Union Carbide Corp. v. State Bd. of Tax Com'rs of State of Ind.
| Decision Date | 27 April 1993 |
| Docket Number | No. 92-3423,92-3423 |
| Parties | UNION CARBIDE CORP., a New York Corporation; Agri Financial Services, Inc., an Iowa Corporation; Cargill, Inc., a Delaware Corporation; Celtran, Inc., a Delaware Corporation; Chrysler Rail Transportation Corp., a Delaware Corporation; GLNX Corp., a Texas Corporation; Mobil Oil Corp., a Delaware Corporation; Tennessee Eastman Co., a New Jersey Corporation; Vista Chemical Company, a Delaware Corporation; and Quantum Chemical Corporation, a Virginia Corporation, Plaintiffs-Appellants, v. STATE BOARD OF TAX COMMISSIONERS OF the STATE OF INDIANA, C. Kurt Zorn, Sandra K. Bickel, Gordon E. McIntyre, as members of the State Board of Tax Commissioners of the State of Indiana; Indiana Department of State Revenue, and Kenneth E. Miller, as Commissioner of the Indiana Department of State Revenue, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
John F. Prescott, Jr., Barton T. Sprunger, Ice, Miller, Donadio & Ryan, Indianapolis, IN, Terrence J. Benshoof (argued), Rodriguez & Villalobos, Chicago, IL, for plaintiffs-appellants.
Marilyn S. Meighen, Office of the Atty. Gen., Tax Div., Indianapolis, IN (argued), for defendants-appellees.
Before RIPPLE and MANION, Circuit Judges, and SHADUR, Senior District Judge. *
Union Carbide Corp. and nine other owners of rail transportation property (collectively "Companies") appeal the district court's dismissal, as time-barred, of Companies' Complaint brought under Section 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 (the "4-R Act" or, when we refer to a specific provision of that statute as found in Title 49, simply "Act § --"), 49 U.S.C. § 11503 (1993). 1 Companies invoke that statutory provision to obtain declaratory and injunctive relief against allegedly discriminatory taxation of their rail cars by the State of Indiana.
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. We reverse the district court's order of dismissal and remand for further proceedings.
Companies furnish rail cars to common carriers for use in interstate commerce and thus qualify as "railroad car compan[ies]" under Ind.Code § 6-1.1-8-2(10). 2 On September 27, 1991 Indiana's State Board of Tax Commissioners ("Board") assessed an ad valorem property tax on Companies' indefinite-situs distributable property pursuant to Code § 6-1.1-8-12(b). Payment of the taxes was due on December 31, 1991 (Code § 6-1.1-8-35(b)).
Code § 6-1.1-8-30 allowed only 20 days for any taxpayer seeking state court review of an assessment to file an appeal to the Indiana Tax Court. Instead of pursuing that route, on December 26, 1991 Companies filed their Complaint in the United States District Court for the Southern District of Indiana seeking (1) a declaration that the tax sought to be imposed on their property was discriminatory and violative of the 4-R Act and (2) an injunction against collection of those assertedly discriminatory taxes. Board moved to dismiss the action as having been brought too late, contending that Indiana's 20-day statutory period for appeals of Board assessments also measured the outside time limit for suits under the 4-R Act.
Noting that the 4-R Act contained no statute of limitations of its own, the district court followed the teaching of Wilson v. Garcia, 471 U.S. 261, 266-67, 105 S.Ct. 1938, 1942, 85 L.Ed.2d 254 (1985), which calls for adoption of a local limitations period "if it is not inconsistent with federal law or policy to do so." In doing so the district court analyzed the nature of Companies' claim as one challenging the methodology that had been used to allocate a portion of the value of Companies' railroad cars to Indiana. It observed that the issue was the same as that decided by Board (and that would have been raised on appeal to the Indiana Tax Court). Accordingly the district court applied a 20-day limitation period and dismissed the action as untimely. 3
Because the district court never reached the merits of Companies' claim, the only issue before us is whether a complaint for declaratory and injunctive relief under the 4-R Act is indeed subject to the same time constraints that apply to appeals of Board assessments in Indiana. Companies urge that the district court's adoption of that 20-day limitations period was inappropriate. They suggest instead that the equitable doctrine of laches should apply or, in the alternative, that Code § 6-1.1-26-1, which allows three years to file a claim for a refund of taxes wrongly collected, establishes a more closely analogous state statute of limitations. We review the district court's ruling as to the proper limitations period de novo (Central States, Southeast & Southwest Areas Pension Fund v. Jordan, 873 F.2d 149, 152 (7th Cir.1989)).
Congress' purpose in passing the 4-R 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 of the United States" (4-R Act § 101(a), 45 U.S.C. § 801(a)). One impediment to such financial stability was discriminatory taxation--the House Committee on Foreign and Interstate Commerce had found that railroads were "over-taxed by at least $50 million each year" (H.R.Rep. No. 725, 94th Cong., 1st Sess. 78 (1975)). In light of that finding the Committee went on to state (id.) that "[i]n view of the generally poor economic condition of the railroad industry and the effect such economic hardship is having on the ability of the industry to adequately serve our national rail transportation needs, the Committee believes discriminatory property and 'in lieu' taxation should be ended."
To relieve that burden of discriminatory state and local taxation (including the burden of having to pay those taxes first and then having to wait to recover the excessive amounts through suits for refund), Congress provided recourse to the federal courts via Act § 11503 ():
(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.
* * * * * *
(c) Notwithstanding section 1341 of title 28 and without regard to the amount in controversy or 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.
Thus Act § 11503(c) creates an express exception to the Tax Injunction Act, 28 U.S.C. § 1341, 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."
Act § 11503(c) grants federal district courts concurrent jurisdiction to "prevent" violations of Act § 11503(b). Although the statute does not otherwise specify the type of relief that a district court may grant, action taken by a court to "prevent" discriminatory taxation is by definition equitable in nature, in the form of injunctive, mandatory or declaratory relief (see Burlington Northern R. Co. v. Bair, 957 F.2d 599, 603 (8th Cir.1992), holding that the only form of relief available under Act § 11503(a) is equitable). 4
Federal courts have long followed a practice of borrowing local time constraints on bringing suit when dealing with federal causes of action for which Congress has provided no statute of limitations (Reed v. United Transportation Union, 488 U.S. 319, 323-24, 109 S.Ct. 621, 624-25, 102 L.Ed.2d 665 (1989)). That "implied absorption of State statutes of limitation within the interstices of the federal enactments is a phase of fashioning remedial details where Congress has not spoken but left matters for judicial determination within the general framework of particular legal principles" (Holmberg v. Armbrecht, 327 U.S. 392, 395, 66 S.Ct. 582, 584, 90 L.Ed. 743 (1946)). Wilson, 471 U.S. at 268, 105 S.Ct. at 1942, teaches that a court searching for an appropriate time limitation must "characterize the essence of the claim in the pending case, and decide which state statute provides the most appropriate limiting principle." Federal interests remain paramount, however, and courts must "look to the underlying federal claim and the federal policies involved" (Central States, 873 F.2d at 152). Once having done so, "[u]nless it is inconsistent with federal policy or federal law, a federal court will adopt the most analogous state limitation period" (id.).
It follows that adoption of a state-prescribed time limit is not a universal rule that drives every type of lawsuit. Federal courts will not borrow state limitations periods if doing so would "frustrate or interfere with the implementation of national policies" or "be inconsistent with the underlying policies of the federal statute" (Occidental Life Ins. Co. v. EEOC, 432 U.S. 355, 367, 97 S.Ct. 2447, 2455, 53 L.Ed.2d 402 (1977)). Thus, for example, Reed, 488 U.S. at 324, 109 S.Ct. at 625 spoke of "a closely circumscribed exception to the general rule" that courts should borrow time limitations from state law, stating that such borrowing was inappropriate (quoting Del Costello v. International Bhd. of Teamsters, 462 U.S. 151, 172, 103...
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