State By and Through Hanson v. Quill Corp.

• Citation: 500 N.W.2d 196
• Decision Date: 11 May 1993
• Docket Number: No. 920283,920283
• Parties: STATE of North Dakota, By and Through its Tax Commissioner, Robert E. HANSON, Plaintiff, Appellant and Cross-Appellee, v. QUILL CORPORATION, Defendant, Appellee and Cross-Appellant. Civ.
• Court: United States State Supreme Court of North Dakota

Page 196

500 N.W.2d 196

61 USLW 2729

STATE of North Dakota, By and Through its Tax Commissioner, Robert E. HANSON, Plaintiff, Appellant and Cross-Appellee, v. QUILL CORPORATION, Defendant, Appellee and Cross-Appellant.

Civ. No. 920283.

Supreme Court of North Dakota.

May 11, 1993.

Donnita A. Wald (argued), and Christianne Y. Runge (appearance), Asst. Attys. Gen., Tax Dept., and M.K. Heidi Heitkamp (no appearance), Atty. Gen., Bismarck, for plaintiff, appellant and cross-appellee.

Richard A. Hanson (argued), and Don S. Harnack (appearance), McDermott, Will & Emery, Chicago, IL, and William P. Pearce (appearance), of Pearce & Durick, Bismarck, ND, for defendant, appellee and cross-appellant.

ON PETITION FOR REHEARING

MESCHKE, Justice.

Quill Corporation has filed a petition for rehearing of our decision after remand from the United States Supreme Court. Quill asserts that it is a prevailing plaintiff in its 42 U.S.C. Sec. 1983 action and is entitled to an award of attorney's fees under 42 U.S.C. Sec. 1988. We hold that a Sec. 1983 action seeking to enjoin the collection of state taxes is not cognizable in state court, and accordingly Quill is not entitled to recover its attorney's fees under Sec. 1988.

The factual and procedural history of this litigation is outlined in our original opinion in this case. See State v. Quill Corp., 470 N.W.2d 203 (N.D.1991), reversed by Quill Corp. v. North Dakota, --- U.S. ----, 112 S.Ct. 1904, 119 L.Ed.2d 91 (1992). The State sought a declaratory judgment under NDCC Ch. 32-23 that Quill was required to collect and remit the applicable use tax on its sales of office equipment and supplies to customers in North Dakota. Quill answered that the use tax provisions, NDCC Ch. 57-40.2, violated Quill's rights under the Due Process Clause and Commerce Clause of the United States Constitution. Quill also counterclaimed for Sec. 1983 relief for violation of its Due Process and Commerce Clause rights, and requested attorney's fees under Sec. 1988.

The trial court held that NDCC 57-40.2-01(6) and (7) was unconstitutional as applied to Quill and that Quill could not be forced to collect and remit the use tax. The court dismissed Quill's counterclaim.

The State appealed to this court and Quill cross-appealed. We reversed, holding that imposition of the duty to collect and remit the use tax did not violate Quill's Due Process or Commerce Clause rights. State v. Quill Corp. The United States Supreme Court granted certiorari and reversed. Quill Corp. v. North Dakota, --- U.S. ----, 112 S.Ct. 1904, 119 L.Ed.2d 91 (1992). The Court agreed that Due Process did not bar imposition of the duty to collect the tax in this case, but held that the Commerce Clause prohibited imposition of the duty upon Quill.

Upon remand, we vacated the part of our opinion that had been reversed by the United States Supreme Court and affirmed the judgment of the trial court. State v. Quill Corp., 487 N.W.2d 598 (N.D.1992). Quill petitioned for rehearing, asserting that it was entitled to prevail on its Sec. 1983 counterclaim and was entitled to attorney's fees under Sec. 1988. We ordered supplementary briefing and granted a rehearing.

The State argued that this case is controlled by Linderkamp v. Bismarck School District No. 1, 397 N.W.2d 76 (N.D.1986), in which we held that taxpayers could not bring a Sec. 1983 action in state court to enjoin the assessment of state taxes if there was an adequate remedy available under state law. Quill argues that the rationale underlying Linderkamp has been rejected by the United States Supreme Court in Howlett v. Rose, 496 U.S. 356, 110 S.Ct. 2430, 110 L.Ed.2d 332 (1990).

In Linderkamp, taxpayers sought to enjoin the levy of certain taxes by a school district. They sought relief under the Declaratory Judgment Act, asserted a Sec. 1983 claim, and requested attorney's fees under Sec. 1988. The district court granted summary judgment under the Declaratory Judgment Act and enjoined certain practices by the school district, but dismissed the Sec. 1983 claim and refused to award attorney's fees.

On appeal, we considered the application of the Tax Injunction Act, 28 U.S.C. Sec. 1341, that directs:

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.

We reasoned that Sec. 1341 would have prohibited the taxpayers from litigating their Sec. 1983 claim in federal court. Although we recognized that Sec. 1341 directly applied only to federal district courts, we considered the policies underlying the Tax Injunction Act and the rationale employed by other state courts in similar cases. We concluded that Sec. 1983 actions could not be brought in state court to enjoin the assessment, levy, or collection of state taxes:

Thus, although we conclude that the Tax Injunction Act does not per se apply to state court actions, we nevertheless conclude that imposition of similar limitations under state law upon Sec. 1983 actions brought in state court challenging the levy of state taxes is appropriate. We therefore hold that a taxpayer may not bring a Sec. 1983 action in state court seeking to enjoin, suspend, or restrain the assessment, levy, or collection of any tax under state law where an adequate state remedy is available.

Linderkamp, 397 N.W.2d at 80 (footnote omitted). Because the taxpayers in Linderkamp had an adequate remedy under state law, we concluded that their Sec. 1983 action was not cognizable in state court and, accordingly, that they were not entitled to attorney's fees under Sec. 1988.

Quill concedes that the Declaratory Judgment Act provides a plain, speedy, and efficient remedy under state law, and that a Sec. 1983 action in federal court would be barred by the Tax Injunction Act. Quill also apparently concedes that, if it is still good law, Linderkamp would bar its Sec. 1983 action in state court. Quill's argument therefore rests entirely upon the premise that Linderkamp has been abrogated by Howlett v. Rose.

In Howlett, a former high school student began a Sec. 1983 action in a Florida state court against a school board and three school officials, asserting that a search of his vehicle while it was parked on school premises violated his federal constitutional rights. The school board asserted that it was immune from suit under Florida's sovereign immunity law. The trial court dismissed the federal claims. The Florida District Court of Appeal held that Florida's statutory waiver of sovereign immunity did not apply to Sec. 1983 cases, and affirmed dismissal of the federal claims. The Supreme Court of Florida denied review, and the United States Supreme Court granted certiorari.

The Supreme Court expressed the question presented in Howlett this way:

The question in this case is whether a state-law defense of "sovereign immunity" is available to a school board otherwise subject to suit in a Florida court even though such a defense would not be available if the action had been brought in a federal forum.

Howlett, 496 U.S. at 358-359, 110 S.Ct. at 2433. The Court, after reviewing Florida statutes and case law, concluded that the school board could not rely upon the sovereign immunity defense, when such a defense would be unavailable if the action had been brought in federal court. The Court therefore reversed the judgment of the Florida District Court of Appeal.

Quill argues that Howlett stands for the proposition that a state court may not refuse to entertain a Sec. 1983 action upon state law principles, even if the action could not have been brought in federal court. Quill misreads Howlett. In its brief, Quill argues:

The parallels between the Florida court decision in Howlett and this Court's decision in Linderkamp are striking. In Howlett, plaintiff brought a state court action against a school board and several school officials which could not have been brought in federal court because of the Eleventh Amendment. Here, Quill counterclaimed for declaratory relief, a claim which could not be brought in federal court because of 28 U.S.C. Sec. 1341.

However, the Howlett problem arose specifically because the school board and school officials were not protected by Eleventh Amendment immunity, and would have been subject to suit in federal court. That is not the case for Quill.

The Florida District Court of Appeal opinion in Howlett was premised upon the Florida Supreme Court's decision in Hill v. Department of Corrections, 513 So.2d 129 (Fla.1987), cert. denied, 484 U.S. 1064, 108 S.Ct. 1024, 98 L.Ed.2d 989 (1988), in which the court applied the state sovereign immunity defense to preclude a Sec. 1983 action in state court against a state agency. Addressing the Florida District Court of Appeal's reliance upon Hill, the Supreme Court stated:

On its facts, the disposition of the Hill case would appear to be unexceptional. The defendant in Hill was a state agency protected from suit in a federal court by the Eleventh Amendment. See Quern v. Jordan, 440 U.S. 332, 341 [99 S.Ct. 1139, 1145, 59 L.Ed.2d 358] (1979) (Sec. 1983 does not "override the traditional sovereign immunity of the States"). As we held last Term in Will v. Michigan Dept. of State Police, 491 U.S. 58 [109 S.Ct. 2304, 105 L.Ed.2d 45] (1989), an entity with Eleventh Amendment immunity is not a "person" within the meaning of Sec. 1983. The anomaly identified by the State Supreme Court, and by the various state courts which it cited, that a State might be forced to entertain in its own courts suits from which it was immune in federal court, is thus fully met by our decision in Will. Will establishes that the State and arms of the State, which have traditionally enjoyed Eleventh Amendment immunity, are not subject to suit under Sec. 1983 in either federal court or state court.

The language and reasoning of the State Supreme Court, if not its precise holding, however,...