A.F. Moore & Assocs., Inc. v. Pappas

• Decision Date: 29 January 2020
• Docket Number: Nos. 19-1971 & 19-1979,s. 19-1971 & 19-1979
• Citation: 948 F.3d 889
• Parties: A.F. MOORE & ASSOCIATES, INC., et al., Plaintiffs-Appellants, v. Maria PAPPAS, Cook County Treasurer, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

948 F.3d 889

A.F. MOORE & ASSOCIATES, INC., et al., Plaintiffs-Appellants,

v.Maria PAPPAS, Cook County Treasurer, et al., Defendants-Appellees.

Nos. 19-1971 & 19-1979

United States Court of Appeals, Seventh Circuit.

Argued December 11, 2019

Decided January 29, 2020

Rehearing and Rehearing En Banc Denied April 9, 2020

Mark R. Davis, Attorney, O'KEEFE LYONS & HYNES LLC, Chicago, IL, for Plaintiffs-Appellants A.F. MOORE & ASSOCIATES, INC., J. EMIL ANDERSON & SON, INC., PRIME GROUP REALTY TRUST, AMERICAN ACADEMY OF ORTHPAEDIC SURGEONS, ERLING EIDE.

Richard L. Fenton, DENTONS US LLP, Chicago, IL, Plaintiffs-Appellants FOX VALLEY/RIVER OAKS PARTNERSHIP, SIMON PROPERTY GROUP.

Paul A. Castiglione, Attorney, OFFICE OF THE COOK COUNTY STATE'S ATTORNEY, Federal Litigation Division, Chicago, IL, for Defendants-Appellees MARIA PAPPAS, COOK COUNTY, ILLINOIS.

Katherine G. Schnake, Gretchen Harris Sperry, Louis Joseph Manetti, Jr., Attorneys, HINSHAW & CULBERTSON LLP, Chicago, IL, for Defendant-Appellee FRITZ KAEGI.

Before Flaum, Hamilton, and Barrett, Circuit Judges.

Barrett, Circuit Judge.

The Equal Protection Clause entitles owners of similarly situated property to roughly equal tax treatment. Allegheny Pittsburgh Coal Co. v. Cty. Comm’n , 488 U.S. 336, 345–46, 109 S.Ct. 633, 102 L.Ed.2d 688 (1989). A group of taxpayers asserts that the tax assessor for Cook County violated that guarantee by assessing their properties at the rates mandated by local ordinance while cutting a break to other owners of similarly situated property. The taxpayers pursued a refund in Illinois court, where they remain tied up in litigation after more than a decade. Frustrated, they turned to federal court for relief, arguing that Illinois’s procedural rules for challenging property taxes prevent them from proving their federal constitutional claims in state court. The district court disagreed and held that the Tax Injunction Act, 28 U.S.C. § 1341, barred their federal suit. The Act strips federal district courts of jurisdiction over challenges to state and local taxes as long as the taxpayer has an adequate forum in state court to raise all constitutional claims. This appeal concerns whether Illinois courts offer a sufficient forum. The issue is made simpler by the County’s concession that Illinois’s tax-objection procedures do not allow the taxpayers to raise their constitutional claims in state court. We are left to conclude that this is the rare case in which taxpayers lack an adequate state-court remedy. The Tax Injunction Act therefore does not bar the taxpayers’ federal suit, so we reverse the district court’s dismissal.

I.

In our review of the district court’s dismissal for lack of subject-matter jurisdiction, we take as true the allegations in the taxpayers’ complaint. Scott Air Force Base Props., LLC v. County of St. Clair , 548 F.3d 516, 519 (7th Cir. 2008).

Cook County prescribes tax assessment rates for different categories of real estate. Before 2008, a County ordinance required the County Assessor to assess single-family residential property at 16% of the market value, commercial property at 38% of the market value, and industrial property at 36% of the market value. But between 2000 and 2008, the Assessor in fact assessed most of the property in those three categories at rates significantly lower than the rates prescribed by law. Cook County officials were candid about the discrepancy between the de jure rates and the de facto rates. In April 2008, the Assessor proposed an ordinance that would "recalibrate" the classification system to "more closely reflect the current relationship between assessment and market value." And one of the ordinance’s primary sponsors on the Cook County Board of Commissioners advocated for the recalibration in clear terms: "We have known for years, forever, and pretended that it is not true [and] that somehow the assessments were at the statutory levels; they are not. This reflects the actual reality as best we know it."

Although most property was assessed at the lower de facto rates, a minority was assessed at the de jure rates or even higher. A.F. Moore & Associates and the other plaintiffs in this case count their properties in that minority. Their assessment rates may have been lawful under the letter of the ordinance, but they were significantly higher than the de facto rates that most other property owners enjoyed. These taxpayers calculate that they paid millions of dollars more in property taxes during the period from 2000 to 2008 than they would have if they were assessed at the de facto rates.

Believing that discrepancy to be unlawful, the taxpayers sought a refund in Illinois state court. The taxpayers followed Illinois’s procedural rules by first exhausting their remedies with the Cook County Board of Review and then bringing a suit in the Circuit Court of Cook County. There they challenged the assessment under the Fourteenth Amendment’s Equal Protection Clause, relying on the rule articulated in Allegheny Pittsburgh Coal Co. v. County Commission : a property owner whose tax assessment comports with state law may nevertheless suffer a violation of the Equal Protection Clause if similarly situated property is assessed at a lower rate than his. 488 U.S. 336, 345–46, 109 S.Ct. 633, 102 L.Ed.2d 688 (1989). The taxpayers also alleged that the assessment violated Illinois statutory law and the Illinois Constitution.

But the taxpayers have struggled to present the evidence that they need to make their case; over a decade later, their state suit remains in discovery. They attribute the delay to a provision of Illinois law, 35 ILCS 200/23-15, which they say constrains them in several ways: it limits whom they can name as a defendant, what evidence they can present, and what arguments they can raise when challenging property taxes. According to the taxpayers, section 23-15 has the effect of preventing them from making their equal protection case in state court altogether.

Seeking a forum for their federal constitutional claims, the taxpayers then sued Cook County, the County Assessor, and the County Treasurer (who serves ex officio as the County’s tax collector) in federal district court, once again alleging a violation of the Equal Protection Clause. They also challenged the Illinois tax-objection procedures under the guarantees to due process in the United States Constitution and the Illinois Constitution. Finally, they alleged additional violations of the substantive guarantees of equal taxation in the Illinois Constitution and the Illinois Property Tax Code. The taxpayers sought declaratory relief and an injunction that the tax collector refund their overpaid taxes.

The district court held that the Tax Injunction Act barred the taxpayers’ federal suit. The Act provides that federal district courts may 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. § 1341 ; see also Hager v. City of West Peoria , 84 F.3d 865, 868 n.1 (7th Cir. 1996) (explaining that the Act also applies to local and municipal taxes). Rejecting the taxpayers’ argument that section 23-15 denied them an adequate state forum, the district court held that Illinois courts provide a "plain, speedy and efficient remedy." The court dismissed the suit for lack of subject-matter jurisdiction under the Act and, in the alternative, declined to exercise jurisdiction under the principle of comity. The taxpayers now appeal, arguing that Illinois does not offer an adequate remedy for their constitutional claims.

II.

A.

The taxpayers maintain that several features of section 23-15 make Illinois courts inhospitable to their claims, but they focus on one in particular. Paragraph (b)(3) of the statute provides that relief is available for assessments that are "incorrect or illegal." It goes on to say: "If an objection is made claiming incorrect valuation, the court shall consider the objection without regard to the correctness of any practice, procedure, or method of valuation followed by the assessor ...." 35 ILCS 200/23-15(b)(3). The taxpayers characterize this as the "Methodology Prohibition."

The taxpayers argue that the Methodology Prohibition is incompatible with their constitutional claim. Procedures that allow them to challenge only the correctness of their assessment without regard to the Assessor’s methods or intent are of no use to these taxpayers. Their argument, after all, is not that their taxes were valued incorrectly under the letter of Cook County law. Rather, they contend that they suffered an equal protection violation because the letter of the law was not applied to everyone else. To prove that claim, they need to conduct discovery about the Assessor’s methods and his intent. Not only that, but the taxpayers want to name the Assessor as a defendant, since his actions are the focus of their claims. But the statute only contemplates the collector as a defendant, see id. 200/23-15(a), so they could not sue the Assessor in state court or file interrogatories for him to answer, and he has been free to destroy evidence of unconstitutional action with impunity. In support of their argument, they cite a non-precedential decision from the Illinois Appellate Court that held that constitutional objections "cannot be raised" in tax objection proceedings because of these restrictions. See Friedman v. Pappas , No. 1-2-2685, at *13–14, 353 Ill.App.3d 1082, 317 Ill.Dec. 483, 881 N.E.2d 969 (Ill. App. Ct. 2004) (Separate App. Pls.-Appellants 194–95). According to the taxpayers, section 23-15 deprives them of any "remedy" at all in state court—let alone one that is "plain, speedy and efficient" under the Tax Injunction Act.

B.

In most cases, a "plain, speedy and efficient" state-court remedy is easy to identify. For the Act’s jurisdictional bar to apply, a state need only "provid[e] the taxpayer with a ‘full hearing and...