780 F.2d 816 (9th Cir. 1986), 83-6451, Ashton v. Cory
|Citation:||780 F.2d 816|
|Party Name:||Edward ASHTON, et al., Plaintiffs-Appellees, v. Kenneth CORY, et al., Defendants-Appellants.|
|Case Date:||January 16, 1986|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Argued and Submitted Oct. 2, 1984.
James P. Watson, Cox, Castle & Nicholson, Los Angeles, Cal., for plaintiffs-appellees.
Patti S. Kitching, Deputy Atty. Gen., Los Angeles, Cal., for defendants-appellants.
Appeal from the United States District Court for the Central District of California.
Before WALLACE, KENNEDY, and FLETCHER, Circuit Judges.
KENNEDY, Circuit Judge:
The Franchise Tax Board of California, the agency charged with enforcement of state personal income tax laws, appeals from a declaratory judgment, issued in favor of the Construction Laborers' Vacation Trust for Southern California (CLVT), holding that Cal.Rev. & Tax.Code Sec. 18817 (West 1983) is preempted by section 514(a) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1144(a) (1982). We reverse and vacate under the Tax Injunction Act, 28 U.S.C. Sec. 1341 (1982), on the ground that the district court lacked jurisdiction.
CLVT established a vacation fund for eligible employees. The fund is an "employee welfare benefit plan," within the meaning of ERISA Sec. 3(1), 29 U.S.C. Sec. 1002(1) (1982). Employers contribute to the fund for each hour worked by each covered employee. The employer contributions to the vacation fund are part of the wages due to the qualifying employees and, as such, are subject to withholding tax, as well as social security and unemployment taxes. Vacation checks are issued annually from the fund to the covered employees.
The Board has served withholding notices on a number of vacation funds, including the one in question, pursuant to Cal.Rev. & Tax.Code Sec. 18817, in an attempt to collect the delinquent personal income taxes of fund participants. In 1980 the Board sued CLVT in Los Angeles Superior Court
for unpaid state income taxes (CLVT I ). CLVT removed the action to federal court, alleging that Cal.Rev. & Tax.Code Sec. 18817 is preempted by ERIS Sec. 514(a), which provides in pertinent part:
... the provisions of this subchapter ... shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan....
29 U.S.C. Sec. 1144(a). The district court granted summary judgment for the Board, and CLVT appealed.
Though not unanimous, our court reversed, ruling that ERISA preempts the state tax law. Franchise Tax Board v. Construction Laborers Vacation Trust, 679 F.2d 1307 (9th Cir.1982), vacated, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). The dissent would have held that the district court lacked subject matter jurisdiction under the Tax Injunction Act, and also would have ruled differently on the preemption issue. 679 F.2d at 1309-13. The Supreme Court vacated for lack of federal question jurisdiction on the ground that the issue of preemption, the sole federal question in the case, arose only as a defense, thus precluding removal. The district court was instructed to remand to the Los Angeles Superior Court, where the case is now pending. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).
CLVT then brought the instant suit against the Board in federal district court, seeking a declaratory judgment that Cal.Rev. & Tax.Code Sec. 18817 is preempted by ERISA. The district court granted summary judgment for CLVT, and this appeal followed. We review the order of summary judgment de novo, in the light most favorable to the nonmoving party, to determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Deukmejian v. United States Postal Service, 734 F.2d 460, 462 (9th Cir.1984) (per curiam); Ferguson v. Flying Tiger Line, Inc., 688 F.2d 1320, 1322 (9th Cir.1982). As there are no disputed questions of fact, we are concerned only with the district court's interpretation and application of the federal statutes.
CLVT contends federal subject matter jurisdiction is conferred by section 502(e)(1) of ERISA, which provides in pertinent part:
... the district courts ... shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary.
29 U.S.C. Sec. 1132(e)(1). The Supreme Court in CLVT I, while holding that the procedural posture of the case precluded removal, nevertheless reserved the question whether a party in CLVT's position could bring an action in federal court for a declaratory judgment regarding a state tax levy. 463 U.S. at 20 n. 21, 27, n. 31, 103 S.Ct. at 2852 n. 21, 2855 n. 31. The Court cautioned, however, that such an action might be barred by the Tax Injunction Act, 28 U.S.C. Sec. 1341. Id. It is precisely this issue that we are required to resolve in the instant appeal.
The Tax Injunction Act provides:
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.
28 U.S.C. Sec. 1341 (emphasis added). This statute, which bars jurisdiction, and section 502(e)(1) of ERISA, which would appear to confer it, contain no cross references to each other. Section 514(d) of ERISA, however, provides that "[n]othing ... shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States...." 29 U.S.C. Sec. 1144(d) (1982). The applicability of the Tax Injunction Act, therefore, is apparently unaffected by ERISA. Accordingly, we must decide whether CLVT's action for declaratory relief is barred by the Tax Injunction Act. See California v. Grace Brethren Church, 457 U.S. 393, 408, 411, 102 S.Ct. 2498, 2507, 2509, 73 L.Ed.2d 93 (1982) (Tax Injunction
Act prohibits declaratory as well as injunctive relief); Air Polynesia, Inc. v. Freitas, 742 F.2d 546, 547 (9th Cir.1984) (same). In resolving the issue, we must determine, first, whether there is a plain, speedy, and efficient remedy available to CLVT in the California courts, and, second, whether Congress intended section 502(e)(1) of ERISA to function as an exception to the Tax Injunction Act. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. at 20 n. 21, 103 S.Ct. at 2852 n. 21. We answer the first question in the affirmative and the second in the negative, and conclude CLVT's action is barred by the Tax Injunction Act.
In assessing whether CLVT's remedy in the California courts is plain, speedy, and efficient within the meaning of the Tax Injunction Act, we are guided by the Supreme Court's decision in Rosewell v. LaSalle National Bank, 450 U.S. 503, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981). In Rosewell the Court construed "plain, speedy and efficient" to require that a state court remedy meet certain minimal procedural criteria. 450 U.S. at 512, 101 S.Ct. at 1228. See also Air Polynesia, Inc. v. Freitas, 742 F.2d at 547. The Court noted the Tax Injunction Act was modeled after the Johnson Act of 1934, an Act prohibiting the federal courts from interfering with orders of state administrative agencies to public utilities, which contained identical language and was intended to ensure that the taxpayer be afforded a full hearing and judicial determination of the controversy. Rosewell, 450 U.S. at 513-14, 101 S.Ct. at 1229. The Court held the Tax Injunction Act similarly requires that the taxpayer be afforded a full hearing and judicial determination in the state courts of any and all federal or constitutional objections to the disputed state tax. Id.
CLVT claims it has no such opportunity to challenge the California tax at issue here, and contends its state court remedy is not plain. CLVT argues further that its remedy is neither speedy nor efficient. We disagree.
A state remedy is not plain, within the meaning of the Tax Injunction Act, if there is uncertainty regarding its availability or effect. See Township of Hillsborough v. Cromwell, 326 U.S. 620, 625-26, 66 S.Ct. 445, 449, 90 L.Ed.2d 358 (1946) (where there was such uncertainty surrounding the ability of New Jersey law to afford full protection to taxpayer's federal rights as to render the state remedy speculative, the district court properly retained jurisdiction over the case). See also Rosewell, 450 U.S. at 516-17, 101 S.Ct. at 1230-31; Tully v. Griffin, Inc., 429 U.S. 68, 76, 97 S.Ct. 219, 224, 50 L.Ed.2d 227 (1976). CLVT, citing Capitol Industries-EMI, Inc. v. Bennett, 681 F.2d 1107, 1118-19 (9th Cir.), cert. denied, 455 U.S. 943, 102 S.Ct. 1438, 71 L.Ed.2d 655, 459 U.S. 1087, 103 S.Ct. 570, 74 L.Ed.2d 932 (1982), 459 U.S. 1203, 103 S.Ct. 1189, 75 L.Ed.2d 435 (1983), argues it has no plain remedy under California law, since it is not the party from whom the tax is due, and may therefore pay the levy and be ineligible for a refund under Cal.Rev. & Tax.Code Sec. 19051 (West 1983). We agree that CLVT's inability to sue for a refund in the California courts distinguishes this case from Grace Brethren Church, 457 U.S. at 417, 102 S.Ct. at 2512 (the opportunity to pay a disputed tax and seek a refund in state court constitutes a plain, speedy, and efficient remedy under the Tax Injunction Act), and Rosewell, 450 U.S. at 517, 528, 101 S.Ct. at 1231, 1236 (same).
Nevertheless, CLVT, as defendant in the CLVT I proceedings currently pending in Los Angeles Superior Court, has the opportunity to pursue in that forum its preemption argument and its challenge to the applicability of Cal.Rev. & Tax.Code Sec. 18817. In this critical respect, the situation differs from that in Capitol Industries-EMI, where there were no pending state proceedings in which the nontaxpayer-foreign parent (EMI) could contest the tax assessed against its California...
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