Anr Pipeline Co. v. La. Tax Comm'n

• Decision Date: 19 July 2011
• Docket Number: No. 11–30101.,11–30101.
• Parties: ANR PIPELINE COMPANY; Tennessee Gas Pipeline Company; Southern Natural Gas Company, Plaintiffs–Appellantsv.LOUISIANA TAX COMMISSION; Pete Peters; Belinda B. Hazel; Kenneth P. Naquin, Jr.; Joey Vercher; Paul Hargrove; Russell L. Benoit; Richard C. Earl; Renee Mire Michel; Wayne P. Blanchard; Bobby L. Cudd; Richard J. Cole, Jr.; Jim D. Sevier; Errol G. Williams; Rebecca H. Craig; Tony Mancuso; James Glen Kelly; Sid J. Gautreaux, III; Eddie Soileau; Lisa Chaisson; Larry G. Cox; Mike Tubbs; Reginald Zeno; City of New Orleans; et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

646 F.3d 940

ANR PIPELINE COMPANY; Tennessee Gas Pipeline Company; Southern Natural Gas Company, Plaintiffs–Appellants

v.LOUISIANA TAX COMMISSION; Pete Peters; Belinda B. Hazel; Kenneth P. Naquin, Jr.; Joey Vercher; Paul Hargrove; Russell L. Benoit; Richard C. Earl; Renee Mire Michel; Wayne P. Blanchard; Bobby L. Cudd; Richard J. Cole, Jr.; Jim D. Sevier; Errol G. Williams; Rebecca H. Craig; Tony Mancuso; James Glen Kelly; Sid J. Gautreaux, III; Eddie Soileau; Lisa Chaisson; Larry G. Cox; Mike Tubbs; Reginald Zeno; City of New Orleans; et al., Defendants–Appellees.

No. 11–30101.

United States Court of Appeals, Fifth Circuit.

July 19, 2011.

Hilton S. Bell (argued), James Kee Irvin, Milling Benson Woodward, L.L.P., New Orleans, LA, Angela Whitaker Adolph, Milling Benson Woodward, L.L.P., Baton Rouge, LA, for Plaintiffs–Appellants.William B. Hidalgo, Hidalgo & Associates, L.L.P., Robert D. Hoffman, Jr., Covington, LA, Brian Andrew Eddington (argued), Crystal DiBenedetto Burkhalter, Charles Malcolm Gordon, Phillip W. Preis, Preis Gordon, A.P.L.C., Mary Grace Erlingson, Crawford Lewis, P.L.L.C., Baton Rouge, LA, Stephen Christopher Dwight, Dwight Law Firm, L.L.C., Lake Charles, LA, Robert Joseph Ellis, Jr., Deputy City Atty., New Orleans, LA, for Defendants–Appellees.Appeal from the United States District Court for the Eastern District of Louisiana.Before DAVIS, PRADO and OWEN, Circuit Judges.EDWARD C. PRADO, Circuit Judge:

ANR Pipeline Co., Tennessee Gas Pipeline Co., and Southern Natural Gas Co. (collectively, “appellants”) own interstate natural-gas pipelines subject to a 25% ad valorem tax under Louisiana Constitution article 7, § 18. They brought and won a state-court suit alleging certain intrastate pipelines were unconstitutionally given more favorable tax treatment by being taxed only at a 15% rate from 1994–2003,¹ but the state court's remedy was not what they expected. Instead of simply refunding appellants the 10% difference in taxes they had paid under protest, the court also ordered appellants' tax liability to be recalculated under the same fair-market-value (“FMV”) determination process to which the intrastate pipelines were subjected. ² The Louisiana courts have upheld the judgment and remedy as consistent with Louisiana law mandating equal treatment, and the Louisiana and United States Supreme Courts have declined to hear appellants' petitions challenging the remedy imposed. The subsequent revaluation process has been consumed by litigation in the Louisiana courts. Appellants have since brought suit in Louisiana court for the same violations for the 2004–2009 tax years, and that litigation is currently pending.

Appellants brought suit in federal court on August 9, 2010, alleging Due Process, Equal Protection, and Commerce Clause violations, via 42 U.S.C. § 1983, resulting from the revaluation process. Specifically, they contend that the process violates Louisiana law in various ways and denies appellants the 10% in taxes that they paid under protest that they are “owed.” Appellants also bring the same constitutional claims for the 2004–2009 tax years as raised in the pending state-court litigation. On appeal is the district court's grant of the defendants' motion to dismiss. We hold that the district court properly dismissed appellants' suit because their federal claims are barred by the Tax Injunction Act, 28 U.S.C. § 1341.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. State Court Proceedings

Appellants own interstate natural-gas pipelines subject to a 25% ad valorem tax under the Louisiana Constitution. Article 7, § 18 of the Louisiana Constitution (“Ad Valorem Taxes”) provides that “public services properties [ ] excluding land” are subject to a 25% tax whereas “other property” is subject to a 15% tax. La. Const. art. VII, § 18(B). Section 18(D) outlines how property subject to the ad valorem taxes is valued. It provides that: “Each assessor shall determine the fair market value of all property subject to taxation within his respective parish or district except public service properties, which shall be valued at fair market value by the Louisiana Tax Commission [ (“LTC”) ] or its successor.” Id. § 18(D). Under Louisiana Law, “public service properties” are “the immovable, major movable, and other movable property owned or used but not otherwise assessed in this state in the operations of each ... pipeline company,” among other entities. La.Rev.Stat. § 47:1851(M). “Pipeline companies” are defined as:

“any company that is engaged primarily in the business of transporting oil, natural gas, petroleum products, or other products within, through, into, or from this state, and which is regulated by (1) the Louisiana Public Service Commission, (2) the Interstate Commerce Commission, or (3) the Federal Power Commission, as a “natural gas company” under [federal law].”

Id. § 47:1851(K).

Because all interstate pipelines running through Louisiana are regulated by the Federal Energy Regulatory Commission,³ all interstate pipelines are “public service” property and subject to ad valorem taxation at the 25% rate by the LTC. Intrastate pipelines that sell to local natural-gas distributing systems are regulated by the Louisiana Public Service Commission (“PSC”) and therefore are classified as public service property and subject to taxation at the 25% rate by the LTC, but other intrastate pipelines are not so regulated and therefore are classified as “other property” and subject to 15% taxation by local parish tax assessors.

For all the applicable tax years, appellants had been taxed at the 25% rate and had their pipelines' FMV calculated by the LTC. Appellants filed their taxes under protest during tax years 1994–2003 because they believed the different tax rates for intra- and interstate natural-gas pipelines were unconstitutional. In 2005, appellants filed suit in the 19th Judicial District Court for East Baton Rouge Parish (“the 19th JDC”), claiming the differing tax rates violated the Equal Protection and Due Process clauses of the Louisiana and United States constitutions, the Commerce Clause, and the uniformity requirement of the Louisiana Constitution. Specifically, appellants argued that intrastate PSC–regulated pipelines (“PSC pipelines”) were impermissibly classified by the LTC as “other property” and taxed at the 15% rate, rather than at the 25% rate.

Appellants won their suit. The 19th JDC determined that the PSC pipelines received preferential treatment and that the LTC's disregard for the uniformity requirement in the Louisiana Constitution violated the Equal Protection and Due Process clauses of the Louisiana and United States Constitutions. The court pretermitted deciding the facial constitutionality of the tax regime under the Commerce Clause, on the ground that appellants would receive a full remedy on its other claims. Rather than simply award appellants the taxes they had paid under protest, the court decided they would receive the exact same treatment as the PCS pipelines. That is, appellants' pipelines would be treated as if it were “other property” for purposes of both the lower rate and the FMV–evaluation process. The local parish assessors thus had to first determine appellants' pipelines' FMV for the 1994–2003 years, calculate the taxes owed for those years using the 15% FMV calculation, and then refund appellants the difference—if any—between the taxes paid and the taxes owed under the new calculation. The 19th JDC remanded the case to the LTC with instructions to require the local parish assessors to revalue appellants' pipelines in a timely manner.

Appellants appealed the remedy fashioned by the 19th JDC to the Louisiana First Circuit Court of Appeal, arguing that their due process rights would be violated by the reassessment. The First Circuit rejected the appeal on the ground that the remedy was proper under Louisiana precedent and that it did not violate their due process rights because there were ample state-law protections. ANR Pipeline Co. v. La. Tax Comm'n, 923 So.2d 81, 93, 97–98 (La.Ct.App.2008) (“ ANR VI ”). It also rejected appellants' appeal of the 19th JDC's failure to decide its Commerce Clause challenge, on the ground that such a ruling was unnecessary to the extent appellants obtained adequate relief through re-assessment and refund of any taxes paid. Id. at 99. The Louisiana Supreme Court denied appellants' writ petition, ANR Pipeline Co. v. La. Tax Comm'n, 925 So.2d 547 (La.2006), and the United States Supreme Court denied their petition for a writ of certiorari, ANR Pipeline Co. v. La. Tax Comm'n, No. 05–1606, 2006 WL 1662255 (U.S. June 15, 2006), writ denied, 549 U.S. 822, 127 S.Ct. 157, 166 L.Ed.2d 38 (2006), both of which challenged the remedy provided and the revaluation process as violating appellants' rights.

The parish assessors began the revaluation process in 2006 and in some parishes appellants received new tax bills that increased their tax liability. Appellants appealed to the LTC in 2006. In June 2007, the 19th JDC on appellants' motion enjoined the LTC from holding revaluation hearings and ordered appellants to receive the full amount of taxes paid under protest. The Court of Appeal vacated that order and ordered the revaluation process to continue. ANR Pipeline Co. v. La. Tax Comm'n, 997 So.2d 105 (La.Ct.App.2008); ANR Pipeline Co. v. La. Tax Comm'n, 997 So.2d 92 (La.Ct.App.2008). The LTC finally heard appellants' appeal in October 2009 and ruled in their favor on November 23, 2009. Twenty parish tax assessors sought judicial review of the LTC's decision in their home districts rather than in the 19th JDC. Appellants filed writs to the Louisiana First, Second, and Third Circuit Courts of Appeal challenging the home-parish reviews; the Second and Third Circuits denied the writs (the Louisiana Supreme Court denied appellants' writ from the Second Circuit's denial), and the writ to the First Circuit is apparently still pending.

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