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JMCB, LLC v. The Board of Commerce & Industry

United States District Court, M.D. Louisiana

December 4, 2017




         This matter comes before the Court sua sponte on the question of subject matter jurisdiction. At a status conference held on August 15, 2017, the Court ordered the parties to submit briefs on this issue. (Doc. 44.) Pursuant to that order, the parties have filed extensive memoranda. (Docs. 45, 46, 47, 52, 53, 55.)

         In sum, Plaintiff JMCB (“Plaintiff”) argues that the Court should remand this matter. Defendants The Board of Commerce & Industry (the “Board”) and Louisiana Department of Economic Development (“LDED”) (collectively, the “State Defendants”) and former Defendant[1]Sabine Pass Liquefaction, LLC (“SPL”) (collectively with the State Defendants, the “Defendants”) contend that there is jurisdiction in this case and that remand is inappropriate.

         The Court has carefully considered the law, the facts in the record, and the arguments of the parties and is prepared to rule. For the following reasons, the Court finds (1) that there is jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d) (“CAFA”); (2) that the Tax Injunction Act, 28 U.S.C. § 1341 (“TIA”), does not bar this action; and (3) that comity, the Eleventh Amendment, and the Declaratory Judgment Act, 28 U.S.C. § 2201, do not justify remand.

         I. Relevant Background

         Article VII, Section 21(F) of the Louisiana Constitution of 1974 provides that the Board, with approval from the governor, “may enter into contracts for the exemption from ad valorem taxes of a new manufacturing establishment or an addition to an existing manufacturing establishment, on such terms and conditions as the [B]oard, with the approval of the governor, deem in the best interest of the state.” (Doc. 1-2 at 2 (quoting La. Const. art. VII, § 21(F)).) The constitutional provision specifically defines “manufacturing establishment” and “addition to a manufacturing establishment, ” and LDED regulations govern the administration of the exemption. (Doc. 1-2 at 2-3.)

         Plaintiff alleges in its Class Action Petition (“Petition”) that it “currently owns property (land) in Cameron Parish which is subject to ad valorem taxes for which no exemption is available.” (Doc. 1-2 at 7.) The Petition further claims that SPL applied for and entered into a contract with the State Defendants for the above tax exemptions. (Doc. 1-2 at 3-5.) According to the Petition, a LDED worksheet recommending approval during the process stated that the contract amount was $6 billion and that the “ad valorem tax was $1, 447, 200, 000”. (Doc.1-2 at 4.)

         Plaintiff now prays for a judgment declaring that the contract between the State Defendants and SPL is, for various specified reasons, “an improper act of the Board in violation of . . . Article VII, Section 21(F), and declaring that the Contract is null and void and without legal effect[.]” (Doc. 1-2 at 12-13.). Plaintiff brings this action on behalf of itself and as representatives of the following class:

Any and all individuals and businesses that own property in Cameron Parish, State of Louisiana that is subject to ad valorem taxation, and any and all Cameron Parish governmental bodies that are entitled to receive Cameron Parish ad valorem property taxes, as of October 12, 2016.
Specifically excluded from the class are Sabine Pass Liquefaction, LLC, its successors and assigns, and all members of the judiciary, their spouses, and their immediate family members.

(Doc. 1-2 at 10-11.)

         II. CAFA

         Defendants asserted in their notice of removal that this Court has jurisdiction under CAFA and argue that the requirements for the statute are met. Plaintiff discusses the policy behind CAFA and maintains that it was not intended for this type of case.

         In short, the Court agrees with Defendants. Pursuant to CAFA, a court has subject matter jurisdiction if “(1) the number of individuals in the proposed class exceeds 100; (2) minimal diversity of citizenship exists; that is, at least one plaintiff and one defendant are from different states, and (3) the amount in controversy, exclusive of interests and costs, is greater than $5, 000, 000.” Nolan v. Exxon Mobil Corp., No. 13-439, 2013 WL 6194621, at *2 (M.D. La. Nov. 26, 2013) (citing 28 U.S.C. § 1332(d), (5)(B)); 14B Charles A. Wright, et al., Federal Practice and Procedure § 3724 (4th ed. 2017) (same).

         Here, the requirements of CAFA are easily met. First, Plaintiff alleges in the Petition that “there are several thousand individuals and businesses, and several applicable governmental bodies in Cameron Parish which would qualify as a member of the proposed class.” (Doc. 1-2 at 11.) Thus, the proposed class exceeds 100.

         Second, there is minimal diversity. “For purposes of [CAFA, ] . . . an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized.” 28 U.S.C. § 1332(d)(10). “[A] limited liability company is an ‘unincorporated association' as that term is used in . . . § 1332(d)(10)[.]” Ferrell v. Express Check Advance of S.C. LLC, 591 F.3d 698, 699 (4th Cir. 2010).

         Here, SPL is alleged to be a “foreign limited liability company domiciled in Delaware.” (Doc. 1-2 at 1.) Further, SPL has submitted uncontroverted evidence establishing (1) it is organized under the laws of Delaware; and (2) its headquarters is in Texas, where its officials control SPL's business activities; where its “highest ranking officials” are based; and where its management and strategic planning (among other operations) are conducted. (Doc. 46-2). Thus, SPL is clearly a citizen of Delaware and Texas. Meanwhile, JMCB alleges that it is a “Louisiana domestic limited liability company.” (Doc. 7 at 7.) Thus, based on either the allegations of the complaint or the unrebutted evidence, there is minimal diversity.

         And third, the amount in controversy requirement is satisfied. “The defendant, as the removing party, bears the burden of proving by a preponderance of the evidence that the jurisdictional amount has been met.” Nolan, 2013 WL 6194621, at *2 (citing Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995)). “Where, as here, the case is removed from a state jurisdiction that does not require the plaintiff to specifically plead the amount in controversy, the defendant may satisfy this burden by demonstrating that it is ‘facially apparent' from the petition that the claims are above the jurisdictional amount.” Id. (citing Luckett v. Delta Airlines, Inc., 171 F.3d 295, 298 (5th Cir. 1999) (citing La. Code Civ. P. art. 893)). “Under these circumstances, the defendant need not prove the jurisdictional amount to a legal certainty.” Id. (citing Allen, 63 F.3d at 1335). “It is enough that the defendant demonstrates that the plaintiff's claim ‘more likely than not' meets the jurisdictional requirement.” Id. (citing Allen, 63 F.3d at 1336).

         Here, Defendants have met their burden. The ad valorem tax at issue is worth approximately $1.4 billion. (Doc. 1-2 at 4.) Thus, Defendants have established each requirement for jurisdiction under CAFA.

         Additionally, the Court rejects the Plaintiff's argument that “there is no indication that class actions involving matters of state tax administration, like the ones raised in this case, were intended to fall within CAFA's ambit.” (Doc. 45 at 2.) First, as Cameron LNG, LLC, argues in a related case, the plain language of CAFA provides that “district courts shall have original jurisdiction of any civil action” if the requirements are met. (JMCB, LLC v. Bd. of Commerce & Indus., No. 17-75 (M.D. La.), Doc. 63 at 1-2 (quoting 28 U.S.C. § 1332(d)(2) (emphasis added)).) Second, as to legislative intent, the Senate Report on CAFA unambiguously stated: “Overall, new section 1332(d) is intended to expand substantially federal court jurisdiction over class actions. Its provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.” S. Rep. No. 109-14, at 43. And third, as SPL asserts: “CAFA contains specific provision outlining the types of cases that are not subject to CAFA, and the tax cases are not on the list.” (Doc. 55 at 2 n.1 (citing 28 U.S.C. § 1332(d)(9))[2]; see also § 1332(d)(5) (primary defendant exception)[3].) That is, state tax cases are not a specifically enumerated exception to CAFA.

         Indeed, Plaintiff has failed to demonstrate that any exception to CAFA applies. This is significant because, while the removing parties have the burden of proving that the above CAFA requirements have been met, Nolan, 2013 WL 6194621, at *2 (citation omitted), the party seeking to remand a class action removed under CAFA has the burden of proving that a CAFA exception applies. Frazier v. Pioneer Americas LLC, 455 F.3d 542, 546 (5th Cir. 2006). Here, Plaintiff's failure to meet its burden is an additional basis for denying its request to remand.

         Lastly, SPL's dismissal from this suit (which, as noted above, is still the subject of certain pending motions) does not eliminate CAFA jurisdiction. “It is well-established that the time-of-removal rule prevents post-removal actions from destroying jurisdiction that attached in a federal court under CAFA.” Cedar Lodge Plantation, L.L.C. v. CSHV Fairway View I, L.L.C., 768 F.3d 425, 427 (5th Cir. 2014) (citing State of Louisiana v. Am. Nat'l Prop. & Cas. Co., 746 F.3d 633, 639-40 (5th Cir. 2014) (describing “overwhelming and unanimous authority” among the circuit courts for the position that post-removal events do not oust CAFA jurisdiction)); see also Wright, Federal Practice and Procedure § 3724 (“A number of courts of appeals now have applied to cases removed under CAFA the general principle that most post-removal events will not affect federal jurisdiction.”). “[W]hat matters for the purpose of determining CAFA jurisdiction is ‘the status of an action when filed-not how it subsequently evolves.' ” Cedar Lodge, 768 F.3d at 427 (quoting State of Louisiana, 746 F.3d at 639). Thus, in Cedar Lodge, the Fifth Circuit held that plaintiff could not “avoid federal jurisdiction through a post-removal amendment” of adding a new defendant. Id. at 429.

         The same reasoning applies here. SPL's dismissal from this action is irrelevant for the Court's jurisdictional analysis under 28 U.S.C. § 1332(d).

         In sum, this Court has subject matter jurisdiction under CAFA. The Court now turns to the other alleged bases for remanding the case.

         III. TIA

         Defendants argue that the TIA does not bar this action based on the plain language of the statute, the law's purpose, and binding Supreme Court precedent. Conversely, Plaintiff says that the Court's decision in this case on the validity of SPL's contract “would directly affect whether the assessment, levy and collection of ad valorem taxes on SPL's property, which is subject to the exemption contract, should be restrained or should proceed during the term of the contract.” (Doc. 52 at 2; see also Doc. 45 at 3.)

         The Court again agrees with the Defendants. The TIA provides: “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. This is a suit by private citizens to invalidate a contract between the State Defendants and SPL because said agreement was allegedly in violation of the Louisiana constitution. (Doc. 1-2 at 11-13.) Plaintiff is seeking to prevent SPL's entitlement to ad valorem tax exemptions. (Doc. 1-2 at 1-2.) As Cameron LNG, LLC, stated in the related proceeding, “JMCB seeks to enforce, not to restrain, the collection of property tax levied by local taxing authorities within Louisiana.” (JMCB v. Board of Commerce & Industry, No. 17-75 (M.D. La.), Doc. 52 at 7.) Thus, this suit does not satisfy the plain language of the TIA, as JMCB is not seeking to “enjoin, suspend, or restrain the assessment, levy or collection of any tax under State law[.]” 28 U.S.C. § 1341.

         Supreme Court precedent confirms this. “[Hibbs v. Winn, 542 U.S. 88, 124 S.Ct. 2276 (2004)] held that the TIA did not preclude a federal challenge by a third party who objected to a tax credit received by others, but in no way objected to her own liability under any revenue-raising tax provision.” Levin v. Commerce Energy, Inc., 560 U.S. 413, 430, 130 S.Ct. 2323, 2335 (2010). The Hibbs court explained how this decision was rooted in the legislative history of the TIA:

Just as the [Anti-Injunction Act (“AIA”), which “Congress drew” upon “[i]n composing the TIA's text, ] shields federal tax collections from federal-court injunctions, so the TIA shields state tax collections from federal-court restraints. In both [the AIA, 26 U.S.C. § 7421(a)[, ] and 28 U.S.C. § 1341, Congress directed taxpayers to pursue refund suits instead of attempting to restrain collections. Third-party suits not seeking to stop the collection (or contest the validity) of a tax imposed on plaintiffs . . . were outside Congress' purview. The TIA's legislative history is not silent in this regard. The Act was designed expressly to restrict “the jurisdiction of the district courts of the United States over suits relating to the collection of State taxes.” S. Rep., p. 1.
Specifically, the Senate Report commented that the Act had two closely related, state-revenue-protective objectives: (1) to eliminate disparities between taxpayers who could seek injunctive relief in federal court-usually out-of-state corporations asserting diversity jurisdiction-and taxpayers with recourse only to state courts, which generally required taxpayers to pay first and litigate later; and (2) to stop taxpayers, with the aid of a federal injunction, from withholding large sums, thereby disrupting state government finances. Id., at 1-2; see R. Fallon, D. Meltzer, & D. Shapiro, Hart and Wechsler's The Federal Courts and the Federal System 1173 (5th ed.2003) (citing Rosewell v. LaSalle Nat. Bank, 450 U.S. 503, 522-523, and nn. 28-29, 527, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981)). See also [Jefferson County v. Acker, 527 U.S. 423, 435, 119 S.Ct. 2069 (1999)] (observing that the TIA was “shaped by state and federal provisions barring anticipatory actions by taxpayers to stop the tax collector from initiating collection proceedings”). In short, in enacting the TIA, Congress trained its attention on taxpayers who sought to avoid paying their tax bill by pursuing a challenge route other than the one specified by the taxing authority. Nowhere does the legislative history announce a sweeping congressional direction to prevent “federal-court interference with all aspects of state tax administration.” Brief for Petitioner 20; post, at 2298.

Hibbs, 542 U.S. at 104-05, 124 S.Ct. at 2287-88. Hibbs also analyzed prior Supreme Court precedent and concluded that the Court “has interpreted and applied the TIA only in cases Congress wrote the Act to address, i.e., cases in which state taxpayers seek federal-court orders enabling them to avoid paying state taxes.” Id., 542 U.S. at 107, 124 S.Ct. at 2289.

         More recently, in Direct Marketing Ass'n v. Brohl, 135 S.Ct. 1124 (2015), the Supreme Court again looked at the TIA in the context of a state law notice and reporting statute. The Court extensively analyzed the terms “assessment, levy or collection” under the Federal Tax Code (both when the TIA was enacted and today) and in various dictionaries, and the Court explained that “these three terms refer to discrete phases of the taxation process[.]” Brohl, 135 S.Ct. at 1129-31.[4] Emphasizing that “[j]urisdictional rules should be clear, ” the Court said that “[t]he question . . . is whether the relief to some degree stops ‘assessment, levy or collection, ' not whether it merely inhibits them.” Id. at 1133 (citation omitted).

         These Supreme Court cases confirm this Court's reading of the plain language of the TIA. This case is exactly the kind which Hibbs said was outside of the TIA: “a federal challenge by a third party who objected to a tax credit received by others, but in no way objected to her own liability under any revenue-raising tax provision.” Levin, 560 U.S. at 430, 130 S.Ct. at 2335. The two purposes of the TIA, as stated in Hibbs, are not implicated here, and Hibbs expressly recognized: “Nowhere does the legislative history announce a sweeping congressional direction to prevent federal-court interference with all aspects of state tax administration.” Hibbs, 542 U.S. at 105, 124 S.Ct. at 2288 (citation and quotations omitted). And, perhaps most importantly, Plaintiff's relief does not fall under any of the clear definitions of “assessment, levy, or collection” articulated by Brohl.

         In sum, the plain language of the TIA as well as Supreme Court precedent demonstrate that the statute is not a bar to this Court exercising subject matter jurisdiction. As a result, the Court rejects Plaintiff's challenge.

         IV. Other Jurisdictional Issues

         A. ...

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