Opinion
Civil Action No. 02-452, SECTION "C" (4)
May 14, 2002
MEMORANDUM AND REASONS
This matter comes before the Court on motion to dismiss for lack of subject matter jurisdiction and lack of standing filed by the defendants Linebarger, Goggan, Blair, Pena Sampson, L.L.P., formerly known as Heard, Linebarger, Graham, Goggan, Blair, Pena Sampson, L.L.P., United Governmental Services of Louisiana, Inc. and the City of New Orleans. Having considered the record, the memoranda of counsel and the law, the Court has determined that it lacks subject matter jurisdiction for the following reasons.
The plaintiffs challenge the constitutionality of a 1998 city ordinance authorizing the collection of delinquent ad valorem taxes through private parties and an "Additional Penalty for Collection Costs:"
All delinquent taxes . . . incur an additional penalty to defray costs of collection if the taxing unit has referred the collection of the delinquent taxes, penalty and interest to an attorney or collection agent. The amount of the additional penalty shall be thirty percent of the amount of taxes, penalty, and interest due.
Code City of New Orleans § 150-46.3, Ord. No. 18637. In February 2002, this ordinance was amended by Ordinance No. 020556, which provided a "legal mechanism to challenge the imposition of collection penalties by paying such penalties under protest, and to otherwise to provide with respect thereto."
The defendants primary argument for dismissal is based on the Tax Injunction Act, 28 U.S.C. § 1341, which provides as follows:
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.
The Tax Injunction Act "is meant to be a broad jurisdictional impediment to federal court interference with the administration of state tax systems." United Gas Pine Line Co. v. Whitman, 595 F.2d 323 (5th Cir. 1979). The plaintiffs argue that dismissal is not appropriate because: (1) the February 2002 amendment to the subject ordinance constitutes an " ex-post-facto post-deprivation remedy" and an "admission" that the original ordinance provided an inadequate legal mechanism to challenge the penalty; (2) the penalty is not a tax; and (3) there is no sufficient state court remedy.
The plaintiffs' arguments fail. First, the Tax Injunction Act preclusion is focused not on the subject matter of tax, but on the broader activities of "assessment, levy or collection of any tax." According to the clear language of the ordinance, the challenged penalty, which is "an additional penalty to defray costs of collection" is undisputedly part and parcel of the collection process.
In addition, the Court finds that the penalty qualifies as a tax for purposes of the Tax Injunction Act. The distinction between a tax and a fee is "a spectrum with the paradigmatic fee at one end and the paradigmatic tax at the other." Neinast v. Texas, 217 F.3d 275, 278 (5th Cir. 2000), cert. denied, 531 U.S. 1190 (2001).
The classic fee is imposed (1) by an agency, not the legislature; (2) upon those it regulates, not the community as a whole; and (3) for the purpose of defraying regulatory costs, not simply for general revenue-raising purposes.Id. Here, the penalty is imposed by legislative (City Council) action and it is applicable to all residents of Orleans Parish who own property. While the penalty is to help defray the cost of collection, it is inexorably tied to the tax collection itself, which "sustains the essential flow of revenue to the government" for purposes of this analysis. Home Builders Association of Mississippi v. City of Madison, 143 F.3d 1006, 1011 (5th Cir. 1998)
In addition, the insufficiency of state court remedies has neither been admitted by the amendment to the ordinance nor established by the plaintiffs. The fact that an additional remedy was provided in 2002 does not carry this issue. A "plain, speedy and efficient remedy" is one which provides the plaintiffs with a full hearing and judicial determination at which all constitutional objections to the tax may be raised. Rosewell v. LaSalle National Bank, 450 U.S. 503, 514 (1981). Courts have recognized that Louisiana's refund procedure provides a "plain, speedy and efficient remedy" for present purposes. MRT Exploration Co. v. McNamara, 731 F.2d 260, 263 (5th Cir. 1984). See also Ford Motor Credit Co. v. Louisiana Tax Commission, 440 F.2d 675 (5th Cir. 1971). Here, it is undisputed that the other avenues, including protest under La. Rev. Stat. § 47:2110 and a declaratory action after protested payment of the tax, existed for the plaintiffs. The multiplicity of suits in the state court system challenging the same ordinance have been pending in the proper state venue for several years.
The fact that the plaintiffs may meet with formidable defenses in state court does not detract from this finding. See e.g., Henry v. Metropolitan Dade County, 329 F.2d 780 (5th Cir. 1964); Stephens v. Portal Boat Co., 781 F.2d 481 (5th Cir. 1986).
Counsel for the plaintiffs has recently filed an identical lawsuit with other named plaintiffs in state court.
Accordingly,
IT IS ORDERED that the motion to dismiss for lack of subject matter jurisdiction and lack of standing filed by the defendants Linebarger, Goggan, Blair, Pena Sampson, L.L.P., formerly known as Heard, Linebarger, Graham, Goggan, Blair, Pena Sampson, L.L.P., United Governmental Services of Louisiana, Inc. and the City of New Orleans is GRANTED.
In light of this ruling, the Court does not reach the issue of standing.