U.S. v. Anderson County, Tenn., 82-5281

• Decision Date: 20 April 1983
• Docket Number: No. 82-5281,82-5281
• Citation: 705 F.2d 184
• Parties: 30 Cont.Cas.Fed. (CCH) 71,060 UNITED STATES of America, Plaintiff-Appellant, v. ANDERSON COUNTY, TENNESSEE, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 184

705 F.2d 184

30 Cont.Cas.Fed. (CCH) 71,060

UNITED STATES of America, Plaintiff-Appellant, v. ANDERSON COUNTY, TENNESSEE, et al., Defendants-Appellees.

No. 82-5281.

United States Court of Appeals Sixth Circuit.

Argued Oct. 26, 1982.

Decided April 20, 1983.

John J. McCarthy (argued), Glenn L. Archer, Jr., Jonathan Cohen and Michael L. Paup, U.S. Dept. of Justice, Tax Div., Washington, D.C., John W. Gill, U.S. Atty., Jimmy Baxter, Asst. U.S. Atty., Knoxville, Tenn., for plaintiff-appellant.

Mike Lawson, Haynes and Associates, Goodlettsville, Tenn., for Anderson County.

William M. Leech, Jr., Atty. Gen. of Tenn., Jim Creecy and Charles L. Lewis (argued), Asst. Attys. Gen., Nashville, Tenn., for State Bd. of Equalization.

Before MARTIN and KRUPANSKY, Circuit Judges, and PRATT, District judge. ^*

KRUPANSKY, Circuit Judge.

This is an action by the United States of America against Anderson County, Tennessee, and officers thereof, seeking a declaration that a tax imposed by Anderson County upon Union Carbide Corporation (Union Carbide), a government contractor, was in violation of Tennessee law and was unconstitutional and void as constituting a discriminatory tax upon the United States and its contractor. The district court, 547 F.Supp. 18, abstained citing to Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941) and Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), as interpreted by this Circuit in United States v. Ohio, 614 F.2d 101 (6th Cir.1979), and dismissed the cause of action.

The United States owns in fee simple the Oak Ridge Reservation, consisting of 37,185 acres of land situated in Anderson and Roane Counties, Tennessee, whereupon are located large federally owned and operated nuclear production and research facilities principally devoted to development of nuclear energy and production of nuclear weapon components for national defense. The Y-12 Plant, located in Anderson County on the Oak Ridge Reservation, is managed for the United States by Union Carbide pursuant to Government Contract No. W-7405-ENG-26 (contract). In return for managing the operation and maintaining the Government owned facilities, Union Carbide receives an annual fixed fee plus costs; the fee is unrelated to the value of the real and personal property managed or to the amount of weapon components produced. Union Carbide performs no work as a private entrepreneur on behalf of itself or any other private entity at the Y-12 Plant. All obligations and costs of operating the Y-12 Plant, including costs of materials and supplies procured by Union Carbide, are liabilities of the United States. Union Carbide advances no funds nor does it commit any of its property to the management of the facility. Union Carbide is not liable for any loss, damage or destruction of government property at the Y-12 Plant absent willful misconduct, bad faith or failure to comply with written instructions. Union Carbide is not obligated to pay any rent, fee, charge, or other consideration in exchange for its presence at, and right of access to, the Y-12 Plant for the purpose of performing its duties under its management contract.

In March, 1980, Anderson County advised Union Carbide that an ad valorem tax would be assessed upon an alleged real property interest of Union Carbide in the federally owned Y-12 Plant facility. In July, 1980, the United States initiated an action in the United States District Court for the Eastern District of Tennessee challenging the tax assessment, whereupon the district court ordered the parties to pursue state administrative remedies and, upon exhaustion thereof, to reappear before the district court for appropriate relief if dissatisfied with the state agency decision.

A complaint was then filed by Union Carbide before the Anderson County Board of Equalization (County Board). However, the United States refused to submit to the jurisdiction of the state administrative agency to preserve its claim of sovereign immunity. In September, 1980, the County Board concluded that the imposed Tennessee tax was legal since no exemption had been procured by the Division of Property Assessments, State of Tennessee, as required by T.C.A. Sec. 67-801.

The decision of the County Board was appealed by Union Carbide to the Assessment Appeals Committee (Appeals Committee). In a 4:3 decision the latter Committee concluded that the contractual relationship between Union Carbide and the United States did not create a property interest in Union Carbide which was subject to taxation under the laws of Tennessee and the assessment was accordingly voided. The constitutionality of the tax was not addressed.

Anderson County filed a petition for review of the decision of the Appeals Committee to the State Board of Equalization (State Board). Before the State Board rendered its decision, the district court dismissed the pending federal action without prejudice, noting that neither party had pursued its claim before the Court during the intervening 12 months from the date of its Order compelling the parties to seek state administrative relief. Approximately six months thereafter, the State Board in a 4:3 decision reversed the decision of the Appeals Committee declaring the tax assessment valid. It was adjudged that (1) Union Carbide was the owner of a real property interest as defined by T.C.A. Sec. 67-601(1) to which a real property tax attached pursuant to T.C.A. Sec. 67-602(6), (2) Union Carbide was not exempt from taxation pursuant to T.C.A. Sec. 67-501, which exempts "all property of the United States ... used exclusively for public ... purposes," and (3) Union Carbide assumed the status of an independent contractor and, consequently, the assessment was not an act of unconstitutional taxation against the United States.

Upon this pronouncement from the highest state agency, the United States reinstituted the instant action in the federal forum seeking a declaration that (1) the contract between Union Carbide and the United States neither conveyed nor created in Union Carbide any real property ownership and that the Board's interpretation of the contract was erroneous and (2) the attempted imposition of tax was unconstitutional because it constituted a discriminatory tax against the United States and was void since Union Carbide acquired no ownership interest at Y-12 as a result of its contract with the United States Government but only a privilege of access to the facility which was not taxable under the laws of Tennessee. Shortly thereafter, Union Carbide filed a petition to review the State Board's decision in the Davidson County Chancery Court. Within this procedural context, the district court exercised Pullman and Younger abstention and dismissed the federal action. This appeal ensued.

The Supreme Court has stated that judicially created doctrines of abstention, whereby the federal forum may decline or postpone exercise of jurisdiction, are "extraordinary and narrow exception[s] to the duty [of the federal forum] to adjudicate [those] controvers[ies] properly" asserted. Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976). The "virtually unflagging obligation" of the federal forum to exercise its jurisdictional powers may be abdicated out of deference to parallel litigation in the state forum in only the most exceptional circumstances. See: Moses H. Cone Memorial Hospital v. Mercury Construction Corp., --- U.S. ----, 103 S.Ct. 927, 935-39, 74 L.Ed.2d 765 (1983). The federal forum has, on numerous occasions, entertained, without discussing abstention, actions wherein the United States has challenged imposition of a state tax upon a federally owned facility or upon a federal contractor. See e.g., United States v. New Mexico, 455 U.S. 720, 102 S.Ct. 1373, 71 L.Ed.2d 580 (1982) (citing cases); United States v. California State Board of Equalization, 683 F.2d 316 (9th Cir.1982). Doctrines of abstention have been expressly rejected in such actions. United States v. Nevada Tax Commission, 439 F.2d 435 (9th Cir.1971); United States v. Bureau of Revenue of New Mexico, 291 F.2d 677 (10th Cir.1961). However, this Circuit has recognized, in an action distinguishable from the case at bar, that abstention may be appropriate in instances wherein the United States challenges assessment of a state tax upon its contractor. United States v. Ohio, 614 F.2d 101 (6th Cir.1979).

Confronting the propriety of Pullman abstention in the action sub judice, it is noted that the doctrine applies

in cases presenting a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law.

Colorado River, supra, 424 U.S. at 814, 96 S.Ct. at 1244. Accord: Hanna v. Toner, 630 F.2d 442, 445 (6th Cir.1980). Pullman abstention may be appropriate to moot a federal issue in the presence of some unsettled question of state law or when there is a need to interpret an ambiguous state statute. In United States v. Ohio, supra, this Court applied Pullman abstention in an action wherein governmental agencies had executed contracts with various private corporations. These agreements required the corporations to purchase, on behalf of the United States, various items of personal property, title to which vested in the United States at the time of delivery to the contractors. The Tax Commission of Ohio levied sales and use tax assessments against the contractors, several of which challenged the tax before the Ohio Board of Tax Appeals. Shortly thereafter, and prior to any state administrative resolution, the United States initiated an action in district court seeking a declaration that the taxes were improper under Ohio law, i.e., that Ohio had violated its own statutes by assessing the tax. Pertinently, the United States did not assert in its complaint that the assessments...