Pitts v. Department of Revenue for State of Wisconsin

• Decision Date: 19 October 1971
• Docket Number: No. 69-C-260.,69-C-260.
• Parties: Orville PITTS and Lawrence D'Attillio, individually and on behalf of all others similarly situated, Plaintiffs, v. DEPARTMENT OF REVENUE FOR the STATE OF WISCONSIN et al., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

333 F. Supp. 662

Orville PITTS and Lawrence D'Attillio, individually and on behalf of all others similarly situated, Plaintiffs, v. DEPARTMENT OF REVENUE FOR the STATE OF WISCONSIN et al., Defendants.

No. 69-C-260.

United States District Court, E. D. Wisconsin.

October 19, 1971.

Robert E. Sutton, Terrance Pitts, Milwaukee, Wis., for plaintiffs.

Robert Warren, Atty. Gen. for State of Wisconsin, Mary V. Bowman, Asst. Atty. Gen., for defendants.

Before CUMMINGS, Circuit Judge, REYNOLDS, Chief District Judge, and TEHAN, Senior District Judge.

OPINION

TEHAN, Senior District Judge.

In this action the plaintiffs challenge the constitutionality of § 70.11(4) and § 71.01(3) (a), Wis.Stats.,¹ under the Fourteenth Amendment to the United States Constitution. More precisely, they contend that the State of Wisconsin's grant of tax exemptions to organizations which discriminate in their membership on the basis of race, some of which organizations are admitted by the defendants to be included within the exemptions, constitutes state action fostering discrimination in violation of the equal protection clause of the Fourteenth Amendment. They seek a judgment declaring that § 70.11(4) and § 71.01(3) (a) are unconstitutional insofar as they permit tax exemptions for organizations which discriminate in membership on the basis of race and an injunction against their enforcement as to those organizations.

The defendants herein are the Department of Revenue for the State of Wisconsin and its secretary. No organization receiving an exemption under circumstances attacked by the plaintiffs was joined as a defendant, none chose to join, and none was brought in by the defendants. In this respect it must be remarked that the plaintiffs do not here challenge the right of any private organization to discriminate, nor do they claim that state action fostering discrimination exists in this case because activities of ostensibly private organizations have become impregnated with a governmental character.²

The primary issue presented, relevant to the question of the existence of subject matter jurisdiction over the plaintiffs' cause of action under § 1343, Title 28 U.S.C. and § 1983, Title 42 U.S.C. as well as determinative of the merits, is whether, in alleging and establishing that tax exemptions are granted under § 70.11(4) and § 71.01(3) (a) to organizations which discriminate, obviously state action, the plaintiffs have alleged and shown state action fostering discrimination violating the equal protection clause or whether the grant of special tax exemptions without inquiry into the policies of the organizations benefitted is merely an expression of neutrality with respect to those policies.

The parties are in agreement on the general principles to be applied by the court in resolving that issue. Thus, it is uncontroverted that:

(1) The Fourteenth Amendment prohibits the State from fostering or encouraging racial discrimination.³

(2) The Fourteenth Amendment does not prohibit purely private discrimination nor require the State to assume other than a neutral position with respect thereto.⁴

(3) The State can become involved in private discrimination to such an extent that that conduct is proscribed by the Fourteenth Amendment, and the court must sift the facts and weigh the circumstances to determine whether that significant involvement exists.⁵

On the fact side, the parties agree that § 70.11(4) and § 71.01(3) (a) were not enacted with any purpose of fostering, encouraging, effecting or perpetuating racial discrimination.⁶

Since the parties agree on general principles, we see no need to discuss at length the many precedents cited by counsel, none of which is precisely in point, discussing the complicated state action doctrine. It is sufficient to state that, as is so often true in this area, agreement on general principles does not begin to resolve the issue.

Three recent opinions dealing with the question of whether tax exemptions constitute significant state or governmental action or involvement have been cited to us by the parties, Walz v. Tax Commission, 397 U.S. 664, 90 S.Ct. 1409, 25 L. Ed.2d 697 (1970), Chicago Joint Bd. Amal. Cloth, Wkrs. v. Chicago Tribune Co., 435 F.2d 470 (7th Cir. 1970), cert. den. 402 U.S. 973, 91 S.Ct. 1662, 29 L. Ed.2d 138, and Green v. Connally, D.C., 330 F.Supp. 1150, decided by a three-judge court in the District of Columbia on June 30, 1971, Civil Action No. 1355-69. One other District Court case, affirmed by the Court of Appeals for this Circuit, Bright v. Isenbarger, 314 F.Supp. 1382 (N.D.Ind., 1970) affirmed 445 F.2d 412, appears relevant on the question. We believe that we can distinguish. Walz, Chicago Joint Board and Bright.

In Walz, the Supreme Court held that New York's grant of property tax exemptions to religious organizations for religious properties did not violate the Fourteenth Amendment.⁷ It did not discuss the state action doctrine as such, but did discuss state involvement and the "policy of neutrality" required by the First-Fourteenth Amendments and weighed factors similar to those relevant to determination of state action issues. In the context there considered, it held that the grant of a tax exemption "creates only a minimal and remote involvement" (p. 676, 90 S.Ct. p. 1415) between the State and the grantee and constituted "benevolent neutrality." (p. 676, 90 S.Ct. 1409) Translated into traditional state action terms, the court held that the grant of a tax exemption constituted affirmative (p. 678, 90 S.Ct. 1409) but not significant state action and therefore was not prohibited by the Fourteenth Amendment. In arriving at this conclusion it weighed the rights of those asserting either the Establishment or Free Exercise Clause of the First Amendment "both of which are cast in absolute terms, and either of which, if expanded to a logical extreme, would tend to clash with the other", (pp. 668-669, 90 S.Ct. p. 1411) acknowledging that "it is an essential part of adjudication to draw distinctions, including fine ones, in the process of interpreting the Constitution." (p. 679, 90 S.Ct. p. 1416)

In the Chicago Joint Board and Bright cases, the plaintiffs were aggrieved by the conduct of private organizations, and their constitutional challenge was based on the theory that the state had, by virtue of the tax exemption, so insinuated itself into that conduct as to have become its author. As a preface to a discussion of those cases it should be said that the plaintiffs' position therein is to be contrasted with that of the present plaintiffs whose challenge is not directed at state supported private conduct but at the state support itself. In the other two cases the actual discriminatory conduct was sought to be enjoined; here, it is only the state encouragement which the plaintiffs want eliminated. This difference in posture may bear upon the weight to be accorded to the prerogatives of private organizations in balancing them against the rights asserted. Nevertheless, in neither instance will the tax exemption transgress the Fourteenth Amendment unless with respect to the particular rights said to be infringed, the state involvement can be said to be significant.

In the Chicago Joint Board case, the Court of Appeals for the Seventh Circuit weighed the plaintiff's claimed First-Fourteenth Amendment right to freedom of speech against the defendants' First-Fourteenth Amendment right to freedom of the press⁸ in the process of determining whether the defendants' conduct involved state action violating the plaintiff's rights. One factor asserted by the plaintiff as connecting the State of Illinois with the defendants' conduct so as to bring the Fourteenth Amendment prohibitions into play was the grant of a use tax exemption to defendants. The Court of Appeals followed Walz, stating 435 F.2d at p. 477:

"The use tax exemption, which newspapers share in common with magazines and periodicals (Time, Inc. v. Hulman, 31 Ill.2d 344, 201 N.E.2d 374), does represent a `state involvement' in the limited sense that any tax exemption does, but not to a degree which constitutes state participation in the conduct or action of the enterprise granted the exemption. Cf. Walz v. Tax Commission of City of New York, 397 U.S. 664, 90 S.Ct. 1409, 25 L.Ed.2d 697."

The Bright case involved a conflict between the plaintiffs' claimed right to procedural due process and the right to a private education, which right was represented by the defendants. Again, one of the factors advanced by the plaintiffs as state action was the grant of a property tax exemption to a broad class of organizations, including the private school involved in the alleged violation of the plaintiffs' rights. The District Court held as follows:

"There can be no doubt that this supervision and tax exemption constitute action by the State, but the question is whether it constitutes the `significant involvement' of the State in the challenged activity so that these actions may be justifiably ascribed to the State itself. See Evans v. Newton, supra, 382 U.S. 296 at 299, 86 S.Ct. 486 15 L.Ed.2d 373; Burton v. Wilmington Parking Auth., supra, 365 U.S. at 725, 81 S.Ct. 856; Reitman v. Mulkey, supra, 387 U.S. at 380, 87 S. Ct. 1627; Adickes v. S. H. Kress & Co., supra, 398 U.S. at 169, 90 S.Ct. at 1614. This court concludes, as did Judge Lord (Pennsylvania v. Brown, supra, D.C., 270 F.Supp 782 at 790), that, standing alone, the supervision which Indiana exercises over education in private schools and the tax exemption which it gives generally to educational institutions do not so insinuate the State `into a position of interdependence with Central Catholic High School * * * that it must be recognized as a joint participant in the challenged activity * * *.' Burton v. Wilmington Parking Auth., supra 365 U.S. at 725, 81 S.Ct. at 862." (314 F.Supp. p. 1396)

and, in its opinion stated:

"* * * the origins and central meaning of the

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