Court Opinion

ID: 9467955
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:00:41.427476+00
Date Added: 2024-06-11T17:40:36.648094
License: Public Domain

BAILEY BROWN, Circuit Judge.
Northwood Apartments operates a 121 unit apartment building in the City of Royal Oak, Michigan. On July 27, 1978, North-wood filed a civil rights damage action under 42 U.S.C. §§ 1983 and 1985 and their jurisdictional counterpart, 28 U.S.C. § 1343, in the United States District Court for the Eastern District of Michigan. Northwood alleged that the City of Royal Oak, acting through the city assessor, Max La Valley, and the deputy assessor, Thomas Sommerville, as part of a conspiracy against North-wood, illegally increased Northwood’s property assessment with the result that North-wood’s taxes were increased by about 20 per cent in 1978. Northwood further alleges that the action was in retaliation for Northwood’s appeal of the earlier assessments. Northwood contends that, in deliberately and maliciously reassessing the property at a higher value, defendants violated Northwood’s constitutional rights to due process, free access to the courts, and equal protection. The district court, on defendants’ motion, dismissed the complaint either for lack of subject matter jurisdiction or alternatively, on abstention grounds.1 After a thorough review of the record in this case, we find neither ground to be a sufficient basis for the district court’s grant of this motion. We therefore reverse the grant of the motion to dismiss for the reasons given below and remand for further proceedings consistent with this opinion.
I
Northwood Apartments is a Michigan co-partnership operating in the City of Royal Oak. In 1975, there was a citywide reassessment of apartment properties. North-wood believed that its 1975 assessment was too high and appealed the assessment to the Michigan Tax Tribunal.2 While the appeal *403was still pending in 1976, Northwood appended its assessment for 1976, which had not changed from 1975, to the original appeal. In 1977, there was another citywide reassessment of apartment properties, and Northwood’s assessment was again increased. Northwood appended the 1977 assessment to its pending appeal. In 1978, although no citywide reassessment of apartment properties was made, Northwood was reassessed and its taxes were increased by about 20 per cent. This assessment was also appended to the original appeal.
In May, 1978, the Michigan Tax Tribunal held a hearing on the petitions for reassessment. The Tribunal determined that Northwood made an insufficient showing of protest to the local board of review for the 1977 assessment, and therefore, the Tribunal had no jurisdiction to review the 1977 assessment. This action is not contested here. The assessments for 1975, 1976 and 1978 were taken under consideration.
In July, 1978, as stated, Northwood filed this action for damages alleging violations of 42 U.S.C. §§ 1983 and 1985(3), as well as pendent state law claims for abuse of process and malicious use of process. North-wood alleged that the City of Royal Oak, LaValley, and Sommerville3 (hereinafter collectively referred to as defendants) intentionally and maliciously reassessed Northwood’s property in 1978 to punish Northwood for appealing its earlier assessments and to deter Northwood from further prosecuting its appeal before the Michigan Tax Tribunal. The complaint further alleged:
The only other apartment owner in the City of Royal Oak who was reassessed in 1978 was another property owner who, like the plaintiff, had appealed its prior years’ valuations to the Michigan Tax Tribunal.
The original complaint sought a declaratory judgment and a permanent injunction as well as compensatory and punitive damages, attorney’s fees and other costs. Further, Northwood sought class certification to represent persons who owned property in Royal Oak. Before the district court ruled on the motion to dismiss, Northwood withdrew its claim for declaratory and injunctive relief and for class certification.
In September, 1978, the Michigan Tax Tribunal reduced the assessment of North-wood’s property for 1975 and for 1976 from $810,000 to $625,000. The 1978 assessment was reduced from $1,028,000 to $750,000.4
In July, 1979, defendants filed a motion to dismiss. In their briefs and at the hearing, defendants raised two arguments in support of their motion to dismiss. First, they asserted that there was no subject matter jurisdiction as the action was barred by the Tax Injunction Act, 28 U.S.C. § 1341. Second, they argued that even if the action was not barred by the Act, the same policies of federalism and comity which led to the passage of the Act should lead the court, in its discretion, to abstain from accepting jurisdiction. The district court indicated its ruling on the motion from the bench, stating:
I do abstain because I think this would have, if I entertained jurisdiction in this case we are going to entertain jurisdiction in many cases where similar claims are made. There may be a good claim in some and maybe not in others I don’t know. *404The collections are the lifeblood of government, no question about it. They have to have taxes. When federal courts start punishing state officers for the way they perform their function it will not only have a chilling effect but a terrifying effect ...
I think there is a degree of discretion. However, I believe it would be an abuse of discretion under the circumstances to grant [sic] this motion. Even if it would not be abused, if it’s one of these areas the court could go either way, I would go this way because I think it’s more appropriate knowing you would get a fair trial in state court.
The court subsequently entered a brief order of dismissal in which the only reason given for dismissal was that it appeared to the court that “it should abstain from asserting jurisdiction over this action.” Although both the statement from the bench and the order spoke in terms of abstention, the order also provided that “Defendants’ Motion to Dismiss for Lack of Subject Matter Jurisdiction” is granted. As defendants’ motion to dismiss contended both that there was no subject matter jurisdiction and, in the alternative, that if there was subject matter jurisdiction, the court should dismiss on abstention grounds, we address both contentions.
For the purposes of this review, the allegations of the complaint are deemed admitted. Walker Process Equip., Inc. v. Food Machinery and Chem. Corp., 382 U.S. 172, 174-75, 86 S.Ct. 347, 348-49, 15 L.Ed.2d 247 (1965).
II
We deal first with defendants’ argument that this action is precluded under the Tax Injunction Act, 28 U.S.C. § 1341. The Act provides that:
The 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.
The Act expressly prevents the district courts only from enjoining, suspending, or restraining assessment, levy, or collection of taxes. Northwood, however, does not seek to accomplish any of these objectives, either directly or indirectly. Northwood seeks compensatory and punitive damages, costs, and attorney’s fees from the city and two city officials who, according to Northwood’s allegations, deliberately overassessed Northwood’s property to punish Northwood for appealing its property assessment to the Michigan Tax Tribunal and to discourage Northwood from further prosecuting the appeal. Therefore, we must examine the legislative history of the Tax Injunction Act to determine if the Act impliedly precludes the present damage action.
This same issue, whether the Tax Injunction Act prevented a taxpayer from bringing suit for damages, was examined by the Seventh Circuit in Fulton Market Cold Storage Co. v. Cullerton, 582 F.2d 1071 (7th Cir. 1978), cert. denied, 439 U.S. 1121, 99 S.Ct. 1033, 59 L.Ed.2d 82 (1979). Plaintiffs in Fulton, relying on 42 U.S.C. § 1983, alleged that the Cook County Assessor “systematically, knowingly, intentionally, fraudulently and invidiously assessed its property at levels other than permitted by law and greatly in excess of the levels at which property in Cook County was generally assessed.” 582 F.2d at 1073. The district court dismissed the complaint relying on the Tax Injunction Act or alternatively on the Act’s underlying policy considerations. Plaintiffs appealed, and the Seventh Circuit reversed, holding that the Tax Injunction Act did not bar a § 1983 action for damages. In so holding, the Seventh Circuit carefully reviewed the legislative history as well as the cases decided under the Act. See 582 F.2d at 1074-80. See also United Gas Pipe Line Co. v. Whitman, 595 F.2d 323 at 324-30 (5th Cir. 1979). Therefore, we will not set out in detail in this opinion the history of the Tax Injunction Act.
Reviewing the history of the Act, we conclude, as did the Seventh Circuit, that the purpose of the Tax Injunction Act was to bar any action for equitable relief which would disrupt the state taxing process.
*405The report of the Senate Judiciary Committee, U.S.S.Rep.No.1035, 75th Cong., 1st Sess. 1-2 (1937), as summarized in Tramel v. Schrader, 505 F.2d 1310 (5th Cir. 1975), reveals that the Tax Injunction Act was aimed at two basic problems.
First, Congress noted that some foreign corporations were in the habit of delaying the payment of taxes through an action in federal court since they could invoke diversity jurisdiction. State citizens, on the other hand, could not obtain a federal forum based on diversity jurisdiction. By passing the Tax Injunction Statute, Congress sought to treat the two classes, foreign corporations and resident citizens, alike.
Second, Congress noted that allowance of injunction suits in the federal courts inevitably resulted in delays in the collection of public revenues by the state and local governments. Because of pressing need for the money, the state and local governments often had to compromise the claims, taking less than what was, in fact, due. By closing the federal courthouse door to taxpayer claims, Congress sought to end this burdensome disruption of local financing.
505 F.2d at 1316.
The first problem is not relevant to the present suit as Northwood is not alleging diversity as a basis for jurisdiction. The second problem is not a present concern as Northwood had successfully contested the assessment in state court and had been awarded a refund at the time the district court heard the motion to dismiss. Delay in the collection of taxes was not at issue in this suit.
We note that the policies underlying the Tax Injunction Act have been found to be a basis for exercising discretion in refusing to grant declaratory relief even though such relief is not expressly proscribed under the Act. Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943). The rationale of Great Lakes was further discussed in Justice Brennan’s concurring opinion in Perez v. Ledesma, 401 U.S. 82, 91 S.Ct. 674, 27 L.Ed.2d 701 (1971):
Great Lakes adhered to the congressional recognition of the unique considerations presented by anticipatory tax litigation ... As the statutes barring anticipatory relief in federal tax cases . . . make entirely clear, the unique considerations that were the basis of Great Lakes relate not so much to considerations of federalism as to the peculiar needs of tax administration.
401 U.S. at 127, 91 S.Ct. at 698.
Applying the rationale of Great Lakes, further explained in Perez, to the present controversy,- we still find no basis for barring federal jurisdiction in this instance. Northwood does not seek anticipatory relief, nor will this action have disruptive effect on state taxation procedures.
In light of the legislative history and the reasoning of the Seventh Circuit in Fulton, with which we agree, we conclude that the Tax Injunction Act is not a bar to subject matter jurisdiction in the present § 1983 and § 1985 suit.
Ill
Defendants contend, and the district court indicated, that even if Northwood has a right to recover, the availability of a state forum in which Northwood may prosecute the present action provides a sufficient remedy and therefore is a proper basis for abstention. We disagree.
In Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976), a district court remanded a diversity case to the state court in which it had originally been brought on the grounds that there was “no available time in which to try the above-styled action in the foreseeable future” and that an adjudication on the merits would be expedited in the state court. The Supreme Court, in reviewing the remand, held that
[A]n otherwise properly removed action may no more be remanded because the district court considers itself too busy to try it than an action properly filed in the federal court in the first instance may be *406dismissed or referred to state courts for such reason.
423 U.S. at 344, 96 S.Ct. at 590.
The argument that a federal right of action, specifically created under § 1983, may be dismissed because a state remedy to enforce such cause of action is available is even less persuasive than the argument that a diversity case may be dismissed or remanded because the state provides a clear remedy. Thus, the notion that the availability of a state court remedy is a proper basis for abstention is incorrect.
The Supreme Court noted in Mitchum v. Foster, 407 U.S. 225, 92 S.Ct. 2151, 32 L.Ed.2d 705 (1972), that the failure of state courts to vindicate federal rights was one of the primary motivations for passage of the statute which was a predecessor to § 1983. Further, we note that a district court’s entertaining of § 1983 and § 1985 damage actions, unlike the declaratory judgment action in Great Lakes, is not a matter for the exercise of discretion.
Defendants claim that even if the present action is not precluded by the Tax Injunction Act, the federal court should still abstain from asserting jurisdiction because of the general policies of federalism and comity-
In support of this contention, defendants again cite the holding in Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943). We note, however, that the question in Great Lakes was whether the Tax Injunction Act proscribed the issuance of a declaratory judgment in a context in which the Act was otherwise clearly applicable. The Court stated that it was not necessary to determine whether the Act, which did not expressly cover declaratory judgments, proscribed the issuance of such judgments. The Court held that since the policy of abstaining in these circumstances was in existence prior to the Act, it was an improper exercise of discretion to issue a declaratory judgment which would contravene the purposes of the Act. The Court reasoned that accepting jurisdiction in such actions
may in every practical sense operate to suspend collection of the state taxes until the litigation is ended. But we find it unnecessary to inquire whether the words of the statute may be so construed as to prohibit a declaration by federal courts concerning the invalidity of a state tax. For we are of the opinion that the considerations which have led federal courts of equity to refuse to enjoin the collection of state taxes, save in exceptional cases, require a like restraint in the use of the declaratory judgment procedure.
319 U.S. at 299, 63 S.Ct. at 1073.
The present § 1983 and § 1985 action would not have the practical effect of suspending collection of state taxes.
In the recent Sixth Circuit case of Hanna v. Toner, 630 F.2d 442 (1980), this court carefully examined the general theories underlying the abstention doctrine. 630 F.2d at 444-46. This court quoted from Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813-14, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976):
Abstention from the exercise of federal jurisdiction is the exception, not the rule. ‘The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest.’ County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-189, 79 S.Ct. 1060, 1063, 3 L.Ed.2d 1163 (1959). ‘[I]t was never a doctrine of equity that a federal court should exercise its judicial discretion to dismiss a suit merely because a State court could entertain it.’ Alabama Pub. Serv. Comm’n v. Southern R. Co., 341 U.S. 341, 361, 71 S.Ct. 762, 774, 95 L.Ed. 1002 (1951) (Frankfurter, J., concurring in result).
*407Defendants have not shown any “extraordinary” circumstances involved in the present suit which would warrant abstention. Further, a review of the general grounds for abstention shows no generally accepted theory of abstention applicable in the present action.
A federal court may abstain where there are unsettled questions of state law which, if settled by the state, would avoid the necessity of deciding the matter on a federal constitutional law ground. Railroad Comm’n of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).
A federal court may also abstain where accepting jurisdiction would create needless conflict with state policies in areas of basic concern to the states, and federal adjudication in the area would disrupt state efforts to establish its own policy with respect to matters of substantial public concern. Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943).
Abstention is also appropriate to avoid duplicative litigation. Colorado River Water Con. Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).
A final ground for abstention is to further the policies of federalism or comity. That is, a federal court should abstain, except under extraordinary circumstances, where exercising jurisdiction would frustrate a pending state court proceeding. Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971).
None of the above abstention doctrines apply to the present suit.
Defendants contend an additional consideration supporting abstention is that allowing a § 1983 action to proceed in state court would be less of an intrusion on state sovereignty. We note that it is hardly less of an intrusion on state sovereignty in this context for a state court to adjudicate this § 1983 and § 1985 cause of action than for the federal court to adjudicate the action.
Defendants finally contend that allowing the federal courts to entertain the present action will have an undesirable chilling effect on officials who administer state tax assessments. We see no reason, however, to believe that allowing the same action to proceed in state court would have a less chilling effect on state officials except to the extent that they believe a state court would be less vigorous in vindicating plaintiff’s § 1983 and § 1985 rights.
IV
The dissent would hold that the district court did not have “jurisdiction” because the complaint did not state a claim for relief under the statutes relied upon by Northwood. However, as recognized by the dissent, the contention that the complaint did not state a claim was contained in defendants’ answer, while the district court ruled only on a motion to dismiss. This motion raised the question under Rule 12(b)(1), Fed.R.Civ.P., relying on the Tax Injunction Act, whether the district court had subject matter jurisdiction. More to the point, the district court had subject matter jurisdiction even if the complaint did not state a claim since the right of Northwood to recover depends upon an interpretation of the Constitution and laws of the United States. Wheeldin v. Wheeler, 373 U.S. 647, 83 S.Ct. 1441, 10 L.Ed.2d 605 (1963); 5 Wright & Miller, Federal Practice & Procedure, § 1350, note 54. Accordingly, even if we agreed that the complaint does not allege a claim, we could not, as the dissent would have us do, dismiss for lack of subject matter jurisdiction.
V
We hold that the Tax Injunction Act does not justify dismissal for lack of subject matter jurisdiction. Further, we determine that no abstention doctrine applies to this proceeding.
We point out that while the district court impliedly assumed that the complaint states a claim for relief, it never so determined, as the issue was not before it on this motion to dismiss. This question is not presently before us, we do not rule on the question, and we indicate no opinion whether the com*408plaint states a claim for relief under the federal statutes relied upon.5
We reverse and remand for further proceedings in accordance with this opinion.

. As will be discussed later, the district court never made clear whether it was dismissing the action because of lack of subject matter jurisdiction or whether it was dismissing on abstention grounds.

. The Michigan Tax Tribunal is a quasi-judicial entity, consisting of five appointed experts, which has “exclusive and original jurisdiction” of (1) appeals from any final decision, ruling, determination, or order of any agency relating to assessment, valuation, rates, special assess*403ments, allocation, or equalization, under property tax laws, M.C.L.A. § 205.731(a); and (2) any direct “proceeding for refund or redetermination of a tax under the property tax laws,” M.C.L.A. § 205.731(b). Proceedings before the Tribunal are considered de novo. M.C.L.A. § 205.735(1). Appeals from final orders and decisions by the Tribunal may be had as of right to the Michigan court of appeals, M.C. L.A. § 205.753, subject to the constitutional restriction that such appeals from “any decision relating to valuation or allocation” may lie only in cases alleging “fraud, error of law or the adoption of wrong principles.” Mich. Const, art. 6, § 28.

. The original complaint named five taxing officials of Royal Oak, but three of these officials were dismissed by stipulation of the parties.

. The Tax Tribunal was affirmed on appeal in Northwood Apartments v. City of Royal Oak, 98 Mich.App. 721, 296 N.W.2d 639 (1980). No determination was made for 1977 as the Tax Tribunal had already ruled that it had no jurisdiction over the 1977 assessment.

. See in this connection Rosewell v. LaSalle National Bank, —— U.S. ——, 101 S.Ct. 1221, 67 L.Ed.2d —— (1981), and particularly the dissenting opinion of Justice Stevens at -, 101 S.Ct. at 1237, and Fulton Market Cold Storage Co., supra, as well as A. Bonding Co. v. Sunnuck, 629 F.2d 1127 (5th Cir. 1980), cited by the dissent.