4 F.3d 244 (4th Cir. 1993), 92-1874, Richmond, Fredericksburg & Potomac R. Co. v. Forst

Docket Nº:92-1874.
Citation:4 F.3d 244
Party Name:RICHMOND, FREDERICKSBURG & POTOMAC RAILROAD COMPANY, Plaintiff-Appellant, v. William H. FORST; David E. Jordan; City of Alexandria; Arlington County, Virginia; Fairfax County, Virginia; Prince William County, Virginia, Defendants-Appellees.
Case Date:July 15, 1993
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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4 F.3d 244 (4th Cir. 1993)




William H. FORST; David E. Jordan; City of Alexandria;

Arlington County, Virginia; Fairfax County,

Virginia; Prince William County,

Virginia, Defendants-Appellees.

No. 92-1874.

United States Court of Appeals, Fourth Circuit

July 15, 1993

Argued Feb. 4, 1993.

Corrected Opinion Filed July 29, 1993.

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Betty Jo Christian, Steptoe & Johnson, Washington, DC, argued (Timothy M. Walsh, Roderick L. Thomas, Steptoe & Johnson, Washington, DC, Everett B. Gibson, Everett B. Gibson Law Firm, Memphis, TN, on the brief), for plaintiff-appellant.

Timothy Michael Kaine, Mezzullo & McCandlish, Richmond, VA, argued (Thomas W. McCandlish, Helen M. Konrad, Mezzullo & McCandlish, John Patrick Griffin, Asst. Atty. Gen., James Godwin Council, Office of The Attorney General of Virginia, Richmond, VA, Charles G. Flinn, Co. Atty., Cynthea L. Perry, Sp. Counsel, Arlington, VA, Philip G. Sunderland, City Atty., Alexandria, VA, Sharon E. Pandak, Co. Atty., Bernadette S. Peele, Asst. Co. Atty., Prince William, VA, A. Robert Cherin, Deputy Co. Atty., Fairfax, VA, on the brief), for defendants-appellees.

Before WIDENER, MURNAGHAN, and WILLIAMS, Circuit Judges.


WILLIAMS, Circuit Judge:

In this appeal, we revisit several issues left open by our opinion in Chesapeake Western Railway v. Forst, 938 F.2d 528 (4th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1577, 118 L.Ed.2d 220 (1992). Here, the Richmond, Fredericksburg & Potomac Railroad Company (RF & P) contends that the Defendants' 1 valuation of its rail transportation property violates Sec. 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 (the "4-R Act"), 49 U.S.C. Sec. 11503 (1988). 2 The district court dismissed RF & P's complaint for failure to state a claim, and, alternatively, because abstention was appropriate

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under the Younger doctrine. 3 Richmond, F. & P.R.R. v. Forst, 797 F.Supp. 494, 495-96 (E.D.Va.1992) (RF & P IV ). The district court also denied without discussion RF & P's motion for a preliminary injunction. Id. at 497.

RF & P appeals each decision of the district court. We hold that RF & P properly stated a claim for which relief can be granted, that abstention is inappropriate in this case, and that the district court should address the merits of RF & P's motion for a preliminary injunction. We therefore reverse the dismissal of the complaint, vacate the denial of the preliminary injunction, and remand for further proceedings.


RF & P has had a long history of disputes with the Virginia taxing authorities. Chesapeake Western, 938 F.2d at 529; County Bd. of Arlington County v. Commonwealth Dep't of Taxation, 240 Va. 108, 393 S.E.2d 194 (1990); Richmond, F. & P.R.R. v. Department of Taxation, 762 F.2d 375 (4th Cir.1985); Richmond, F. & P.R.R. v. State Corp. Comm'n, 230 Va. 260, 336 S.E.2d 896 (1985) (RF & P III ); Richmond, Fredericksburg & Potomac R.R. v. State Corp. Comm'n, 219 Va. 301, 247 S.E.2d 408 (1978) (RF & P II ); Richmond, F. & P.R.R. v. Commonwealth, 203 Va. 294, 124 S.E.2d 206 (1962) (RF & P I ). In each of these cases, the Railroad has contested in one way or another the Commonwealth's valuation of its property for tax assessment purposes. The courts have consistently rejected RF & P's challenges to its tax liability. In this case, RF & P seeks to litigate in the narrow confines left open by these prior decisions.

Some familiarity with the history of Virginia's taxation of railroad property is necessary to understand the narrow challenge which RF & P now brings. At the turn of the century, the Virginia Constitutional Convention of 1901-02 considered and rejected the "unit method" of valuation of railroad property. See Norfolk & W.R.R. v. Commonwealth, 211 Va. 692, 179 S.E.2d 623, 628-29 (1971). Instead, Virginia adopted the "across-the-fence" (ATF) method, which it used consistently until 1984. 4 In 1984 the Department of Taxation abandoned the ATF method in favor of the unit method, and assessed RF & P's railroad property using the new method for each of the tax years 1984 through 1989. 5 On June 8, 1990, the Supreme Court of Virginia invalidated the unit method because it failed to determine the fair market value of the property as required by the Virginia constitution. County Board, 393 S.E.2d at 197. Subsequently, the Department reverted to the ATF method of valuation.

Following the decision in County Board, numerous cities and counties in Virginia filed suit against the Department of Taxation to obtain reassessments under the newly reinstituted ATF method of the railroad property in their respective jurisdictions for the 1984 through 1989 tax years. See, e.g., City of Alexandria v. Commonwealth, No. 760CL91T03221-00 (Va.Cir.Ct. filed August 27, 1991); County Bd. of Arlington v. Department of Taxation, No. 760CL91T00011-00 (Va.Cir.Ct. filed Jan. 1, 1991); Prince William County v. Department of Taxation, Law No. LS3097-1 (Va.Cir.Ct. filed Aug. 31, 1990). Before revising its assessments in previous tax years, however, the Department first issued its 1990 assessments under the ATF method. The 1990 assessments were certified in late September of that year. (Complaint p 15.)

Before the 1990 assessments became final, RF & P and five other railroad companies brought suit in federal court to challenge Virginia's ATF method of taxing railroad property under Sec. 306 of the 4-R Act. Chesapeake W. Ry. v. Forst, No. 3:90CV00484,

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1990 WL 506863 (E.D.Va. Oct. 3, 1990). On appeal, we held that Sec. 306 does not permit a railroad to challenge a state's method of determining the true market value of railroad property. Chesapeake W. Ry. v. Forst, 938 F.2d 528, 533 (4th Cir.1991). We expressly reserved to the railroads the right to challenge a state's "calculation" of fair market value. Id. Following Chesapeake Western, the Department of Taxation certified revised assessments for the 1988 and 1989 tax years on August 23, 1991. (Complaint p 12.) The Department certified its assessments for the 1991 tax year on September 1, 1991. (Id. p 15.) The revisions produced substantial increases in the assessed values of RF & P's property. For example, under the unit method, the Department had assessed RF & P's property in Alexandria at a value of $15,293,168 for the 1988 tax year. Under the ATF method, the Department revised that assessment to a value of $111,663,882, or 730 percent of the original assessment. (Id. p 12.) In tax years 1989 and 1990, that assessment increased to $134,799,906 and $158,052,238, respectively. (Id. p 12, 15.) RF & P filed timely administrative appeals with the Tax Commissioner for each of the tax years at issue in this case, but in a decision rendered March 31, 1992, the Commissioner denied all relief. (Id. p 18-19.)

Two weeks later, RF & P filed its complaint in the district court, seeking injunctive and declaratory relief. Shortly thereafter, the Defendants moved to dismiss the complaint under Rule 12(b)(6), asserting various theories justifying dismissal. Collectively, Defendants argued that RF & P was again seeking to force them to adopt the unit method of valuation, that RF & P's challenge to its 1990 assessments was barred by res judicata, that RF & P's claims were barred by collateral estoppel, that abstention was appropriate under both Younger and Burford, 6 and that the court should decline jurisdiction under the "wise judicial administration" doctrine enunciated in Colorado River. 7 Although the district court limited its holding to a dismissal under Rule 12(b)(6) and under Younger, Defendants renew each of these arguments before this court. We will address in turn the dismissal for failure to state a claim, the Defendants' affirmative defenses, the abstention doctrines, and finally RF & P's request for preliminary relief.

II. Failure to State a Claim

Pursuant to Federal Rule of Civil Procedure 12(b)(6), the district court dismissed RF & P's complaint for failure to state a claim under Sec. 306 of the 4-R Act. RF & P IV, 797 F.Supp. at 496. In reviewing a dismissal under Rule 12(b)(6), we accept the allegations of the complaint as true, Advanced Health-Care Servs., Inc. v. Radford Community Hosp., 910 F.2d 139, 143 (4th Cir.1990), and will affirm the dismissal only if "it appears beyond doubt that the plaintiff can prove no set of facts to support [its] allegations." Revene v. Charles County Comm'rs, 882 F.2d 870, 872 (4th Cir.1989). We review a dismissal under Rule 12(b)(6) de novo. Id.

We first examine the statute under which RF & P instituted these proceedings. Subsection (b)(1) of Sec. 306 provides that a state may not:

assess rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value of other commercial and industrial property in the same assessment jurisdiction has to the true market value of the other commercial and industrial property.

49 U.S.C. Sec. 11503(b)(1). The Act gives federal courts the power to prevent a violation of Sec. 306(b) and provides an explicit exception to the Tax Injunction Act, 28 U.S.C. Sec. 1341 (1988). 49 U.S.C. Sec. 11503(c). 8 No court

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may, however, grant relief under Sec. 306 unless the ratio of assessed value to true market value of railroad property is at least five percent more than the ratio of assessed value to true market value of other commercial and industrial property in the same assessment jurisdiction. 49 U.S.C. Sec. 11503(c).

Thus, to state a facially valid claim under Sec. 306, a plaintiff must allege (1) the assessed value of its transportation property, (2) the true market value of its property, and (3) the ratio of assessed value to market value for all other commercial and industrial property in the same assessment...

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