Chippewa Trading Co. v. Cox

• Decision Date: 19 April 2004
• Docket Number: No. 03-1445.,03-1445.
• Citation: 365 F.3d 538
• Parties: CHIPPEWA TRADING CO., an Indian corporation chartered and organized under the laws of the Keweenaw Bay Indian Community, Plaintiff-Appellant, v. Michael COX, an individual in his official capacity as Attorney General of the State of Michigan; Jay B. Rising, an individual in his official capacity as Treasurer of the State of Michigan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

365 F.3d 538

CHIPPEWA TRADING CO., an Indian corporation chartered and organized under the laws of the Keweenaw Bay Indian Community, Plaintiff-Appellant, v. Michael COX, an individual in his official capacity as Attorney General of the State of Michigan; Jay B. Rising, an individual in his official capacity as Treasurer of the State of Michigan, Defendants-Appellees.

No. 03-1445.

United States Court of Appeals, Sixth Circuit.

Argued December 9, 2003.

Decided and Filed April 19, 2004.

Scott M. Moore (argued and briefed), Moore International Law Offices, San Francisco, CA, for Plaintiff-Appellant.

Daniel M. Levy (argued and briefed), Office of the Attorney General of Michigan, Detroit, MI, for Defendants-Appellees.

Before BOGGS, Chief Judge; and BATCHELDER and SUTTON, Circuit Judges.

OPINION

BOGGS, Chief Judge.

Chippewa Trading Co. appeals from the dismissal of its action under 42 U.S.C. § 1983, challenging the constitutionality of several aspects of Michigan's Tobacco Products Tax Act (TPTA), Mich. Comp. Laws § 205.421 et seq. The district court concluded that principles of comity counseled it to abstain from hearing Chippewa's challenge to a state tax scheme, as Chippewa had a "plain, adequate, and complete" remedy available in the courts of Michigan. Fair Assessment in Real Estate Ass'n v. McNary, 454 U.S. 100, 116, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981). We affirm.

I

Chippewa is a corporation chartered under the laws of the Keweenaw Bay Indian Community (a federally recognized tribe) and located on an Indian reservation in Michigan. The events that gave rise to this case began on August 31, 2001, when the Michigan State Police stopped a truck containing tobacco products that were being shipped to Chippewa by International Native Company (INC), an Indian company located on a reservation in New York. The truck's driver was Andrew Arch, the president of another Indian shipping company. The state police seized the tobacco products on Arch's truck because they carried no tobacco tax stamps, which is a violation of TPTA.

When such a seizure occurs, the TPTA statutory scheme requires police to give notice to "the person from whom the seizure was made." Mich. Comp. Laws § 205.429(3). The statute allows "any person claiming an interest in the property" to challenge the seizure in an administrative hearing, but such a challenge must be made within "10 business days after the date of service of the [notice]." Ibid. After this deadline, "the property seized [is] considered forfeited to the state by operation of law." Ibid. The result of an administrative hearing challenging a TPTA seizure may be appealed to a Michigan circuit court. See § 205.429(4).

After seizing Arch's shipment, the state police sent written notice of the seizure to INC, the shipper, whom they believed to be the owner of the shipment. In fact, Chippewa, the buyer, had prepaid for the goods. No written notice was sent to Chippewa. However, Chippewa received actual notice of the seizure (from Arch) within four days after it occurred. Chippewa Trading Co. v. Granholm, No. 2:02-CV-68, 2003 U.S. Dist. LEXIS 10790, at *3 (W.D.Mich. Mar. 28, 2003). The only party to contest this seizure at the administrative level was INC, which was represented by the same attorney who represents Chippewa in this federal proceeding. In October 2001, the administrative referee concluded that the products seized from Arch's truck were contraband that should be forfeited to the state.

Chippewa then stepped in and appealed the referee's decision in Michigan's 12th Circuit Court. It argued that the notice provisions of TPTA violate the Fourteenth Amendment's Due Process Clause because they do not require police to notify the owner of alleged contraband that its property has been seized, only the person from whom the seizure is made. The state court dismissed this action on February 8, 2002, on the ground that Chippewa lacked standing.

In January 2002, while that appeal was still pending in the 12th Circuit Court, the State Police seized another shipment of tobacco products without stamps en route to Chippewa. Chippewa challenged this second TPTA seizure at the administrative level, lost, and appealed that decision to Michigan's 41st Circuit Court. On September 4, 2002, the 41st Circuit Court held a scheduling hearing on the appeal and ordered that Chippewa's due process claim would be heard on October 11, 2002. However, shortly thereafter, Chippewa voluntarily dismissed the action in the 41st Circuit Court.

Meanwhile, in April 2002, Chippewa filed the present action in federal district court, challenging the seizure from Arch in August 2001. Chippewa's original complaint sought declaratory and injunctive relief under 42 U.S.C. § 1983, plus attorney's fees. Its only claim was that the TPTA forfeiture scheme should be enjoined as a violation of due process, because of the notice defects that Chippewa had alleged in the 12th Circuit Court proceeding. In October 2002, Chippewa filed a supplemental brief in support of summary judgment that raised further constitutional claims: namely, that the application of TPTA to an Indian entity such as Chippewa violated the Supremacy Clause, U.S. Const., art. VI, cl. 2, the Indian Commerce Clause, U.S. Const., art. I, § 8, cl. 3, and the terms of the federal government's 1842 Treaty with the Chippewa, 7 Stat. 591.

The State¹ moved to dismiss Chippewa's federal action on the grounds that the district court lacked jurisdiction under the Tax Injunction Act, the Eleventh Amendment, and principles of comity. The district court granted the State's motion on the basis of comity, without addressing the other proposed bases for dismissal. It held that because "the relief requested, invalidation of and/or injunction against all or part of the TPTA, would unduly interfere with the fiscal operations and independence of the State of Michigan and its system of taxation," dismissal was proper. Chippewa, 2003 U.S. Dist. LEXIS 10790 at *10. The court further held that Chippewa's case did not implicate the exception to the comity doctrine that applies when there is no "plain, adequate and complete" remedy available at state law. Id. at *11 (citing Fair Assessment, 454 U.S. at 116, 102 S.Ct. 177). The court noted that the state offered two avenues for relief: First, TPTA itself provides an administrative procedure to challenge forfeitures. Second, Michigan's courts are authorized to hear and decide constitutional challenges to state tax laws, though they cannot prospectively enjoin the assessment or collection of a tax. See id. at **12-13.

Chippewa timely appealed the district court's order to this court. Our review of a district court's decision on abstention is de novo. Baskin v. Bath Twp. Bd. of Zoning Appeals, 15 F.3d 569, 571 (6th Cir.1994).

II

A

As the district court recognized, Chippewa's action implicates a broad federal common-law principle of comity that governs constitutional challenges to state tax administration. This principle, which stems chiefly from Fair Assessment and Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943), prohibits "taxpayers... from asserting § 1983 actions against the validity of state tax systems in [the lower] federal courts." Fair Assessment, 454 U.S. at 116, 102 S.Ct. 177. In such cases, a federal court should normally abstain from hearing the action as long as there is a "plain, adequate, and complete" remedy available to the plaintiff in state court. Ibid. While this comity principle reflects some of the same concerns that led Congress to enact the Tax Injunction Act, 28 U.S.C. § 1341,² it stands on its own bottom, and extends to cases seeking monetary damages as well as injunctive or other equitable relief. Fair Assessment, 454 U.S. at 110, 102 S.Ct. 177; In re Gillis, 836 F.2d 1001, 1006 (6th Cir.1988) (comity principle is "substantially broader" than bar imposed by Tax Injunction Act). At the same time, relief in federal court remains potentially available in such cases through direct review by the United States Supreme Court of any final state court judgment on a constitutional challenge to a tax. Fair Assessment, 454 U.S. at 116, 102 S.Ct. 177.

Previous holdings make clear that Chippewa's suit threatens a level of interference with Michigan's tax scheme that is enough to implicate the comity principle. See id. at 114-15, 102 S.Ct. 177 (holding that comity barred § 1983 suit against county tax assessors challenging alleged overassessment of the value of improved real estate; suit would have chilling effect on county tax officials); Gillis, 836 F.2d at 1008 (comity barred federal declaratory action claiming that Kentucky tax authorities violated equal protection by systematically underassessing property in the form of coal, oil, and gas interests). Here, Chippewa's Due Process Clause claim challenges the forfeiture provisions of TPTA on their face. This claim seeks to disable the basic enforcement mechanism of the statute. If that were not enough, Chippewa's later-added claims under the Indian Commerce Clause and the Treaty with the Chippewa call into question the State's ability to exact tobacco product taxes from Chippewa, and, by extension, from similar Indian businesses. Such challenges to the applicability of state tax laws to a class of potential taxpayers also implicate comity. See Great Lakes, 319 U.S. at 294, 297, 63 S.Ct. 1070 (holding that comity barred federal declaratory action on behalf of Louisiana barge owners claiming that federal maritime law pre-empted Louisiana's business excise tax as applied to them); see also ACLU Found. of La. v. Bridges, 334 F.3d 416 (5th Cir.2003) (holding that Tax Injunction Act barred federal suit challenging state's grant of tax exemptions to religious institutions).³

B

Chippewa argues that abstention is nevertheless improper because Chippewa lacks a "plain, adequate, and complete" state remedy by which to pursue...