Hedgepeth v. State of Tennessee

• Decision Date: 14 March 2000
• Docket Number: No. 99-5166,99-5166
• Citation: 215 F.3d 608
• Parties: (6th Cir. 2000) Andrew Hedgepeth, Celia Burson, David McCleary, and Gaynell Metts, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. State of Tennessee, State of Tennessee Department of Safety, and Mike Green, in his official capacity as Commissioner of the State of Tennessee Department of Safety, Defendants-Appellees. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 608

215 F.3d 608 (6th Cir. 2000)

Andrew Hedgepeth, Celia Burson, David McCleary, and Gaynell Metts, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. State of Tennessee, State of Tennessee Department of Safety, and Mike Green, in his official capacity as Commissioner of the State of Tennessee Department of Safety, Defendants-Appellees.

No. 99-5166

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: March 14, 2000

Decided and Filed: June 12, 2000

Appeal from the United States District Court for the Western District of Tennessee at Memphis; No. 97-02825--Jerome Turner, District Judge. [Copyrighted Material Omitted] Michael F. Rafferty, HARRIS, SHELTON, DUNLAP & COBB, Alex Saharovich, NAHON & SAHAROVICH, Memphis, Tennessee, for Appellants.

S. Elizabeth Martin, Office of the Attorney General, Civil Litigation & State Services Division, Nashville, TN, for Defendant-Appellee State of Tennessee.

Mary M. Collier, S. Elizabeth Martin, Office of the Attorney General, Civil Litigation & State Services Division, Nashville, TN, for Defendants-Appellees Tennessee Dept. of Safety and Mike Green.

Before: RYAN, MOORE, and FARRIS,^* Circuit Judges.

FARRIS, J., delivered the opinion of the court, in which RYAN, J., joined. MOORE, J. (pp. 616-18), delivered a separate dissenting opinion.

OPINION

FARRIS, Circuit Judge.

BACKGROUND

Andrew Hedgepeth, Celia Burson, David McCleary, and Gaynell Metts are disabled individuals who brought this action on September 12, 1997, under the federal Americans with Disabilities Act, 42 U.S.C. § 12101, et seq., against the State of Tennessee, the State of Tennessee Department of Safety, and Mike Green, the Commissioner of the Tennessee Department of Safety.

The State of Tennessee charges a sum for the issuance and renewal of disabled parking placards pursuant to the Disabled Drivers Law of 1975, Tenn. Code Ann. § 55-21-101, et seq. The placards allow disabled persons equal access to public and private facilities by making available various parking accommodations. The State of Tennessee Department of Safety charges disabled persons (or those who provide transportation services for them) a fee of $20.50 for vehicle registration and for a placard that is valid for two years, and $3.00 for replacement or renewal of the placard every two years thereafter. Plaintiffs contend that the State's fees are surcharges that discriminate against individuals with disabilities in violation of the ADA. The force of Plaintiffs' contention is that a public entity may not permissibly charge the disabled for measures taken to provide the nondiscriminatory treatment required by the Act. See 42 U.S.C. § 12132; 28 C.F.R. § 35.130(f). The complaint seeks damages under the ADA, as well as declaratory and injunctive relief.

The State moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) arguing that: (1) the district court did not have subject matter jurisdiction because the State's charges were "taxes" for purposes of the Tax Injunction Act; (2) the court lacked jurisdiction because the State is immune from such a lawsuit under the Eleventh Amendment; and (3) Plaintiffs' claims were barred by the statute of limitations.

The district court dismissed Plaintiffs' complaint on December 28, 1998. It determined that the State's assessment for the disabled parking placards was a tax for purposes of the Tax Injunction Act and that Plaintiffs had a "plain, speedy, and efficient remedy" to contest the matter at the state level. Alternatively, the district court held for purposes of appellate review that the complaint should also be dismissed on grounds of Eleventh Amendment immunity¹ and the statute of limitations².

DISCUSSION

I. Whether the Federal Courts Lack Jurisdiction Over Plaintiffs' Complaint Pursuant to the Tax Injunction Act.

A. Standard of Review

We review de novo a district court's order dismissing a complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1). See Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). When the defendant challenges subject matter jurisdiction through a motion to dismiss, the plaintiff bears the burden of establishing jurisdiction. See id. The district court's factual findings made in resolving a motion to dismiss are reviewed for clear error while its application of the law to the facts is reviewed de novo. See RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1135 (6th Cir. 1996).

B. The Tax Injunction Act

The district court's jurisdiction turns on the application of the Tax Injunction Act, which provides 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. 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).

To date, there are two federal circuit courts that have addressed the precise issue of whether assessments imposed for disabled parking placards constitute taxes or fees under the TIA³. See Hexom v. Oregon Dep't of Transp., 177 F.3d 1134 (9th Cir. 1999); Marcus v. Kansas, Dep't of Revenue, 170 F.3d 1305 (10th Cir. 1999). The Ninth Circuit in Hexom held that the $4.00 fee was not designed to raise revenue. See Hexom, 177 F.3d at 1139. Rather, the fee was designed to pay for the costs of a special program, and thus was not a tax for purposes of the TIA and did not preclude federal court jurisdiction. See id. The Tenth Circuit also concluded that the $5.25 assessment was not a tax because it was "expressly tied to the administrative costs of a specific regulatory scheme and, therefore, its essential character [was] regulatory." Marcus, 170 F.3d at 1312.

1.Whether Tennessee's Assessment is a Fee or a Tax

The issue is whether the State's $20.50 assessment for disabled parking placards and $3.00 assessment for renewal or replacement is a tax or a regulatory fee. If the assessment is a tax, then the Act applies and operates to bar federal jurisdiction unless the state fails to provide a plain, speedy and efficient remedy⁴. See Wright, 835 F.2d at 144-45. "It is elemental . . . that the label given an assessment by state law is not dispositive of whether the assessment is a 'tax under state law.' Rather, the definition of the term 'tax' is a question of federal law, and the issue here is whether the assessment is a tax within the meaning of that term as employed by Congress in the Tax Injunction Act." Id. at 144 (citations omitted).

The leading decision is San Juan Cellular Telephone Co. v. Public Service Commission of Puerto Rico, 967 F.2d 683 (1st Cir. 1992). The court explained that, [t]he 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.

Id. at 685 (citations omitted).

The Sixth Circuit has adopted the First Circuit's approach in determining whether an assessment is a "tax," utilizing the often cited three-factor test: "(1) the entity that imposes the assessment; (2) the parties upon whom the assessment is imposed; and (3) whether the assessment is expended for general public purposes, or used for the regulation or benefit of the parties upon whom the assessment is imposed." American Landfill, Inc. v. Stark/Tuscaranwas/Wayne Joint Solid Waste Management Dist., 166 F.3d 835, 837 (6th Cir. 1999) (quoting Bidart Bros. v. California Apple Comm'n, 73 F.3d 925, 931 (9th Cir. 1996)); see San Juan Cellular Tel. Co., 967 F.2d at 685. Additionally, if "the assessment falls near the middle of the spectrum between a regulatory fee and a classic tax, the predominant factor is the revenue's ultimate use. When the ultimate use is to provide a general public benefit, the assessment is likely a tax, while an assessment that provides a more narrow benefit to the regulated companies is likely a fee." American Landfill, Inc., 166 F.3d at 838 (citations omitted). Fees can serve regulatory purposes as distinguished from general public purposes in two ways: either by discouraging particular conduct through the device of making it more costly, or by generating income ear marked to cover the cost of the regulation. See San Juan Cellular Tel. Co., 967 F.2d at 685.

The record demonstrates that the State's assessment is a tax rather than a fee. Under the statutory scheme imposed by the Tennessee legislature, the $20.50 disabled placard assessment and the $3.00 renewal assessment are apportioned into the State's highway fund, the general fund, the police pay supplement fund, and the trooper safety fund. See Tenn. Code Ann. §§ 55-4-103, 55-4-111, 55-6-107, 55-21-103. Specifically, the assessment is allocated as follows:

1.The $20.50 placard fee collected by county clerks and remitted to the Title and Registration Division of the Tennessee Department of Safety or remitted directly to the division by applicants is deposited in the State of Tennessee Treasury and is allocated in the following manner:

(A)There is $18.75 registration tax provided by Tenn. Code Ann. §§ 55-21-103(b)(2)(A)(i) and 55-4-111(a)(1). Of this $18.75 the first $1.00 is paid into the state treasury and credited to the police pay supplement fund. Of the $17.75 remainder, ninety-eight percent (98%) is distributed to the general...