Howard v. City of Detroit

• Citation: 40 F.4th 417
• Decision Date: 11 July 2022
• Docket Number: 21-1261
• Parties: Deborah HOWARD, Flossie Byrd, Billie Hickey, Jeffrey Stevenson, and William Hickey, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. CITY OF DETROIT, MICHIGAN, City of Detroit, Michigan Office of the Chief Financial Officer, City of Detroit, Michigan Office of the Assessor, Michael Duggan, in his official capacity as Mayor of the City of Detroit, Michigan, Alvin Horhn, in his official capacity as City of Detroit Assessor, Wayne County, Michigan, W. Howard Morris, in his official capacity as Commissioner of the State Tax Commission, Leonard D. Kutschman, in his official capacity as Commissioner of the State Tax Commission, and David A. Buick, in his official capacity as Executive Director of the State Tax Commission, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

40 F.4th 417

Deborah HOWARD, Flossie Byrd, Billie Hickey, Jeffrey Stevenson, and William Hickey, individually and on behalf of all others similarly situated, Plaintiffs-Appellants,

v.CITY OF DETROIT, MICHIGAN, City of Detroit, Michigan Office of the Chief Financial Officer, City of Detroit, Michigan Office of the Assessor, Michael Duggan, in his official capacity as Mayor of the City of Detroit, Michigan, Alvin Horhn, in his official capacity as City of Detroit Assessor, Wayne County, Michigan, W. Howard Morris, in his official capacity as Commissioner of the State Tax Commission, Leonard D. Kutschman, in his official capacity as Commissioner of the State Tax Commission, and David A. Buick, in his official capacity as Executive Director of the State Tax Commission, Defendants-Appellees.

No. 21-1261

United States Court of Appeals, Sixth Circuit.

Argued: December 9, 2021

Decided and Filed: July 11, 2022

ARGUED: Samuel E. Schoenburg, GOLDMAN ISMAIL TOMASELLI BRENNAN & BAUM LLP, Chicago, Illinois, for Appellants. James D. Noseda, CITY OF DETROIT CITY LAW DEPARTMENT, Detroit, Michigan, for City of Detroit Appellees. Theodore W. Seitz, DYKEMA GOSSETT PLLC, Lansing, Michigan, for Appellee Wayne County. Michael S. Hill, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellees Buick, Morris, and Kutschman. ON BRIEF: Samuel E. Schoenburg, Rami N. Fakhouri, Elizabeth B. Farrington, GOLDMAN ISMAIL TOMASELLI BRENNAN & BAUM LLP, Chicago, Illinois, for Appellants. James D. Noseda, CITY OF DETROIT CITY LAW DEPARTMENT, Detroit, Michigan, for City of Detroit Appellees. Theodore W. Seitz, Jill M. Wheaton, Nasseem S. Ramin, DYKEMA GOSSETT PLLC, Lansing, Michigan, for Appellee Wayne County. Michael S. Hill, Matthew B. Hodges, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellees Buick, Morris, and Kutschman. Sarah Tremont, COVINGTON & BURLING LLP, Washington, D.C., for Amicus Curiae.

Before: BOGGS, GIBBONS, and NALBANDIAN, Circuit Judges.

GIBBONS, J., delivered the opinion of the court in which NALBANDIAN, J., joined. BOGGS, J. (pp. –––– – ––––), delivered a separate dissenting opinion.

JULIA SMITH GIBBONS, Circuit Judge.

Several Detroit homeowners, on behalf of themselves and all others similarly situated, sued the City of Detroit, Wayne County, and several city, county, and state individuals in their official capacities alleging a denial of due process and other state law violations as a result of the untimely mailing of property tax assessment notices in 2017. The district court granted defendants’ motions to dismiss for lack of subject matter jurisdiction, finding the Tax Injunction Act ("TIA") and the principle of comity barred plaintiffs’ action. Because we find the state remedy is uncertain, federal jurisdiction is permitted. We reverse and remand for further proceedings.

I

To dispute a property tax assessment, Detroit ordinances and Michigan state law outline a three-step process. First, taxpayers may "make complaint on or before February 15th, either orally or in writing ... before the Board of Assessors." Detroit, Mich., Code of Ordinances § 44-4-3(a). Second, "[a]ny person who has previously complained to the Board of Assessors ... may appeal to the Board of Review." Detroit, Mich., Code of Ordinances § 44-4-6(b). Finally, in order for the Michigan Tax Tribunal to have jurisdiction over an assessment dispute, "the assessment must be protested before the board of review." M.C.L. § 205.735a(3). The Tax Tribunal "has exclusive and original jurisdiction" over proceedings related to assessment, refunds, and redeterminations of property taxes. M.C.L. § 205.731.

On February 14, 2017, Detroit mailed over 260,000 tax assessment notices to Detroit homeowners. The notices informed homeowners of an "EXTENDED ASSESSORS REVIEW SCHEDULE" that would conclude on February 18, 2017, just four days later. DE 1-1, Tax Assessment Notice, Page ID 44. Reflecting local ordinances and state law, the notices stated: "Protest during the February Assessors Review Period is required to protect your right to appear before the March Board of Review. Protest at the March Board of Review is necessary to protect your right to further appeal to the Michigan Tax Tribunal." Id. The notice reiterated that homeowners who "believe the Taxable Value, the Assessed Value, the State Equalized Value, the Property Classification, or the Transfer of Ownership information is incorrect ... must appeal during the ASSESSORS REVIEW PERIOD." Id.

At a City Council meeting on February 14, the same day notices were mailed, a city official announced: "The Assessors Review process will end this year February the 28th. Normally it ends on the 15th, but because the review took so long to verify the errors that were discovered ... the decision was made to extend it." DE 1, Compl., Page ID 20.¹ Various news outlets reported the extension and that Detroit had waived the requirement of appearance before the Board of Assessors so residents could appeal directly to the Board of Review.² Detroit did not distribute individualized mailings to homeowners to inform them of the extended review period or the waiver of the Board of Assessors protest requirement.

Deborah Howard, Flossie Byrd, William and Billie Hickey, and Jeffrey Stevenson, on behalf of themselves and all others similarly situated (collectively, "plaintiffs" or "appellants"), filed a class action complaint in the Eastern District of Michigan. They allege the City of Detroit, the Detroit Offices of the Chief Financial Officer and Assessor, Mayor Michael Duggan, and Assessor Alvin Horhn (collectively, "Detroit appellees") violated their due process rights with the untimely mailings and failure to communicate the extension and waiver. Plaintiffs assert that because "Michigan's government, under the auspices of the State Tax Commission ("STC"), assumed control of Detroit's flawed property tax assessment process from 2014 through 2017," State Tax Commissioners W. Howard Morris and Leonard D. Kutschman, and STC Executive Director David A. Buick (collectively, "Michigan appellees") are equally responsible for the violations of plaintiffs’ due process rights. Id. at 2–3. Finally, plaintiffs argue Wayne County, Michigan, is "complicit in the denial of due process by foreclosing on delinquent homes where their owners had no opportunity to appeal their assessments" and has been unjustly enriched. Id. at 7. Plaintiffs seek injunctive, declaratory, and monetary relief under 42 U.S.C. § 1983 for the alleged denial of due process.

The district court granted defendants’ motions to dismiss under Federal Rule of Civil Procedure 12(b)(1). The court found it lacked jurisdiction because plaintiffs’ due process claim was within the scope of the TIA and the state remedy was "plain, speedy and efficient." DE 33, Op., Page ID 587. Because the court dismissed plaintiffs’ federal claim, it declined to exercise supplemental jurisdiction over the remaining state law claims. Plaintiffs timely appealed.

II

" Rule 12(b)(1) motions to dismiss for lack of subject-matter jurisdiction generally come in two varieties: a facial attack or a factual attack." Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co. , 491 F.3d 320, 330 (6th Cir. 2007). A facial attack occurs when a party "questions merely the sufficiency of the pleading." Id. The district court "takes the allegations in the complaint as true." Id. When a party raises "a factual attack on the subject-matter jurisdiction alleged in the complaint, no presumptive truthfulness applies to the allegations" and "the district court has wide discretion" to review evidence outside the complaint. Id. Since here the district court reviewed defendants’ motion to dismiss as a facial attack and made no factual findings, we review the decision de novo. Carrier Corp. v. Outokumpu Oyj , 673 F.3d 430, 440 (6th Cir. 2012).

III

The TIA prohibits district courts from "enjoin[ing], suspend[ing] or restrain[ing] 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 TIA "has its roots in equity practice, in principles of federalism, and in recognition of the imperative need of a State to administer its own fiscal operations." Tully v. Griffin, Inc. , 429 U.S. 68, 73, 97 S.Ct. 219, 50 L.Ed.2d 227 (1976). The principle of comity does not bar jurisdiction where, as here, petitioners do not challenge the validity of a state tax system. See Fair Assessment in Real Est. Ass'n, Inc. v. McNary , 454 U.S. 100, 116, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981) ("[T]axpayers are barred by the principles of comity from asserting § 1983 actions against the validity of state tax systems in federal courts.").

We assume, without deciding, that appellants seek remedies that would enjoin, suspend, or restrain the collection of taxes. The TIA does not bar federal jurisdiction, however, because there is no plain, speedy and efficient remedy available in state court. We reverse and remand for further proceedings.

A

The " ‘plain, speedy and efficient’ exception to the [Tax Injunction] Act's prohibition was only designed to require that the state remedy satisfy certain procedural criteria." Rosewell v. LaSalle Nat'l Bank , 450 U.S. 503, 522, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981) ; see also Hedgepeth v. Tennessee , 215 F.3d 608, 615 (6th Cir. 2000) (The "TIA merely requires that the state provide certain minimal procedural protections against illegal tax collection."). The state must ensure a "full hearing and judicial determination of the controversy" during which a petitioner "may raise any and all constitutional objections to the tax." Rosewell , 450 U.S. at 513–14, 101 S.Ct. 1221 (quoting 81 Cong. Rec. 1416 (1937)). In order to "be faithful to the congressional intent ‘to limit drastically’ federal-court interference with state tax systems, [courts] must construe narrowly the ‘plain, speedy and efficient’ exception."...