North Georgia Elec. Membership Corp. v. City of Calhoun, Ga.

• Decision Date: 22 April 1993
• Docket Number: No. 92-8114,92-8114
• Citation: 989 F.2d 429
• Parties: NORTH GEORGIA ELECTRIC MEMBERSHIP CORPORATION, Plaintiff-Appellant, v. CITY OF CALHOUN, GEORGIA, a Municipal Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 429

989 F.2d 429

25 Fed.R.Serv.3d 798

NORTH GEORGIA ELECTRIC MEMBERSHIP CORPORATION, Plaintiff-Appellant, v. CITY OF CALHOUN, GEORGIA, a Municipal Corporation, Defendant-Appellee.

No. 92-8114.

United States Court of Appeals Eleventh Circuit.

April 22, 1993.

Herbert S. Sanger, Jr., Knoxville, TN, James C. Brim, Jr., Camilla, GA, Charles W. Ban Beke, Wagner, Myers & Sanger, Knoxville, TN, L. Hugh Kemp, Kinney, Kemp, Pickell, Sponcler & Joiner, Dalton, GA, for plaintiff-appellant.

L. Clifford Adams, Jr., Hurt, Richardson, Garner, Todd & Cadenhead, Robert J. Middleton, Paul M. Talmadge, Jr., Atlanta, Ga., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before KRAVITCH, Circuit Judge, GODBOLD and OAKES ^*, Senior Circuit Judges.

OAKES, Senior Circuit Judge:

The North Georgia Electric Membership Corporation ("North Georgia"), a nonprofit rural collective which distributes electricity produced by the Tennessee Valley Authority ("TVA") to a large portion of northern Georgia, has refused to pay a franchise fee (the "Tax") imposed in 1987 by the City of Calhoun, Georgia (the "City" or "Calhoun"). The City has attempted to levy its 4% Tax on North Georgia's gross sales of electricity within the City limits, which in 1988 exceeded $4.7 million. North Georgia has roughly 800 customers within the City of Calhoun, all on land annexed by the City in recent years. North Georgia first brought suit to invalidate the tax in the District Court for the Northern District of Georgia, Harold L. Murphy, Judge, on antitrust, commerce clause, due process, and equal protection grounds. Judge Murphy dismissed the claim on June 20, 1988, reasoning that the Tax Injunction Act, 28 U.S.C. § 1341 (1988) and principles of comity barred a federal court from hearing any challenge to the tax. The court rejected North Georgia's contention that it was a federal instrumentality to which the Tax Injunction Act does not apply. North Georgia v. City of Calhoun, No. 4:87-CV-218-HLM (N.D.Ga. July 20, 1988). North Georgia did not appeal.

On April 11, 1989, the City brought suit in a Georgia state court, seeking to compel North Georgia to pay $188,774.02 in taxes due under the Tax for the calendar year of 1988, and seeking a declaration that North Georgia owed the tax for future periods. That case remains undecided. On March 14, 1991, North Georgia responded with this litigation seeking a declaratory judgment in federal district court--again before Judge Murphy--that the tax was invalid. In this suit, for the first time, North Georgia argued that the Tax violated § 13 of the Tennessee Valley Authority Act of 1933, 16 U.S.C. § 831l (1988) (the "TVA Act"), which exempts TVA and its franchises from state and local taxes. ¹ The City did not raise the issue of collateral estoppel in its answer initially, but on May 9, 1991, the City moved to amend its answer to include as a new defense that: "[p]laintiff's claim is barred by the doctrines of res judicada [sic] and collateral estoppel." The district court granted this motion on July 1, 1991.

On January 2, 1992, the district court dismissed North Georgia's complaint. 820 F.Supp. 1403. North Georgia once again argued that it was a federal instrumentality. Nonetheless, the district court held for a second time that the Tax Injunction Act and principles of comity barred a federal court from hearing the case. The district court mentioned, in a footnote, that the City had raised collateral estoppel on the jurisdictional issue as a defense, but stated that "Plaintiff points out that Defendant failed to assert the affirmative defenses of res judicata and collateral estoppel in its answer."

Because we conclude that the defendants did, in fact, properly raise collateral estoppel as a defense, and that North Georgia should have been barred by collateral estoppel from litigating the validity of the tax in federal court, we affirm. We express no opinion as to the merits either of the jurisdictional issue--whether TVA distributors are federal instrumentalities exempt from the restrictions imposed by the Tax Injunction Act--or of North Georgia's challenges to the ultimate validity of the Tax.

DISCUSSION

North Georgia raises three arguments against the City's assertion of collateral estoppel, none of which has merit. First, North Georgia claims that the City failed to raise collateral estoppel as an affirmative defense, and thus that Fed.R.Civ.P. 8(c) should bar the City from raising it now. However, as we have noted, the City filed a motion to amend its answer to include the defense of collateral estoppel, and the district court did indeed grant this motion, which was in fact "unopposed," North Georgia v. City of Calhoun, Ga., No. 4:91-CV-57-HLM (N.D.Ga. July 1, 1991) (order granting motion to amend answer to include defense of collateral estoppel), although North Georgia's reply brief erroneously states that "the district court never granted City's belated motion to amend its answer to assert such affirmative defenses." Reply Brief at 7.

Although the City did not formally file a new answer, Local Rule 200-2 permits "parties filing or moving to file an amendment to a pleading ... to incorporate relevant provisions of prior pleadings by reference," where "reproduction of the entire pleadings as amended would be unduly burdensome." Thus, it appears that including the new matter in a motion suffices. Furthermore, while it might not have been "unduly burdensome" for the City to reproduce the entire answer as amended in the motion, it does seem unnecessary. North Georgia and the district court were both on notice that the City intended to assert collateral estoppel as a defense. At least where the pleadings are as straightforward as they were in this case, this should suffice. See Fed.R.Civ.P. 8(e)(1) ("No technical forms of pleading or motions are required."); 5 Charles A. Wright and Arthur R. Miller Federal Practice and Procedure § 1270 at 414 (1990) (requirement of pleading affirmative defenses "serves the purpose of giving the opposing party notice"); Metromedia Co. v. Fugazy, 983 F.2d 350, 367 (2d Cir.1992) (first decision filed on day trial began in second suit; attorneys raised issue in opening arguments to jury and at appropriate points during trial; "[a]ppellants had as much notice of the claim of estoppel as could reasonably be required[ ]" and thus "[t]he waiver argument borders on the frivolous."). In their discussion of preclusion, Wright, Miller and Cooper again focus on notice, arguing that the reason that "preclusion [must] be pleaded and proved is that a party entitled to demand preclusion is also entitled to waive it." 18 Wright, Miller and Cooper § 4405 at 32 (1981).

None of these sources suggests that we should read the pleading requirement so technically as to conclude that the City's effort to amend its answer was inadequate. The interests behind requiring defendants affirmatively to plead the defense of collateral estoppel--providing notice to the plaintiffs and the court, and ensuring that the defendants prefer to assert the bar--were met. The record demonstrates that both North Georgia and the district court were on notice that the City was asserting, not deliberately waiving, the defense of collateral estoppel, and that the basis of this defense was the federal case dismissed in 1988.

Furthermore, the cases in which waiver has been found, both according to our own research and judging by the cases cited in Wright, Miller, and Cooper, involve much clearer evidence of waiver. In the typical waiver case, the defendants did not raise the defense in pleadings, amended pleadings, or arguments before the court. Rather, defendants deemed to have waived a defense of res judicata or collateral estoppel generally raises the issue for the first time quite late in the proceedings--after a trial has been lost, e.g., Aluminum Prods. Distribs., Inc. v. Aaacon Auto Transp., Inc., 549 F.2d 1381, 1384 (10th Cir.1977) (raised in motion for new trial), or on appeal, e.g., Louisville & N.R. Co. v. M/V Bayou Lacombe, 597 F.2d 469, 471 n. 1 (5th Cir.1979). ²

Second, North Georgia argues that collateral estoppel should not apply because the first suit was dismissed for lack of federal jurisdiction, rather than on the merits. However, the first suit did adjudicate the jurisdictional issue on the merits. Consequently, while the first suit does not bar North Georgia from challenging the validity of the City's Tax, it does bar relitigation of the jurisdictional question. As the Fifth Circuit stated,

Although the dismissal of a complaint for lack of jurisdiction does not adjudicate the merits so as to make the case res judicata on the substance of the asserted claim, it does adjudicate the court's jurisdiction, and a second complaint cannot command a second consideration of the same jurisdictional claims.

Boone v. Kurtz, 617 F.2d 435, 436 (5th Cir.1980). ³ See also Cutler v. Hayes, 818 F.2d 879, 888 (D.C.Cir.1987) (standing may not be relitigated); Restatement (Second) of Judgments § 20, cmt. b illus. 1 (1982) (valid final judgment for lack of jurisdiction or improper venue does not bar relitigation of the claim, but does bar relitigation of the issues actually litigated) ("Restatement"); see generally id. §§ 27-28 (issue preclusion). Wright, Miller and Cooper agree:

Civil Rule 41(b) provides that a dismissal for lack of jurisdiction or improper venue does not operate as an adjudication upon the merits. This provision means only that the dismissal permits a second action on the same claim that corrects the deficiency found in the first action. The judgment remains effective to preclude relitigation of the precise issue of jurisdiction or venue that led to the initial dismissal.

18 Wright, Miller and Cooper § 4436 at 338-39 (footnotes omitted). See also Rose v. Town of Harwich, 778 F.2d 77, 79-80 (1st Cir.1985) (statute of limitations ruling barred...