Valero Terrestrial Corp. v. Caffrey

• Citation: 205 F.3d 130
• Decision Date: 02 December 1999
• Docket Number: CA-97-177-5-S,No. 99-1600,99-1600
• Parties: (4th Cir. 2000) VALERO TERRESTRIAL CORPORATION; LACKAWANNA TRANSPORT COMPANY; SOLID WASTE SERVICES, INCORPORATED, d/b/a J. P. Mascaro & Sons, Plaintiffs-Appellants, v. THE HONORABLE JOHN E. CAFFREY, Director, Division of Environmental Protection; RANDY HUFFMAN, Assistant Chief, Office of Waste Management of the Division of Environmental Protection; DARRELL V. MCGRAW, JR., The Attorney General of the State of West Virginia; RICHARD E. BOYLE, Tax Commissioner, Defendants-Appellees, and THE HONORABLE OTIS CASTO, Commissioner, The Public Service Commission of the State of West Virginia; THE HONORABLE CHARLOTTE LANE, Commissioner, The Public Service Commission of the State of West Virginia; THE HONORABLE RICHARD FRUM, Commissioner, The Public Service Commission of the State of West Virginia; THE HONORABLE ROBIN CAPEHART, Secretary, Department of Tax and Revenue of the State of West Virginia, Defendants. (). . Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 130

205 F.3d 130 (4th Cir. 2000)

VALERO TERRESTRIAL CORPORATION; LACKAWANNA TRANSPORT COMPANY; SOLID WASTE SERVICES, INCORPORATED, d/b/a J. P. Mascaro & Sons, Plaintiffs-Appellants, v. THE HONORABLE JOHN E. CAFFREY, Director, Division of Environmental Protection; RANDY HUFFMAN, Assistant Chief, Office of Waste Management of the Division of Environmental Protection; DARRELL V. MCGRAW, JR., The Attorney General of the State of West Virginia; RICHARD E. BOYLE, Tax Commissioner, Defendants-Appellees and THE HONORABLE OTIS CASTO, Commissioner, The Public Service Commission of the State of West Virginia; THE HONORABLE CHARLOTTE LANE, Commissioner, The Public Service Commission of the State of West Virginia; THE HONORABLE RICHARD FRUM, Commissioner, The Public Service Commission of the State of West Virginia; THE HONORABLE

ROBIN CAPEHART, Secretary, Department of Tax and Revenue of the State of West Virginia, Defendants.

No. 99-1600 (CA-97-177-5-S).

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

Argued: December 2, 1999.

Decided: March 2, 2000.

Appeal from the United States District Court for the Northern District of West Virginia, at Wheeling.

Frederick P. Stamp, Jr., Chief District Judge.

COUNSEL ARGUED: William Francis Fox, Jr., Harleysville, Pennsylvania, for Appellants. Silas Bent Taylor, Senior Deputy Attorney General, Charleston, West Virginia, for Appellees. ON BRIEF: Logan Hassig, SNYDER & HASSIG, New Martinsville, West Virginia, for Appellants. Armando Benincasa, William E. Adams, Jr., Office of Legal Services, WEST VIRGINIA DIVISION OF ENVIRONMENTAL PROTECTION, Charleston, West Virginia, for Appellees Caffrey and Huffman.

Before MURNAGHAN and WILLIAMS, Circuit Judges, and Cynthia H. HALL, Senior Circuit Judge of the United States Court of Appeals for the Ninth Circuit, sitting by designation.

Affirmed by published opinion. Senior Judge Hall wrote the opinion, in which Judge Murnaghan and Judge Williams joined.

OPINION

CYNTHIA HOLCOMB HALL, Senior Circuit Judge:

Valero Terrestrial Corp. ("Valero") appeals the district court's granting of summary judgment in favor of John Caffrey ("Caffrey" or "appellee") (sued in his official capacity as the Director of the Division of Environmental Protection for the State of West Virginia along with other West Virginia state officials). Valero had sued Caffrey seeking declaratory and injunctive relief claiming that a charge imposed by West Virginia Code § 22-16-4(a) (the Solid Waste Assessment Fee), a section of West Virginia's Landfill Closure Act, is an unconstitutional violation of the commerce clause and Valero's substantive due process rights. Before the district court reached the substantive portion of Valero's claim, it deemed the charge imposed by § 22-16-4(a) a "tax" for purposes of the federal Tax Injunction Act¹ ("TIA") and consequently declared itself without jurisdiction to decide Valero's substantive claim. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

I.

Appellants (Valero, Lackawanna Transport Company, Solid Waste Services, Inc., and d/b/a J.P. Mascaro & Sons) own and operate two landfills and a solid waste transport company that uses landfills to dispose of customers' waste in West Virginia. Under West Virginia law, appellants are assessed various charges² that are imposed on parties that partake in the landfill industry.

One such charge is mandated by West Virginia Code§ 22-16-4(a) which imposes "a solid waste assessment fee . . . upon the disposal of solid waste at any solid waste disposal facility[(landfill)] in this state in the amount of three dollars and fifty cents per ton . . . ." The charge is imposed upon "the person disposing of solid waste at [the landfills] . . . and the fee [is] collected by the operator of the [landfill] who . . . remit[s] it to the tax commissioner" on a monthly basis. See W. Va. Code § 22-16-4(b).

The revenue collected from the charge described above is deposited into the "Closure Cost Assistance Fund" which is dedicated to West Virginia's Landfill Closure Assistance Program. See W. Va. Code §§ 22-16-1 and 22-16-12. This Program provides funding for landfills that do not meet certain environmental criteria set out by the Environmental Protection Agency ("EPA"). The EPA, in promulgating its environmental criteria for the regulation of landfills, was concerned with remedying those instances where landfills would contribute to serious groundwater contamination.

The scheme enacted by West Virginia to combat contaminated landfills was constructed to address the problem concerning those landfill facilities whose owners were not able to pay the costs of upgrade or closure. Because of the combined necessities of complying with the EPA regulations and cleaning up contamination which created an enormous potential health hazard, the West Virginia legislature deemed that the charge at issue here would be funneled towards the landfill closure/upgrade costs for those facilities unable to afford such expenses. The West Virginia legislature stressed that this was necessary because a large percentage of citizens within the state rely on groundwater as their sole source of water.

Once the funds are collected, they are deposited under the rubric of the Landfill Closure Assistance Fund which is designated as a special revenue fund. Nevertheless, this fund is part of the general state fund within the state treasury and under the control of the State Treasurer. As such, any refund ordered by that account would come directly from the state treasury in accordance with state law which states that all money collected under the acts of the legislature becomes part of the state treasury. See W. Va. Code § 12-2-2.

Appellants challenged the constitutionality of the charge assessed under § 22-16-4(a). They claim that § 22-16-4(a) violates interstate commerce rights protected under the dormant Commerce Clause and also violates substantive due process rights. Appellees countered with the claim that the TIA divests the district court of jurisdiction on the basis that the charge imposed by § 22-16-4(a) is a "tax" and not a "fee." The district court agreed with appellees' argument and construing appellees' motion to dismiss for lack of subject matter jurisdiction as a motion for summary judgment, granted summary judgment for appellees before reaching the merits of appellants' claim. Appellants appeal this ruling.

II.

We review de novo a grant of summary judgment. See Akers v. Caperton, 998 F.2d 220, 224 (4th Cir. 1993). Similarly, we review de novo a dismissal for lack of subject matter jurisdiction. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999).

The TIA provides:

The district court shall not enjoin, suspend, or restrain the assessment, levy, or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.³

28 U.S.C. § 1341. The TIA represents a recognition that states are best situated to administer their own fiscal operations. See Tully v. Griffin, Inc., 429 U.S. 68, 73 (1976). As such, the term "tax" is subject to a "broader" interpretation when reviewed under the aegis of the TIA. See Tramel v. Schrader, 505 F.2d 1310, 1315 (5th Cir. 1975). The West Virginia charge at issue here is defined as a "fee" in the pertinent subsection of the statute. See W. Va. Code § 22-16-4(c). However, the nomenclature provided to the charge at issue is not material as the inquiry focuses on explicit factual circumstances that transcend the literal meaning of the terminology. See Folio v. City of Clarksburg, 134 F.3d 1211, 1216-17 (4th Cir. 1998).

To determine whether a particular charge is a "fee" or a "tax," the general inquiry is to assess whether the charge is for revenue raising purposes, making it a "tax," or for regulatory or punitive purposes, making it a "fee." See Collins Holding Corp. v. Jasper County, 123 F.3d 797, 800 (4th Cir. 1997). To aid this analysis, courts have developed a three-part test that looks to different factors: (1) what entity imposes the charge; (2) what population is subject to the charge; and (3) what purposes are served by the use of the monies obtained by the charge. See San Juan Cellular Telephone Co. v. Public Service Comm'n, 967 F.2d 683, 685 (1st Cir. 1992); see also Bidart Bros. v. California Apple Comm'n, 73 F.3d 925, 931 (9th Cir. 1996).

In San Juan Cellular, the court set out the precise confines of a "classic tax" versus a "classic fee." The "classic tax" is imposed by the legislature upon a large segment of society, and is spent to benefit the community at large. See San Juan Cellular , 976 F.2d at 685. The "classic fee" is imposed by an administrative agency upon only those persons, or entities, subject to its regulation for regulatory purposes, or to raise "money placed in a special fund to defray the agency's regulation-related expenses." Id. The San Juan Cellular court noted that most charges will not fall neatly into either extremity and the characteristics of the charge will tend to place it somewhere in the middle. See id.

When the three-part inquiry yields a result that places the charge somewhere in the middle of the San Juan Cellular descriptions, the most important factor becomes the purpose behind the statute, or regulation, which imposes the charge. See South Carolina v. Block, 717 F.2d 874, 887 (4th Cir. 1983). In those circumstances if the ultimate use of the revenue benefits the general public then the charge will qualify as a "tax," while if the benefits are more narrowly circumscribed then the charge will more likely qualify as a "fee." See San Juan Cellular, 967 F.2d at 685.

The first two steps of the inquiry indicate that the charge imposed by W. Va. Code § 22-16-4(a) is a "tax." First, the charge was imposed by the West Virginia legislature and not any administrative agency. Second, the charge is imposed on the persons disposing of the waste into the landfill and...