Cumberland Farms, Inc. v. Tax Assessor, State of Me.

• Decision Date: 10 April 1997
• Docket Number: No. 96-2353,96-2353
• Citation: 116 F.3d 943
• Parties: 151 A.L.R. Fed. 691 CUMBERLAND FARMS, INC., Plaintiff, Appellant, v. TAX ASSESSOR, STATE OF MAINE, and Treasurer, State of Maine, Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 943

116 F.3d 943

151 A.L.R. Fed. 691

CUMBERLAND FARMS, INC., Plaintiff, Appellant, v. TAX ASSESSOR, STATE OF MAINE, and Treasurer, State of Maine,

Defendants, Appellees.

No. 96-2353.

United States Court of Appeals, First Circuit.

Heard April 10, 1997.

Decided June 20, 1997.

Sheldon A. Weiss with whom Joel C. Martin, James B. Haddow, and Petruccelli & Martin were on brief, for plaintiff, appellant.

Janet M. McClintock, Assistant Attorney General, State of Maine, with whom Andrew Ketterer, Attorney General, Lucinda E. White, Assistant Attorney General, and Thomas D. Warren, State Solicitor, were on brief, for defendants, appellees.

Before TORRUELLA, Chief Judge, SELYA, Circuit Judge, and SARIS, ^* District Judge.

SELYA, Circuit Judge.

Plaintiff-appellant Cumberland Farms, Inc. ("CFI"), a Massachusetts-based processor and distributor of milk, operates a chain of convenience stores throughout the northeastern states. In this case, it asserts that a milk handling surcharge imposed by the State of Maine violates the Commerce Clause. The defendants are state officials, sued as such (collectively, "Maine" or "the State"). In their view, the milk handling surcharge is indistinguishable for Commerce Clause purposes from a sales tax and does not discriminate against interstate commerce either on its face or in its purpose and effect. Because the Tax Injunction Act, 28 U.S.C. § 1341 (1994), deprives the federal courts (other than the Supreme Court) of jurisdiction to decide the merits of this difficult (and interesting) question, we vacate the judgment below and remand with instructions to dismiss the case.

I. Background

Our tale begins with the Maine Dairy Farm Stabilization Act ("the DFS Act"), Me.Rev.Stat. Ann. tit. 36, §§ 4541-4547 (repealed 1995). The DFS Act had two components. On the one hand, it imposed a tax on packaged fluid milk sold in Maine (whether produced in or out of state). On the other hand, it provided a rebate of the funds so collected to in-state dairy farmers. The first handler in Maine bore the obligation of collecting and paying the tax, regardless of whether such first handler was a wholesaler or a retailer selling milk packaged out of state. See id. at 4543(1).

The tax imposed by the DFS Act had an unusual structure, better suited to price maintenance than to revenue augmentation. The amount of the tax varied between 0cents and 5cents per quart of milk and increased as the "basic price" of milk fell below the target price of $16.00 per hundredweight (later changed to $16.50 per hundredweight). ¹ See id. at § 4543(2). The statute directed the State Treasurer to segregate the proceeds from this tax and distribute 94% of the funds so collected to in-state dairy farmers in proportion to their milk production. See id. at § 4544(2)(A). This tax-and-subsidy scheme enabled in-state milk producers to receive the target price for their milk come what may--first, they received the basic price from their customers, and then they received the difference between the target price and the basic price as a rebate from the State--and thus shielded them from out-of-state competition.

The Supreme Court threw a monkey wrench into the gears of the DFS Act when it decided West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 114 S.Ct. 2205, 129 L.Ed.2d 157 (1994). In that case, the Court addressed a Massachusetts pricing order which was tailored to serve substantially the same ends as the DFS Act. The order imposed an assessment on fluid milk sold by Massachusetts retailers and directed distribution of the amounts collected to Massachusetts dairy farmers. See id. at 190-91, 114 S.Ct. at 2209-10. Finding that the order's purpose and effect were "to enable higher cost Massachusetts dairy farmers to compete with lower cost dairy farmers in other States," the Court declared the arrangement "clearly unconstitutional." Id. at 194, 114 S.Ct. at 2211-12.

In the aftermath of West Lynn Creamery, we considered CFI's constitutional challenge to the DFS Act. Finding no significant constitutional distinction between that Act and the Massachusetts law invalidated in West Lynn Creamery, we struck down Maine's scheme. See Cumberland Farms, Inc. v. LaFaver, 33 F.3d 1 (1st Cir.1994) (per curiam) (Cumberland I ).

The Maine legislature responded with remarkable alacrity. In January of 1995, it enacted "An Act to Continue the Fee on the Handling of Milk," Me.Rev.Stat. Ann. tit. 36, §§ 4771-4773 ("the 1995 Act"). The preamble to the legislation recited that "the State and its citizens are experiencing economic difficulties and significant fiscal problems" such that "revenues are necessary to the State's ability to address such difficulties and problems." 1995 Me. Laws ch. 2, Emergency Preamble. The 1995 Act assesses a surcharge on milk handlers that is nearly identical to that previously mandated by the DFS Act ² but directs that the revenues generated are to be deposited into Maine's general fund. See Me.Rev.Stat. Ann. tit. 36, § 4772(8).

Shortly after the effective date of the 1995 Act, the plot thickened. The state legislature began systematically to ensure continued subsidization of Maine's dairy farmers. As part of three successive omnibus spending bills for state government, the legislature appropriated to in-state milk producers $1,500,000 for the period March 1995 to June 1996, $4,050,000 for the period July to September 1996, and $3,150,000 for the period July 1996 to June 1997. See 1995 Me. Laws ch. 5, § A-1; id. at ch. 368, § B-1; id. at ch. 665, § KK-1.

CFI believed that this legislative patchwork was a thinly-veiled contrivance aimed at circumventing the decision in Cumberland I and that the new legislation, taken in its entirety, shared the same constitutional infirmity which led to the demise of the DFS Act. Consequently, it brought suit in the federal district court seeking injunctive, declaratory, and monetary relief. In due season, the district court rejected CFI's plaint. Although the court believed that the state legislature, in passing the 1995 legislative package (that is, the 1995 Act and the ensuing appropriation bills), "intended to circumvent the Court's decision in West Lynn Creamery by simply pulling apart the two components of the [DFS] Act," it nonetheless felt compelled to unwrap the package and analyze each piece of legislation separately. Cumberland Farms, Inc. v. Mahany, 943 F.Supp. 83, 87 (D.Me.1996). The court concluded that, when examined independently, both the revenue-raising and spending bills passed muster under the Commerce Clause. See id. at 88-90. Accordingly, it granted summary judgment in Maine's favor. This appeal followed.

II. Analysis

Federal courts are courts of limited jurisdiction, and thus must take pains to act only within the margins of that jurisdiction. See National Ass'n of Social Workers v. Harwood, 69 F.3d 622, 628 n. 6 (1st Cir.1995). Here, Maine interposes the Tax Injunction Act, 28 U.S.C. § 1341 ("the TIA"), as a defense to CFI's suit. Although Maine did not raise this point below, the TIA's commands are jurisdictional in nature and are not subject to waiver. See Trailer Marine Transp. Corp. v. Rivera Vazquez, 977 F.2d 1, 5 (1st Cir.1992). Thus, we start--and finish--our analysis by discussing this facet of the State's defense.

The TIA provides in relevant part 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." 28 U.S.C. § 1341. In one respect, the TIA sweeps more broadly than the letter of its text suggests. As authoritatively construed, the TIA forbids not only injunctive relief, but also declaratory and monetary relief. See National Private Truck Council, Inc. v. Oklahoma Tax Comm'n, 515 U.S. 582, ----, 115 S.Ct. 2351, 2354, 132 L.Ed.2d 509 (1995). Hence, the TIA, if it applies in this instance, is a complete bar to maintaining the instant action in a federal forum. We turn, then, to the question of its applicability.

Two conditions must be satisfied before the TIA will deprive a federal court of jurisdiction: first, the challenged impost must constitute a tax; and second, the State must furnish an adequate alternative to a federal-court remedy. Here, we are concerned only with the first condition, for CFI does not dispute that Maine affords a plain, speedy, and efficient anodyne to persons putatively aggrieved by the operation of the 1995 Act. ³

The question is whether, for purposes of the TIA, Maine's milk handling surcharge is a tax (which would defeat the exercise of federal jurisdiction) or a fee (which would allow the exercise of federal jurisdiction). In San Juan Cellular Tel. Co. v. Public Serv. Comm'n, 967 F.2d 683 (1st Cir.1992), we set forth the standard that guides our analysis of this issue. There, after surveying the case law, we stated that:

[Courts] have sketched a spectrum with a paradigmatic tax at one end and a paradigmatic fee at the other. The classic "tax" is imposed by a legislature upon many, or all, citizens. It raises money, contributed to a general fund, and spent for the benefit of the entire community. The classic "regulatory fee" is imposed by an agency upon those subject to its regulation. It may serve regulatory purposes directly by, for example, deliberately discouraging particular conduct by making it more expensive. Or it may serve such purposes indirectly by, for example, raising money placed in a special fund to help defray the agency's regulation-related expenses.

Courts facing cases that lie near the middle of this spectrum have tended ... to emphasize the revenue's ultimate use, asking whether it provides a general benefit to the public, of a sort often financed by a general tax, or whether it provides more narrow benefits to regulated companies or defrays [an] agency's cost of regulation.

Id. at 685 (citations omitted). This formulation for...