Reybold Venture Grp., Xi-A LLC v. Del. Dep't of Educ.

• Decision Date: 30 May 2013
• Docket Number: Civ. No. 11–1297–SLR.
• Citation: 947 F.Supp.2d 430
• Parties: REYBOLD VENTURE GROUP, XI–A LLC, et al., Plaintiffs, v. DELAWARE DEPARTMENT OF EDUCATION, Defendant.
• Court: U.S. District Court — District of Delaware

947 F.Supp.2d 430

REYBOLD VENTURE GROUP, XI–A LLC, et al., Plaintiffs,

v.DELAWARE DEPARTMENT OF EDUCATION, Defendant.

Civ. No. 11–1297–SLR.

United States District Court, D. Delaware.

May 30, 2013.

Jeffrey M. Weiner, Esquire of Jeffrey M. Weiner, Esq., Wilmington, DE, for Plaintiffs.

Joseph C. Handlon, Deputy Attorney General, Delaware Department of Justice, Wilmington, DE, John B. Hindman, Deputy Attorney General, Delaware Department of Justice, Dover, DE, for Defendant.

MEMORANDUM OPINION

SUE L. ROBINSON, District Judge.

I. INTRODUCTION

On December 28, 2011, plaintiffs Reybold Venture Group XI–A LLC, Reybold Venture Group XI–B LLC, Reybold Venture Group XI–C LLC, Reybold Venture Group XI–D LLC, Reybold Venture Group XI–E LLC, and Reybold Venture Group XI–F LLC (collectively, “plaintiffs”) filed a complaint alleging that the Voluntary School Assessment Act (“VSA”), 9 Del. C. § 2661, is discriminatory and/or unconstitutional. (D.I. 1) Defendant Delaware Department of Education (“defendant”) answered the complaint on February 7, 2012. (D.I. 4) Currently before the court are defendant's motion for summary judgment (D.I. 21) and plaintiffs' motion for partial summary judgment (D.I. 22).

II. BACKGROUND

Plaintiffs are each Delaware Limited Liability Companies and hold the title interest to the Meridian Crossing subdivision (“Meridian”) originally designed to contain 738 residential units.¹ (D.I. 1 at ¶¶ 1, 4) Defendant is an Agency of the State of Delaware. (D.I. 1 at ¶ 2)

The VSA was enacted on July 30, 1999. It provides ² that, prior to recording a major subdivision plan in New Castle County, an applicant must either submit a certification to the Department of Land Use that the appropriate school district has adequate capacity or pledge to pay a Voluntary School Assessment (“VSA payment”). See9 Del. C. § 2661. The VSA excludes developments restricted to individuals 55 years of age or older and low income housing.³ 9 Del. C. § 2661(c)(2). The VSA payment is calculated on a per-unit basis, based on the average cost of construction for a public school. 14 Del. C. § 103(c)(3). It is capped at 5% of the total cost of the residential unit. Id.

On June 9, 2003, plaintiffs entered into an agreement with defendant providing that plaintiffs would make VSA payments in the amount of $3,261 for each qualifying residential unit built over the next five years. For any subsequent five year period, the amount of the VSA payment would be recalculated based on then current construction cost data. (D.I. 23 at 3–4); see14 Del. C. § 103(c). Plaintiffs made the VSA payments as needed through September 23, 2011. (D.I. 28 at 16) As of November 21, 2011, defendant recalculated the amount per the agreement as $6,088. ( Id.)

III. STANDARD OF REVIEW

Not only may the lack of subject matter jurisdiction be raised at any time, it cannot be waived and the court is obliged to address the issue on its own motion. See Moodie v. Fed. Reserve Bank of NY, 58 F.3d 879, 882 (2d Cir.1995). “Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action,” without reaching the merits of the remaining arguments. Fed.R.Civ.P. 12(h)(3); Moodie, 58 F.3d at 882. Once jurisdiction is challenged, the party asserting subject matter jurisdiction has the burden of proving its existence. See Carpet Group Int'l v. Oriental Rug Importers Ass'n, Inc., 227 F.3d 62, 69 (3d Cir.2000). Under Rule 12(b)(1), the court's jurisdiction may be challenged either facially (based on the legal sufficiency of the claim) or factually (based on the sufficiency of jurisdictional fact). See 2 James W. Moore, Moore's Federal Practice § 12.30[4] (3d ed. 1997). Under a facial challenge to jurisdiction, the court must accept as true the allegations contained in the complaint. See id. Dismissal for a facial challenge to jurisdiction is “proper only when the claim ‘clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial and frivolous.’ ” Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408–09 (3d Cir.1991) (quoting Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946)).

Under a factual attack, however, the court is not “confine [d] to allegations in the ... complaint, but [can] consider affidavits, depositions, and testimony to resolve factual issues bearing on jurisdiction.” Gotha v. United States, 115 F.3d 176, 179 (3d Cir.1997); see also Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891–92 (3d Cir.1977). In such a situation, “no presumptive truthfulness attaches to plaintiffs allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Carpet Group, 227 F.3d at 69 (quoting Mortensen, 549 F.2d at 891). Although the court should determine subject matter jurisdiction at the outset of a case, “the truth of jurisdictional allegations need not always be determined with finality at the threshold of litigation.” 2 Moore § 12.30[1]. Rather, a party may first establish jurisdiction “by means of a nonfrivolous assertion of jurisdictional elements and any litigation of a contested subject-matter jurisdictional fact issue occurs in comparatively summary procedure before a judge alone (as distinct from litigation of the same fact issue as an element of the cause of action, if the claim survives the jurisdictional objection).” Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 537–38, 115 S.Ct. 1043, 130 L.Ed.2d 1024 (1995) (citations omitted).

IV. DISCUSSIONA. Tax Injunction Act

As defendant has challenged the court's subject matter jurisdiction in its motion for summary judgment, the court begins by assessing the effect of the Tax Injunction Act, 28 U.S.C. § 1341 (the “Act”). The Act prohibits federal courts from enjoining “the assessment, levy or collection of any tax under state law” where state law provides a “plain, speedy and efficient” remedy. Kerns v. Dukes, 153 F.3d 96, 101 (3d Cir.1998); Raskauskas v. Town of Bethany Beach, 555 F.Supp. 783, 786 (D.Del.1983). Generally, a district court is precluded from issuing an injunction or granting declaratory relief from the collection of state taxes. Raskauskas, 555 F.Supp. at 787. Application of the Act is not discretionary; “rather, the Act creates a ‘non-waivable jurisdictional bar that absolutely precludes federal courts from assessing the validity of state or local taxation schemes.’ ” Kerns v. Dukes, 944 F.Supp. 1214, 1219 (D.Del.1996), aff'd,153 F.3d 96, 101 (3d Cir.1998). Moreover, the principles of comity restrict federal courts from interfering in this area recognized as a compelling state interest. See Fair Assessment in Real Estate Assoc. v. McNary, 454 U.S. 100, 102–103, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981); Lang v. Remington, 1999 WL 33220547 at *3–4 (D.Del. Nov. 29, 1999). For example, federal courts may not entertain suits brought under 42 U.S.C. § 1983 for damages in connection with state tax suits. Fair Assessment, 454 U.S. at 111, 102 S.Ct. 177.

Here, plaintiffs seek a declaration that the VSA is unenforceable, an order to enjoin defendant from collecting VSA payments, and a refund of all of their VSA payments. (D.I. 1 at 4–5 ¶¶ 1–3) Focusing on the concerns addressed by the Act, plaintiffs appear to argue that the fiscal consequences to the State of Delaware are secondary to their constitutional concerns. Further, plaintiffs assert that a change in the application of the VSA—from a per-unit basis to another assessment measure—would likely have no fiscal consequences. (D.I. 28 at 11–12); Harvey & Harvey, Inc. v. Delaware Solid Waste Authority, 600 F.Supp. 1369 (D.Del.1985) (finding that cases with outcomes having a secondary effect on the financial affairs of a state are not always precluded by the Act).

Federal courts have analyzed the relevant case law on a continuum to determine if they must decline jurisdiction. Kerns, 944 F.Supp. at 1220. At one end are cases involving regularly assessed taxes, such as property taxes, where federal courts will always lack jurisdiction. Id. Relief is also precluded in cases involving the manner in which a statute is administered. Id. (citing Kimmey v. H.A. Berkheimer, Inc., 376 F.Supp. 49, 54 (E.D.Pa.1974) (dismissing civil rights action challenging local tax collection law where plaintiffs' challenge was to administration of law as opposed to validity of actual tax), aff'd,511 F.2d 1394 (3d Cir.1975)). Federal courts have declined jurisdiction as well in “cases in which the government has expended or proposes to expend funds on projects, and the plaintiff has been hurt, or will imminently be hurt, by reason of a governmental statute or ordinance creating an assessment or lien,” even when the plaintiffs have presented the court with a constitutional challenge. Kerns, 944 F.Supp. at 1220. At the opposite end of the continuum “are cases in which the governing body has not and is not proposing to spend any funds, but through allegedly unlawful governmental action seeks to increase its revenue by subjecting its citizens to further tax levies.” Id. at 1221.

The facts of this case fall squarely within the scope of the Act's jurisdictional bar. The VSA is a one-time impact fee imposed on all new home construction to ensure adequate funding for the local schools that may have to accommodate the new residents. Those least likely to use public education ⁴ and developers of low income housing are exempt. Plaintiffs paid their VSA fees on their Meridian property for years.⁵

Clearly the VSA is a regularly assessed tax addressing a legitimate project, that of public education. And, indeed, plaintiffs do not object to the assessment itself, only to the way it is administered, i.e., on a per-unit basis rather than on an assessed value or per-square foot basis. Although plaintiffs have asserted a...