Jefferson County v. Weissman

• Decision Date: 16 March 2011
• Docket Number: 1100293.
• Citation: 69 So.3d 827
• Parties: JEFFERSON COUNTYv.Jeffrey WEISSMAN, D.D.S., et al.
• Court: Alabama Supreme Court

69 So.3d 827

JEFFERSON COUNTY

v.Jeffrey WEISSMAN, D.D.S., et al.

1100293.

Supreme Court of Alabama.

March 16, 2011.

Matthew H. Lembke and Andrew L. Brasher of Bradley Arant Boult Cummings LLP, Birmingham; Robert D. Segall of Copeland, Franco, Screws & Gill, P.A., Montgomery; and Jeffrey M. Sewell, county atty., Birmingham, for appellant.Wilson F. Green of Fleenor Green & McKinney LLP, Tuscaloosa; E. Clayton Lowe, Jr., of Lowe & Grammas, LLP, Vestavia Hills; and Donald R. Jones, Jr., Montgomery, for appellees.COBB, Chief Justice.

Jefferson County (“the County”) appeals from a summary judgment of the Jefferson Circuit Court ¹ enjoining the County from collecting taxes under Act No. 2009–811, Ala. Acts 2009 (“the 2009 Act”),² as of December 1, 2010. The plaintiffs, represented by Dr. Jeffrey Weissman, a Jefferson County dentist, filed the instant action in December 2009, contending that the 2009 Act was unconstitutional on a number of grounds. The action was shaped by the ensuing litigation into a class action the members of which are professionals and businesses subject to the taxes imposed pursuant to the 2009 Act. The plaintiffs' complaint, as finally amended, asserts that the 2009 Act is unconstitutional because (1) it conflicts with Ala. Const. 1901, Art. IV, § 105,³ (2) the notice requirements of Ala. Const. 1901, Art. IV, § 106,⁴ were violated as to the 2009 Act, (3) it violated Ala. Const. 1901, Art. XI, § 212 (forbidding the delegation of taxing authority), and (4) it violated Ala. Const. 1901, Art. IV, § 45 (laws restricted to one subject, which is clearly expressed in the title). After the plaintiffs were certified as a class, a motion that the County did not oppose, the parties filed cross-motions for a summary judgment. The case was thoroughly briefed, and the trial court conducted a hearing on the summary-judgment motions, thereafter denying the County's summary-judgment motion and entering a summary judgment for the plaintiffs. The summary judgment for the plaintiffs included an injunction against further tax collections by the County under the 2009 Act. The trial court also determined that its order would be prospective only and that a retroactive refund of taxes already collected would be “neither appropriate nor justified,” citing Ex parte Coker, 575 So.2d 43 (Ala.1990). In pertinent part, the trial court's order states:

“The Court finds that the 2009 Act, a local act, is unconstitutional because the published notice of the 2009 Act does not comply with Article IV, Section 106 of the Alabama Constitution and applicable case-law. Specifically, the Court finds that the notice of the 2009 Act does not accurately describe numerous material and substantial elements of the bill, including that the 2009 Act is to be retroactively applied or that the 2009 Act confers enabling authority to impose a new occupational tax on both previously taxed taxpayers and on a new class of ‘licensed professionals' which was exempt from the ‘old’ Jefferson County's Occupational Tax. The Court notes that the omission or misstatement of any one material and substantial element of the 2009 Act with respect to the notice would, standing alone, be sufficient to render the 2009 Act unconstitutional under Section 106. The Court finds unpersuasive Jefferson County's argument that Section 106's notice requirements do not apply because the 2009 Act was passed by the Alabama Legislature during a special session. The Court also finds unpersuasive Jefferson County's argument that publishing simply the ‘general nature’ of the Act's substantive features satisfies the notice requirements imposed under Section 106.”

The County appealed; this Court granted its motion to expedite. ⁵ Consequent with this expedited appeal, this Court ordered the trial court to modify its injunction to permit the County to continue collecting taxes under the 2009 Act during the pendency of the appeal, with the funds so collected to be placed in an interest-bearing escrow account for distribution in accord with this Court's determination of the merits.

Historical Considerations

The history of the litigation involving Jefferson County's occupational taxes is largely set out in this Court's two opinions involving plaintiff Jessica Edwards: Jefferson County Commission v. Edwards, 32 So.3d 572 (Ala.2009) ( “ Edwards I ”), and Jefferson County Commission v. Edwards, 49 So.3d 685 (Ala.2010) (“ Edwards II ”). The case underlying this appeal continues the “exquisitely complex sequence of legislative enactments and related litigation,” Edwards I, 32 So.3d at 575, that was addressed in those opinions. In summary, Edwards I and Edwards II dealt with the application of Act No. 406, Ala. Acts 1967 (“the 1967 Act”), which authorized the County to levy license or privilege taxes upon persons for engaging in businesses but exempted from its provisions licensed professionals who were required to obtain licenses from the State under Ala.Code 1975, § 40–12–1 et seq. Thereafter, under the authority of the 1967 Act, the County imposed a business-license tax on businesses and an occupational tax on individuals.

Edwards I and Edwards II were appeals from judgments in the plaintiffs' class action contending that the 1967 Act had been repealed by the enactment of Act No. 99–669, Ala. Acts 1999 (“the 1999 repeal Act”); the trial court agreed, finding that a retroactive refund was not warranted but that collections under the 1967 Act were enjoined prospectively in January 2009. The County asserted that it required immediate enactment of an act to restore comparable taxing authority in order for the County to remain fiscally solvent; the trial court stayed application of the injunction until the end of the regular legislative session in May 2009. However, the legislature failed to pass any legislation during the regular session restoring the County's taxing authority. The County's fiscal position deteriorated rapidly, and it soon began restricting usual services. The summer months saw increasing political pressure for State government to address the situation, and numerous notices regarding proposed local laws were published in local and statewide news media. After the County's legislative delegation reached agreements as to the details of a proposed replacement-taxing plan, Governor Riley, acting pursuant to Ala. Const. 1901, Art. V, § 122,⁶ called the legislature into an “extraordinary session” to address the situation. The 2009 Act was subsequently enacted during that session. Among other things, the 2009 Act purports to reenact the 1967 Act without the original exemptions, to repeal the 1999 repeal Act, and essentially to reinstate and approve the County's tax collections as they were conducted under the 1967 Act. In addition, the 2009 Act provided for a referendum to be held in June 2012 allowing the voters to approve or to reject the authorization to continue levying the tax. Section 10 of the 2009 Act also provides for the severability of any portion of the 2009 Act found invalid without invalidating the remainder of the 2009 Act.

Soon after the 2009 Act was enacted, this Court in Edwards I affirmed the trial court's judgment holding that the 1999 repeal Act had repealed the 1967 Act. The Court took judicial notice of the passage of the 2009 Act but noted that its validity was not then before the Court. 32 So.3d at 580 n. 5. In Edwards II, the Court did address various aspects of the application of the 2009 Act:

“After our affirmance of the trial court's judgment in [ Edwards I ], the taxpayers, in light of the retroactivity provisions in Act No. 2009–811, filed a motion to release the tax proceeds that had been placed in the escrow fund to a court-appointed settlement administrator for the calculation of refunds due. The County filed a motion to dissolve the injunction, to vacate the escrow order, and to release the escrowed taxes to Jefferson County. The taxpayers then filed a motion to enforce the January 12, 2009, order;[⁷] the County filed a motion to clarify the escrow period. On December 23, 2009, the trial court entered an order denying the County's motion to dissolve the injunction, holding that Act No. 2009–811 violates § 95 of the Alabama Constitution of 1901 prohibiting the enactment of legislation taking away a cause of action after a suit based on that cause of action has been filed.” 49 So.3d at 688. With respect to a violation of Ala. Const. 1901, Art. IV, § 95, the Court determined that “there remains a problem with a portion of the [2009 Act]. Section 7 of the act ‘ratified, validated, and confirmed’ the collection of the taxes determined to be illegal and, therefore, is the equivalent of an impermissible legislative determination that there could be no recovery of these illegally collected taxes, contrary to the prohibition against taking away a cause of action in § 95.” 49 So.3d at 693. After a painstaking analysis, the Court in Edwards II concluded:

“We reverse that aspect of the December 23, 2009, judgment in which the trial court declared the retroactivity of tax collection pursuant to Act No. 2009–811 to be unconstitutional, but, because we strike that portion of Section 7 of Act No. 2009–811 ratifying, validating, and confirming the collection of the illegal tax, we affirm that aspect of the judgment in which the trial court ordered the transfer of the escrowed funds to a special master. We reverse the January 15, 2010, order in which the trial court ordered the County to pay postjudgment interest. In further proceedings on remand, consistent with the determination that Act No. 2009–811 is not unconstitutional [with respect to § 95], the trial court, whether or not it uses the services of a master to assist it in the distribution of the escrowed funds, shall compute the County's liability exclusive of taxes collected after January 12, 2009, but levied prior thereto, and without the obligation to pay interest pursuant to § 8–8–10...