U.S. Xpress v. Taxation & Rev. Dept.
| Decision Date | 15 July 2005 |
| Docket Number | No. 24,702.,24,702. |
| Parties | U.S. XPRESS, INC., a Nevada corporation, M.S. Carriers, Inc., a Tennessee corporation, and Swift Transportation Company, Inc., an Arizona corporation, Individually and on behalf of a class of all similarly situated taxpayers, Plaintiffs-Appellants, v. STATE of New Mexico, NEW MEXICO TAXATION AND REVENUE DEPARTMENT and Jan Goodwin, Secretary of the New Mexico Taxation and Revenue Department, Defendants-Appellees. |
| Court | New Mexico Supreme Court |
Tim J. De Young, Angelo J. Artuso, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, for Appellants.
Patricia A. Madrid, Attorney General, C. Joseph Lennihan, Special Assistant Attorney General, Santa Fe, for Appellees.
Patricia Madrid, Attorney General, Steven L. Bunch, Javier Lopez, Special Assistant Attorneys General, Santa Fe, for Amicus Curiae New Mexico Department of Transportation.
{1} Appellants' motion for rehearing is denied. The opinion filed in this case on March 23, 2005, is withdrawn and this opinion is substituted in its place.
{2} Plaintiffs appeal an order from the district court denying class certification. Plaintiffs argue that the district court erroneously concluded that the proposed plaintiff class could only include taxpayers who had exhausted their administrative remedies. We agree. Therefore, we reverse and remand for proceedings consistent with this opinion.
{3} In December 2002, Plaintiffs filed claims with the New Mexico Taxation and Revenue Department (the Department) for a refund of highway beautification fees, administrative fees, and taxes collected under Section 74-4F-(C) of the Hazardous Materials Transportation Act, NMSA 1978, §§ 74-4F-1 to -8 (1996), and Section 7-15A-10 of the Weight Distance Tax Act, NMSA 1978, §§ 7-15A-1 to -11 (1988, as amended through 2004); see §§ 74-4F-3(C) and 7-15A-10. However, we note that the provisions of the Hazardous Materials Transportation Act and the Weight Distance Tax Act that provided for the collection of the challenged taxes have since been repealed. See 2004 N.M. Laws ch. 78, § 2 (repealing Section 74-4F-3); see also 2003 N.M. Laws (1st S.S.) ch. 3, §§ 30, 31 (repealing Section 7-15A-10 effective July 1, 2004). The Department granted Plaintiffs' claims for refunds of the highway beautification fees and for the taxes collected in 1999, 2000, and 2001, under Sections 74-4F-3(C) and 7-15A-103(C) (hereinafter "Uncontested Taxes"). However, the Department denied Plaintiffs' claim for taxes collected prior to 1999 and for the administrative fees (hereinafter "Contested Taxes").
{4} On August 4, 2003, Plaintiffs filed a class action complaint alleging that the taxes imposed by Sections 74-4F-3(C) and Section 7-15A-10 were unconstitutional because they violated the Supremacy and Dormant Commerce Clauses of the United States Constitution. On September 23, 2003, Plaintiffs moved to certify the class described in their complaint. Based on section 22 of the Tax Administration Act, NMSA 1978, §§ 7-1-1 to -82 (1965, as amended through 2004), the district court concluded that it "lack[ed] jurisdiction over those members of the proposed class who have not exhausted their administrative remedies," and held that when the taxpayers who had not exhausted their administrative remedies were excluded, Plaintiffs' proposed class did not meet the numerosity requirement for class actions. See Rule 1-023(A)(1) NMRA. Therefore, the district court denied Plaintiffs' request to certify the class on February 23, 2004. They now appeal.
{5} Resolution of the question before us turns on the proper construction of a statutory administrative exhaustion requirement in the context of a class action. Construction of a statute is a question of law that we review de novo. Morgan Keegan Mortgage Co. v. Candelaria, 1998-NMCA-008, ¶ 5, 124 N.M. 405, 951 P.2d 1066.
{6} In this case, we are presented with the question of whether the Tax Administration Act allows the district court to hear the purely legal claims of putative class members who have not exhausted their administrative remedies when administrative review of their claims would be futile and the named plaintiffs have exhausted their administrative remedies in pursuit of identical claims. On the facts before us, we conclude that it does.
{7} The Tax Administration Act provides a taxpayer with two remedies when he believes that a tax has been wrongfully assessed against him. § 7-1-23. He may either (1) refuse to pay the tax and file a written protest with the secretary of the Department under Section 7-1-24, or (2) he may pay the tax and file a claim for a refund with the secretary under Section 7-1-26. Further, no New Mexico court "has jurisdiction to entertain any proceeding by a taxpayer in which the taxpayer calls into question the taxpayer's liability for any tax" unless the taxpayer has exhausted one of his administrative remedies. § 7-1-22. Based on this statute, the Department argues that the district court lacks subject matter jurisdiction over the members of the class who had not exhausted their administrative remedies. Therefore, the Department argues that the district court correctly denied Plaintiffs' motion for class certification.
{8} When this Court interprets the statutes of New Mexico, our "principal objective . . . is to determine and give effect to the intent of the legislature." Regents of the Univ. of N.M. v. N.M. Fed'n of Teachers, 1998-NMSC-020, ¶ 28, 125 N.M. 401, 962 P.2d 1236 (internal quotation marks and citation omitted). The "primary indicator" of the legislature's intent is the plain language of the statute. Anthony Water & Sanitation Dist. v. Turney, 2002-NMCA-095, ¶ 10, 132 N.M. 683, 54 P.3d 87. However, our courts "have rejected formalistic and mechanistic interpretation of statutory language." D'Avignon v. Graham, 113 N.M. 129, 131, 823 P.2d 929, 931 (Ct.App.1991). For example, "[w]here the literal language of a statute leads to an absurd result . . . we may construe the statute to avoid such a result." State v. Gutierrez, 115 N.M. 551, 552, 854 P.2d 878, 879 (Ct.App.1993).
{9} By including an administrative exhaustion requirement in the Tax Administration Act, the legislature demonstrated that it intended the Department to be the forum of first resort for taxpayers. See Neff v. Taxation & Revenue Dep't, 116 N.M. 240, 244, 861 P.2d 281, 285 (Ct.App.1993). However, we must determine whether the legislature intended the administrative exhaustion requirement to preclude our courts from exercising jurisdiction over the purely legal claims of the absent members of a class who have not exhausted their remedies when exhaustion would be futile.
{10} The Department correctly points out that a statutory exhaustion requirement is generally less flexible and pragmatic than its common law counterpart. 2 Richard J. Pierce, Jr., Administrative Law Treatise § 15.3, at 982 (4th ed.2002). Nonetheless, we find that the exhaustion requirement in the Tax Administration Act is motivated by the same basic principles as the common law doctrine. As a general matter, the exhaustion of administrative remedies is "required as a matter of preventing premature interference with agency processes, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review." Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975); see also Pierce, supra, § 15.2, at 971-72. Exhaustion "also encourages the use of more economical and less formal means of resolving disputes and is credited with promoting accuracy, efficiency, agency autonomy, and judicial economy." 2 Am.Jur.2d Admin. Law § 474, at 402 (2004) (footnotes omitted). In particular, the requirement in the Tax Administration Act that administrative remedies be exhausted "respects the fiscal operations of the state and offers to the reviewing courts the benefit of the agency's findings and conclusions in an area in which agencies have special expertise." Neff, 116 N.M. at 245, 861 P.2d at 286 (internal quotation marks and citation omitted); see also Bailey v. State, 348 N.C. 130, 500 S.E.2d 54, 75 (1998) ().
{11} We begin our analysis by considering Plaintiffs' claims for refunds of the Contested Taxes. In this case, we fail to see how requiring every member of the class to exhaust his administrative remedies will further the objectives that underlie the Tax Administration Act's administrative exhaustion requirement. Each of the named plaintiffs submitted a claim for a refund of the Contested Taxes. In each case, the Department denied their claims. Under these circumstances, we hold that by pursuing their administrative claims Plaintiffs have satisfied the purpose and intent of the exhaustion requirement for the absent class members.
{12} First, Plaintiffs' claims for refunds of the Contested Taxes are representative of the claims of the absent class members, and have provided the Department with an ample opportunity to address the issue and to correct any errors. See Rule 1-023(A)(3); Salfi, 422 U.S. at 765, 95 S.Ct. 2457 (). Because the Department has established a uniform pattern of denial of Plaintiffs' claims for refunds of the Contested Taxes, Plaintiffs have identified a genuine dispute and not merely an instance of error or mistake.
{13} Second, determining the merit of Plaintiffs' claims (and the claims of the absent class members) does not...
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