American Landfill, Inc. v. Stark/Tuscarawas/Wayne Joint Solid Waste Management Dist.

• Decision Date: 28 January 1999
• Docket Number: No. 97-4222,97-4222
• Citation: 166 F.3d 835
• Parties: 29 Envtl. L. Rep. 20,500 AMERICAN LANDFILL, INC., Plaintiff-Appellant, v. STARK/TUSCARAWAS/WAYNE JOINT SOLID WASTE MANAGEMENT DISTRICT, Defendant-Appellee, Betty D. Montgomery, Ohio Attorney General, Intervenor-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 835

166 F.3d 835

29 Envtl. L. Rep. 20,500

AMERICAN LANDFILL, INC., Plaintiff-Appellant, v. STARK/TUSCARAWAS/WAYNE JOINT SOLID WASTE MANAGEMENT DISTRICT, Defendant-Appellee Betty D. Montgomery, Ohio Attorney General, Intervenor-Appellee.

No. 97-4222.

United States Court of Appeals Sixth Circuit.

Argued Oct. 28, 1998.

Decided Jan. 28, 1999.

David C. Weiner (argued and briefed), Mark E. Staib (briefed), Erica L. Calderas (briefed), Hahn, Loeser & Parks, L.L.P., Cleveland, Ohio, for Plaintiff-Appellant.

Stephen M. O'Bryan (argued and briefed), Peter M. Poulos (briefed), Kelley, Mccann & Livingstone, L.L.P., Cleveland, Ohio, for Defendant-Appellee.

Bryan F. Zima (argued and briefed), Office of the Attorney General, Environmental Enforcement Section, Columbus, Ohio, for Intervenor-Appellee.

David E. Northrop, Nancy J. Miller, Samuels & Northrop Co., Columbus, Ohio, for amicus curiae.

Before: BOGGS, SUHRHEINRICH, and SILER, Circuit Judges.

OPINION

SILER, Circuit Judge.

Plaintiff, American Landfill, Inc., challenges the constitutionality of certain assessments on solid waste disposal in Ohio. Defendant, Stark/Tuscarawas/Wayne Joint Solid Waste Management District, and Intervenor, the Attorney General of Ohio, moved to dismiss the action under Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction based on the Tax Injunction Act, 28 U.S.C. § 1341, arguing that the fees were actually state taxes under federal law. The district court dismissed the action, finding the charges to be taxes. We affirm.

I. BACKGROUND:

Under the Ohio Revised Code, the State of Ohio authorizes solid waste management districts to levy an assessment upon persons disposing of material at solid waste disposal facilities located within their district. See OHIO REV.CODE ANN. § 3734.57(B) (Banks-Baldwin 1998). The State requires each county to establish a solid waste management district or to participate in a joint solid waste management district with other counties. The district's purpose is to prepare, adopt, submit, and implement a solid waste management plan in compliance with the Revised Code. See id. § 3734.52(A). The solid waste management plan is to focus on the availability of and access to sufficient solid waste facility capacity to meet the district's solid waste needs. It does not regulate transporters or generators of solid waste. Solid waste facilities are not licensed by the districts and do not pay the assessment as a permit or license fee. The facilities pay a fee to the board of health for an operating license, see id. § 3734.06, and the solid waste facilities are regulated by the board, see id. § 3734.04.

The assessments collected by solid waste management districts are to be used for various purposes. Among them are:

-- preparing and implementing the district's solid waste management plan;

-- development and implementation of solid waste recycling or reduction programs;

-- providing financial assistance to local boards of health for water analysis and other enforcement activities;

-- providing financial assistance to counties for maintenance of roads, public facilities, and emergency services which result from the location of a solid waste facility in the counties; and

-- assistance to local law enforcement and boards of health to enforce littering and open dumping laws.

The assessments are collected by the owner or operator of the solid waste disposal facility on the basis of tonnage or cubic yardage, forwarded to the board of county commissioners, board of directors of the solid waste district, or treasurer for the municipal corporation. See id. § 3734.57(E). Under the current Revised Code, the assessments for waste generated in-district and out-of-state are the same, while the assessments for waste generated in-state but out-of-district are twice the in-district rate. Under a repealed portion of the Revised Code, the assessments for in-district waste, in-state but out-of-district waste, and out-of-state waste were in a 1:2:3 ratio.

Stark, Tuscarawas, and Wayne Counties formed defendant joint solid waste district pursuant to the Revised Code, and collect assessments from owners or operators of solid waste disposal facilities in accordance with the Code. American Landfill operates a solid waste disposal facility within Stark County.

American Landfill filed suit against the district for reimbursement of monies paid for the disposal of out-of-district wastes which were in excess of the in-district rate and for declaratory relief declaring the current differential between in-district assessments and in-state but out-of-district assessments to be unconstitutional. In its dismissal, the district court held that the Tax Injunction Act divested it of subject matter jurisdiction because the assessments in question were "taxes" and not "fees" under federal law. It relied solely on Wright v. McClain, 835 F.2d 143 (6th Cir.1987), in analyzing the issue.

II. DISCUSSION:

The standard of review on the issue of subject matter jurisdiction is de novo. See Greater Detroit Resource Recovery Auth. v. EPA, 916 F.2d 317, 319 (6th Cir.1990).

The Tax Injunction Act ("the Act"), 28 U.S.C. § 1341, provides that "[t]he 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." In order to determine whether the Act divests a district court of jurisdiction over an action, that court must decide whether the assessment in question is a tax within the meaning of that term as used in the Act. ¹ The definition of the term "tax" is a question of federal law. See Wright v. McClain, 835 F.2d 143, 144 (6th Cir.1987) (citing Robinson Protective Alarm Co. v. City of Philadelphia, 581 F.2d 371, 374 (3d Cir.1978)).

A. Are the assessments for solid waste disposal under Ohio law, R.C. 3734.57(B), "taxes" or "fees" for purposes of the Tax Injunction Act?

Wright v. McClain emphasizes that a court must determine "whether the assessment in question is for revenue raising purposes or merely a regulatory or punitive levy in the nature of a privilege fee," with "taxes" being assessed for revenue purposes and "fees" being assessed for regulatory or punitive purposes. Wright, 835 F.2d at 145. The challenged assessment in Wright was a Tennessee law providing that a gainfully employed parolee was required to contribute toward the cost of his supervision and rehabilitation as well as to a criminal injuries compensation fund. This court determined that the assessment was a "tax" for purposes of the Act, saying that:

[a]lthough the levies imposed under the statute are earmarked for the Corrections Department budget and not the general fund, they are no less for revenue raising purposes as distinguished from license or privilege fees, or punitive assessments. The purposes of the charges are to defray the cost to the general public of [supervising offenders and compensating victims]. Those purposes relate directly to the general welfare of the citizens of Tennessee and the assessments to fund them are no less general revenue raising levies simply because they are dedicated to a particular aspect of the commonwealth.

Id.

Two other circuits addressing this question have used what may be seen as a three-factor test for determining whether an assessment is a "tax" under the Act. The factors originated in San Juan Cellular Tel. Co. v. Public Serv. Comm'n, 967 F.2d 683, 685 (1st Cir.1992), after that court surveyed various cases defining "taxes," including National Cable Television Ass'n v. United States, 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974), and Wright. Those factors, as repeated in Bidart Bros. v. California Apple Comm'n, 73 F.3d 925, 931 (9th Cir.1996), are: "(1) the entity that imposes the assessment; (2) the parties upon whom the assessment is imposed; and (3) whether the assessment is expended for general public purposes, or used for the regulation or benefit of the parties upon whom the assessment is imposed." Both San Juan and Bidart indicate that for cases where the assessment falls near the middle of the spectrum between a regulatory fee and a classic tax, the predominant factor is the revenue's ultimate use. See San Juan, 967 F.2d at 685; Bidart, 73 F.3d at 932. When the ultimate use is to provide a general public benefit, the assessment is likely a tax, while an assessment that provides a more narrow benefit to the regulated companies is likely a fee. See id.

In San Juan, a private cellular service firm was required to pay a periodic assessment of three percent of gross revenue in order to obtain authorization to begin service, and the money was placed in a special fund for defraying the expenses in operating the Public Service Commission, the entity granting the authorization. That assessment was determined to be a "fee." It was assessed by a regulatory agency, placed in a special fund, and dedicated to defraying regulatory expenses. See San Juan, 967 F.2d at 686. Bidart involved a challenge to the California Apple Commission's assessment (by the pound) on marketed apples where the assessments were used predominantly in promoting California apples. Because the assessment was not only made by an agency created by a vote of apple producers and terminable by a similar vote, but also placed in a special fund solely for use for Commission purposes, the assessment was found to be a "fee" rather than a "tax" for purposes of the Act.

The Supreme Court has not addressed the precise issue in dispute here, the means of defining a "tax" for purposes of the Tax Injunction Act. It has, however, differentiated between a "tax" and a "fee" in other situations, most notably during its analysis of FCC fees challenged as taxes in National Cable Television Ass'n, 415 U.S. at 336, 94 S.Ct. 1146. In that case, the Court stated that:

[t]axation is a legislative function...