Harlan Sprague Dawley, Inc. v. Indiana Dept. of State Revenue

• Decision Date: 06 December 1991
• Docket Number: No. 49T05-9007-TA-00038,49T05-9007-TA-00038
• Parties: HARLAN SPRAGUE DAWLEY, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE and John R. Gildea, Commissioner, Respondents.
• Court: Indiana Tax Court

Page 214

583 N.E.2d 214

HARLAN SPRAGUE DAWLEY, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE and John R. Gildea Commissioner, Respondents.

No. 49T05-9007-TA-00038.

Tax Court of Indiana.

Dec. 6, 1991.

Thomas A. Withrow, C. Daniel Yates, B. Keith Shake, James H. Rownd, Henderson, Daily, Withrow & Devoe, Indianapolis, for petitioner.

Linley E. Pearson, Atty. Gen., Marilyn S. Meighen, Deputy Atty. Gen., Indianapolis, for respondents.

ORDER

FISHER, Judge.

The Respondents, Indiana Department of State Revenue and Commissioner John R. Gildea, in his official capacity (collectively the Department), move to dismiss the Petitioner's, Harlan Sprague Dawley, Inc. (Harlan Sprague), 42 U.S.C. Sec. 1983 (Sec. 1983) claim for lack of subject matter jurisdiction pursuant to Ind.Rules of Procedure, Trial Rule 12(B)(1). The claim at issue in Harlan Sprague's petition, as amended, requests injunctive and declaratory relief pursuant to Sec. 1983 and attorneys' fees pursuant to 42 U.S.C. Sec. 1988 (Sec. 1988), asserting the Department imposed sales tax under color of state law in deprivation of Harlan Sprague's federal constitutional rights.

ISSUES

I. Does the Indiana Tax Court have subject matter jurisdiction under its enabling legislation to determine a federal claim made pursuant 42 U.S.C. Sec. 1983 challenging the state's taxation?

II. If the answer to the first issue is affirmative, is the court's exercise of subject matter jurisdiction barred by the application of the "plain, speedy, and efficient" state remedy standard of the Tax Injunction Act of 1937, ¹ the doctrine of equitable restraint, or the existence of an exclusive state remedy?

III. If the court's jurisdiction is not barred, does the court have the discretion to refuse to hear Harlan Sprague's Sec. 1983 claim?

DISCUSSION AND DECISION

I.

According to Indiana's well-settled standard: "Jurisdiction of the subject matter involves the POWER ² of the court to hear and determine a general class of cases to which the proceedings belong." In re Adoption of H.S. (1985), Ind.App., 483 N.E.2d 777, 780. Regardless of whether the court is one of limited or general jurisdiction, subject matter jurisdiction is not simply jurisdiction over the particular case occupying the court, but is jurisdiction over the class of cases to which the particular case belongs. See State ex rel. Egan v. Wolever (1891), 127 Ind. 306, 315, 26 N.E. 762, 765 (citing Jackson v. Smith (1889), 120 Ind. 520, 522, 22 N.E. 431; Yates v. Lansing, 5 Johns. 282). "The only relevant inquiry in determining whether the court has subject matter jurisdiction is to ask whether th[e] kind of claim the plaintiff As a general rule, state courts have subject matter jurisdiction concurrently with federal courts over cases arising under federal law:

advances falls within the general scope of authority conferred upon such court by the constitution or statute." In re Adoption of H.S., 483 N.E.2d at 780 (citing State ex rel. Young v. Noble Circuit Court (1975), 263 Ind. 353, 332 N.E.2d 99).

[S]tate courts may assume subject-matter jurisdiction over a federal cause of action absent provision by Congress to the contrary or disabling incompatibility between the federal claim and state-court adjudication. Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 507-508 [82 S.Ct. 519, 522-523, 7 L.Ed.2d 483] (1962); Claflin v. Houseman, 93 U.S. 130, 136 (1876). The rule is premised on relation between the States and the National Government within our federal system. See The Federalist No. 82 (Hamilton). The two exercise concurrent sovereignty, although the Constitution limits the powers of each and requires the States to recognize federal law as paramount. Federal law confers rights binding on state courts, the subject-matter jurisdiction of which is governed in the first instance by state laws (footnote omitted).

Gulf Offshore Co. v. Mobil Oil Corp. (1981), 453 U.S. 473, 477-78, 101 S.Ct. 2870, 2874-75, 69 L.Ed.2d 784.

Furthermore, the United States Supreme Court has held that Sec. 1983 provides for concurrent jurisdiction between state and federal courts. Martinez v. State of California (1980), 444 U.S. 277, 283 n. 7, 100 S.Ct. 553, 558 n. 7, 62 L.Ed.2d 481 (quoting Testa v. Katt (1947), 330 U.S. 386, 391, 67 S.Ct. 810, 813, 91 L.Ed. 967); Claflin v. Houseman (1876), 93 U.S. 130, 137, 23 L.Ed. 833; Maine v. Thiboutot (1980), 448 U.S. 1, 11, 100 S.Ct. 2502, 2508, 65 L.Ed.2d 555. The Department, however, asserts the Indiana Tax Court, a court of limited jurisdiction, would exceed its legislative mandate and violate the separation of powers to entertain Harlan Sprague's Sec. 1983 claim because the court does not have jurisdiction to determine tort claims.

Although state courts of general jurisdiction undisputedly enjoy concurrent jurisdiction over Sec. 1983 claims, they nonetheless are deprived of jurisdiction over all causes, matters, and proceedings if exclusive jurisdiction is conferred by statute upon some other court. Wabash R. Co. v. Pub. Serv. Comm'n (1953), 232 Ind. 277, 285, 112 N.E.2d 292, 295 (Bobbitt, J., dissenting) (citing Burns' 1946 Repl., Sec. 4-303). The Indiana General Assembly established the Indiana Tax Court as a specialized forum with expertise in tax matters. The enabling legislation defines the tax court's jurisdiction:

(a) The tax court is a court of limited jurisdiction. The tax court has exclusive jurisdiction over any case that arises under the tax laws of this state and that is an initial appeal of a final determination made by:

(1) the department of state revenue with respect to a listed tax (as defined in IC 6-8.1-1-1); or

(2) the state board of tax commissioners.

(b) The tax court also has any other jurisdiction conferred by statute.

(c) The cases over which the tax court has exclusive original jurisdiction are referred to as original tax appeals in this chapter. The tax court does not have jurisdiction over a case unless:

(1) the case is an original tax appeal; or

(2) the tax court has otherwise been specifically assigned jurisdiction by statute.

IND.CODE 33-3-5-2 (emphasis added).

The legislature therefore removed from Indiana's courts of general jurisdiction the power to hear and determine the general class of cases within the tax court's exclusive jurisdiction. As a result, a Sec. 1983 claim, a federal civil rights tort, which arises under the tax laws of Indiana and is the initial appeal from the final determination of a state tax agency can only be determined in Indiana by the tax court. Accordingly, The tax court has subject matter The court has not specifically construed the "arises under" language of IC 33-3-5-2(a). The United States Supreme Court's interpretation of similar jurisdictional "arising under" language in both Article III, Section 2 of the United States Constitution and 28 U.S.C. Sec. 1331(a) is relevant to an interpretation of IC 33-3-5-2(a) by analogy. Harlan Sprague asserts the scope of the jurisdictional grant in IC 33-3-5-2 should be interpreted as expansively as its Constitutional and statutory analogues. The United States Constitution grants judicial power to the federal courts: "The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and the Treaties made, or which shall be made, under their Authority...." U.S. Const., Art. III, Sec. 2 (emphasis added). The Supreme Court reads this language together with its legislative history as a broad jurisdictional grant.

jurisdiction under IC 33-3-5-2(a) to hear and determine Harlan Sprague's Sec. 1983 claim if it "arises under" the tax laws of Indiana and is within the initial appeal of the Department's final determination.

[The] language in art. III, Sec. 2, of the Constitution, which has been construed as permitting Congress to extend federal jurisdiction to any case of which federal law potentially 'forms an ingredient,' see Osborn v. Bank of the United States, 9 Wheat. 738, 823, 6 L.Ed. 204 (1824), and its limited legislative history suggests that the 44th Congress may have meant to 'confer the whole power which the Constitution conferred,' 2 Cong.Rec. 4986 (1874) (remarks of Sen. Carpenter).

Franchise Tax Bd. v. Constr. Laborers Vacation Trust (1983), 463 U.S. 1, 8 n. 8, 103 S.Ct. 2841, 2846 n. 8, 77 L.Ed.2d 420.

Therefore, "a suit 'arises under' the Constitution if a petitioner's claim 'will be sustained if the Constitution ... [is] given one construction and will be defeated if [it is] given another.' " Powell v. McCormack (1969), 395 U.S. 486, 514, 89 S.Ct. 1944, 1960, 23 L.Ed.2d 491 (quoting Bell v. Hood (1946), 327 U.S. 678, 685, 66 S.Ct. 773, 777, 90 L.Ed. 939); Osborn v. Bank of the United States (1824), 22 U.S. 738, 822 (9 Wheat.), 6 L.Ed. 204 (superseded by statute).

Harlan Sprague's Sec. 1983 claim would be sustained under one interpretation of the Indiana sales tax laws, but defeated under a different interpretation. Consequently, employing the Supreme Court's standard by analogy, Harlan Sprague's Sec. 1983 claim "arises under" the tax laws of Indiana.

In addition, the Constitution's "arising under" language is the source of the federal doctrine of pendant jurisdiction in which federal courts have jurisdiction over state claims that do not "arise under" the federal laws if brought in a single case with sufficient federal claims. See United Mine Workers v. Gibbs (1966), 383 U.S. 715, 724-25, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218. The pendency doctrine illustrates the breadth of the interpretation of the Constitution's jurisdictional grant. Pendent jurisdiction is properly invoked if the federal claim is sufficient to confer subject matter jurisdiction, if the state and federal claims derive from a common nucleus of operative fact, and if the claims are the type the plaintiff would expect to be tried in a single proceeding. Id.

Harlan Sprague's state and federal claims ³ derive from a common nucleus of The...