Coleman v. Campbell Cnty. Library Bd. of Trs.
| Decision Date | 27 September 2012 |
| Docket Number | Civil Action No. 12–30–DLB. |
| Citation | 901 F.Supp.2d 925 |
| Parties | Charlie COLEMAN, et al., Plaintiffs v. CAMPBELL COUNTY LIBRARY BOARD OF TRUSTEES, Defendant and Garth Kuhnhein, et al., Plaintiffs v. Kenton County Library Board of Trustees, Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
OPINION TEXT STARTS HERE
Brandon N. Voelker, Cold Spring, KY, pro se.
Jeffrey C. Mando, Louis D. Kelly, Mary Ann Stewart, Adams, Stepner, Woltermann & Dusing, PLLC, Covington, KY, Cori R. Stirling, Michael W. Hawkins, Dinsmore & Shohl, LLP, Cincinnati OH, for Defendant.
These cases were removed from the Campbell and Kenton County Circuit Courts in February of 2012. Once removed, the Defendant Library Board or Trustees filed motions to dismiss on several grounds. Upon reviewing the merits of those motions, the Court, sua sponte, ordered supplemental briefing as to the applicabilityof the Tax Injunction Act to the claims raised by Plaintiffs. That briefing having now been completed (Docs. # 25, 28), and the Court having heard from counsel on September 25, 2012 and being otherwise sufficiently advised, the Court concludes that the Act applies and thus constitutes a jurisdictional bar. Because this Act deprives this Court of jurisdiction, these cases will be remanded to their respective originating state trial courts and all pending motions will be deferred the presiding state court judges on remand.
On January 18, 2012, Plaintiffs Charlie Coleman, John P. Roth, and Erik Hermes filed a Class Action Complaint with Jury Trial Demand and Declaration of Rights against the Campbell County Public Library Board of Trustees (“Campbell County Library”) in Campbell Circuit Court. (Doc. # 11, 2:12–cv–30). In that Complaint, Plaintiffs alleged that they are residents and property owners in Campbell County, Kentucky, that they have paid property taxes to the Campbell County Library as set forth in their yearly county tax bills, and that the Campbell County Library has incrementally increased its ad valorem tax rate from $.38 to $.457 per $1,000 from 1994 through 2011 without complying with the provisions of KRS 173.790, which governs the increase or decrease of the tax levy. (Doc. # 11, at 3–4). As a result, Plaintiffs contend that they and the proposed class members are owed a refund of $2,218,497.83 for the year 2010, as well as for all other years where the tax has been improperly increased. (Doc. # 11, at 4).
Two days later, Plaintiff Garth Kuhnhein filed a nearly identical complaint against the Kenton County Library Board of Trustees (“Kenton County Library”) in Kenton Circuit Court. (Doc. # 13–1, 2:12–cv–35). In that Complaint, Plaintiff alleged that he was a resident and property owner in Kenton County, Kentucky, that he has paid property taxes to the Kenton County Library as set forth in his yearly county tax bill, and that the Kenton County Library has incrementally increased its ad valorem tax rate from $0.82 to $1.13 1 per $1,000 from 2007–2011 without complying with the provisions of KRS 173.790, which governs the increase or decrease of the tax levy. (Doc. # 13–1, at 1–2). As a result, Plaintiff contends that he and the proposed class members are owed a refund of $5,125,466.97 for the year 2011, as well as for all other years where the tax has been improperly increased. (Doc. # 13–1, at 2).
Both actions were subsequently removed to this Court and then consolidated on March 2, 2012. In their Notices of Removal, Defendants asserted that this Court has jurisdiction based upon federal question and supplemental jurisdiction. (Doc. # 1, 2:12–cv–30); (Doc. # 1, 2:12–cv–35).
More recently, the Court ordered supplemental briefing on the applicability of the Tax Injunction Act to the claims raised by Plaintiffs. (Doc. # 21, 2:12–cv–30). The parties subsequently completed that briefing and presented their positions during a telephone conference on September 25, 2012. (Docs. # 25, 28).
The Tax Injunction Act (“the Act”) provides that “[t]he district court 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.” 28 U.S.C. § 1341. The purposes of the Act are “to promote comity and to afford states the broadest independence, consistent with the federal constitution, in the administration of their affairs, particularly revenue raising.” Wright v. McClain, 835 F.2d 143, 144 (6th Cir.1987). Simply put, the Act generally prohibits federal-court interference with state tax systems, unless the state offers no plain, speedy and efficient remedy for the wrong of which the aggrieved party complains.
Based upon the language and purposes of the Act, the United States Supreme Court has held that the statute operates to deprive a district court of jurisdiction to hear a challenge to a state tax system. California v. Grace Brethren Church, 457 U.S. 393, 396, 102 S.Ct. 2498, 73 L.Ed.2d 93 (1982); see also Arkansas v. Farm Credit Services of Cent. Arkansas, 520 U.S. 821, 825, 117 S.Ct. 1776, 138 L.Ed.2d 34 (1997) (). As a result, an action removed to federal court must be remanded to state court if the Act is applicable. Soo Line R. Co. v. City of Harvey, 424 F.Supp. 329, 331 (D.N.D.1976) (citing State Tax Commission v. Union Carbide Corp., 386 F.Supp. 250 (D.Idaho 1974)).
With framework in mind, the applicability of the Act primarily depends upon the relief requested by Plaintiffs, even though these purported class actions were removed by Defendants. Here, Plaintiffs set forth several causes of action, including conversion, unjust enrichment, and violation of 42 U.S.C. § 1983 based on an unlawful taking. Plaintiffs also seek a declaratory judgment that Defendants violated KRS 173.790 by assessing and collecting ad valorem taxes without following the petition requirements of the statute 2 and request the following relief:
1. Mandatory injunctive relief requiring the libraries to issue refunds for taxes billed and collected in excess of the statutorily approved rate;
2. Mandatory injunctive relief preventing the libraries from increases their tax rates unless they comply with the provisions of KRS 173.790;
3. Judgment and award of compensatory damages, in the form of refunds, with interest, against the libraries;
4. Declaratory judgment that KRS 173.90 governs the tax rate and the ability to increase and/or decrease said rate;
5. Prejudgment interest, court costs and attorney fees pursuant to 42 U.S.C. § 1983.
In light of the relief requested by Plaintiffs, the Act applies and thus compels this Court to remand these actions, unless Kentucky offers no plain, speedy and efficient remedy with respect to the alleged violation of KRS 173.790.
As noted, Plaintiffs request injunctions, a declaratory judgment, and refunds, as well as prejudgment interest, court costs, and attorney fees pursuant to 42 U.S.C. § 1983. This subsection, then, will address each type of relief requested and explain how these requests, both individually and collectively, bring these actions within the ambit of the Act.
On its face, the Act bars suits in federal court for injunctive relief in state tax cases. See28 U.S.C. § 1341. Here, Plaintiffs seek two injunctions: (1) Injunctive relief requiring Defendants to issue refunds for taxes billed and collected in excess of the statutorily approved rate; and (2) injunctive relief preventing Defendants from increasing their tax rates unless they comply with the provisions of KRS 173.790. Even if the former request—to require Defendants to issue refunds—may be construed as simply a demand for a refund,3 the latter request—to prevent Defendants from increasing their tax rates—is clearly an attempt to enjoin the assessment, levy or collection of the ad valorem tax. Based on the statutory text, this Court cannot consider such relief (unless Kentucky offers no plain, speedy and efficient remedy).
Although perhaps not obvious from the face of the statute, the Supreme Court has held that the Act also bars suits for declaratory relief in state tax cases. California v. Grace Brethren Church, 457 U.S. 393, 102 S.Ct. 2498, 73 L.Ed.2d 93 (1982); see also Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 299, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943) (). 4 This is because “Congress' intent in enacting the ... Act was to prevent federal-court interference with the assessment and collection of state taxes.” Id. at 411, 102 S.Ct. 2498.
In these cases, Plaintiffs are seeking a declaratory judgment that Defendants violated KRS 173.790 by assessing and collecting ad valorem taxes without following the petition requirements of the statute; in a nutshell, they want this Court to declare that KRS 173.790 governs the tax rate and ability to increase and/or decrease said rate. Again, based upon the Supreme Court's interpretation of the Act, this Court cannot consider such relief (unless Kentucky offers no plain, speedy and efficient remedy).
Similar to the Supreme Court's holding with respect to declaratory relief, it is generally recognized that federal suits for state tax refunds are also barred by the Act. See Wright v. Pappas, 256 F.3d 635 (7th Cir.2001); Marvin F. Poer & Co. v. Counties of Alameda, 725 F.2d 1234 (9th Cir.1984); Cities Service Gas Co. v. Oklahoma Tax Comm'n, 656 F.2d 584, 586 (10th Cir.1981); United Gas Pipe Line Co. v. Whitman, 595 F.2d 323 (5th Cir.1979); Kelly v. Springett, 527 F.2d 1090 (...
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