In re Metromedia Fiber Network, Inc.

• Decision Date: 15 July 2003
• Docket Number: Adversary No. 02-05355 (ASH).,Bankruptcy No. 02-22737 (ASH).,Bankruptcy No. 02-22736 (ASH).,Adversary No. 02-05356(ASH).,Bankruptcy No. 02-22744(ASH).,Bankruptcy No. 02-22740 (ASH).,Bankruptcy No. 02-22739 (ASH).,Bankruptcy No. 02-22752(ASH).,Bankruptcy No. 02-22742(ASH).,Adversary No. 02-05360(ASH).,Adversary No. 02-05352 (ASH).,Adversary No. 02-05349 (ASH).,Bankruptcy No. 02-22745(ASH).,Bankruptcy No. 02-22749(ASH).,Adversary No. 02-05348 (ASH).,Adversary No. 02-05350 (ASH).,Bankruptcy No. 02-22741 (ASH).,Adversary No. 02-05347 (ASH).,Adversary No. 02-05353 (ASH).,Bankruptcy No. 02-22753(ASH).,Adversary No. 02-05359(ASH).,Bankruptcy No. 02-22746(ASH).,Bankruptcy No. 02-22751(ASH).,Adversary No. 02-05354 (ASH).,Adversary No. 02-05351 (ASH).,Bankruptcy No. 02-22754(ASH).,Bankruptcy No. 02-22738 (ASH).
• Citation: 299 B.R. 251
• Parties: In re METROMEDIA FIBER NETWORK, INC., et al., Debtors. Metromedia Fiber Network, Inc., et al., Plaintiffs, v. Various State and Local Taxing Authorities, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

299 B.R. 251

In re METROMEDIA FIBER NETWORK, INC., et al., Debtors.

Metromedia Fiber Network, Inc., et al., Plaintiffs, v. Various State and Local Taxing Authorities, Defendants.

Bankruptcy No. 02-22736 (ASH).

Bankruptcy No. 02-22737 (ASH).

Bankruptcy No. 02-22738 (ASH).

Bankruptcy No. 02-22739 (ASH).

Bankruptcy No. 02-22740 (ASH).

Bankruptcy No. 02-22741 (ASH).

Bankruptcy No. 02-22742(ASH).

Bankruptcy No. 02-22744(ASH).

Bankruptcy No. 02-22745(ASH).

Bankruptcy No. 02-22746(ASH).

Bankruptcy No. 02-22749(ASH).

Bankruptcy No. 02-22751(ASH).

Bankruptcy No. 02-22752(ASH).

Bankruptcy No. 02-22753(ASH).

Bankruptcy No. 02-22754(ASH).

Adversary No. 02-05347 (ASH).

Adversary No. 02-05348 (ASH).

Adversary No. 02-05349 (ASH).

Adversary No. 02-05350 (ASH).

Adversary No. 02-05351 (ASH).

Adversary No. 02-05352 (ASH).

Adversary No. 02-05353 (ASH).

Adversary No. 02-05354 (ASH).

Adversary No. 02-05355 (ASH).

Adversary No. 02-05356(ASH).

Adversary No. 02-05359(ASH).

Adversary No. 02-05360(ASH).

United States Bankruptcy Court, S.D. New York.

July 15, 2003.

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Kronish, Lieb, Weiner & Hellman LLP, by Lawrence C. Gottlieb, Esq., Ronald R. Sussman, Esq., Richard S. Kanowitz, Esq., New York City, for Debtors/Plaintiffs.

Barr & Haas, LLP, by Harvey S. Barr, Esq., Spring Valley, NY, for Defendants Dallas Central Appraisal District, Foy Mitchell, Jr., Harris County Appraisal District and Jim Robinson.

Shannon, Gracey, Ratliff & Miller LLP, by Michael M. Tabor, Esq., Dallas, TX, for Defendants Dallas Central Appraisal District and Foy Mitchell, Jr.

Linebarger, Goggan, Blair & Sampson LLP, by Elizabeth Weller, Esq., Dallas, TX, for Defendants Dallas County, Margaret Keliher, City of Dallas, Shirley A. Acy, Dallas Independent School District, Dr. Mike Moses, City of Houston, Anna Russell, Cypress-Fairbanks Independent School District, Richard E. Berry, Houston Independent School District and Kay Stripling.

Office of County Counsel, by Marcy L. Berkman, Esq., San Jose, CA, for Defendants County of Santa Clara and Lawrence E. Stone.

Anderson, Kill & Olick, by Michael J. Venditto, Esq., New York City, for Defendants County of San Francisco and Doris M. Ward.

Office of County Counsel, by Joyce Aiello, Esq., Los Angeles, CA, for Defendants County of Los Angeles and Rick Auerbach.

Office of County Counsel, by Mary E. Baker, Esq., Houston, TX, for Defendants Harris County and Robert Eckels.

New York State Attorney General's Office, by Lewis Polishook, Esq., New York City, for Defendants New York State Office of Real Property Services, New York State Board of Real Property Services and Thomas G. Griffen.

Corporation Counsel of City of New York, by Gabriela Cacuci, Esq., New York City, for Defendants New York City Department of Finance and Martha E. Stark.

Department of Assessment and Taxation, by Jeffrey G. Comen, Esq., Baltimore, MD, for Defendants Maryland Department of Assessments and Taxation and Ronald W. Wineholt.

Sidley, Austin, Brown & Wood LLP, by Melissa Zelen Neier, Esq., New York City, for Defendants Virginia State Corporation Commission, Clinton Miller, County of Fairfax and Kevin C. Greenlief.

DECISION ON MOTIONS TO DISMISS BASED ON SOVEREIGN IMMUNITY AND ABSTENTION

ADLAI S. HARDIN, JR., Bankruptcy Judge.

Presently pending in this Court are twelve adversary proceedings commenced by the debtors in these administratively consolidated Chapter 11 cases under 11 U.S.C. § 505 against "(1) state taxing entities charged with valuing and/or appraising personal property for the determination of ad valorem taxes; (2) local taxing entities charged with assessing and/or collecting ad valorem taxes; or (3) individual officers who represent these taxing entities and who are charged with insuring that the taxing entities comply with state law" (Debtors' Omnibus Memorandum of Law in Opposition to Defendants' Motions to Dismiss Adversary Complaints, hereinafter the "Omnibus Memorandum," at 6).¹

The debtors are in the business of providing fiber optic infrastructure, high-bandwidth Internet connectivity and managed Internet infrastructure for customers in the United States and Europe. The debtors have constructed, maintained and operated a fiber optic network and related facilities throughout the United States and within all of the defendants' jurisdictions. Over 1,000 taxing jurisdictions within the United States assert that this infrastructure constitutes property taxable to the debtors ("Taxable Property"). Portions of the Taxable Property are located in each of the defendants' taxing jurisdictions and are subject to ad valorem taxation. The debtors assert that the final property tax must be based on the Taxable Property's fair market value.

The gravamen of the debtors' complaints in these adversary proceedings is that the defendants have appraised the debtors' Taxable Property, subsequently assessed, and are now seeking to collect ad valorem taxes from the debtors which are based on valuations grossly in excess of the Taxable Property's fair market value. The debtors ask this Court to determine the fair market value of the Taxable Property in each of the defendants' taxing jurisdictions under Section 505 of the Bankruptcy Code.

A number of defendants in the adversary proceedings have moved to dismiss the complaints on various grounds, the principal being the Eleventh Amendment of the United States Constitution and the doctrine of sovereign immunity, and abstention under 28 U.S.C. § 1334(c). For the reasons set forth below, all of the adversary proceedings will be dismissed.

Jurisdiction

The threshold question which must be addressed before any other issue is the jurisdiction of this Court. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) ("`Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause.' Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514, 19 L.Ed. 264 (1869). `On every writ of error or appeal, the first and fundamental question is that of jurisdiction, first, of this court, and then of the court from which the record comes. This question the court is bound to ask and answer for itself, even when not otherwise suggested, and without respect to the relation of the parties to it.' Great Southern Fire Proof Hotel Co. v. Jones, supra, [177 U.S. 449] at 453[, 20 S.Ct. 690, 44 L.Ed. 842 (1900)]. The requirement that jurisdiction be established as a threshold matter `spring[s] from the nature and limits of the judicial power of the United States' and is `inflexible and without exception.' Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382[, 4 S.Ct. 510, 28 L.Ed. 462] (1884)"); Concourse Rehabilitation & Nursing Ctr. Inc. v. DeBuono, 179 F.3d 38, 43 (2d Cir.1999) ("The threshold issue in this, and every case, is whether a federal court has subject matter jurisdiction over the suit before it"); PIN/NIP, Inc. v. Platte Chem. Co., 304 F.3d 1235, 1241 (Fed.Cir.2002) ("Jurisdiction is a threshold issue, Johannsen v. Pay Less Drug Stores N.W., Inc., 918 F.2d 160, 161, 16 USPQ2d 1697 (Fed.Cir.1990), and a court must satisfy itself that it has jurisdiction to hear and decide a case before proceeding to the merits, View Eng'g, Inc. v. Robotic Vision Sys., Inc., 115 F.3d 962, 963, 42 USPQ2d 1956 (Fed.Cir.1997)"); Danca v. Private Health Care Sys., Inc., 185 F.3d 1, 4 (1st Cir.1999) ("A threshold issue in this case, as in every case, is subject matter jurisdiction"); Nat'l Rifle Ass'n of Am. v. Magaw, 132 F.3d 272, 279 (6th Cir.1997) ("The threshold question in every federal case is whether the court has the judicial power to entertain the suit. Warth v. Seldin, 422 U.S 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)"); United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1325 (6th Cir.1993) ("This court's threshold duty in every case is to determine whether it has subject matter jurisdiction over the controversy before it").

The debtors seek relief under Section 505 of the Bankruptcy Code. Section 505(a)(1) provides as follows:

(a)(1) Except as provided in paragraph (2) of this subsection, the court may determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax, whether or not previously assessed, whether or not paid, and whether or not contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction.

Jurisdiction is invoked under 28 U.S.C. § 1334. Subsections (a) and (b) of Section 1334 provide as follows:

(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.

(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

The jurisdiction so conferred on the district courts may be referred to bankruptcy courts under 28 U.S.C. § 157(a). In this District, jurisdiction over bankruptcy cases and proceedings has been referred to the bankruptcy courts within the District pursuant to the standing order of reference signed by Acting Chief Judge Robert J. Ward dated July 10, 1984.

Accordingly, this Court has jurisdiction over these adversary proceedings unless jurisdiction is precluded by the Eleventh Amendment or the doctrine of sovereign immunity. Because the law on sovereign immunity has not been uniformly intuited by the many able jurists and scholars who have written on the subject over the last two centuries, a brief historical summary will be helpful before turning to the debtors' arguments.

I. Background: the ...