In re Ad Valorem Tax Litigation

• Decision Date: 26 June 2007
• Docket Number: No. 07-0009.,07-0009.
• Citation: 287 S.W.3d 517
• Parties: In re AD VALOREM TAX LITIGATION.
• Court: Texas Supreme Court

287 S.W.3d 517

In re AD VALOREM TAX LITIGATION.

No. 07-0009.

Texas Judicial Panel on Multidistrict Litigation.

Heard May 17, 2007.

Decided June 26, 2007.

On Review By The Multidistrict Litigation Panel

Justice DOUGLAS S. LANG delivered the unanimous opinion of the Multidistrict Litigation Panel, in which Justice GEORGE C. HANKS, JR., Justice CATHERINE STONE, Justice ANN CRAWFORD McCLURE, and Justice JANE BLAND joined.¹

I. Motion to Transfer

This is the second motion to transfer filed by Valero Energy Corporation respecting its ad valorum tax litigation against thirty-nine different tax appraisal districts across the State of Texas. We denied Valero's first motion to transfer by our opinion of April 19, 2006 (Valero I).² In these cases, Valero challenges the Appraisal Districts' valuation of its refineries, pipelines, terminals, and convenience stores, together with the inventory, furniture, fixtures, and equipment related to those assets.

II. Factual and Procedural Context

The record supplied to us for consideration of this motion is not detailed. With a few exceptions, Valero and the Districts have not provided us with facts identifying how many parcels of real estate, convenience stores with their attendant personalty, or other facilities of Valero are involved in these suits or what property is involved in any particular suit. While we are not advised how many cases involve refineries, pipelines, and terminals, the record reflects that one of the property valuations at issue is a coker unit in Valero's Texas City, Galveston County refinery. We presume that refinery's asset value is at issue as well. As to the convenience stores or "c-stores" across the state which are the subjects of litigation, we are not advised how many such facilities are to be addressed in the cases pending across the state. Two Appraisal Districts have identified "c-store" properties that are the subject of a valuation dispute. The Hidalgo County Appraisal District advises the values of "`c-stores' and the personal property associated therewith located at not less than 17 different locations" in Hidalgo County are in dispute. The Dallas Central Appraisal District describes generally that all three of Valero's law suits pending in Dallas County deal with real estate and personal property at an unspecified number of convenience stores. We presume Valero convenience stores, the real estate where each is situated and the attendant inventory, fixtures, and equipment, are, at least in part, the subject of virtually every suit Valero seeks to transfer. Finally, we are advised by Valero that the legal claims it specifically asserts in its cases are that its properties have been appraised above market value and unequally with respect to comparable properties. TEX. TAX CODE ANN. § 42.24 (Vernon 2001).

Valero I involved 150 lawsuits in eighty-five district courts in forty-two counties with forty-two appraisal districts. This current case, Valero II, when filed, involved 125 cases³ in eighty-five district courts in thirty-nine counties with thirty-nine appraisal districts.⁴

In Valero I, we denied Valero's motion to transfer, concluding that under Rule 13, Texas Rules of Judicial Administration, Valero had "... not shown that these cases are related or that it would serve the convenience of the litigants, witnesses, or lawyers to have the pretrial issues heard by one judge."⁵ Valero did not seek review of that decision pursuant to rule 13.9(a). Valero now contends our first decision was in error based upon the contentions we address below. Also, Valero argues our decision is contrary to the case law from the federal courts interpreting the federal multi-district litigation statute, 28 U.S.C. Section 1407.⁶ According to Valero, the Texas multi-district litigation law was modeled after the federal multi-district litigation scheme and we should follow the lead of the federal cases as to whether the cases Valero seeks to transfer are "related." Further, although not agreeing with our reasoning in Valero I as to whether the transfer of the cases "would serve the convenience of the litigants, witnesses, or lawyers," Valero contends that the circumstances have changed in that conflicting evidentiary and discovery rulings have transpired since our ruling in Valero I. Based upon these and other contentions discussed below, Valero argues we should reverse our conclusion in Valero I and decide in Valero's favor in this case, Valero II.

We cannot agree with the arguments of Valero. Accordingly, we deny Valero's motion to transfer and decline to appoint a pretrial judge pursuant to rule 13.3. We have evaluated our decision in Valero I in light of Valero's arguments as to the facts and the law and the contention of changed circumstances. We conclude Valero has not shown that these cases are sufficiently "related," or that it would serve the convenience of the litigants, witnesses, or lawyers to have the pretrial issues heard by a single pretrial judge.

III. Are the cases related?

Under rule 13.2(f), cases are "related" if they involve "one or more common issues of fact." See TEX R.JUD ADMIN. 13.2(f); TEX. GOV'T CODE ANN § 74.162 (Vernon 2005). Valero asserts the over arching common issue of fact, which leads to the conclusion the cases are "related," is the "valuation" of the various properties which Valero and the Districts must try in the district courts. Further, Valero contends that by demonstrating "valuation" is a common issue of fact in these cases, especially the valuation of convenience store inventory, it has met its burden on this motion to transfer because it need only show that there are "one or more common questions of fact."

Valero describes the "valuation" issue as it relates to the several types of property which are the subject of the lawsuits. It tells us that "numerous items of Valero's personal property are common to Valero's convenience stores (among other facilities)." In fact, as to personal property valuation, Valero contends this court has "... recognized ... these cases involve the valuation of numerous common items, including the inventory of Valero's convenience stores ...," citing us to In re Ad Valorem Tax Litig., 216 S.W.3d 83 (Tex. Jud. MDL Panel 2006). At the same time, Valero acknowledges that "there may not be" common issues with respect to the value of the real estate on which the convenience stores are located. In oral submission, Valero recognizes, as it must, that parcels of real estate are "unique." Additionally, Valero contends that valuation of its pipelines, refineries, and terminals also involve common questions of fact because those facilities, in particular, refineries, include spare parts, vehicles, vessels, small tanks, and computer equipment, often purchased in bulk and distributed to several locations. We are also advised that pipeline construction costs are incurred on a system-wide basis that crosses county lines. These costs are "allocated" by system regardless of county, and are used by appraisers in developing cost, income, and market approaches to valuation. Likewise, some refinery equipment, such as manual controls, "have similar functional obsolescence for deduction purposes."

Valero's arguments in Valero II are somewhat different from those it developed in Valero I.⁷ Valero now concedes there may be an absence of common issues of fact respecting valuation of real estate parcels. We note that although Valero focuses in its reply in this case upon its contention that a common issue exists relative to valuation of personalty, while recognizing the unique nature of real estate valuation, Valero does not suggest the scope of the matters to be addressed and coordinated by the pretrial court should be limited to those related to personal property valuation.

Many of the respondent Districts filed separate responses to the motion to transfer. However, the Districts appear to be aligned in their positions. We glean from their briefing the following major points: (1) Valero has not met its burden in showing one or more common issues of fact because the sole issue raised, "valuation," is the ultimate issue in each case of the appraised value of the property, in each location; (2) the assertion of a common fact issue as to inventory does not withstand scrutiny because: a) the amount and type of inventory in each store is unlikely to be the same as to any store due to location and physical differences, b) it will be difficult to consider the value of the inventory separately from the value of the real property, both for the subjects and for any comparable sales utilized by the appraisers, and c) the fact that issues may be similar in some cases does not warrant transfer when the vast majority of the cases involve individualized inquiries; (3) contrary to the assertion of Valero, these cases are significantly different from the cases transferred in In re Silica Products because there, the underlying suits shared a common fact issue: whether and to what extent the plaintiffs were injured by silica, whereas here, the issue in the underlying local case is different from the issue in each other case, i.e., to determine the "correct" value of each property,⁸ thus, "individualized issues" predominate; (4) this motion is an attempt to create a statewide center for ad valorum tax appeals which violates Article VIII, Section 23 of the Texas Constitution which requires, in part, that "Administrative and judicial enforcement of uniform standards and procedures for appraisal property for ad valorum tax purposes, as prescribed by general law, shall originate in the county where the tax is imposed...." Further, the legislation which implements that constitutional mandate requires, in part, that, "The district court shall try all issues of fact and law raised by the pleadings in the manner applicable to civil suits generally." sec. 42.23(a) Tex. Tax Code., (5) Were this motion granted, it would breed untold...