RALPH B. GUY, Jr., Circuit Judge.
Petitioner, Gary Gillis, along with the county property valuation administrators of the state of Kentucky, seeks a writ of mandamus requiring the district court to enter an order of dismissal in Nowak v. Foster, No. C84-0057-P (W.D.Ky.Sept. 5, 1985), for lack of subject matter jurisdiction. Petitioners are the named defendants in that case. Pursuant to our authority under the All Writs Statute, 28 U.S.C. § 1651, and for the reasons stated below, the petition shall be granted and the writ shall issue.
On February 17, 1984, a complaint was filed with the United States District Court for the Western District of Kentucky. Plaintiffs alleged that they were citizens and taxpayers of the commonwealth of Kentucky and that their taxable property was "assessed at fair cash value, or its full agricultural or horticultural value, in accordance with law." Named as a defendant was Gary Gillis, Secretary of Revenue of the commonwealth of Kentucky. As Secretary of Revenue, Mr. Gillis is head of the Revenue Cabinet, which has some supervisory authority over property valuation administrators. Ky.Rev.Stat. § 131.020. The other named defendants were property valuation administrators of six counties in Kentucky. These officers are responsible for assessing all taxable property within their counties. Ky.Rev.Stat. §§ 132.420, 132.450.
The action was brought pursuant to 42 U.S.C. § 1983. Plaintiffs complained that "[a]s a result of the acts and omissions of the defendants, the taxable property in [Kentucky] owned by coal, oil and gas interests [was] systematically assessed for taxation purposes at substantially less than its fair cash value." This property included "land, improvements to land, equipment and unextracted coal, oil and gas." Because their property was assessed at its full fair cash value, plaintiffs asserted that this alleged "systematic underassessment of property held by coal, oil and gas interests" violated their right to equal protection of law.
Additionally, plaintiffs requested certification of both a plaintiff class ("all citizens of the State of Kentucky who own taxable property in the state and whose property is assessed at fair cash value, or full agricultural or horticultural value, in accordance with law") and a defendant class ("all property valuation administrators of counties in which taxable property owned by coal, oil or gas interests is located"). Class
In their prayer for relief, plaintiffs asked that the court: (1) declare that the defendants' assessments of property owned by coal, oil, and gas interests violates plaintiffs' rights to equal protection of law; (2) enter a permanent injunction against the defendants and the defendant class requiring them to assess all real and personal property owned by coal, oil, and gas interests at fair cash value; and (3) award the plaintiffs reasonable costs and attorney fees.
On May 10, 1984, the defendants moved to dismiss the action on the grounds that (1) the court lacked subject matter jurisdiction of the complaint because of the Tax Injunction Act, 28 U.S.C. § 1341 and the related principle of comity as enunciated in cases such as Fair Assessment in Real Estate Ass'n v. McNary, 454 U.S. 100, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981); (2) the plaintiffs lacked standing to bring the action; and (3) the action was barred by the Eleventh Amendment to the United States Constitution. On September 11, 1985, the court entered its order holding that plaintiffs' action was not barred either by the Tax Injunction Act or the doctrine of comity because the complaint sought to "enhance rather than inhibit the assessment of taxes in Kentucky." Defendants moved the court to reconsider its decision on the motion to dismiss or to certify its order denying the motion for immediate appeal under 28 U.S.C. § 1292(b) on November 14, 1986. On January 23, 1987, after the filing of the petition herein, the district court denied defendants' motion to reconsider or certify.
The petition for writ of mandamus was filed on January 22, 1987. Petitioners contend that the district court erred in failing to dismiss the civil action in question on the grounds that it was barred by the Tax Injunction Act and the principle of comity underlying and augmenting the Act. In addition, petitioners assert that the court erred in failing to dismiss on the ground that the plaintiffs' lack standing to seek adjudication of the claim asserted.
The Tax Injunction Act
The Tax Injunction Act states simply that the district courts "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." 28 U.S.C. § 1341. The statute "has its roots in equity practice, in principles of federalism, and in recognition of the imperative need of a State to administer its own fiscal operations." Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503, 522, 101 S.Ct. 1221, 1234, 67 L.Ed.2d 464, reh'g denied, 451 U.S. 1011 (1981) (quoting Tully v. Griffin, Inc., 429 U.S. 68, 73, 97 S.Ct. 219, 222, 50 L.Ed.2d 227 (1976)). "This last consideration was the principal motivating force behind the Act: this legislation was first and foremost a vehicle to limit drastically federal district court jurisdiction to interfere with so important a local concern as the collection of taxes." Rosewell, 450 U.S. at 522, 101 S.Ct. at 1234 (citing 81 Cong.Rec. 1415 (1937) (remarks of Sen. Bone)).
The Supreme Court has long recognized the dangers inherent in disrupting the administration of state tax systems:
Dows v. City of Chicago, 78 U.S. (11 Wall.) 108, 110, 20 L.Ed. 65 (1870).
The Act divests district courts not only of jurisdiction to issue an injunction enjoining state officials, but also of jurisdiction
In arguing that the Tax Injunction Act did not bar their claim, respondents relied principally on Hargrave v. McKinney, 413 F.2d 320 (5th Cir.1969), and its progeny. Plaintiffs there challenged a state statute providing that any county imposing ad valorem property taxes for educational purposes above a certain rate would not be eligible to receive state funds to support its educational system. Because the plaintiffs' suit challenged the constitutionality of a state taxing statute, the district court held that it was barred by the Tax Injunction Act. The Fifth Circuit reversed, stating:
413 F.2d at 326 (emphasis added).
Respondents again assert that because their claim would not suspend or restrain the collection of taxes, but instead seeks to enhance the collection of taxes, under Hargrave their case is not barred by the Tax Injunction Act.
We do not believe that the Grace Brethren ruling was as narrow as respondents contend. First of all, the Tax Injunction Act does not speak only to the collection of taxes; it refers as well to the assessment and levy of taxes. While admittedly the great majority of cases present plaintiffs seeking to enjoin the collection of taxes, and certainly the most direct threat to the state fisc is presented when the collection of taxes is enjoined, still the Act is not, by its own language, limited to the collection of taxes.
Secondly, the broad language used by the Grace Brethren court suggests anything but a narrow limitation on the power of courts to issue declaratory judgments:
457 U.S. at 408-09, 102 S.Ct. at 2507-08 (footnote omitted).
Thus, respondents' argument that the prohibition on the availability of declaratory relief is coextensive with the prohibition on injunctive relief suggests to us, if anything, that injunctive relief is broadly unavailable as well. Nevertheless, it is true that the particular declaratory and injunctive relief sought in the district court by respondents does not fall within the literal language of the Tax Injunction Act. Whether the Tax Injunction Act actually does bar the availability of such relief we find unnecessary to decide, because we conclude that principles of comity, which underlie and augment the Act, bar the action brought by respondents in the district court.
Although the Tax Injunction Act may not be applicable, we cannot ignore the policies underlying the Act. "[E]ven where the Tax Injunction Act would not bar federal-court interference in state tax administration, principles of federal equity may nevertheless counsel the withholding of relief." Rosewell, 450 U.S. at 525 n. 33, 101 S.Ct. at 1235 n. 33. Thus, even if the facts of a state tax matter do not technically fit within the language of § 1341, the federal courts should restrain from interfering in the state proceedings. Alcan Aluminum v. Department of Revenue, 724 F.2d 1294 (7th Cir.1984).
Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943), sets forth the basis for this judicial restraint:
319 U.S. at 298, 63 S.Ct. at 1073.
This reasoning was updated recently in Fair Assessment in Real Estate Ass'n v. McNary, 454 U.S. 100, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981). There, the Court addressed whether an action for damages brought pursuant to 42 U.S.C. § 1983 alleging deprivation of equal protection due to unequal taxation of real property was barred on the basis of comity. In spite of the strong federal policy underlying § 1983 permitting the vindication of constitutional violations by state officials in federal court, the Court concluded that "the principle of comity controls." 454 U.S. at 105, 102 S.Ct. at 180. Accordingly, it held that § 1983 actions seeking damages for unconstitutional application of state or local tax laws could not be maintained in federal court as long as an adequate state remedy was available. Id. at 107, 102 S.Ct. at 181.
More significantly, the Court determined that the principle of comity, which predated the Tax Injunction Act, was not restricted by passage of the Act. The Court stated that "[n]either the legislative history of the Act nor that of its precursor, 28 U.S.C. § 1342, suggests that Congress intended that federal-court deference in state tax matters be limited to the actions enumerated in those sections." 454 U.S. at 110, 102 S.Ct. at 183. Consequently, the scope of federal court deference based on principles of comity is substantially broader than that required under the Tax Injunction Act.
The Court found it particularly significant that the petitioners' § 1983 action would be no less disruptive of the state's tax system than would the historic equitable efforts to enjoin the collection of taxes. For instance, it noted that petitioners could not recover under § 1983 unless a district court first determined that the defendant's administration of the county tax system violated the petitioner's constitutional rights. "In effect, the district court must first enter a declaratory judgment like that barred in Great Lakes." 454 U.S. at 113, 102 S.Ct. at 184. The Court felt that such a determination would be fully as
In addition to the intrusiveness of the judgment, the Court felt that the very maintenance of the suit itself would intrude on the enforcement of the state scheme:
Id. (quoting with approval the district court's opinion at 478 F.Supp. 1231, 1233-34 (E.D.Mo.1979)). This intrusion was highlighted in Fair Assessment by the particular facts of the case. First, named as defendants were virtually every key tax official in the county. In addition, the actions which were challenged in the complaint — unequal assessment of new and old property and retaliatory assessment of property belonging to those who successfully appealed to the Board of Equalization — could be the result of policies or practicalities beyond the control of any individual officer, i.e., from a practical allocation of limited resources. Finally, a judicial determination of official liability for the acts complained of would have an undeniable chilling effect upon the actions of all county officers governed by the same practicalities or required to implement the same policies. Such a chilling effect would result not only from the possibility of collecting damages from officials found to have acted in violation of known constitutional rights, but also from the availability of attorney fees under 42 U.S.C. § 1988. In short, the Court found that petitioners' action would "in every practical sense operate to suspend collection of the state taxes...." Great Lakes, 319 U.S. at 299, 63 S.Ct. at 1073. The Court previously rejected this form of federal court interference on principles of federalism. 454 U.S. at 114-15, 102 S.Ct. at 185.
The Court ultimately held that the
454 U.S. at 115-16, 102 S.Ct. at 186.
Once again, relying on the Hargrave line of cases, respondents argue that the action brought in the district court would not impede state tax collections in any way, and thus is not barred by the doctrine of comity as enunciated in Great Lakes and Fair Assessment. Respondents assert that their claim is actually a benefit to state authorities, since it seeks to enhance tax
First, we would note, that while other courts have adopted the Hargrave distinction in relation to the comity inquiry, see Appling County v. Municipal Elec. Auth., 621 F.2d 1301, 1304 (5th Cir.), cert. denied, 449 U.S. 1015, 101 S.Ct. 574, 66 L.Ed.2d 474 (1980), the Hargrave court itself did not address that question, and indeed, expressed doubt about the propriety of federal court interference in state tax matters, stating:
413 F.2d at 327.
Second, while ultimately respondents claim they seek to force the collection of additional taxes, the interference by the federal courts into the state tax system is the same in degree and kind as a suit seeking to enjoin a state tax; and the expense to the state in defending the action is identical. Accordingly, we find the Hargrave distinction, at least under these circumstances, unpersuasive.
In fact, it appears clear that the factors which led the Court in Fair Assessment to hold that a § 1983 claim for damages could not be maintained compels a like result in respondents' case. Initially, it is noteworthy that the district court would be forced to issue a declaratory judgment finding that virtually all property owners in the state of Kentucky had been deprived of their right to equal protection under the United States Constitution by the manner in which petitioners administered the state tax system. While respondents insist that such a ruling would work no damage to the fiscal system of the state — since the remedy would be reassessment of those who have been underassessed, rather than refunds to respondents — we cannot logically conclude that no harm would result from a ruling that property assessments have been unconstitutionally administered for years. As stated in Perez v. Ledesma:
401 U.S. 82, 128 n. 17, 91 S.Ct. 674, 698 n. 17, 27 L.Ed.2d 701 (1971) (Brennan, J., concurring in part and dissenting in part) (emphasis added).
Next, as in Fair Assessment, the very maintenance of respondents' suit unduly intrudes on administration of the State's tax system. Every county property valuation administrator is named as a defendant in Nowak. And like Fair Assessment, the policies complained of by respondents could well be beyond the control of any of those defendants. Respondents themselves have demonstrated this latter circumstance by the allegations in their complaint. For instance, respondents identify the factors contributing to the alleged systematic underassessment of taxable property owned by coal, oil, and gas interests as: 1) property valuation administrators lack the competence and/or training to properly assess property held by coal, oil, and gas interests; 2) property valuation administrators lack the staff and resources to properly assess property held by coal, oil, and gas interests; 3) property valuation administrators underassess property held by coal, oil, and gas interests because it is politically expedient for them to do so; 4) property valuation administrators do not systematically use available sales or market data to value property held by coal, oil, and gas interests, nor do they systematically use such data to verify the accuracy of the valuations reported to them by coal, oil, and gas interests; 5) property valuation administrators have not been required to conduct revaluations of property held by coal, oil, and gas interests; 6) the Kentucky Legislature has granted unmined coal a de facto exemption from property taxation by lowering the tax on unmined coal to a rate so low that it is uneconomical and impractical to collect the tax; 7) the Secretary of Revenue does not provide property valuation administrators with sufficient technical assistance to enable them to properly assess property held by coal, oil, and gas interests; 8) the Secretary of Revenue's supervision of property valuation administrators is inadequate to assure that they will assess property held by coal, oil, and gas interests at its fair cash value; and 9) the Secretary of Revenue permits property valuation administrators to systematically underassess property held by coal, oil, and gas interests because it is politically expedient for him to do so. The nature of some of these allegations, i.e., limited resources and supervision, suggest that a district court should be reluctant to tread into this area.
The facts alleged by respondents also illustrate the fallacy of their contention that the state fisc will not be adversely affected by their action. Although respondents have not expressly prayed for damages, they are seeking costs and attorney fees under 42 U.S.C. § 1988. Likewise, the costs to the State in trying the case will be substantial. Moreover, if respondents were to succeed on their claim, the cost of the relief they seek, including injunctive relief requiring petitioners to reassess all real and personal property owned by coal, oil, and gas interests, will be considerable. In addition, state resources and personnel will be diverted to accomplish that relief. In short, respondents' action would be fully as intrusive as the § 1983 damage action barred by the Court in Fair Assessment.
For these reasons, we believe that the principles of comity dictate that a federal court should not intrude into the state tax system and certainly not to the degree that a claim such as respondents' would require. As long as an adequate state remedy exists, taxpayers like respondents should utilize that remedy.
Available State Remedies
Respondents' claim would not be barred by the principle of comity if no "plain, adequate and complete" state remedy
Respondents insist that no adequate state remedy is available to them. First, respondents contend that because the resolution of their case turns primarily upon questions of fact, they would not be free to litigate in the Kentucky courts without first exhausting their administrative remedies through the local boards of assessment appeals and the Kentucky Board of Tax Appeals.
While normally third parties are not free to challenge tax assessments of others, respondents point to a provision of Kentucky law which they claim provides a remedy which they would be required to exhaust. Ky.Rev.Stat. § 133.120(1) provides in pertinent part:
Respondents contend that they would be forced to file such third-party protests on every coal, oil, and gas property in every county. Next, according to respondents, they would be likewise required to exhaust administrative appellate remedies.
We disagree. In Kentucky Bd. of Tax Appeals v. Simpson, 691 S.W.2d 221 (Ky.App.1985), the court held that third-party protesters under § 133.120(1) were not "aggrieved parties" who could appeal an adverse local decision to the board of tax appeals. Merely asking for review under § 133.120(1), the court held, gives third-party protesters no rights "beyond bringing the fact of low assessments to light. It
Accordingly, respondents' contention that they would have to pursue this third-party remedy, and then appeal an adverse decision, is without merit. First, they clearly have no appellate procedure available to them. Secondly, the third-party protest procedure is no remedy at all; it is simply a method of bringing underassessments to light. We cannot perceive how the Kentucky courts could require exhaustion of this procedure when it provides no remedy.
Furthermore, even if the third-party protester "remedy" would normally have to be exhausted, Kentucky courts have not required exhaustion of administrative remedies when a constitutional challenge is presented. In International Soc'y for Krishna Consciousness v. Common-wealth, 610 S.W.2d 910 (Ky.App.1980), plaintiffs challenged the assessment of a retail sales tax on their activities of proselytizing and alms/donation solicitation as violative of the free exercise clause of the first amendment. The court held that plaintiffs' failure to protest the assessment through the administrative process did not foreclose judicial review, since exhaustion is not required when the constitutionality of an assessment is challenged. Id. at 912.
This holding was reaffirmed in Dolan v. Land, 667 S.W.2d 684 (Ky.1984), where plaintiffs challenged the method employed by the Fayette County property valuation administrator in assessing agricultural and horticultural land as unconstitutional. The supreme court affirmed the lower court's holding that the method employed did violate the Kentucky Constitution, and excused plaintiffs' failure to exhaust administrative remedies because the constitutionality of the assessment method was challenged. Id. at 688.
Respondents assert, however, that the exhaustion exception for constitutional challenges is not available to them. They contend that their claim is a constitutional challenge only in the sense that the Kentucky Constitution requires all property in the state to be taxed at fair cash value. Ky. Const. § 172. Because the whole system of administrative remedies created by Kentucky law is designed precisely for this type of challenge, respondents conclude that if their claim fell within the constitutional question exception to the exhaustion requirement under Kentucky law, then all Kentucky taxpayers who challenge their assessments would be included within the exception.
We agree that if respondents' claim simply alleged denial of the right to have land assessed at fair market value in accordance with the Kentucky Constitution, it would not present the type of constitutional challenge excepted from exhaustion requirements as recognized in International Soc'y for Krishna Consciousness and Dolan. But this argument neatly ignores the federal constitutional challenge — denial of equal protection under the fourteenth amendment — on which respondents have founded their entire case. It is this aspect of their case that places it within the constitutional challenge exception to administrative exhaustion rules.
Respondents also attempt to distinguish Dolan, by asserting that it concerned the constitutionality of a specific method of assessment, in contrast to respondents' case, which entails an attack on particular assessments. Thus, respondents submit, they would be required to exhaust administrative remedies in relation to each of those particular assessments. Again, we find this argument without merit. Respondents simply cannot have it both ways. They cannot assert that this is only an attack on
Our review of Kentucky law convinces us that respondents have a state remedy which is "plain, adequate and complete." Fair Assessment, 454 U.S. at 116 n. 8, 102 S.Ct. at 186 n. 8. No administrative remedy exists to be exhausted. Even if the third-party protester provision is required to be "exhausted," since this case presents a constitutional challenge, such requirement would be excused. Kentucky courts have shown no reluctance in remedying constitutional violations when found. See, e.g., Russman v. Luckett, 391 S.W.2d 694 (Ky.1965).
Whether the Writ Should Issue
We must still address whether this case is appropriate for the extraordinary remedy of mandamus, which will be granted only when a petitioner shows that "its right to issuance of the writ is `clear and indisputable.'" In re Post-Newsweek Stations, Michigan, Inc., 722 F.2d 325, 329 (6th Cir.1983) (quoting Bankers Life & Casualty Co. v. Holland, 346 U.S. 379, 384, 74 S.Ct. 145, 148, 98 L.Ed. 106 (1953)). While this court clearly has the power to issue a writ of mandamus pursuant to 28 U.S.C. § 1651, petitioners bear a heavy burden in showing that mandamus is the proper remedy. In re Bendectin Products Liability Litigation, 749 F.2d 300, 303 (6th Cir.1984).
In In Re Bendectin, we analyzed the propriety of granting the writ by using guidelines developed by the Ninth Circuit in Bauman v. United States District Court, 557 F.2d 650, 654 (9th Cir.1977). Those guidelines, based upon an extensive review of applicable Supreme Court and Ninth Circuit case law, are:
749 F.2d at 304.
As the Bauman court recognized, however, the "guidelines are cumulative and may not all point to the same conclusion." 557 F.2d at 655. "Rarely if ever will a case arise where all the guidelines point in the same direction or even where each guideline is relevant or applicable." Id. In many cases, "a proper disposition will often require a balancing of conflicting factors." Id.
At least three of the Bauman factors counsel strongly in favor of issuance of the writ. First, it is clear that by the time petitioners have the right to appeal the adverse ruling, much of the damage will have been done. The trial court refused to certify an interlocutory appeal under 28 U.S.C. § 1292(b), although recognizing that the issue sought to be certified was controlling, and that there was substantial ground for difference of opinion on the issue. Consequently, there is no other remedy which would avert the necessity of trial on the merits.
The second factor, which as noted relates closely to the first, recognizes that the damage to be avoided is the intrusiveness of the trial itself, along with the danger that the administration of the state tax scheme will be declared unconstitutional.
In addition, we believe that the district court's order denying petitioners' motion to dismiss is clearly erroneous as a matter of law. The district court's reliance on Hargrave was in error, as we question the correctness of that decision. And the court wholly failed to consider whether adequate state remedies were available to respondents. Based upon the Supreme Court's broad pronouncements in cases like Fair Assessment, we conclude the district court's decision was clearly erroneous. Consequently, the third Bauman factor militates in favor of granting the writ.
The fourth and fifth guidelines in Bauman have little or no applicability. While the issues raised by the district court's order seldom arise, they are not issues of first impression. These factors do not exercise any influence on whether the writ should issue.
Accordingly, we find that the issuance of a writ of mandamus directing the district court to dismiss the complaint is appropriate in this unusual case. Consequently, we need not reach petitioners' other jurisdictional challenge. The petition is GRANTED and the writ shall ISSUE.
NATHANIEL R. JONES, Circuit Judge, concurring.
I join the majority in finding that Kentucky's administrative remedy is adequate, however, I do so only because respondents are exempt from the heavy burden Kentucky places on challengers to its property assessment system. Respondents' claim falls within the constitutional challenge exception of Kentucky's administrative exhaustion rule, therefore they are exempt from Kentucky's requirement that administrative remedies be exhausted before state judicial review becomes available. See International Soc. for Krishna Consciousness v. Commonwealth, 610 S.W.2d 910, 912 (Ky.Ct.App.1980). If it were not for this exception, I do not see how Kentucky would meet the "plain, adequate and complete" standard expressed in Fair Assessment in Real Estate Assn. v. McNary, 454 U.S. 100, 116, 102 S.Ct. 177, 186, 70 L.Ed.2d 271 (1981). See Georgia Railroad & Banking Co. v. Redwine, 342 U.S. 299, 72 S.Ct. 321, 96 L.Ed. 335 (1952) (a remedy that "would require the filing of over 300 separate claims in fourteen different counties to protect the single claim asserted by [the taxpayer]" was deemed inadequate).
Since we are deciding this case on the grounds that respondents' claim is an exception, I would not reach the question of choosing between attacking particular assessments and invoking federal jurisdiction under the equal protection clause.
522 F.2d at 1124 (citing S.Rep. No. 1035, 75th Cong., 1st Sess. 102 (1937), and 81 Cong.Rec. 1416-17 (1937)).
Nevertheless the Supreme Court has, on other occasions, recognized other purposes behind the Act. "To be sure, in enacting the Tax Injunction Act, Congress considered primarily injunctions against state officials because that form of anticipatory relief was the principal weapon used by businesses to delay or avoid paying state taxes.... Nevertheless, the legislative history of the Tax Injunction Act demonstrates that Congress worried not so much about the form of relief available in the federal courts, as about divesting the federal courts of jurisdiction to interfere with state tax administration." Grace Brethren, 457 U.S. at 409 n. 22, 102 S.Ct. at 2508 n. 22.