Northeast Federal Credit Union v. Neves

• Decision Date: 09 December 1987
• Docket Number: No. 87-1799,87-1799
• Citation: 837 F.2d 531
• Parties: NORTHEAST FEDERAL CREDIT UNION, Plaintiff, Appellee, v. Anthony J. NEVES, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 531

837 F.2d 531

NORTHEAST FEDERAL CREDIT UNION, Plaintiff, Appellee, v. Anthony J. NEVES, Defendant, Appellant.

No. 87-1799.

United States Court of Appeals, First Circuit.

Heard Dec. 9, 1987.

Decided Jan. 25, 1988.

Polly Haight Frawley, Asst. Atty. Gen., with whom James E. Tierney, Atty. Gen., Augusta, Me., was on brief, for appellant.

Daniel J. Harkinson, with whom C. Russell Shillaber and Cooper, Hall, Whittum & Shillaber, P.C., Rochester, N.H., were on brief, for appellee.

Before BREYER and SELYA, Circuit Judges, and LAFFITTE, ^* District Judge.

SELYA, Circuit Judge.

The State of Maine through its tax assessor, Anthony J. Neves, attempted to garnish certain accounts on deposit at Northeast Federal Credit Union (NEFCU) alleging that the depositors (mostly New Hampshire residents employed at the United States Naval Shipyard, Kittery, Maine) owed state income taxes to Maine. NEFCU, a federally chartered credit union which operated a branch at the shipyard while maintaining its principal offices in New Hampshire, refused to honor the levies. NEFCU contended inter alia that a federal statute, 12 U.S.C. Sec. 1768 (1982), barred Maine from attaching the deposits. ¹

When Maine sought to enforce the levies by commencing an action against NEFCU in a Maine state court, the credit union countered by filing a bill of interpleader in the United States District Court for the District of New Hampshire. It named as defendants not only Neves, but also the individual depositors identified in the notices of levy. NEFCU asked the federal tribunal to restrain prosecution of the state enforcement proceedings. Following a hearing, the district court held that 12 U.S.C. Sec. 1768 protected the deposits in question from Maine's attempts to garnish them. Northeast Federal Credit Union v. Neves, 664 F.Supp. 640, 642-43 (D.N.H.1987) (NEFCU I ). The district judge reasoned that the state, in the idiom of section 1768, was endeavoring to impose a "duty or burden of collecting or enforcing the payment" of state taxes on the credit union, and that section 1768 "grants NEFCU exemption from any attempts at levy or collection of [Maine's state income] tax by the Maine taxing authorities." Id. at 643. Accordingly, the court ordered "Neves, his agents, servants, or employees, and any state taxing authorities of the State of Maine ... to cease and desist any attempts at imposition of a levy [upon NEFCU] seeking to collect or enforce payment of any Maine state taxes...." Id.

An immediate appeal ensued. 28 U.S.C. Sec. 1292(a)(1). At oral argument, the district court's subject matter jurisdiction was called into question. Because this issue had neither been vetted below nor briefed on appeal, ² we requested supplemental filings. Having received these addenda and thoroughly reviewed the record, we find that the district court was without jurisdiction to hear and determine the action.

I. MY FAIR LEVY

According to NEFCU's complaint, jurisdiction was premised upon the federal interpleader statute, 28 U.S.C. Sec. 1335(a) (1987), which provides in pertinent part:

(a) The district courts shall have original jurisdiction of any civil action of interpleader or in the nature of interpleader filed by any person, firm, or corporation, association, or society having in his or its custody or possession money or property of the value of $500 or more ... or being under any obligation written or unwritten to the amount of $500 or more, if

(1) Two or more adverse claimants, of diverse citizenship as defined in section 1332 of this title, are claiming or may claim to be entitled to such money or property ...; and if (2) the plaintiff has deposited such money or property ... into the registry of the court, there to abide the judgment of the court, or has given bond payable to the clerk of the court [upon appropriate conditions].

Id.

In this case, the "adverse claimants" to the funds are, on the one hand, the depositors, and on the second hand, the tax assessor. See Treinies, 308 U.S. at 70-73, 60 S.Ct. at 47-48. Their claims are of the kind envisioned by the statute; though they "do not have a common origin, ... [they] are adverse to and independent of one another." 28 U.S.C. Sec. 1335(b). It is not disputed that the depositors, by and large, are citizens of New Hampshire. Their antagonist, Neves, was portrayed below as a citizen of Maine, ergo, "diverse." But, this blithe assertion glosses over the realities of the litigation.

No one has any quarrel with Neves individually. The credit union sues him simply in his capacity as the state's tax assessor, for actions undertaken in his official capacity and in the course of his official duties. By exactly the same token, Neves' claim of entitlement to the deposits is not personal to him; he seeks the monies not for his own enrichment, but to apply against the depositors' indebtedness to the state. The immediate relief sought, the restraining order, operated to enjoin the "state taxing authorities." See NEFCU I, 664 F.Supp. at 643. The ultimate relief obtainable, the depositors' access to the account balances free and clear of the levy, can be obtained only at Maine's expense.

Where, as here, all of the claims are made against a government official acting purely in a representative role, the suit must be regarded as one against the sovereign. See Kentucky v. Graham, 473 U.S. 159, 166, 105 S.Ct. 3099, 3105, 87 L.Ed.2d 114 (1985) ("an official-capacity suit is, in all respects other than name, to be treated as a suit against the entity"); Monell v. Dep't of Social Services of the City of New York, 436 U.S. 658, 690 n. 55, 98 S.Ct. 2018, 2035 n. 55, 56 L.Ed.2d 611 (1978) (official-capacity suits "represent only another way of pleading an action against an entity of which an officer is an agent"); Culebras Enterprises Corp. v. Rivera Rios, 813 F.2d 506, 516 (1st Cir.1987) (official-capacity suit "tantamount to a suit against the [sovereign]"). This being so, the finding of diversity of citizenship entered below is imperilled. As the Court held long ago:

A State is not [itself] a citizen. And, under the Judiciary Acts of the United States, it is well settled that a suit between a State and a citizen or a corporation of another State is not between citizens of different States; ....

Postal Telegraph Cable Co. v. Alabama, 155 U.S. 482, 487, 15 S.Ct. 192, 194, 39 L.Ed. 231 (1894). See also Moor v. County of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 1800, 36 L.Ed.2d 596 (1973) ("There is no question that a State is not a 'citizen' for purposes of the diversity jurisdiction.").

The rule holds true whether the state is a party de jure, in its own name, or becomes a party de facto, because an alter ego--say, a department of state government or an official-capacity state actor--is made a party. "For the purpose of diversity jurisdiction, the determinative factor is whether the state is the real party in interest." Krisel v. Duran, 386 F.2d 179, 181 (2d Cir.) (per curiam), cert. denied, 390 U.S. 1042, 88 S.Ct. 1635, 20 L.Ed.2d 303 (1967). See also State Highway Comm'n of Wyoming v. Utah Construction Co., 278 U.S. 194, 199-200, 49 S.Ct. 104, 105-06, 73 L.Ed. 262 (1929); George R. Whitten, Jr., Inc. v State University Construction Fund, 493 F.2d 177, 179-80 & n. 2 (1st Cir.1974). The test is pretty much the same as that used to determine whether a "state is the real, substantial party in interest and [thus] entitled to invoke its sovereign immunity," Ford Motor Co. v. Dep't of Treasury of Indiana, 323 U.S. 459, 464, 65 S.Ct. 347, 350, 89 L.Ed. 389 (1945), or to assess whether an agency "is sufficiently an arm of the state to qualify for the protection of the Eleventh Amendment." Paul N. Howard Co. v. Puerto Rico Aqueduct Sewer Authority, 744 F.2d 880, 886 (1st Cir.1984), cert. denied, 469 U.S. 1191, 105 S.Ct. 965, 83 L.Ed.2d 970 (1985).

In this case, we need not dawdle over the point. Revenues are the lifeblood of governments. The state's division of taxation is an integral part of Maine's governmental apparatus. The taxes in question are owed to the state, not to Neves personally. The levy which the assessor strains to enforce, if it proves to be productive, will inure exclusively to the benefit of the public fisc. As Professor Henry Higgins might have chirped, "the gain from strain is plainly that of Maine."

The Court's decision in Worcester County Trust Co. v. Riley, 302 U.S. 292, 58 S.Ct. 185, 82 L.Ed. 268 (1937), is instructive in this regard. There, a federal interpleader action was brought on behalf of a decedent's estate against revenue officers of California and Massachusetts to resolve conflicting death tax claims. The Court unanimously held that the case, though nominally against individuals, sought to affect defendants' actions as state officers and was in reality a suit against the two states. Id. at 299-300, 58 S.Ct. at 187-88. Riley is closely in point. We conclude, without serious pause, that Maine is the real party in interest in this interpleader action. Therefore, Neves' citizenship as an individual is of no moment; as an official-capacity defendant, he has no citizenship for jurisdictional purposes. There is an absence of even the minimal diversity as between "adverse claimants" necessary to animate 28 U.S.C. Sec. 1335.

II. HANDS ACROSS THE BORDER

In the latest round of filings, NEFCU abandons its original jurisdictional hypothesis and attempts to come at its problem from a new direction. In brief, the credit union argues that it should be allowed to amend its complaint to allege jurisdiction under 28 U.S.C. Sec. 1331 in lieu of 28 U.S.C. Sec. 1335. ³ NEFCU now says that since it maintains the depositors' accounts at its New Hampshire headquarters, Maine's effort to snare the funds is a constitutionally impermissible reach across state lines. Thus, the "federal question" in this case becomes "Maine's attempted extraterritorial assertion of power," Appellee's Supplemental Brief at 4,...