled the court to find that the District had waived the jurisdictional point. Id. at 14. ([U]nless we determine that the trial court abused its discretion in modifying and extending the July 7, 1995 temporary restraining order against the District, the equitable approach is to conclude, on the extraordinary, stringent, and unique circumstances presented to us . . . that § 47-3307 does not constitute an absolute bar to our jurisdiction.). Petitioners argue that Eastern Trans-Waste, though addressing the waiver issue, relied not on waiver, but on `the equitable approach' used in the last quoted portion of the opinion. This Court cannot agree. If an equitable approach, untied to the waiver issue, was sufficient to sustain jurisdiction, there was no need to have addressed it at all. Plainly, however, the waiver issue was one of two issues the Court needed to address to come to a decision. That, Barry continues to be the test is evident from Agbaraji v. Aldridge, 836 A.2d 567, 569 (D.C.2003), where the Court reiterated the Barry test, citing both Barry and Eastern Trans-Waste. Petitioners argue that the application of the Barry/Williams Packing test prevents the Court from doing substantial justice in this case, pointing out that equity knows of no hard and fast rules. Adopting petitioners' argument, however, would lead the Court down the path that the Supreme Court rejected in Williams Packing and our Court of Appeals rejected in Barry  a case-by-case weighing of equities in an attempt to do substantial justice. Petitioners point out the extraordinary circumstances that they contend exist in this case: the massive lead contamination; the failure of the District to incorporate the information into its assessments; and the District's profiting from its failure to make public the information regarding lead contamination that it had learned from The District of Columbia Water and Sewer Authority until after the assessment measurement date. These might be deemed extraordinary circumstances under petitioners' reading of the law; in another case there might be other unique facts or combinations of facts that might lead a court to deem the circumstances extraordinary. Untied to any fixed standard, petitioners' argument would lead to burdensome litigation and uncertainty in the application of the law, undermining the ability of the government to collect taxes. [2] It must be recalled that the Court's analysis starts with a statute that by its plain terms prevents the Court from exercising jurisdiction at all. Petitioners would have the Court, despite this statute, address the merits of a taxpayers' petition, weigh the equities, and come to an equitable decision, all in an effort to determine whether the Court has jurisdiction in the first place. This approach is inconsistent with the anti-injunction statute.