150 F.3d 1178 (10th Cir. 1998), 96-3250, ANR Pipeline Co. v. Lafaver
|Docket Nº:||96-3250, 96-3345.|
|Citation:||150 F.3d 1178|
|Party Name:||ANR PIPELINE COMPANY and Colorado Interstate Gas Company, Plaintiffs-Appellees, v. John D. LAFAVER, Secretary of the Kansas Department of Revenue, in his official capacity; Kansas Department of Revenue; Mark S. Beck, Director of the Division of Property Valuation of the Kansas Department of Revenue, in his official capacity; Division of Property Va|
|Case Date:||July 21, 1998|
|Court:||United States Courts of Appeals, Court of Appeals for the Tenth Circuit|
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William E. Waters, Kansas Department of Revenue, Topeka, Kansas, for defendants-cross-claim defendants-appellants.
Richard D. Greene, Morris, Laing, Evans, Brock & Kennedy, Wichita, Kansas (Rebecca H. Noecker and Karen L. Pauley, Colorado Interstate Gas Co., Colorado Springs, Colorado, on brief), for plaintiffs-appellees.
Before ANDERSON, EBEL and KELLY, Circuit Judges.
EBEL, Circuit Judge.
This appeal involves the efforts of two natural gas pipelines, in the face of burgeoning economic competition in the deregulated energy industry, to deal with what they regard as the unequal property tax system in Kansas vis-a-vis the pipelines' traditional competitors, railroad companies, as well as the pipelines' claims of unfair judicial process in the state courts of Kansas. We must dismiss this appeal, vacate the district court's judgment, and direct the district court to dismiss all claims in this case against both the state agency defendants and the state official defendants. The Eleventh Amendment stands as a bar to federal jurisdiction over all of these claims, and the plaintiffs' suit is not saved by the Ex parte Young doctrine.
These two appeals arise out of a single district court order denying a motion to dismiss under Fed.R.Civ.P. 12(b)(1) for lack of subject-matter jurisdiction, filed by the state agency defendants and the state official defendants (collectively referred to as "state defendants") two weeks after the plaintiffs filed this suit. 1 The state defendants filed one appeal, No. 96-3250, as an "appeal by right" based on the district court's denial of the state defendants' claim of sovereign immunity under the Eleventh Amendment. Subsequently, the state defendants also filed a separate motion seeking permission to file a second interlocutory appeal challenging that portion of the court's decision involving the Tax Injunction Act and the Rooker /Feldman doctrine. The motion was granted, and this second appeal was denominated No. 96-3345. Despite this procedural division of the issues between the two separate appeals, we believe the interests of justice would be best
served by consolidating both appeals and disposing of this case in a single opinion. 2
The 4-R Act.
The seeds of this property tax dispute were planted in the Railroad Revitalization and Regulatory Reform Act of 1976 ("4-R Act"), Pub.L. 94-210, 90 Stat. 31 (codified as amended at 49 U.S.C. § 11501 (1994)). Under this legislation, Congress prohibited state and local taxing agencies from imposing discriminatory taxes on railroads. See 49 U.S.C. § 11501(b). The legislation generated vast amounts of litigation in which railroads alleged that various taxing schemes by states and local governments violated the 4-R Act. See, e.g., Burlington N. R.R. Co. v. Huddleston, 94 F.3d 1413 (10th Cir.1996) (the most recent Tenth Circuit case on 4-R Act). One of those 4-R Act lawsuits involved a challenge by railroads operating in Kansas against the state's taxation scheme for the railroads' personal property. On August 11, 1989, that litigation was resolved with a consent decree that required the Kansas Division of Property Valuation to exempt 80% of the railroads' personal property from the tax roll, and then to levy a 30% tax assessment on the remainder of the railroad's real and personal property.
Seeing this dramatic tax break for their competitors, several natural gas pipeline companies requested similar treatment from the Kansas Division of Property Valuation, but the state refused. The pipeline companies then went to court. From the outset of the litigation underlying these appeals, the pipeline companies have argued that they are similarly situated vis-a-vis the railroad companies, i.e., that both are public utilities under Kansas law. See Kan. Stat. Ann. §§ 79-5a01(a)(1) & (a)(4) (1989). The pipelines argue that they have an equal protection right to the same tax breaks provided to the railroads. See U.S. Const., XIV amend., § 1.
Key to the pipelines' equal protection claim is their concomitant allegation that they were denied procedural due process by the tax appeal proceedings in Kansas at both the administrative and judicial level. For this reason, the sequence of events in the underlying litigation is important.
The pipelines' state-court litigation.
After the August 11, 1989, consent decree exempting much of the railroads' Kansas personal property from taxation, the pipelines filed suit in Shawnee County District Court claiming their 1989 tax assessment by the Kansas Division of Property Valuation violated state and federal guarantees of equal protection. In an unreported decision, the state district court dismissed the suit for lack of subject-matter jurisdiction because the pipelines had failed to file an appeal of the assessment before the Kansas Board of Tax Appeals ("BOTA"). In 1993, the Kansas Court of Appeals reversed the district court's decision and remanded the case for consideration of the pipelines' equal protection arguments. See Colorado Interstate Gas Co. v. Beshears, 18 Kan.App.2d 814, 860 P.2d 56, 61-62 (1993) [hereinafter "CIG I "] (holding that the failure to exhaust administrative remedies was no bar to jurisdiction when no actual administrative remedies were available).
During the pendency of this first case, the pipelines filed appeals of their 1990 and 1991 tax assessments with BOTA, again claiming that the lack of favorable exemptions for themselves, vis-a-vis the railroads, violated the pipelines' rights to equal protection. The 1990 and 1991 appeals were submitted to BOTA on a stipulated record, and the Board rejected the challenges. The pipelines appealed that decision to the Kansas Supreme Court, which affirmed the BOTA decision. See In re Appeal of ANR Pipeline Co., 254 Kan. 534, 866 P.2d 1060 [hereinafter "CIG II (ANR Pipeline) "], cert. denied, 513 U.S. 917, 115 S.Ct. 296, 130 L.Ed.2d 209 (1994). The Kansas Supreme Court held that any disparate treatment between the pipelines and the railroads--including the 80% exemption of personal property--was mandated by the 4-R Act. See id. at 1067-68. The court also held that Kansas' constitutional guarantees of equal...
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