Anr Pipeline Co v. La. Tax Comm'n

• Decision Date: 18 January 2011
• Docket Number: CIVIL ACTION NO: 10-2622
• Parties: ANR PIPELINE CO., ET AL. v. LOUISIANA TAX COMMISSION, ET AL.
• Court: U.S. District Court — Eastern District of Louisiana

ANR PIPELINE CO., ET AL.

v.LOUISIANA TAX COMMISSION, ET AL.

CIVIL ACTION NO: 10-2622

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

SECTION: "A" (3)

January 18, 2011

ORDER

The following motions are before the Court: Motions to Dismiss (Rec. Docs. 30, 33, 132) filed by Wayne Melancon, et al., ¹ Paul Hargrove, et al., ² and Tony Mancuso, et al.;³ Motion for Hearing on Plaintiffs' Request for Preliminary Injunction (Rec. Doc. 36) filed by plaintiffs ANR Pipeline Co., Southern Natural Gas Co., and Tennessee Gas Pipeline Co.; Motion for Sanctions (Rec. Doc. 45) filed by Wayne Melancon, et al. All motions are opposed. The motions, set for hearing on the Court's October 27, 2010 and November 10, 2010 hearing dates, are before the Court on the briefs without oral argument.

This action has its genesis in litigation that has proceeded through the state court system for several years. Plaintiffs are ANR Pipeline Co., Tennessee Gas Pipeline Co., and Southern Natural Gas Co.--interstate pipelines that pass through Louisiana. Plaintiffs' claims arise out ad valorem taxes imposed under Louisiana law for tax years 1994-2003 and 2004-2009. ANR, Tennessee Gas, and Southern Natural filed the instant complaint for injunctive relief and damages pursuant to 42 U.S.C. § 1983. Plaintiffs seek inter alia to have this Court enjoin ongoing state court proceedings pertaining to the remedy phase of litigation that resolved the 1994-2003 claims as well as ongoingstate court litigation pertaining to their claims for a refund of taxes paid under protest for tax years 2004-2009.⁴

The Court, having carefully considered the pleadings, memoranda, decisions of the state court, applicable law, and arguments of counsel, is persuaded that Plaintiffs' complaint should be dismissed in its entirety.

I. BACKGROUND

Louisiana's Ad Valorem Tax Scheme

Plaintiffs own interstate natural gas pipelines that pass through Louisiana and other states. Interstate pipelines are regulated by the Federal Energy Regulatory Commission ("the FERC") pursuant to federal law. In contrast, Louisiana intrastate pipelines are located wholly within the state of Louisiana. La. Rev. Stat. Ann. § 30:503(8) (2007). Intrastate pipelines are regulated by either the Louisiana Public Service Commission or by the Louisiana Department of Natural Resources depending upon whether or not the pipeline is delivering gas sold to local distributing systems for resale. La. Const. art IX, § 2(A); La. Rev. Stat. Ann. § 30:551(A) (2007).

The Louisiana Constitution provides the classifications for property subject to ad valorem taxes and the percentages at which the various classifications are taxed. Transcontinental Gas Pipeline Corp. v. La. Tax Comm'n, 32 So. 3d 199, 202 (La. 2010) (citing La. Const. art. VII, § 18(B)). The classifications pertinent to this case are "public services properties" and "other property." "Public service properties" are assessed at a rate of 25 percent of their fair market value and "other property" is assessed at a rate of 15 percent of its fair market value.⁵ The local parish tax assessor determines the fair market value of all property subject to taxation within his respective parish except as to public service properties. La. Const. art. VII, § 18(D). The fair market value of public service properties is determined by the Louisiana Tax Commission.⁶ Id. The Commission then allocates the assessed valuation of the public service property pipeline among the local taxing units in accordance with state law. La. Rev. Stat. Ann. § 47:1855(A) (2006).

Whether a natural gas pipeline is classified as a public service property or other property ultimately depends on which agency regulates the pipeline. For taxation purposes, the public service property classification includes pipeline companies, La. R.S. § 47:1851(M), but pipeline companies are those that are regulated by either the Public Service Commission or the FERC, id. § 1851(K).⁷ Thus, all interstate pipelines running through Louisiana are classified as public service properties because they are regulated by the FERC. Likewise, those certain intrastate pipelines who sell to local distributing systems are classified as public service properties because they are regulated by the Public Service Commission (hereinafter "PSC pipelines"). But all other intrastate gas pipelines, i.e., those that do not sell to local distributing systems (hereinafter "non-PSC intrastate pipelines"), are classified as other property. Applying the provisions of the state constitution, interstate pipelines and PSC pipelines are assessed at 25 percent of fair market value as determined by the Louisiana Tax Commission, and non-PSC intrastate pipelines are assessed at 15 percent of fair market value as determined by the local parish tax assessors. La. Const. art. VII, § 18(B), (D); La. R.S. § 47:1851(K), (M).

Prior Litigation-Tax Years 1994-2003

During tax years 1994-2003 Plaintiffs paid the disputed portions of their ad valorem taxes under protest because they were convinced that the difference between the 25 percent and 15 percent assessment ratios was discriminatory and unfair.⁸

Plaintiffs then filed suit for declaratory judgment and for refunds of the taxes paid under protest in the 19^th Judicial District Court for East Baton Rouge Parish ("the 19^th JDC").⁹Plaintiffs claimed that the differing assessment ratios (25% vs. 15%) violated the uniformity requirement of the Louisiana Constitution and the equal protection, due process, and commerce clauses of the United States Constitution. Plaintiffs' claims were premised on the fact that a) the Louisiana Tax Commission had intentionally assessed the PSC pipelines in accordance with the 15 percent rate that applies to intrastate pipelines, i.e., the PSC pipelines were supposed to be assessed at the same 25 percent rate applicable to interstate pipelines but were instead receiving more favorable treatment, and b) Plaintiffs' intrastate natural gas pipeline competitors were assessed at 15 percent of fair market value while Plaintiffs endured the ostensibly more onerous 25 percent rate.

The 19^th JDC held a four day bench trial in January 2005 and on March 30, 2005, the court issued written reasons finding the actions of the Commission with respect to PSC pipelines, i.e., assessing them at 15 percent when they should have been assessedat 25 percent, violated the equal protection and due process clauses of the Louisiana and United States Constitutions because of the Commission's disregard of the requirement for uniformity.¹⁰(Rec. Doc. 1 Exh. A). The trial court pretermitted decision on the constitutionality of La. R.S. 47:1851(K), specifically whether it violated the federal Commerce Clause. In doing so the trial court relied upon jurisprudential principles discouraging courts from ruling on constitutional issues unnecessarily. (Rec. Doc. 1 Exh. A at 9) (citing La. Assoc. Gen. Contractors, Inc. v. New Orleans Aviation Bd., 701 So. 2d 130, 132 (La. 1997)). Because the court found that the Commission's violation with respect to uniformity entitled Plaintiffs to relief for tax years 1994-2003, it found it unnecessary to decide whether or not La. R.S. § 47:1851(K) was unconstitutional with respect to the refund claims for those years. (Id. at 9).

As a remedy the Plaintiffs had urged the court to award them a cash refund of the amounts paid under protest, that amount being simply the difference between the assessment at 25 percent versus 15 percent. However, the trial court was persuaded that the legally-mandated remedy was to have Plaintiffs receive the exact same "favorable" treatment that the PSC pipelines hadreceived: For the tax years at issue, the local assessors were to determine the fair market value of Plaintiffs' property and to reassess it at 15 percent of fair market value. Plaintiffs were to be refunded any amounts that were overpaid for each year, with interest. (Id. at 12). The state court remanded the matter to the Commission with instructions to have the Commission require the local parish assessors to proceed with the reassessments. Recognizing that state law required that refunds, if any, be completed in a timely manner, the court ordered that any refunds be paid by September 30, 2005. (Id. at 12).

Plaintiffs appealed the decision. Plaintiffs challenged the trial court's remedy on numerous grounds but the common thread running through all of their contentions was that the trial court erred by ordering the local assessors to revalue their property, arguing instead that the original assessment by the Louisiana Tax Commission, which Plaintiffs never challenged, should remain undisturbed, and that the 15 percent ratio should apply to that original assessment. Plaintiffs argued that the trial court's order did not provide meaningful relief because the reassessment procedure could lead to "fixing of values" or inflated assessments by local assessors in order to deprive Plaintiffs of their refunds, or result in hundreds of administrative hearings before parish authorities and further litigation over the revalued fair market values. Plaintiffs argued that such ascenario would lead to further violations of their rights, particularly their due process rights. Plaintiffs argued that the only refund that would provide adequate relief is a full refund of all taxes paid under protest.

The Louisiana First Circuit Court of Appeal decided against Plaintiffs on all issues reasoning that uniformity principles mandated that Plaintiffs' property be valued by the same method applied to their intrastate competitors whose favorable treatment they had been challenging, i.e., valuation as "other property" by the local parish assessor. ANR Pipeline Co. v. La. Tax Comm'n, 923 So. 2d 81, 93 (La. App. 1^st Cir. 2008) ("ANR VI"). The First Circuit concluded that the remedy did not violate Plaintiffs' due process rights because state law provided ample procedural protections for Plaintiffs to object to any assessments....