Court Opinion

ID: 215900
Source: CourtListenerOpinion
Date Created: 2011-05-02 23:18:00+00
Date Added: 2024-06-11T17:28:26.231044
License: Public Domain

Case: 10-30727 Document: 00511463661 Page: 1 Date Filed: 05/02/2011

                 IN THE UNITED STATES COURT OF APPEALS
                          FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                                                            Fifth Circuit

                                                                                         FILED
                                                                                         May 2, 2011
                                           No. 10-30727
                                         Summary Calendar                               Lyle W. Cayce
                                                                                             Clerk

DENISE WASHINGTON, individually and on behalf of all others similarly
situated,

                 Plaintiff - Appellant

v.

NEW ORLEANS CITY; REGINALD ZENO, Director of Finance, Parish of
Orleans,

                 Defendants - Appellees

                      Appeal from the United States District Court
                          for the Eastern District of Louisiana
                                USDC No. 2:09-CV-7523

Before KING, BENAVIDES, and ELROD, Circuit Judges
PER CURIAM:*
        In Washington v. Linebarger, Goggan, Blair, Pena & Sampson, LLP
(Washington I), we held the Tax Injunction Act, 28 U.S.C. § 1341, prohibited
plaintiff     Denise       Washington          from     challenging         in    federal      court        the
constitutionality of a New Orleans city ordinance assessing a 30% collection
penalty on delinquent ad valorem taxes. 338 F.3d 442 (5th Cir. 2003). After our

        *
          Pursuant to 5th Cir. R. 47.5, the Court has determined that this opinion should not be published and
is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.
     Case: 10-30727 Document: 00511463661 Page: 2 Date Filed: 05/02/2011

                                            No. 10-30727

decision, in separate litigation, the Louisiana Supreme Court held the 30%
collection penalty violated the Louisiana constitution.                            Washington then
reasserted her claims in this putative class action, essentially asking the district
court (and now us) to reconsider Washington I in light of the Louisiana Supreme
Court’s decision. For the second time, we hold there is no federal jurisdiction
over this action.
                                       I. BACKGROUND
      The essential facts of this case are related in Washington I. In 1998,
defendant New Orleans City (the “City”) enacted an ordinance authorizing the
collection of delinquent ad valorem taxes through private parties and assessing
an additional 30% penalty to “defray the costs of collection.”1 338 F.3d at 443-44.
The City contracted with a collection agency 2 and a law firm 3 to collect the
delinquent taxes, penalties, and interest. Id. at 443. In exchange for their
services, the collection agency and the law firm received 30% of the delinquent
taxes, penalties, and interest they actually collected. Id.
      In 2002, plaintiff Denise Washington, along with other putative class
representatives, sued the City, the collection agency, and the law firm in federal

      1
          In relevant part, the ordinance provides:

      [A]ll delinquent taxes . . shall incur an additional penalty to defray costs of legal and other
      services related to the collection of delinquent taxes if the taxing unit has referred the
      collection of the delinquent taxes, penalty and interest to a private attorney or collection
      agent. The amount of the additional penalty shall be thirty percent of the amount of taxes,
      penalties and interest due.

Code City of New Orleans § 150-46.3(b).
      2
          United Governmental Services of Louisiana, Inc.
      3
          Linebarger, Goggan, Blair, Pena & Sampson, LLP.

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court. Id. The lawsuit challenged the constitutionality of the 30% collection
penalty. Id. The district court dismissed the case for lack of jurisdiction under
the Tax Injunction Act, which prohibits a federal district court from enjoining,
suspending or restraining the “assessment, levy or collection of any tax under
State law where a plain, speedy and efficient remedy may be had in the court of
such State.” 28 U.S.C. § 1341. Washington appealed, asserting the 30% penalty
was a “fee” and not a “tax” within the meaning of § 1341. Id. We affirmed,
finding that the 30% penalty was “inexorably tied to the tax collection itself,”
and also that a plain, speedy, and efficient remedy existed in the Louisiana
courts. Id. at 444-45. We concluded Washington was required to “challenge the
New Orleans ordinance in Louisiana courts and, if need be, secure review by the
Supreme Court.” Id. at 445.
      On July 1, 2008, in separate litigation, the Louisiana Supreme Court held
the City’s imposition and collection of the 30% collection penalty violated the
Louisiana constitution. See Fransen v. City of New Orleans, 988 So. 2d 225, 241-
42 (2008) (citing L A. C ONST. art. VII, § 25). The court specifically found the
Louisiana constitution “prohibits methods or proceedings other than tax sales
to collect delinquent ad valorem property taxes,” and also prohibits “penalties,
other than interest, upon delinquent ad valorem property taxes on immovables.”
Id. at 242. The case was remanded to the trial court for further proceedings. Id.
at 243. Those proceedings are now pending.
      On December 4, 2009, Washington filed this putative class action under
42 U.S.C. § 1983 in federal court against the City and Reginald Zeno, the
Director of Finance for the Parish of Orleans. The substance of this action is the
same as Washington I: Washington asserts the 30% collection penalty violated

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                                  No. 10-30727

various provisions of the United States Constitution.          Washington seeks
restitution, compensatory and punitive damages, and attorney’s fees and costs.
The district court dismissed Washington’s claims for lack of jurisdiction
pursuant to the Tax Injunction Act and our decision in Washington I.
Washington appealed. For the following reasons, we affirm.
                                II. STANDARD
      We review de novo a district court’s determination that it lacks jurisdiction
under the Tax Injunction Act. Washington I, 338 F.3d at 444. When, as here,
the district court determined its jurisdiction based on the complaint alone, our
review is “limited to determining whether the district court’s application of the
law is correct.” Rodriguez v. Christus Spohn Health Sys. Corp., 628 F.3d 731,
734 (5th Cir. 2010).
                              III. DISCUSSION
A.    Merits
      The Tax Injunction Act provides “[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.” 28 U.S.C. § 1341. Section 1341 reflects “the fundamental principle of
comity between federal courts and state governments that is essential to ‘Our
Federalism,’ particularly in the area of state taxation.” Fair Assessment in Real
Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 103 (1981). Section 1341 is not “a
narrow statute aimed only at injunctive interference with tax collection, but is
rather a broad restriction on federal jurisdiction in suits that impede state tax
administration.” A Bonding Co. v. Sunnuck, 629 F.2d 1127, 1133 (5th Cir. 1980)
(quoting United Gas Pipe Line Co. v. Whitman, 595 F.2d 323, 326 (5th Cir.

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1979)); see also Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503 (1981) (Section
1341 is “a vehicle to limit drastically federal district court jurisdiction to
interfere with so important a local concern as the collection of taxes.”).
“[F]ederal courts must guard against interpretations of the Tax Injunction Act
which might defeat its purpose and text.” Arkansas v. Farm Credit Servs. of
Cent. Ark., 520 U.S. 821, 827 (1997).
      In Washington I, we held § 1341 prohibited Washington from challenging
the City’s 30% collection penalty in federal court. 338 F.3d at 444-45. We
specifically found that the penalty was “inexorably tied to the tax collection
itself,” and that Louisiana courts offered a plain, speedy, and efficient remedy
for Washington’s claims. Id. In this action, Washington essentially asks us to
revisit these findings in light of the Louisiana Supreme Court’s decision in
Fransen.
      As a preliminary matter, Fransen confirms our finding that the Louisiana
courts offer a plain, speedy, and efficient remedy for Washington’s claims. The
Louisiana Supreme Court has already invalidated the 30% collection penalty,
and Washington has identified no reason why the Louisiana courts would not
now award and enforce any restitution or damages to which she may be entitled.
Washington asserts her claims will be subject “to the whim and caprice of a
municipality loathe to pay its judgment creditors,” but it does not appear
Washington has even pursued her claims in the Louisiana courts. We decline
to presume the Louisiana courts would not adequately protect Washington’s
federal rights. See California v. Grace Brethren Church, 457 U.S. 393, 417 n.37
(1982) (rejecting taxpayers’ argument “to the extent that it assumed that the
state courts will not protect their constitutional rights”); cf. Smith v. Travis

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Cnty. Educ. Dist., 968 F.2d 453, 456 (5th Cir. 1992) (observing “the taxpayers
have not demonstrated that the state courts have refused to entertain their
federal claim in their pending state court actions). Indeed, we have repeatedly
recognized that Louisiana’s payment-under-protest statute4 provides an effective
procedural vehicle to raise federal claims in Louisiana courts. Washington I, 388
F.3d at 444-45; MRT Exploration Co. v. McNamara, 731 F.2d 260, 263 n.5 (5th
Cir. 1984); United Gas, 595 F.2d at 324. Absent unusual circumstances not
demonstrated here, this is all § 1341 requires. See Rosewell, 450 U.S. at 523
(finding state payment-under-protest statute was plain, speedy, and efficient
remedy).
        Furthermore, that the 30% collection penalty was invalidated by the
Louisiana Supreme Court does not affect our finding that the penalty was
“inexorably tied” to tax collection. Washington I, 338 F.3d at 444. Valid or not,
the penalty was an attempt by the City to compel the payment of delinquent ad
valorem taxes. Because the penalty directly sought to “sustain the essential flow
of revenue to the government,” it falls within the broad scope of § 1341. Home
Builders Assoc. of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1011 (5th Cir.
1998).
        Lastly, it is of no import that Washington seeks only retrospective relief
(i.e., restitution, damages, fees, and costs) and not an injunction against future
enforcement of the 30% collection penalty. United Gas, 595 F.2d at 327 (finding
§ 1341 “precludes actions for refunds even if anticipatory relief is not sought”).
Nor does it matter that Washington’s claims are asserted under § 1983. See, e.g.,

       4
         See La. Rev. Stat. Ann. § 47:2134. In 2009, former La. Rev. Stat. Ann. § 47:2110 was recodified
at § 47:2134. The change was “not intended to change the law.” La. Rev. Stat. Ann. § 47:2134,
comment–2008.

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McNary, 454 U.S. at 116 (holding “taxpayers are barred by the principle of
comity from asserting § 1983 actions against the validity of state tax systems in
federal courts”); Moss v. State of Georgia, 655 F.2d 668, 669 (5th Cir. 1981)
(holding § 1341 barred § 1983 action seeking compensatory and punitive
damages for allegedly unconstitutional ad valorem taxes).5 This is because the
purpose of § 1341 is to protect the integrity of the state treasury, and a suit for
a refund can be as disruptive of state tax administration as a suit for declaratory
or injunctive relief. Sunnuck, 629 F.2d at 1133; United Gas, 595 F.2d at 327.
Washington emphasizes that her claims seek restitution of an invalid penalty
and not a tax per se. This argument simply fails to acknowledge the breadth of
§ 1341. Ordering the City to return millions of dollars assessed to facilitate the
collection of delinquent taxes plainly would disrupt Louisiana’s “fiscal
operations” and “state tax administration.” Sunnuck, 629 F.2d at 1130, 1133;
see also McQueen v. Bullock, 907 F.2d 1544, 1547 (5th Cir. 1990). Section 1341
requires that “such judicial threats should come only from state courts.”
Sunnuck, 629 F.2d at 1133.
        In sum, the Louisiana Supreme Court’s decision in Fransen presents no
reason to disturb our decision in Washington I.
B.      Writ of prohibition
        Certain documents in the pending state-court Fransen action are covered
by a protective order. Washington’s counsel, Henry Klein, moved the state trial
court to lift the protective order in order to file the protected documents in this
action. The trial court ruled that Klein needed to either proceed by “rule to show

        5
         See also Smith, 968 F.2d at 456; Sunnuck, 629 F.2d at 1133; Bland v. McHann, 463 F.2d 21, 27 (5th
Cir. 1972).

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                                   No. 10-30727

cause,” or else independently obtain the documents with a federal subpoena.
Klein then directed a federal subpoena to the plaintiffs in the Fransen litigation
(who are themselves bound by the protective order and represented by Klein),
and filed the protected documents in this action.
      The state trial court held Klein in contempt for violating its protective
order. The trial court ordered Klein to remove the protected documents from the
record in this action, and not to make any further use of the documents outside
the Fransen action. Klein sought review of the trial court’s contempt order in
the Louisiana court of appeal. The court of appeal upheld the trial court’s
finding of contempt, but also held the trial court was without jurisdiction to
order documents removed from federal court. The protected documents remain
in the record on appeal in this action.
      Klein now seeks a writ of prohibition preventing the state trial court from
further enforcing its contempt order. We deny the motion. Klein has identified
no authority permitting a party to flout a state court protective order simply
because documents in a state action might prove useful in a separate federal
action. We observe the Federal Rules of Civil Procedure offered Klein ample
opportunity to obtain the documents he needed without violating the state
court’s protective order. See, e.g., F ED. R. C IV. P. 34(c), 45 (authorizing third-
party subpoenas).    Although it appears Klein attempted to use a Rule 45
subpoena, the subpoena was directed not to the third parties that originally
possessed the disputed documents, but instead to Klein’s own clients who are
themselves bound by the protective order. It was for the state trial court to
determine whether this strategy violated its protective order and, if so, what
sanctions are appropriate.

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                             IV. CONCLUSION
     For the reasons stated, the district court’s decision dismissing this case is
AFFIRMED. Appellant’s motion for writ of prohibition is DENIED.

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