CSX Transp., Inc. v. Tennessee State Bd. of Equalization, 91-5270

• Citation: 964 F.2d 548
• Decision Date: 15 May 1992
• Docket Number: No. 91-5270,91-5270
• Parties: CSX TRANSPORTATION, INC., Plaintiff-Appellant, v. TENNESSEE STATE BOARD OF EQUALIZATION, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 548

964 F.2d 548

CSX TRANSPORTATION, INC., Plaintiff-Appellant, v. TENNESSEE STATE BOARD OF EQUALIZATION, Defendant-Appellee.

No. 91-5270.

United States Court of Appeals Sixth Circuit.

Argued Oct. 29, 1991.

Decided May 15, 1992.

Janis M. Wild, Laughlin, Halle, McBride, Lunsford & Fletcher, Memphis, Tenn., Gareth S. Aden, Gullett, Sanford, Robinson & Martin, Nashville, Tenn., James W. McBride, (argued and briefed), Laughlin, Halle, McBride, Lunsford & Fletcher, Washington, D.C., for plaintiff-appellant.

Daryl J. Brand, Asst. Atty. Gen. (briefed), Jimmy G. Creecy, Asst. Atty. Gen. (argued and briefed), Charles W. Burson, Atty. Gen., Office of Atty. Gen. of Tennessee, Nashville, Tenn., for defendant-appellee.

Before: RYAN and BOGGS, Circuit Judges; and GODBOLD, Senior Circuit Judge. ^*

BOGGS, Circuit Judge.

CSX is an interstate railroad operating in Tennessee. CSX filed this suit against the Tennessee Board of Equalization under § 306 of the Railroad Revitalization Act and Regulatory Reform Act of 1976, currently codified at 49 U.S.C. § 11503 ¹, which prohibits discriminatory state taxation of railroads. At the outset of the litigation, CSX moved for a preliminary injunction against the further assessment, levy or collection of discriminatory ad valorem taxes in Tennessee. The district court denied the motion for a preliminary injunction and CSX appeals that decision to this court. For the reasons set forth below, we affirm the district court's denial of a preliminary injunction.

I

The purpose of the Railroad Revitalization and Regulatory Reform Act of 1976 (the "4R Act") was to "provide the means to rehabilitate and maintain the physical facilities, improve the operations and structure, and restore the financial stability of the railway system in the United States." § 101(a). Congress included § 306 to further these goals, particularly the goal of restoring the financial stability of the railroads. Section 306 was meant to eliminate the longstanding burden of discriminatory state and local taxation of railroad property. The relevant provisions of § 306, now § 11503, are as follows:

(b) The following acts unreasonably burden and discriminate against interstate commerce, and a State, subdivision of a State, or authority acting for a state or subdivision of a State may not do any of them:

(1) assess rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value of other commercial and industrial property in the same assessment jurisdiction has to the true market value of the other commercial and industrial property;

(2) levy or collect a tax on an assessment that may not be made under clause (1) of this subsection;

(3) levy or collect an ad valorem property tax on rail transportation property at a tax rate that exceeds the tax rate applicable to commercial and industrial property in the same assessment jurisdiction.

(4) impose another tax that discriminates against a rail carrier providing transportation subject to the jurisdiction of the Commission under subchapter I of chapter 105 of this title.

(c) Notwithstanding section 1341 of title 28 and without regard to the amount in controversy or the citizenship of the parties, a district court of the United States has jurisdiction, concurrent with other jurisdiction of courts of the United States and the States, to prevent a violation of subsection (b) of this section. Relief may be granted under this subsection only if the ratio of assessed value to true market value of rail transportation property exceeds by at least 5 percent, the ratio of assessed value to true market value of other commercial and industrial property in the same assessment jurisdiction. The burden of proof in determining assessed value to true market value is governed by State law.

Section 11503(a)(3) defines "rail transportation property" as property, as defined by the Interstate Commerce Commission, owned or used by a rail carrier providing transportation subject to the jurisdiction of the Commission. Further, "commercial and industrial property" means property, other than transportation property and land used primarily for agricultural purposes or timber growing, devoted to a commercial or industrial use and subject to a property tax levy. § 11503(a)(4).

The original Section 306(2) expressly conferred jurisdiction on United States district courts "to grant such mandatory and prohibitive injunctive relief, interim equitable relief, and declaratory judgments as may be necessary to prevent, restrain, or terminate" any violations of the section. Since language changes that have occurred were not intended to be substantive, the recodification of § 306(2) at § 11503(c) also grants the authority to district courts to issue injunctive relief to prevent or terminate violations of § 11503(b). Atchison, T. & S.F. Ry. v. Lennen, 640 F.2d 255 (10th Cir.1981). Section 11503(c) is an exception to the Tax Injunction Act, 28 U.S.C. § 1341 (1988), which provides that federal 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." See also Burlington Northern R.R. v. Department of Revenue, 934 F.2d 1064, 1067 (9th Cir.1991).

Under traditional equitable principles for granting a preliminary injunction in this Circuit, a court must consider (1) whether the moving party has a substantial probability of success on the merits; (2) whether irreparable injury will occur if the injunction is not issued; (3) whether the injunction will have a harmful effect on third parties; and (4) whether the public interest would be served by the injunction. Frisch's Restaurant, Inc. v. Shoney's, Inc., 759 F.2d 1261, 1263 (6th Cir.1985). In addition, an injunction generally should not issue if there is an adequate remedy at law. EBSCO Indus. v. Lilly, 840 F.2d 333, 335-36 (6th Cir.), cert. denied, 488 U.S. 825, 109 S.Ct. 73, 102 L.Ed.2d 50 (1988). However, since Congress has expressly authorized the granting of injunctive relief to halt or prevent a violation of § 11503, traditional equitable criteria do not govern the issuance of preliminary injunctions under § 11503. Burlington Northern 934 F.2d at 1074-75; Trailer Train R.R. v. State Bd. of Equalization, 697 F.2d 860, 869 (9th Cir.), cert. denied, 464 U.S. 846, 104 S.Ct. 149, 78 L.Ed.2d 139 (1983); Lennen, 640 F.2d at 259-60; State of Tenn. v. Louisville & N. R.R., 478 F.Supp. 199, 210 (M.D.Tenn.1979). See also United States v. City and County of San Francisco, 310 U.S. 16, 30, 60 S.Ct. 749, 756, 84 L.Ed. 1050 (1940). In order to issue a preliminary injunction under § 11503, a court must determine only whether there is "reasonable cause" to believe that a violation of § 11503(b) has occurred or is about to occur. Lennen, 640 F.2d at 261.

II

In this case, CSX challenges several aspects of Tennessee's taxation system as discriminatory violations of § 11503(b). In Tennessee, all taxable real and personal property, including commercial and industrial property, is assessed by local assessors for the purpose of levying and collecting ad valorem taxes. T.C.A. §§ 67-5-102 and 67-5-103. Assessments of real property are made locally by periodic reevaluations by local assessors. Personal property is assessed annually on the basis of information supplied by property owners. However, the property of common carriers and public utilities is appraised annually at the state level by the Tennessee Public Service Commission. T.C.A. § 67-5-1301. The Commission appraises the value of a railroad's property as a single statewide unit and then apportions parts of the property's value to counties and municipalities according to statutory apportionment formulas. See T.C.A. §§ 67-5-1302(a)(2), 67-5-1323, 67-5-1324, and 67-5-1325.

Real and personal property is assessed for taxation at percentages of its true market value known as assessment ratios. T.C.A. §§ 67-5-801(a) and 67-5-901(a). An assessment ratio is the ratio of the assessed value to the true market value of the property. Pursuant to Article II, Section 28 of the Tennessee Constitution, railroad real property is assessed at 40% of its true market value. Under its Constitution, Tennessee also assesses industrial and commercial property at 40% of its true market value. The state assesses railroad personal property at 30% of its true market value. Industrial and commercial personalty is also assessed at 30% of its value.

Assessments of railroad property are made annually by the Commission, primarily on the basis of information supplied by property owners in a schedule filed with the Assessment Division. T.C.A. § 67-5-1301. The Commission first conducts a mass appraisal of the "unit value" for all of the railroad's operating property in its entire multi-state system. T.C.A. § 67-5-1302. The Commission then applies an allocation factor to apportion part of the system's value to Tennessee. T.C.A. §§ 67-5-1322, 1323. Finally, the Commission distributes assessed taxation values for railroad property to the various counties and municipalities in Tennessee according to the statutory apportionment formulas.

The State Board of Equalization reviews the assessments made by the Public Service Commission. T.C.A. § 67-5-1328. The State Board of Equalization is part of an elaborate statutory process in Tennessee to ensure that centrally valued railroad property is assessed at the same level as locally valued property. T.C.A. § 67-5-1603, et seq. The local assessment of property values is usually below 100% of fair market value because most counties do not value all real property annually. Railroad property, on the other hand, is appraised annually at full value by the Commission. More frequent assessment generally results in higher relative taxation, since more of the actual current market value is...