Perry v. Coles Cnty.

• Decision Date: 11 October 2018
• Docket Number: No. 17-3615,17-3615
• Parties: Robbie J. PERRY, et al., on behalf of themselves and others similarly situated as Mattoon Township (Coles County, Illinois) commercial and industrial property owners, Plaintiffs-Appellants, v. COLES COUNTY, ILLINOIS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

906 F.3d 583

Robbie J. PERRY, et al., on behalf of themselves and others similarly situated as Mattoon Township (Coles County, Illinois) commercial and industrial property owners, Plaintiffs-Appellants,

v.COLES COUNTY, ILLINOIS, Defendant-Appellee.

No. 17-3615

United States Court of Appeals, Seventh Circuit.

Argued September 27, 2018

Decided October 11, 2018

Erick G. Kaardal, Attorney, MOHRMAN, KAARDAL & ERICKSON, P.A., Minneapolis, MN, for Plaintiff - Appellant.

Craig L. Unrath, Jessica R. Sarff, Attorney, HEYL, ROYSTER, VOELKER & ALLEN, Peoria, IL, for Defendant - Appellee.

Before FLAUM, MANION, and SYKES, Circuit Judges.

Flaum, Circuit Judge.

Robbie J. Perry and James Rex Dukeman, on behalf of themselves and others similarly situated, sued Coles County, Illinois for placing a disproportionate tax on commercial and industrial properties in Mattoon Township in violation of the Equal Protection Clause of the Fourteenth Amendment. The district court dismissed plaintiffs’ claims based on the comity doctrine, and plaintiffs appeal. For the reasons stated below, we affirm.

I. Background

Plaintiffs-appellants Robbie J. Perry and James Rex Duke-man own commercial and industrial parcels in Mattoon Township. Plaintiffs filed a class-action lawsuit against defendant-appellee Coles County, Illinois ("Coles County" or the "County") for placing a disproportionate tax on commercial and industrial properties in Mattoon Township as opposed to similar types of properties elsewhere in the County.

Illinois law authorizes county assessments for tax purposes and provides procedures for doing so. Pursuant to these procedures, counties must perform general assessments every four years by an assessor who views each property and determines its value in that year. See 35 Ill. Comp. Stat. §§ 200/9-155, 9-215. According to the operative complaint, from 2002 to 2016, Coles County did not comply with this law. Instead of viewing and assessing properties, Coles County used a property’s assessment from the last year in which that property was assessed.

In 2015, Coles County ordered a county-wide reassessment of commercial and industrial properties. The Mattoon School District and other taxing authorities urged Coles County to complete the reassessments in time for the 2016 tax year. However, Coles County only reassessed properties in Mattoon Township for the 2016 tax year. For the remaining townships, Coles County again used assessments from prior years. As a result, from the 2015 tax year to the 2016 tax year, the reassessed values for Mattoon Township commercial properties increased by $10,656,968 (an approximately 25% increase), and the reassessed values for Mattoon Township industrial properties increased by $1,547,063 (an approximately 21% increase). Assessed values elsewhere in the County did not change.

Plaintiffs allege the County’s assessments for the 2016 tax year violated the Fourteenth Amendment’s Equal Protection Clause by placing a disproportionate tax on them and by treating them differently than similarly-situated property owners in the County. Plaintiffs filed a class-action complaint against Coles County in the United States District Court for the Central District of Illinois, bringing claims for violation of the Equal Protection Clause pursuant to 42 U.S.C. § 1983 (Count I); for a declaratory judgment that Coles County violated the Equal Protection Clause (Count II); and for an injunction requiring Coles County to immediately assess the remaining properties in the County and to redo the assessments of Mattoon Township that were used for the 2016 tax year (Count III).¹ In their amended complaint, Plaintiffs seek $929,876.41 in damages, additional damages for future years, pre- and post-judgment interest, attorneys’ fees and costs, and any other legal or equitable relief that the court awards.

Coles County moved to dismiss the amended complaint for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1). The district court agreed with Coles County and granted the motion to dismiss plaintiffs’ amended complaint in its entirety, entering judgment in favor of Coles County. Plaintiffs appealed.

II. Discussion

We review a district court’s grant of a motion to dismiss de novo. Kowalski v. Boliker , 893 F.3d 987, 994 (7th Cir. 2018). The district court granted Coles County’s motion to dismiss based on comity concerns rather than on the merits. We agree that the district court correctly dismissed plaintiffs’ amended complaint based on the comity doctrine.

A. The Tax Injunction Act

As an initial matter, we note that the district court concluded it was unnecessary to address the applicability of the Tax Injunction Act ("TIA"), 28 U.S.C. § 1341,² because dismissal was appropriate based on the comity doctrine. This is the approach the Supreme Court has taken in similar contexts. See Levin v. Commerce Energy, Inc. , 560 U.S. 413, 432, 130 S.Ct. 2323, 176 L.Ed.2d 1131 (2010) ("Because we conclude that the comity doctrine justifies dismissal of respondents’ federal-court action, we need not decide whether the TIA would itself block the suit."); Fair Assessment in Real Estate Ass’n, Inc. v. McNary , 454 U.S. 100, 107, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981) ("Because we decide today that the principle of comity bars federal courts from granting damages relief in [state tax] cases, we do not decide whether [the TIA], standing alone, would require such a result."). This Court has also applied the comity doctrine to bar suits involving state taxation without separately considering the TIA’s applicability. See Capra v. Cook Cty. Bd. of Review , 733 F.3d 705, 709 (7th Cir. 2013) (affirming dismissal without prejudice of § 1983 damages claims against board of review "based on comity concerns under [ Fair Assessment ]" without independent TIA analysis); Heyde v. Pittenger , 633 F.3d 512, 521 (7th Cir. 2011) (district court’s decision to grant summary judgment in favor of tax assessors was correct "[p]ursuant to principles of comity"); Fromm v. Rosewell , 771 F.2d 1089, 1092 (7th Cir. 1985) ("We agree with the district court that the comity principle controls the disposition of appellants’ claims for declaratory relief and money damages.").³

The TIA divests federal courts of subject-matter jurisdiction in cases where "the relief sought would diminish or encumber state tax revenue." Scott Air Force Base Props., LLC v. County of St. Clair , 548 F.3d 516, 520 (7th Cir. 2008). Comity, by contrast, is a doctrine of abstention. Capra , 733 F.3d at 713 & nn.5–6. However, as discussed below, the comity issue is dispositive and served as the basis for the district court’s threshold dismissal of plaintiffs’ claims without reaching their merits. Therefore, we will also analyze plaintiffs’ claims solely according to comity principles. See Levin , 560 U.S. at 432, 130 S.Ct. 2323 ("[F]ederal court[s] ha[ve] flexibility to choose among threshold grounds for dismissal." (citing Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp. , 549 U.S. 422, 431, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007) ) ).⁴

B. The Comity Doctrine

Out of respect for state functions, the comity doctrine "restrains federal courts from entertaining claims for relief that risk disrupting state tax administration." Id. at 417, 130 S.Ct. 2323 ; see also Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc. , 651 F.3d 722, 725 (7th Cir. 2011) (en banc) (comity, or "respect for another sovereign," is "the duty of federal courts to cede litigation seeking to enjoin state tax statutes to the state courts"). This doctrine reflects the reluctance of federal courts "to interfere by injunction with [states’] fiscal operations" and the concomitant desire to show "scrupulous regard for the rightful independence of state governments." Matthews v. Rodgers , 284 U.S. 521, 525, 52 S.Ct. 217, 76 L.Ed. 447 (1932).

Specifically, as relevant here, the comity doctrine bars taxpayers from asserting § 1983 claims against "the validity of state tax systems" via federal lawsuits. Fair Assessment , 454 U.S. at 116, 102 S.Ct. 177 ; see also Nat’l Private Truck Council, Inc. v. Okla. TaxComm’n , 515 U.S. 582, 588, 115 S.Ct. 2351, 132 L.Ed.2d 509 (1995) (federal courts may not award damages, declaratory relief, or injunctive relief for § 1983 claims in state tax cases). Taxpayers seeking such relief must instead "seek protection of their federal rights by state remedies, provided of course that those remedies are plain, adequate, and complete." Fair Assessment , 454 U.S. at 116, 102 S.Ct. 177 ; see also Levin , 560 U.S. at 429, 130 S.Ct. 2323 ("[I]f the [state taxation] scheme is indeed unconstitutional, surely the [state] courts are better positioned to determine ... how to comply with the mandate of equal treatment."); Capra , 733 F.3d at 713 (" Fair Assessment has been applied consistently to bar plaintiffs from bringing section 1983 suits challenging the validity or imposition of state and local taxes in federal courts" in the presence of "adequate, plain, and complete" state remedies.).

When courts assess the adequacy of a state remedy, the question is whether the remedy is procedurally sufficient, not whether it will "result in the taxpayer’s desired outcome." Capra , 733 F.3d at 714. State remedies are sufficient for abstention based on comity principles "if they provide the taxpayer with a ‘full hearing and judicial determination at which she may raise any and all constitutional objections to the tax.’ " Cosgriff v. County of Winnebago , 876 F.3d 912, 916 (7th Cir. 2017) (quoting Capra , 733 F.3d at 714 ).

In Illinois, aggrieved taxpayers can file property tax assessment complaints with a county board of review. See id. at 914 ; Capra , 733 F.3d at 708. This Court has previously explained the available remedy in Illinois for taxpayers who wish to appeal the decisions of these boards:

Under Illinois law, taxpayers dissatisfied with a decision of a county Board of Review have two options for appeal. They can

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