Hay v. Indiana State Board of Tax Commissioners , 312 F.3d 876 ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-1199
STEPHEN M. HAY, WAWASEE AIRPORT,
INCORPORATED, SUZANNE BISHOP, and
MICHAEL UMBAUGH,
Plaintiffs-Appellants,
v.
INDIANA STATE BOARD OF TAX COMMISSIONERS,
JON LARAMORE, Chairman of the Indiana State Board
of Tax Commissioners, GORDON E. MCINTYRE,
member of the Indiana State Board of Tax
Commissioners, and LISA ACOBERT, member of the
Indiana State Board of Tax Commissioners,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Indiana, South Bend Division.
No. 01 C 583—Allen Sharp, Judge.
____________
ARGUED SEPTEMBER 25, 2002—DECIDED DECEMBER 6, 2002
____________
Before BAUER, ROVNER, and WILLIAMS, Circuit Judges.
ROVNER, Circuit Judge. Plaintiffs-Appellants, Stephen M.
Hay, Wawasee Airport, Inc., Suzanne Bishop and Michael
Umbaugh (“landowners”) object to the manner in which
their real properties have been assessed for Indiana State
property tax purposes. Consequently, they filed a complaint
2 No. 02-1199
against the Indiana State Board of Tax Commissioners,
Jon Laramore, as Chairman of the State Board, and
Gordon McIntyre and Lisa Acobert, members of the State
Board (collectively “State Board”).1
The complaint alleges that the method used to assess
the landowners’ real property violates their due process
rights under the Fifth and Fourteenth Amendments. The
State Board filed a Motion to Dismiss the
landowners’ complaint for lack of jurisdiction. The District
Court granted the motion to dismiss and the landowners
appeal. We affirm.
I.
Indiana’s real property tax assessment methods have
been plagued with problems and subject to extensive
state court litigation. See, e.g., State Bd. of Tax Comm’rs
v. Town of St. John, 702 N.E.2d 1034 (Ind. 1998). As a
result of this litigation, the State Board issued new as-
sessment regulations which became effective May 23, 2001.
The plaintiffs in this case are all taxpayers in Indiana
who contend that the State Board violated their constitu-
tional rights under the Fifth and Fourteenth Amend-
ments to the United States Constitution by continuing
to use superceded tax assessment methods that the state
court has declared to be infirm. The landowners filed a
complaint in federal court challenging the assessments
made using this former, flawed system. The State Board
countered with a motion to dismiss for lack of subject mat-
1
The Indiana Legislature abolished the Indiana State Board of
Tax Commissioners as of December 31, 2001, and created in its
stead the Department of Local Government Finance (“DLGF ”).
Jon Laramore is the Commissioner of the new DLGF. Lisa
Acobert is the Deputy Commissioner. Gordon McIntyre retired
from public service before the State Board was abolished. The
DLGF has no equivalent position to the one McIntyre held.
No. 02-1199 3
ter jurisdiction, claiming that the Federal Tax Injunction
Act prohibits the district court from hearing challenges
to state tax law regulations where the state law provides
an effective remedy for such challenges. The landowners
argue, however, that their claim is not barred by the Tax
Injunction Act as they have no effective remedy for their
complaint within the state court system. Their response
to the motion to dismiss hinges on their contention that
the district court must accept as true, without looking
beyond the allegations of the complaint, their allegation
that they have no plain, speedy and effective remedy in
the state court system.
Reviewing the district court’s dismissal for lack of sub-
ject matter jurisdiction de novo (see CCC Info. Servs., Inc.
v. American Salvage Pool Assoc., 230 F.3d 342, 345-46
(7th Cir. 2000)), we find that the Tax Injunction Act
does indeed bar the landowners from pursuing a claim
in federal court.
II.
Unlike the state courts of Indiana, the federal district
courts are courts of limited jurisdiction. Before entertain-
ing any claim, a federal district court must assure itself
that it has jurisdiction to hear the matter presented to
it. The Tax Injunction Act is one particular statute that
limits the jurisdiction of federal district courts. It provides:
The district courts shall not enjoin, suspend or re-
strain 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 Supreme Court has explained that
“[t]he 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 (1981) (internal
4 No. 02-1199
citations omitted). Consequently, a federal district court
must abstain from involving itself in questions regard-
ing the collection of state taxes provided that state law
provides a “plain, speedy and efficient remedy” for chal-
lenges to the state tax law. See 28 U.S.C. § 1341.
The landowners urged the district court to read their
complaint liberally and accept as true the well-pleaded
allegations of the complaint. In particular, they contend
that the court should accept the allegation that the land-
owners have no plain, speedy or effective remedy in the
state courts. The landowners assert that unless the de-
fendant proffers evidence to call the court’s jurisdic-
tion into question, the court cannot look beyond the four
corners of the complaint. Of course if, as the landown-
ers claim, we have no choice but to accept the lack of
adequate remedy allegation on its face without more, the
Tax Injunction Act would not apply and the plaintiffs
would be free (at least for the time being) to pursue
their claim in federal court. It would be a simple route
to the federal courts not only for the landowners, but for
all plaintiffs challenging state tax regulations. Under the
landowners’ scenario, a plaintiff could simply allege the
lack of a plain, speedy and efficient remedy in the state
courts and the doors to the federal courts would spring
open. But as we detail below, there is no such magic
key to federal jurisdiction, and the federal courts cannot
blindly accept a plaintiff’s claim that jurisdiction exists.
Jurisdiction is the “power to declare law,” and without
it the federal courts cannot proceed. Ruhrgas v. Mara-
thon Oil Co., 526 U.S. 574, 577, 583 (1999). Accordingly,
not only may the federal courts police subject matter
jurisdiction sua sponte, they must. Id.; United States v.
Smith, 992 F.2d 98, 99 (7th Cir. 1993). The landowners
cite portions of Commodity Trend Serv., Inc. v. Commodity
Futures Trading Comm’n, 149 F.3d 679 (7th Cir. 1998),
which allude to the fact that a court may look beyond
No. 02-1199 5
the allegations of a complaint “once a defendant proffers
evidence that calls the court’s jurisdiction into question.”
Id. at 685. The landowners would like us to conclude that
the contrapositive of this proposition is also true—that
the court cannot look beyond the allegations of the com-
plaint when the defendant has not proffered evidence
that calls the court’s jurisdiction into question. This is
not what Commodity Trend or its progeny say, however.
See Commodity Trend Serv., Inc., 149 F.3d at 685 (“On
a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(1), the court is not bound to accept the
truth of the allegations in the complaint. Rather, the
plaintiff has the obligation to establish jurisdiction by
competent proof, and the court may properly look to
evidence beyond the pleadings in this inquiry.”). See also
Bastien v. AT&T Wireless Servs., Inc., 205 F.3d 983, 990
(7th Cir. 2000) (same). Given the court’s responsibility to
police jurisdiction sua sponte, Wright and Miller assert
that it is “not appropriate” for a court to evaluate a Rule
12(b)(1) motion by accepting all allegations as true. 5A
Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure § 1350, at 149 (2d ed. Supp. 2002). “Accord-
ingly, upon a challenge to the court’s jurisdiction by a par-
ty, the court should conduct a careful inquiry and make a
conclusive determination whether it has subject matter
jurisdiction or not. . . .” Id.2 We conclude that the district
court had not only the right, but the duty to look beyond
2
The landowners are correct when they note the difference be-
tween a facial and factual attack on jurisdiction. Only in the lat-
ter case does the court look beyond the allegations of the com-
plaint. Capitol Leasing Co. v. Federal Deposit Ins. Corp., 999 F.2d
188, 191 (7th Cir. 1993). The State Board, however, has chal-
lenged the factual basis for jurisdiction (i.e., whether there is
plain, speedy and efficient remedy) and thus the court may look
into any evidence that calls jurisdiction into doubt. Commodity
Trend Servs., Inc., 149 F.3d at 685.
6 No. 02-1199
the allegations of the complaint to determine that it had
jurisdiction to hear the landowners’ claim.
Having concluded that the federal courts properly may
look beyond the factual allegations of the complaint, we
now do so to determine whether in fact the district court
had jurisdiction to consider the landowners’ claim. The
Tax Injunction Act divests the district court of jurisdic-
tion if the state courts provide a “plain, speedy and effi-
cient remedy” for a taxpayer’s claim. 28 U.S.C. § 1341. The
landowners assert that they have no plain, speedy and
efficient remedy in the state courts. They allege sever-
al reasons why this is so, most of which can be boiled
down to the following two allegations: first, the state court
refuses to hear facial challenges to the old regulations,
and second, although finding that the state tax assess-
ment regulations violated the state constitution, the state
courts have allowed only prospective relief.3
Although the landowners claim that the remedy pro-
vided by Indiana is not adequate, the Supreme Court
3
Without making any legal argument, the landowners’ brief
lists eight allegations from their complaint to support their claim
that they have no “plain, speedy and efficient” remedy in state
court. Most of these allegations are simply subsets of their com-
plaints regarding the inability to launch facial attacks and the
lack of a retroactive remedy. The landowners provide no legal
argument for any of their claims, apparently preferring to rest
on their theory that the district court must simply accept each
of the allegations as true. Unfortunately for the landowners,
we have concluded that we need not accept each of the allegations
as true, and the bare assertions of the complaint do not constitute
argument and thus do not preserve those claims for appellate
review. United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991).
Nevertheless, we have evaluated the landowners’ claims regard-
ing facial challenges and prospective relief as part of our duty
to determine, on our own, whether the district court had juris-
diction to consider the landowners’ claims.
No. 02-1199 7
has set forth minimal procedural requirements for ade-
quacy, demanding only a “full hearing and judicial deter-
mination at which [a taxpayer] may raise any and all
constitutional objections to the tax.” Rosewell, 450 U.S.
at 512-15. The district court must look at the totality of
all of the remedies available to a taxpayer to determine
whether or not taxpayers have the opportunity to raise
constitutional challenges. Colonial Pipeline Co. v. Collins,
921 F.2d 1237, 1245 (11th Cir. 1991).
Under Indiana law, a taxpayer can seek review of a
property tax assessment by the County Property Tax
Assessment Board of Appeals (Ind. Code 6-1.1-15-1) and
can appeal any finding to the Indiana Board of Tax Re-
view (Ind. Code § 6-1.1-15-3). If a taxpayer remains unsat-
isfied after these administrative review processes, she
may seek judicial review with the Indiana Tax Court.
Ind. Code § 6-1.1-15-5. From there, all appeals go to the
Indiana Supreme Court, and then, of course, a party may
petition the United States Supreme Court for certiorari.
In addition to the direct challenge, the state statute also
provides a procedure for taxpayers to receive a refund
for property taxes assessed and paid that are later found
to be illegal as a matter of law. Ind. Code § 6-1.1-26-1.
Viewing these statutory mechanisms in light of the
requirements of Rosewell, we conclude that Indiana pro-
vides a plain, speedy and efficient remedy for those
who wish to contest their real property tax assessment.
Indeed, we have come to the same conclusion twice be-
fore based on an examination of now-repealed, but sub-
stantially similar state court review mechanisms. See Miller
v. Bauer, 517 F.2d 27 (7th Cir. 1975); Sacks Bros. Loan
Co. v. Cunningham, 578 F.2d 172 (7th Cir. 1978). In Miller,
the Court noted that a taxpayer could appeal the assess-
ment to the County Board of Review, then to the State
Board, a county circuit court, to the Indiana Supreme
Court, and finally to the United States Supreme Court.
8 No. 02-1199
Id. at 32. Similarly, in Sacks, the court noted that review
was available first by the County Board of Review, then
by the State Board of Tax Commissioners, followed by
review in the state courts. Id. at 174-75. The Sacks court
also noted that taxpayers could take an alternate course
and seek a refund after paying the taxes by demonstrat-
ing that the taxes were, as a matter of law, illegal. Id. at
175. Although the specifics of the tax assessment stat-
utes have been revised, these same remedies are avail-
able to the taxpayers in the instant case.
Despite the availability of these remedies, the taxpay-
ers complain that the remedy is insufficient because
the Indiana Tax Court will no longer accept facial con-
stitutional challenges to the former State Board regula-
tions. The Indiana Supreme Court has already declared
that the cost schedules at issue violate the Property
Taxation Clause of the Indiana Constitution because
they lack ascertainable standards. Town of St. John, 702
N.E.2d at 1043. The Indiana Tax Court has decided not to
accept further facial challenges to these provisions in
order to prevent taxpayers from going into court, stating
that the former system is facially unconstitutional due
to a lack of ascertainable standards (as the court has al-
ready found) and thereby obtaining an assured reversal
of the taxpayer’s property assessment. Dana Corp. v. State
Bd. of Tax Comm’rs, 694 N.E.2d 1244, 1247 (Ind. Tax
Ct. 1998). This rule makes sense. Without it, every taxpay-
er could file a facial challenge in the Indiana Tax Court,
obtain a declaration that the former assessment system
was unconstitutional, and walk away with a reversal of
the challenged tax assessment. The refusal to hear facial
challenges, however, does not bar taxpayers from launch-
ing constitutional challenges to their property assess-
ments. The tax courts in Indiana have heard and will
continue to hear “as applied” challenges to property tax
assessments made under the old system. Id. at 1247; see
No. 02-1199 9
also Bishop v. State Bd. of Tax Comm’rs, 743 N.E.2d 810,
813 (Ind. Tax Ct. 2001). As long as a taxpayer can pre-
sent specific evidence that an assessment is unconstitu-
tional as applied to her, she can obtain a reversal of her
property tax assessment. Dana Corp., 694 N.E.2d at 1247.
There is no evidence in the record that any of the plain-
tiffs have been prohibited from bringing an “as applied”
challenge in the state court system, and thus the state
court remedies are not inadequate in this manner.
Nor do we find the state court remedies deficient be-
cause the Indiana Tax Court will apply the new regula-
tions prospectively only. See Lawyer v. Hilton Head Pub.
Serv. Dist. No. 1, 220 F.3d 298, 305 (4th Cir. 2000) (finding,
in a similar scenario, that the decision to allow only
prospective relief does not make the remedy inadequate).
Such an allegation is really a complaint about a substan-
tive defect in the state court’s remedy, and Rosewell
requires only that states maintain procedurally adequate
remedies. Rosewell, 450 U.S. at 512. Moreover, the fact that
Indiana has put a new constitutional system into place
as of May 2001 after finding defects in its previous assess-
ment procedure further establishes that Indiana is capa-
ble of administering its own tax system without interfer-
ence from the federal courts. Finally, taxpayers can con-
tinue to pursue “as applied” challenges to any assessment
made under the old system. For these reasons we conclude
that the State of Indiana provides a plain, speedy and
efficient remedy for taxpayers who quarrel with the as-
sessment they have received. The federal courts, therefore,
have no jurisdiction to consider the landowners’ claims.
As a final matter, the landowners argue in their re-
ply brief that the district court should not have granted
the motion to dismiss without giving the landowners
the opportunity for discovery or an evidentiary hearing.
A district court has wide latitude in determining wheth-
10 No. 02-1199
er to grant a party’s request for discovery and we re-
view such a decision for an abuse of discretion. Doty v.
Illinois Cent. R.R. Co., 162 F.3d 460, 461 (7th Cir. 1998). In
this case, in order to determine whether subject mat-
ter jurisdiction existed, the court needed to determine
whether Indiana provided a plain, speedy and efficient
remedy to taxpayers. Because of the minimal procedural
requirements for “plain, speedy and efficient” set forth
by the Supreme Court in Rosewell, the district court
could make a determination of adequacy based on the
information before it, including by reviewing the applic-
able statutes establishing the procedures for tax assess-
ment review. Consequently, it was not an abuse of dis-
cretion for the district court to grant the motion to dis-
miss without allowing the landowners to conduct discov-
ery. See Rothrock v. United States, 62 F.3d 196, 200 (7th
Cir. 1995) (stating that where both sides had available
the applicable statutes and regulations and the question
of a lack of subject matter jurisdiction was grounded in
these sources, it was not an abuse of discretion to decide
the case without allowing additional discovery). Similarly,
it was unnecessary for the district court to hold a hear-
ing on the motion to dismiss for lack of subject matter
jurisdiction as the facts were straightforward and the
law not complex. See Cook v. Providence Hosp., 820 F.2d
176, 178 (6th Cir. 1987) (finding that no hearing is re-
quired on a motion to dismiss where the facts are rela-
tively simple, substantially uncontroverted, and the law
is not complex).
III.
For the reasons stated above, we affirm the district
court’s grant of the motion to dismiss for lack of subject
matter jurisdiction.
AFFIRMED.
No. 02-1199 11
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-6-02