MRT Exploration Co. v. McNamara, s. 83-4238

• Decision Date: 03 May 1984
• Docket Number: Nos. 83-4238,83-4239,s. 83-4238
• Citation: 731 F.2d 260
• Parties: MRT EXPLORATION COMPANY, et al., Plaintiffs-Appellants, v. Shirley McNAMARA, Secretary, Louisiana Department of Revenue and Taxation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 260

731 F.2d 260

MRT EXPLORATION COMPANY, et al., Plaintiffs-Appellants, v. Shirley McNAMARA, Secretary, Louisiana Department of Revenue and Taxation, Defendant-Appellee.

Nos. 83-4238, 83-4239.

United States Court of Appeals, Fifth Circuit.

May 3, 1984.

Shotwell, Brown & Sperry, James H. Napper, II, Monroe, La., for plaintiffs-appellants.

Malcolm S. Murchison, Joseph L. Hargrove, Jr., Shreveport, La., for Pennzoil Producing Co.

J. Edgerton Pierson, Jr., Shreveport, La., for Arkla.

Pugh & Pugh, Robert G. Pugh, Jr., Robert G. Pugh, Shreveport, La., for defendant-appellee.

Appeals from the United States District Court for the Western District of Louisiana.

Before GEE, POLITZ and JOHNSON, Circuit Judges.

JOHNSON, Circuit Judge:

Plaintiffs appeal the district court's dismissal of their complaint for lack of subject matter jurisdiction. The district court based dismissal on the jurisdictional bar of the Tax Injunction Act of 1937, 28 U.S.C. Sec. 1341. We affirm.

During the 1950's and 1960's, the plaintiff corporations entered into oil and gas leases with the federal government. The leases encompassed both privately owned property and acreage within Barksdale Air Force Base, both in the State of Louisiana. Barksdale is located on a 22,000 acre tract of land which was acquired by the federal government in 1930 for the purpose of using the land as a federal enclave, to wit, a military base. The United States acquired a fee simple title to the tract by donations from the State of Louisiana, the City of Shreveport, and the Bossier Levee District, a state agency. The authorizing statute expressly reserved to the State the administration of the criminal laws and the service of civil process. The statute provided that the United States should have "the right of exclusive jurisdiction" over any land purchased, condemned, or otherwise acquired "for all purposes except the administration of the criminal laws ... and the service of civil process of said State therein...." ¹

Pursuant to the leases between plaintiffs and the United States the federal government was to receive royalty payments for natural resources extracted from the production units which included portions of Barksdale. In September 1982 a representative of defendant McNamara, the Secretary of the Louisiana Department of Revenue and Taxation, informed plaintiffs that Louisiana would require severance tax payments for natural resources severed from the federal lands within Louisiana except for the royalty interest retained by the federal government. Plaintiffs have paid under protest the severance taxes assessed by defendant since October 1982. ² In the instant proceedings plaintiffs seek to recover the severance taxes paid under protest and request a declaratory judgment that the Louisiana severance tax statutes are unconstitutional insofar as they are applied to oil and gas production from Barksdale. ³ The district court granted defendant's motion to dismiss, holding that the Tax Injunction Act of 1937, 28 U.S.C. Sec. 1341, bars plaintiffs' refund suit in federal court.

Plaintiffs assert federal question jurisdiction under 28 U.S.C. Sec. 1341. Defendants do not challenge the existence of a substantial federal question ⁴ but instead contend that federal jurisdiction is prohibited pursuant to section 1341.

28 U.S.C. Sec. 1341 states: "The [federal] district courts shall not enjoin, suspend or restrain 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." Plaintiffs attempt to escape the jurisdictional bar of section 1341 by asking this Court to accept one of two propositions: (1) there is no "plain, speedy and efficient remedy" in the Louisiana state courts because the United States has exclusive jurisdiction over the property and claims in dispute pursuant to art. I, Sec. 8, cl. 17 of the United States Constitution or, in the alternative, (2) a "federal instrumentality" exception to the Act applies. The district court rejected both of these contentions. We affirm the district court.

Plaintiffs' argument that section 1341 is inapplicable because no adequate state remedy exists hinges on the assumption that the United States has exclusive judicial jurisdiction over federal military enclaves such as Barksdale pursuant to art. I, Sec. 8, cl. 17 of the United States Constitution. It provides:

The Congress shall have Power ... To exercise exclusive Legislation in all Cases whatsoever ... over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings....

Plaintiffs' contention flies in the face of the clear wording of the clause which grants Congress the power "[t]o exercise exclusive Legislation." That this clause deals with legislative jurisdiction is reinforced by the fact that article I is the article of the Constitution which deals with the powers of Congress rather than the powers of the federal judiciary.

Nor does Humble Pipe Line Co. v. Waggonner, 376 U.S. 369, 84 S.Ct. 857, 11 L.Ed.2d 782 (1964), cited by plaintiffs as conclusively establishing the exclusive judicial jurisdiction of the United States over Barksdale, support plaintiffs' position. In Humble Pipe Line the Supreme Court held that the State of Louisiana did not have jurisdiction to levy an ad valorem tax on oil drilling equipment and pipelines owned by private companies and situated on Barksdale. The Court reasoned that art. I, Sec. 8, cl. 17 of the Constitution vests exclusive jurisdiction in the federal government and that "[w]hen Congress has wished to allow a State to exercise jurisdiction to levy certain taxes within a federal enclave it has specifically so stated, as in the Buck Act. 4 U.S.C. Secs. 104-110." 84 S.Ct. at 860-61. Humble Pipe Line only speaks to the merits of the instant case. Nowhere does the Court discuss whether federal subject matter jurisdiction exists to litigate the constitutionality of applying a state ad valorem tax to the privately owned property involved. Indeed, Humble Pipe Line came to the Supreme Court through the Louisiana court system. Consequently, the jurisdictional question before this Court would not have arisen. Humble Pipe Line in no way speaks to, much less resolves, the question of the existence of federal subject matter jurisdiction in the instant case.

The jurisdictional question before us is, however, conclusively resolved by one of this Circuit's own cases. In United Gas Pipe Line Co. v. Whitman, 595 F.2d 323, 330 (5th Cir.1979), this Court held that section 1341 is "a jurisdictional prohibition on the maintenance of tax refund suits in federal courts, whenever a state remedy that is plain, speedy and efficient is available." ⁵ Plaintiffs attempt to distinguish United Gas because it did not involve the exclusive jurisdiction of the United States over Barksdale. The argument that United Gas should not control the instant case because United Gas did not involve a federal military enclave is unpersuasive. The United Gas opinion did not purport to rely on any particular fact pattern. In that case, this Court relied on the history of section 1341, judicial precedent, and concepts of federalism to conclude that the section was "a broad jurisdictional impediment to federal court interference with the administration of state tax systems." Id. at 326. This Court repeatedly referred to suits that impede state tax administration and to suits for tax refund without attempting to make any further limitations. We stated: "[W]e hold that tax refund suits fall within the statute's prohibition." Id. at 324. We further stated: "[W]e conclude that it is the duty of federal courts, in actions for the refund of state taxes, to defer to state administrative and judicial remedies where the state remedy is 'plain, speedy and efficient.' " Id. at 327. We concluded that the policy of section 1341--that judicial threats to a state's tax system should come only from state courts when the state provides taxpayers a remedy that is plain, speedy and efficient--"would be severely frustrated by opening jurisdiction to the district courts to hear refund suit challenges to the validity of state taxes." Id. at 330.

The instant case falls squarely within the holding in United Gas; it is clearly a suit for the refund of state taxes. Significantly, the Louisiana Department of Revenue and Taxation is taxing only the revenues of the plaintiffs and not the royalty going to the United States. The fact that Barksdale is a federal military enclave does not in any way undermine the analysis employed in United Gas. There is no reason why Louisiana should be any less free from federal interference in the administration of its own fiscal affairs because these plaintiffs extracted minerals which came from beneath federal lands. In United Gas we looked to the fact that a tax refund suit in Louisiana places tax funds in escrow pending judicial resolution of the taxpayer's protest and therefore effectively denies the State the use of the tax monies until the refund suit is finally resolved. ⁶ We stated in United Gas that:

[t]he central thrust of section 1341 is that if the fiscal machinery of a state government is to be jammed by the interdiction of a court denying a state its tax revenues, that interdiction ought properly come only from the courts of the state itself. The maintenance of tax refund suits in federal courts runs full force against that statutory purpose.

Id. at 328-29. In United Gas, however, we did not rely solely on the Louisiana provision for the escrow account in order to reach the conclusion that tax refund suits in federal court contravene the purpose of section 1341. We specifically stated:

If tax refund suits were not barred by section 1341, they would be maintainable in federal courts any time a federal question was involved in the...