138 F.3d 537 (4th Cir. 1998), 97-1296, CSX Transp., Inc. v. Board of Public Works of State of W.Va.

Docket Nº:97-1296.
Citation:138 F.3d 537
Party Name:CSX TRANSPORTATION, INCORPORATED; Nicholas, Fayette and Greenbrier Railroad Company, Plaintiffs-Appellants, v. THE BOARD OF PUBLIC WORKS OF THE STATE OF WEST VIRGINIA; Gaston Caperton, III, Governor; Larrie Bailey, State Treasurer; Glen B. Gainer, III, State Auditor; Darrell V. McGraw, Jr., Attorney General; Gus Douglass, Commissioner of Agricultur
Case Date:March 10, 1998
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 537

138 F.3d 537 (4th Cir. 1998)

CSX TRANSPORTATION, INCORPORATED; Nicholas, Fayette and

Greenbrier Railroad Company, Plaintiffs-Appellants,

v.

THE BOARD OF PUBLIC WORKS OF THE STATE OF WEST VIRGINIA;

Gaston Caperton, III, Governor; Larrie Bailey, State

Treasurer; Glen B. Gainer, III, State Auditor; Darrell V.

McGraw, Jr., Attorney General; Gus Douglass, Commissioner

of Agriculture; Hank Marockie, State Superintendent of

Schools, Defendants-Appellees,

United States of America, Intervenor.

Association of American Railroads; American Shortline

Railroad Association; Regional Railroads of

America; Railway Progress Institute,

Amici Curiae.

No. 97-1296.

United States Court of Appeals, Fourth Circuit

March 10, 1998

Argued Oct. 29, 1997.

Page 538

ARGUED: James W. McBride, Baker, Donelson, Bearman & Caldwell, Washington, DC, for Appellants. Stephanie Robin Marcus, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, for Intervenor. Katherine A. Schultz, Senior Deputy Attorney General, Office of the Attorney General, Charleston, WV, for Appellees. ON BRIEF: Anne M. Stolee, Baker, Donelson, Bearman & Caldwell, Washington, DC, for Appellants. Frank W. Hunger, Assistant Attorney General, Rebecca Aline Betts, United States Attorney, Mark B. Stern, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, for Intervenor. Darrell V. McGraw, Jr., Attorney General, Stephanie M. Sisson, Assistant Attorney General, Office of the Attorney General, Charleston, WV, for Appellees. Kenneth P. Kolson, Association of American Railroads, Washington, DC; Betty J. Christian, Shannen W. Coffin, Steptoe & Johnson, L.L.P., Washington, DC, for Amicus Curiae Association of American Railroads. Richard A. Malm, Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, IA, for Amici Curiae American Short Line Railroad Association, et al.

Before MURNAGHAN, NIEMEYER, and HAMILTON, Circuit Judges.

Reversed and remanded by published opinion. Judge MURNAGHAN wrote the opinion, in which Judge NIEMEYER and HAMILTON joined.

OPINION

MURNAGHAN, Circuit Judge:

Two railroads alleged that the assessment, levying and collection of certain West Virginia taxes violated the Railroad Revitalization and Regulatory Reform Act of 1976. Finding that the Act's purported abrogation of a state's Eleventh Amendment sovereign immunity was invalid under Seminole Tribe v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), and that Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), relief was unavailable, the district court dismissed the case for lack of subject matter jurisdiction. We reverse the dismissal of the Ex parte Young claim. Because an injunction against the future collection of illegal taxes could provide full relief to the plaintiffs, we do not resolve the question whether the abrogation of sovereign immunity is valid or invalid.

I.

CSX Transportation, Inc., and Nicholas, Fayette & Greenbrier Railroad Co. ("Railroads") brought this action against the Board of Public Works of the State of West Virginia ("Board") and its members to challenge ad valorem taxes imposed for the 1996 tax year. The Railroads' property was assessed on December 31, 1994. On September 13, 1995, the tentative notices of the assessments were issued to the Railroads. The Board met in December of 1995 to finalize the assessments, and when the Railroads failed to protest, the assessments became final in January of 1996.

Page 539

The Railroads paid one half of their assessed taxes on August 30, 1996, in accordance with West Virginia law. However, in January of 1997, the West Virginia Department of Tax and Revenue released data concerning the level of assessment of other commercial and industrial taxpayers in the state for the 1996 tax year. Based on this data, the Railroads concluded that their assessments violated section 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 ("4-R Act"), Pub.L. No. 94-210, 90 Stat. 54 (1976), now codified at 49 U.S.C. § 11501. 1

The Railroads filed a motion for a preliminary injunction seeking to enjoin the Board and its members from collecting the remaining taxes assessed against them. The Railroads alleged that the Board had assessed their property at a ratio of assessed value to true market value more than five percent greater than the ratio of assessed value to true market value at which other commercial and industrial property was assessed for the 1996 tax year, in violation of section 306(1)(a) of the 4-R Act, 49 U.S.C. § 11501(b)(1) & (c). 2 The Railroads further alleged that the Board and its members were attempting to collect tax payments from the Railroads in violation of section 306(1)(b), 49 U.S.C. § 11501(b)(2). By Order of February 25, 1997, the district court denied the motion for a preliminary injunction.

In that Order, the district court found that the purported abrogation of Eleventh Amendment sovereign immunity found in section 306 was invalid, based on the Supreme Court's recent decision in Seminole Tribe v. Florida. The court also found that it could not enjoin the individual members of the Board under Ex parte Young because the relief requested by the Railroads was retrospective. The court therefore dismissed the case for lack of jurisdiction.

The Railroads then made their second one-half payment of assessed taxes on February 28, 1997, but they unilaterally deducted from that payment the amount they alleged was discriminatory over-taxation Now the Railroads appeal from the dismissal of their claims.

II.

The sovereign immunity embodied in the Eleventh Amendment protects an unconsenting state against suit brought by private parties in federal court. See Seminole Tribe v. Florida, 517 U.S. 44, 52-54, 116 S.Ct. 1114, 1122, 134 L.Ed.2d 252 (1996). The federal government may abrogate that immunity from suit, however, by a clear expression of legislative intent to abrogate enacted pursuant to a valid exercise of power. See id. at 55-58, 116 S.Ct. at 1123-24. It is uncontested that section 306 of the 4-R Act

Page 540

clearly intended to abrogate state sovereign immunity. However, after Seminole Tribe, the only power which the Supreme Court has held may be used to abrogate a state's sovereign immunity is Section Five of the Fourteenth Amendment. See id. at 58-60, 116 S.Ct. at 1125. The abrogation in section 306 of the 4-R Act is only effective, therefore, if it is a valid exercise of that power.

It is contested whether, in addition to exercising its Commerce Clause power, Congress intended to or could have passed section 306 of the 4-R Act pursuant to its Fourteenth Amendment enforcement power. Ignoring the wealth of precedent establishing that Congress's failure to mention that it acted pursuant to Section Five of the Fourteenth Amendment is not dispositive, see, e.g., EEOC v. Wyoming, 460 U.S. 226, 243 n. 18, 103 S.Ct. 1054, 1064 n. 18, 75 L.Ed.2d 18 (1983); Schlossberg v. Maryland (In re Creative Goldsmiths of Washington, D.C., Inc.), 119 F.3d 1140, 1147 (4th Cir.1997) ("Because there is no evidence that Congress either passed the Bankruptcy Code under § 5 of the Fourteenth Amendment or sought to preserve the core values specifically enumerated in that amendment, we hold that Congress' effort to abrogate the states' Eleventh Amendment immunity ... is unconstitutional and ineffective."); Crawford v. Davis, 109 F.3d 1281, 1283 (8th Cir.1997), the district court held that because the major purpose of the 4-R Act in general was to protect interstate commerce, section 306 could not be supported by the Fourteenth Amendment enforcement power.

Although remedying discriminatory taxation, in general, is an equal protection concern, the power granted to Congress by Section Five of the Fourteenth Amendment is limited to the promulgation of remedial or preventive legislation that enforces the provisions of the Fourteenth Amendment and does not extend to substantive legislation that defines the Amendment's restrictions on the states. 3 See City of Boerne v. Flores, --- U.S. ----, ----, 117 S.Ct. 2157, 2164, 138 L.Ed.2d 624 (1997). We need not determine whether section 306 is remedial equal protection legislation or substantive legislation, however, because even assuming that section 306 cannot be justified as an exercise of Section Five of the Fourteenth Amendment and therefore its purported abrogation of state sovereign immunity is invalid, Ex parte Young authorizes an injunction, without eliminating sovereign immunity, that will provide the railroads with complete relief. By correcting the district court's erroneous Ex parte Young analysis, we make resolution of the Section Five issue unnecessary. 4 See Ashe v. Styles, 67 F.3d 46, 51 (4th Cir.1995) ("[A]s is our general practice, we hesitate to adjudicate undecided constitutional issues unnecessarily."), cert. denied, 516 U.S. 1162, 116 S.Ct. 1051, 134 L.Ed.2d 196 (1996).

III.

An injunction under the Ex parte Young doctrine may provide the Railroads with complete relief regardless whether the state is immune from suit under the Eleventh Amendment. The theory of Ex parte Young is that because an unconstitutional statute is void, it cannot cloak an official in the state's sovereign immunity. Although the reasoning of Ex parte Young has never been extended to claims for retrospective relief, federal courts may grant prospective injunctive relief against state officials to prevent ongoing violations of federal law. See Green v. Mansour, 474 U.S. 64, 68, 106 S.Ct. 423, 425-26, 88 L.Ed.2d 371 (1985) (citing Ex

Page 541

parte Young, 209 U.S. 123, 159-60, 28 S.Ct. 441, 453-54, 52 L.Ed. 714 (1908)); Gray v. Laws, 51 F.3d 426, 430 n. 1 (4th Cir.1995). An injunction against the future collection of the illegal taxes, even those that already have been assessed, is prospective, and therefore available...

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