Laborde v. City of Gahanna

• Decision Date: 20 May 2013
• Docket Number: Case No. 2:12–cv–00697.
• Citation: 946 F.Supp.2d 725
• Parties: Douglas P. LABORDE, et al., Plaintiffs, v. CITY OF GAHANNA, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

946 F.Supp.2d 725

Douglas P. LABORDE, et al., Plaintiffs,

v.CITY OF GAHANNA, et al., Defendants.

Case No. 2:12–cv–00697.

United States District Court,

S.D. Ohio,

Eastern Division.

May 20, 2013.

Todd H. Neuman, Rick L. Ashton, Allen Kuehnle Stovall & Neuman LLP, Columbus, OH, for Plaintiffs.

Brian M. Zets, Wiles, Boyle, Burkholder & Bringardner Co., LPA, Columbus, OH, Gregory D. Brunton, Reminger Co., L.P.A., Columbus, OH, Zachary Benjamin Pyers, Reminger & Reminger Co., LPA, Columbus, OH, for Defendants.

OPINION AND ORDER

GREGORY L. FROST, District Judge.

This matter is before the Court on the following filings:

1. Defendants City of Gahanna and Gahanna Finance Director Jennifer Teal's motion to dismiss Plaintiffs' Fifth Amendment claim (ECF No. 14), Plaintiffs' response (ECF No. 20), and the Gahanna Defendants' reply (ECF No. 27);

2. Defendant Regional Income Tax Agency's (“RITA”) motion for judgment on the pleadings (ECF No. 15), Plaintiffs' response (ECF No. 22), and RITA's reply (ECF No. 29); and

3. Plaintiffs' objection to the affidavit of Defendant Teal (ECF No. 21) and the Gahanna Defendants' reply (ECF No. 28).

For the reasons detailed below, the Court SUSTAINS Plaintiffs' objection to Defendant Teal's affidavit, GRANTS the Gahanna Defendants' motion to dismiss, GRANTS RITA's motion for judgment on the pleadings, and REMANDS the remaining state-law claims to the Court of Common Pleas for Franklin County, Ohio.

I. Background

This case is a putative class action alleging that Defendant City of Gahanna, Ohio (“Gahanna”), used a tax form that resulted in the overpayment of municipal income taxes by Gahanna residents for tax years 2008 to 2011. Also joined as Defendants in this action are Gahanna finance director Jennifer Teal and RITA. Because this matter is before the Court on motions for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c), the Court gleans the following relevant facts from the allegations in Plaintiffs' Complaint.

Gahanna has, by ordinance, imposed a system for the assessment, collection, and payment of individual income taxes applicable to that city's residents. (Compl. ¶ 11, ECF No. 2 at PAGEID# 33.) Gahanna City Code §§ 161.03(1), (3), and (6) levy an income tax at the rate of 1.5 percent on certain qualifying wages, salaries, commissions, net profits, and other types of income earned by Gahanna residents. (Compl.¶ 12.) The Gahanna City Code also provides for certain credits that offset a Gahanna resident's income tax liability. Relevant to this case is Gahanna City Code § 161.18, which allows “a credit of eighty-three and one-third percent (83–1/3%) of the amount” a Gahanna resident has paid in municipal income tax to another municipality for income earned outside Gahanna. (Compl. ¶ 16 at PAGEID# 34.) The amount of the allowable credit is capped at the amount of the taxpayer's liability (absent the credit) for Gahanna income tax. ( Id.)

Under Gahanna City Code § 161.05(a), Gahanna residents are required to file a city income tax return on a form prescribed by RITA. ( Id. ¶ 17.) RITA is an agency created by members of a Regional Council of Governments under Chapter 167 of the Ohio Revised Code. ( Id. ¶ 5 at PAGEID# 32.) Plaintiffs allege that Gahanna residents are required to use “Form 37,” which RITA prescribed and the City approved. ( Id. at ¶ 20, PAGEID# 35.)

Plaintiffs allege that Form 37 is inconsistent with Gahanna City Code § 161.18. Specifically, Plaintiffs allege that a taxpayer who used Form 37 for tax years 2008, 2009, 2010, and 2011 did not receive the full tax credit to which he or she was entitled under § 161.18. ( Id. at ¶ 23.) To illustrate the point, Plaintiffs' Complaint detailed a hypothetical situation that displayed the inconsistency between Form 37 and § 161.18. ( Id. at ¶ 24.) Plaintiffs' hypothetical assumes a Gahanna resident who works in Columbus, Ohio, earning an annual income of $100,000. ( Id.) The hypothetical further provides that the taxpayer paid $2,500 in municipal income taxes to Columbus based on Columbus' tax rate of 2.5%, which is one percent higher than Gahanna's rate. ( Id.) Under the Gahanna Code, the taxpayer's liability for Gahanna income tax would be $1,500 ($100,000 multiplied by the 1.5% tax rate). But Gahanna City Code § 161.18 entitles the hypothetical taxpayer to a tax credit of $1,500 against the taxpayer's Gahanna income tax liability calculated as follows:

a. 83 1/3% multiplied by $2,500 (the amount paid to Columbus);

b. The resulting $2,083 is capped at $1,500, the amount the taxpayer would otherwise owe to Gahanna. ( Id. ¶ 26 at PAGEID# 36.)

Plaintiffs allege, however, that if the taxpayer uses Form 37, the taxpayer does not enjoy the benefit of the credit allowed by law. Form 37 applies the tax credit of 83–1/3% against the lesser of (1) the tax withheld by the taxpayer's employer or (2) the amount of wages earned multiplied by Gahanna's 1.5% income tax rate. ( Id. ¶ 31 at PAGEID# 37.) Thus, in the hypothetical illustrated above, Form 37 calculates a credit to the taxpayer of approximately $1,250 (83–1/3% multiplied by the $1,500), which is $250 less than the amount of the tax credit that the Gahanna ordinance actually provides. ( See id. ¶ 32.)

The named Plaintiffs allege that Form 37 caused their Gahanna income tax liability to be overstated on their 2009, 2010, and 2011 municipal income tax returns by $347, $438, and $473, respectively. ( Id. ¶ 42 at PAGEID# 38) Plaintiffs filed this lawsuit in the Franklin County Court of Common Pleas, seeking “restitution of the monies overpaid in reliance [on] and as provided for by Form 37” for the tax years at issue. ( Id. ¶ 45 at PAGEID# 39.) Plaintiffs' Complaint alleges nine counts: a claim for declaratory judgment as to the proper construction of Gahanna City Code § 161.18 (Count 1), a claim for declaratory judgment as to whether Form 37 properly calculates the tax credit for income earned outside Gahanna (Count 2), a claim for declaratory judgment as to the proper construction of Gahanna City Code § 161.05 (Count 3), a takings claim under the Ohio Constitution (Count 4), a takings claim under the United States Constitution (Count 5), a claim alleging a violation of 42 U.S.C. § 1983 (Count 6), a claim for “injunctive relief” (Count 7), a claim for unjust enrichment (Count 8), and a claim alleging strict liability under Ohio Rev.Code § 9.39 (Count 9).

Defendants removed the case to this Court, invoking federal question jurisdiction in view of Plaintiffs' allegations of an unconstitutional taking under the federal Constitution and liability under 42 U.S.C. § 1983. (ECF No. 1.) Defendants answered Plaintiffs' Complaint (ECF Nos. 5 and 7) and then filed two dispositive motions between them (ECF Nos. 14 and 15). Defendants Gahanna and Teal styled their motion as a “Motion to Dismiss Plaintiffs' Fifth Amendment Claim”; Defendant RITA styled its motion as a “Motion for Judgment on the Pleadings.” ( Id.)

Neither motion is a model of clarity in the relief it seeks. The motion of Gahanna and Teal purports to seek only the dismissal of Counts 5 and 7 of Plaintiffs' Complaint. (ECF No. 14 at PAGEID# 107.) Elsewhere in the motion, however, Gahanna and Teal argue that this Court must not retain jurisdiction over the state-law claims, presumably seeking this Court's remand of those counts. ( Id. at PAGEID# 115.) Gahanna and Teal also construe Count 5 of the Complaint as asserting a Fifth Amendment takings claim under 42 U.S.C. § 1983 even though Plaintiffs also assert a § 1983 takings claim in Count 6. ( Id. at PAGEID# 108.) As for RITA's motion, RITA expressly moves for judgment on the pleadings “as it relates to Plaintiffs' federal law claims for violation of the Fifth Amendment to the United States Constitution and violation of [42 U.S.C. § 1983], as well as [Plaintiffs'] request for injunctive relief.” (ECF No. 15 at PAGEID# 144.) In the body of the motion, however, RITA makes clear that it seeks dismissal of all the federal claims and asks the Court to “relinquish jurisdiction” over the remaining state-law claims. (ECF No. 15 at PAGEID# 154–56.) It is with this understanding of the motions that the Court adjudicates them.

II. Discussion

Defendants bring their motions before the Court under Fed.R.Civ.P. 12(c), seeking partial judgment on the pleadings on Plaintiffs' claims based upon a Fifth Amendment “taking” of their property without just compensation. ¹ Courts consider a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c) in the same manner as a Rule 12(b)(6) motion to dismiss. Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir.2010). That is, the court should grant the motion when it appears “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 405 (6th Cir.1998). For purposes of this determination, the Court construes the complaint in the light most favorable to Plaintiffs and assumes all well-pleaded factual allegations in the complaint to be true. Thurman v. Pfizer, Inc., 484 F.3d 855, 859 (6th Cir.2007). The Court need not accept the truth of any legal conclusions or unwarranted factual inferences. JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581–82 (6th Cir.2007).

A. Objection to Defendant Teal's Affidavit

As an initial matter, the Court addresses Plaintiffs' objection to the inclusion of an affidavit by Defendant Teal, attached as an exhibit to Gahanna's and Teal's motion to dismiss. (ECF No. 21.) When ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6) or a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c), courts may consider matters outside the pleadings that “are presented to and not excluded by the court,” but only if the court converts the motion to one for summary judgment under Fed.R.Civ.P. 56. The Court is not, however, required to do so and may exclude matters outside the pleadings from its...