Csx Transp. v. New York State Office of Real Prop.

• Decision Date: 25 September 2002
• Docket Number: Docket No. 01-7966.
• Citation: 306 F.3d 87
• Parties: CSX TRANSPORTATION, INC., Plaintiff-Appellee, v. NEW YORK STATE OFFICE OF REAL PROPERTY SERVICES, Frank B. Cernese, John M. Bacheller, in their official capacities as members of the New York State Board of Real Property Services and their successors in office, Thomas G. Griffin, in his official capacity as executive director and secretary to the State Office of Real Property Services and his successors in office, and Ifigenia T. Brown, Defendants-Appellants, City of New York, City of Rochester, East Syracuse-Minoa Central School District, North Rockland Central School District, Ravena-Coeymans-Selkirk Central School District, Onondaga County, Monroe County, Town of Bethlehem, Town of Cheektowaga, Town of Stony Point and Village of Herkimer, in their own behalf and as representatives of a defendant's class, Defendants, The United States of America, Intervenor.
• Court: U.S. Court of Appeals — Second Circuit

306 F.3d 87

CSX TRANSPORTATION, INC., Plaintiff-Appellee, v. NEW YORK STATE OFFICE OF REAL PROPERTY SERVICES, Frank B. Cernese, John M. Bacheller, in their official capacities as members of the New York State Board of Real Property Services and their successors in office, Thomas G. Griffin, in his official capacity as executive director and secretary to the State Office of Real Property Services and his successors in office, and Ifigenia T. Brown, Defendants-Appellants, City of New York, City of Rochester, East Syracuse-Minoa Central School District, North Rockland Central School District, Ravena-Coeymans-Selkirk Central School District, Onondaga County, Monroe County, Town of Bethlehem, Town of Cheektowaga, Town of Stony Point and Village of Herkimer, in their own behalf and as representatives of a defendant's class, Defendants, The United States of America, Intervenor.

Docket No. 01-7966.

United States Court of Appeals, Second Circuit.

Argued: April 29, 2002.

Decided: September 25, 2002.

COPYRIGHT MATERIAL OMITTED

Gregory G. Fletcher, Baker, Donelson, Bearman & Caldwell, Memphis, TN (James N. Blair, Wolfman, Babbit & King, LLP, New York, NY, on the brief, Courtney G. Hyers, Senior Tax Counsel, CSX Corporation, Richmond, VA, of counsel, David J. Bowling, General Tax Counsel, CSX Corporation, Richmond, VA, of counsel), for Plaintiff-Appellee.

Daniel J. Chepaitis, Assistant Solicitor General, Office Of the Attorney General of the State of New York, New York, N.Y. (Eliot Spitzer, Attorney General of the State of New York, Caitlin J. Halligan, Solicitor General of the State of New York, Michael S. Belohlavek, Deputy Solicitor General of the State of New York), for Defendants-Appellants.

Stephanie R. Marcus, Appellate Staff, Civil Division, U.S. Department of Justice, Washington, DC (Robert D, McCallum, Jr., Assistant Attorney General, James B. Comey, Jr., United States Attorney for the Southern District of New York, Mark B. Stern, Appellate Staff, Civil Division, U.S. Department of Justice, on the brief), for intervenor the United States.

Before MINER and SACK, Circuit Judges, and BERMAN, District Judge.^*

MINER, Circuit Judge.

Defendant-appellant the New York State Office of Real Property Services ("ORPS") and defendants-appellants Frank B. Cernese, John M. Bacheller, Thomas G. Griffin, and Ifigenia T. Brown (the "Individual Defendants") appeal from an order of the United States District Court for the Southern District of New York (Brieant, J.) denying their motion, based on Eleventh Amendment immunity, for judgment on the pleadings in a declaratory judgment action brought by plaintiff-appellee CSX Transportation, Inc. ("CSX"). CSX brought the action to enjoin ORPS and the Individual Defendants (collectively, the "State Defendants") from assessing, levying, or collecting ad valorem taxes on CSX's rail transportation property in New York State for the 2001 tax year. CSX alleges in its complaint that the State Defendants' methods for assessing, levying, and collecting taxes on its property violates the Railroad Revitalization and Regulatory Reform Act of 1976 (the "4-R Act" or the "Act"), 49 U.S.C. § 11501. In denying the State Defendants' motion for judgment on the pleadings, the district court concluded that the 4-R Act was "remedial legislation" designed to abrogate Eleventh Amendment immunity of the states pursuant to Congress' powers under the Fourteenth Amendment and that, additionally, jurisdiction over the Individual Defendants could be maintained under the doctrine established in Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908).

For the reasons that follow, we join the three circuit courts of appeal that have considered this issue, and conclude: (1) that in passing the 4-R Act Congress abrogated the states' Eleventh Amendment immunity pursuant to its Fourteenth Amendment equal protection powers, and (2) that jurisdiction over the Individual Defendants is properly invoked under Ex Parte Young.

BACKGROUND

I. Proceedings in the District Court

CSX operates an interstate railroad comprised of hundreds of predecessor railroads, the oldest of which dates back more than 170 years. CSX operates in 23 states, including New York, where it conducts its operations on taxable property in 28 of New York's 62 counties. The State Defendants are responsible for establishing annual railroad taxation ceilings for the various taxing districts in New York State.

The New York State taxing scheme that is the subject of this appeal has been contested for nearly ten years. On September 20, 1993, the Consolidated Rail Corporation ("Conrail") brought suit in the United States District Court for the Southern District of New York against various defendants including the State Board of Equalization and Assessment of the State of New York (predecessor to ORPS) and some of its employees (collectively the "SBEA"), seeking to enjoin them from imposing state property taxes that were allegedly calculated in violation of the 4-R Act on railroad properties for the 1993 tax year.¹ See Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473 (2d Cir.1995). On January 7, 1994, the district court granted Conrail's motion for a preliminary injunction, finding, inter alia, a likelihood of success on the merits, and certified the defendant class. Id. at 477. The SBEA appealed from the district court's orders, and we affirmed the preliminary injunction and certification on January 31, 1995. Id. at 475. Thereafter, on November 27, 1996, the district court first reached one of the questions presented here: whether the 4-R Act was a valid abrogation of the states' Eleventh Amendment immunity. The district court held that it was. The court concluded that the abrogation of the states' Eleventh Amendment immunity was properly based on the authority conferred by Section 5 of the Fourteenth Amendment.² However, that question was never raised on appeal because sometime in 1997 the parties settled Conrail's claims retroactively for tax years 1993 through 1996, and prospectively for the tax years 1997 through 2000.³

Thereafter, CSX became the successor to a portion of the Conrail railroad property that was the subject of the settlement. See CSX Transp., Inc. v. N.Y. State Office of Real Prop. Servs., 150 F.Supp.2d 605, 608 (S.D.N.Y.2001). Pursuant to statute, the SBEA was succeeded in 1997 by ORPS, which retained the same powers as the SBEA. See N.Y. Real Prop. Tax § 200.

On February 13, 2001, CSX filed suit seeking preliminary and final injunctive relief against the State Defendants and a proposed defendant class comprised of all taxing jurisdictions in which CSX operates.⁴ In its complaint, CSX alleges that the State Defendants have assessed and plan to assess its properties in New York State at a rate at least 5 percent higher than the ratio of assessed value to true market value of other commercial and industrial property in the districts in which it operates, in violation of the 4-R Act. Accordingly, CSX sought to enjoin the State Defendants and the putative defendant class from assessing or levying taxes against it for the 2001 tax year. The State Defendants filed their answer on March 21, 2001, raising Eleventh Amendment immunity as one of their defenses. The following day, the district court certified the defendant class pursuant to Federal Rule of Civil Procedure 23. On April 30, 2001, the State Defendants moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) on the grounds that the relief sought by CSX was barred by the Eleventh Amendment, and also that Ex Parte Young did not permit suit to be maintained against the Individual Defendants. On May 30, 2001, the district court held oral argument on the State Defendants' motion, at which time CSX sought by order to show cause a temporary restraining order and preliminary injunction to prevent the State Defendants from issuing final certifications of railroad ceilings for the 2001 tax year. That same day, the district court granted a temporary restraining order and scheduled a hearing on the order to show cause application for a preliminary injunction on September 6, 2001.

In a Memorandum and Order dated July 10, 2001, the district court denied the State Defendants' motion for judgment on the pleadings. The district court found that the "4-R Act was passed in 1968 in order to address ... well-developed and well-documented concerns that a pattern of discriminatory conduct was evident in the conduct of the States' taxation practices with respect to interstate railroad transportation property." CSX, 150 F.Supp.2d at 611. Accordingly, the district court held that in passing the 4-R Act, Congress had validly abrogated the states' Eleventh Amendment immunity through its enforcement powers under Section 5 of the Fourteenth Amendment. As to the availability of jurisdiction against the Individual Defendants, the district court explained "that the doctrine of Ex Parte Young remains viable" despite "question[ing] by some commentators." Id. at 612. The court also found that jurisdiction could be invoked under Ex Parte Young because the Individual Defendants "are quite demonstrably connected to the unlawful act of State discriminatory taxation of railroad real property." Id. The district court explained that in Hyde Park this Court held that although "as a formal matter" each taxing district in New York makes its own determination of the final assessed value of railroad property, "realistically, when the State Agency determines the railroad ceiling... it is making an `assessment' within the meaning of the 4-R Act." Id. (citing Hyde Park, 47 F.3d at 481). The district court held that such a finding was, "[b]esides its precedential value, ... law of the case." Id.

On August 9, 2001, the State Defendants filed a timely appeal, and on September 6, 2001, the district court entered an order continuing the temporary restraining order and adjourning the return...