Fulton Market Cold Storage Co. v. Cullerton

• Decision Date: 07 August 1978
• Docket Number: No. 77-2133,77-2133
• Citation: 50 A.L.R. Fed. 758,582 F.2d 1071
• Parties: FULTON MARKET COLD STORAGE COMPANY, Plaintiff-Appellant, v. P. J. CULLERTON et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1071

582 F.2d 1071

50 A.L.R.Fed. 758

FULTON MARKET COLD STORAGE COMPANY, Plaintiff-Appellant, v.P. J. CULLERTON et al., Defendants-Appellees.

No. 77-2133.

United States Court of Appeals Seventh Circuit.

Argued Feb. 15, 1978.

Decided Aug. 7, 1978.

James L. Fox, Chicago, Ill., for plaintiff-appellant.

Herbert Lee Caplan, Michael F. Baccash, Asst. State's Atty., Chicago, Ill., for defendants-appellees.

Before SWYGERT and TONE, Circuit Judges, and SHARP^*, District Judge.

ALLEN SHARP, District Judge.

I.

On January 2, 1974 Fulton Market Cold Storage Company("Fulton") filed a civil rights damage action against the Cook County Assessor under 42 U.S.C. § 1983 and its jurisdictional counterpart 28 U.S.C. § 1343(3).Later Fulton amended its complaint and added a number of defendants and counts.In its amended complaint Fulton, a Cook County Illinois property owner, seeks actual and punitive damages for injuries allegedly inflicted upon it by county and state taxing officials.Fulton charges that these defendants, individually and as parties to a continuing conspiracy, acted and combined under color of law to deprive it of its rights under the due process and equal protection clauses of the Fourteenth Amendment of the United States Constitution, the due process provisions of the Illinois Constitutions of 1870 and 1970, Article IX, Section 1 of the Illinois Constitution of 1870, and various provisions of the Illinois Revenue Act, 120 Ill.Rev.Stat. §§ 482 Et seq.

Specifically, Fulton alleges that from 1958 to 1973, the defendants have systematically, knowingly, intentionally, fraudulently and invidiously assessed its property at levels other than permitted by law and greatly in excess of the levels at which property in Cook County was generally assessed in those years.Fulton alleges that in 1968 and 1969 its property was deliberately assessed at two and one-half times the level at which property was generally assessed in Cook County in those years.Fulton's other allegations charge that the defendants' system of illegal valuations and discriminatory assessments has been widely, wilfully and purposefully practiced in Cook County and has worked substantial injury upon Fulton.

The defendants fall into three groups: (1)Cook County Assessors P. J. Cullerton and Thomas M. Tully("the Assessor Defendants") who, by statute, had the duty to assess real property in Cook County; (2)Cook County Board of Appeals members ("the County Defendants") who, by statute, had the duty to review and order corrected unlawful assessments brought before them on complaint; and (3) Directors of the Illinois Department of Revenue and the Illinois Department of Local Government Affairs("the StateDefendants") who, by statute, had the duty to equalize the total assessed valuations of the several counties so that such total assessed valuations as equalized equaled the full cash value of the property subject to assessment within the several counties and the duty to order a reassessment for any year in which they found that the assessments in any county were not in substantial compliance with the law.

For relief, Fulton's amended complaint prays for $60,000 plus the sums it has expended in the years 1958 through 1974 in seeking redress from the acts and conduct of the defendants, plus the damage to its business resulting therefrom and punitive damages.

The district court dismissed the plaintiff's amended complaint relying upon 28 U.S.C. § 1341 and its underlying policy considerations.Fulton appealed and the matter is now before this court.

II.

The central issue now before this court is whether 28 U.S.C. § 1341 or its underlying policy considerations bar the plaintiff's § 1983 suit for damages.After a careful review of all the authority cited by counsel and after an independent search for authority by this court, it appears that no other court has ever directly addressed itself to this precise question.This court and several others have construed § 1341 in cases where the plaintiff was seeking some form of equitable relief, e. g., injunctive or declaratory actions.But no case has been found where this statute was extended to damage actions as well.Consequently, since this appears to be a case of first impression, this court must analyze § 1341 with reference to its legislative history and the significant cases which have construed the statute in order to determine the important underlying policy considerations.Only then may this court properly resolve the issue.

III.

28 U.S.C. § 1341

Title 28 U.S.C. § 1341 provides:

The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under the State law where a plain, speedy and efficient remedy may be had in the courts of such State.

As this court has held in the past, this statute clearly prohibits a district court from issuing an injunction which would "suspend or restrain the assessment, levy or collection of any tax under State law" unless the State remedy is not "plain, speedy and efficient."28 East Jackson Enterprises, Inc. v. Cullerton, 551 F.2d 1093(7th Cir.1977)(on second petition for rehearing);See also28 East Jackson Enterprises, Inc. v. Cullerton, 523 F.2d 439(7th Cir.1975);Pintozzi v. Scott, 436 F.2d 375(7th Cir.1970);Tramel v. Schrader, 505 F.2d 1310(5th Cir.1975);andBland v. McHann, 463 F.2d 21(5th Cir.1972).

Additionally, despite the fact that § 1341 speaks only of injunctions, this court has held that the statute also bars declaratory actions.Illinois Central R. Co. v. Howlett, 525 F.2d 178(7th Cir.1975);Gray v. Morgan, 371 F.2d 172(7th Cir.1966).See alsoPerez v. Ledesma, 401 U.S. 82, 91 S.Ct. 674, 27 L.Ed.2d 701(1971)(Brennan, J., concurring in part and dissenting in part);Hickmann v. Wujick, 488 F.2d 875(2d Cir.1973);American Commuters Ass'n v. Levitt, 405 F.2d 1148(2d Cir.1969).

While it is well settled that § 1341 may bar equitable relief, injunctive and declaratory, it is uncertain whether the policy considerations which underlie § 1341 may also bar an action for damages.To resolve this question properly it is important to examine the legislative history and congressional intent of § 1341.

Legislative History

The Fifth Circuit in Hargrave v. McKinney, 413 F.2d 320(1969), explained the context in which § 1341 was enacted:

The expansion of the federal judicial power countenanced by the Supreme Court in Ex parte Young, 1908, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714, "brought about a major shift in the actual distribution of power between states and nation" which was not "overlooked by Congress, or by the spokesmen of the interests adversely affected."H. Hart and H. Wechsler, The Federal Courts and Federal System, pp. 846-847(1953).Congress responded to the federal courts' newly-declared power to enjoin actions by state officials in their enforcement of state legislative acts by enacting four major pieces of legislation.

In a footnote, the court specified the legislation:

(1) Three-judge requirement of 1910 presently codified in 28 U.S.C. § 2281.(now repealed Pub.L. 94-381, §§ 1, 2, Aug. 12, 1976, 90 Stat. 1119.)

(2) The stay requirement of 1913 presently codified in 28 U.S.C. § 2284(last paragraph).

(3)Johnson Act of 1934 prohibiting injunctions against state public utility rate orders presently codified in 28 U.S.C. § 1342.

(4)Tax Injunction Act of 1937 at issue in the instant case.(codified in28 U.S.C. § 1341)

Id. at 325 and n. 9.

It therefore appears that § 1341 was part of a larger congressional response to Ex parte Young, supra, wherein Congress attempted to limit the injunctive power of federal courts.

The specific congressional policy considerations which underlie § 1341 are revealed in the Senate Judiciary Committee Report.In the report, two purposes of § 1341 are expressed.First, the statute was directed at the elimination of unjust discrimination between citizens of the State and foreign corporations.It was feared that a foreign corporation, through diversity, could obtain a federal injunction prohibiting the collection of certain state taxes.Such a procedure, however, was unavailable to a State resident.As the Senate Judiciary Committee Report stated:

If those to whom the federal courts are open may secure injunctive relief against the collection of taxes, the highly unfair picture is presented of the citizen of the State being required to pay first and then litigate, while those privileged to sue in the federal courts need only pay what they choose and withhold the balance during the period of litigation.

S.Rep.No. 1035, 75th Cong., 1st Sess. 1-2(1937).The second purpose of § 1341 was also directed at foreign corporations.The primary concern was that foreign corporations, by obtaining a federal injunction, could seriously disrupt the State taxing process.As the Senate Report stated it was possible for

foreign corporations doing business in such States to withhold from them and their governmental subdivisions taxes in such vast amounts and for such long periods of time as to seriously disrupt State and county finances.The pressing needs of these States for this tax money is so great that in many instances they have been compelled to compromise these suits, as a result of which substantial portions of the tax have been lost to the States without a judicial examination into the real merits of the controversy.

In Tramel v. Schrader, 505 F.2d 1310(5th Cir.1975), Judge Coleman, writing for the Fifth Circuit, summarized the congressional intent in enacting § 1341:

In other words, in passing the Tax Injunction Statute, Congress took aim at two evils.

First, Congress noted that some foreign corporations were in the habit of delaying the payment of taxes through an action in federal court since they could invoke diversity jurisdiction.State citizens, on the other hand, could not obtain a federal forum based on diversity jurisdiction.By passing...