DirecTV, Inc. v. Tolson

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

DIRECTV, INCORPORATED; ECHOSTAR 

SATELLITE, L.L.C.,

Plaintiffs-Appellants,

v.

E. NORRIS TOLSON, in his official

capacity as Secretary of Revenue,  No. 07-1250

Defendant-Appellee.

NORTH CAROLINA CABLE

TELECOMMUNICATIONS ASSOCIATION,

Amicus Supporting Appellee.



Appeal from the United States District Court

for the Eastern District of North Carolina, at New Bern.

Louise W. Flanagan, Chief District Judge.

(5:05-cv-00784-FL)

Argued: December 5, 2007

Decided: January 10, 2008

Before NIEMEYER and SHEDD, Circuit Judges, and

Leonie M. BRINKEMA, United States District Judge for the

Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Judge Shedd wrote the opinion, in

which Judge Niemeyer and Judge Brinkema joined.

2 DIRECTV, INC. v. TOLSON

COUNSEL

ARGUED: Pantelis Michalopoulos, STEPTOE & JOHNSON,

L.L.P., Washington, D.C., for Appellants. Michael David Youth,

NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North

Carolina, for Appellee. ON BRIEF: Mark F. Horning, Janice D.

Gorin, STEPTOE & JOHNSON, L.L.P., Washington, D.C.; Christo-

pher G. Smith, J. Mitchell Armbruster, SMITH, ANDERSON,

BLOUNT, DORSETT, MITCHELL & JERNIGAN, L.L.P., Raleigh,

North Carolina, for Appellants. Christopher G. Browning, Jr., Solici-

tor General, NORTH CAROLINA DEPARTMENT OF JUSTICE,

Raleigh, North Carolina, for Appellee. Mark J. Prak, Marcus W. Tra-

then, Charles F. Marshall, BROOKS, PIERCE, MCLENDON, HUM-

PHREY & LEONARD, L.L.P., Raleigh, North Carolina, for Amicus

Supporting Appellee.

OPINION

SHEDD, Circuit Judge:

Plaintiffs DIRECTV, Inc. and Echostar Satellite, LLC, providers of

satellite television programming, brought this suit claiming that North

Carolina’s system of taxing multi-channel television programming

violates the Dormant Commerce Clause of Article I of the United

States Constitution. The district court granted Defendant E. Norris

Tolson’s motion to dismiss, concluding that Plaintiffs’ suit is barred

by the Tax Injunction Act and principles of comity, that Plaintiffs lack

standing, and that Plaintiffs failed to state a claim on which relief can

be granted. We hold that Plaintiffs’ suit is barred by principles of

comity and therefore affirm.

I

A.

Consumers have two main choices for the purchase of subscription

multi-channel television programming: traditional "cable" providers

and direct broadcast satellite ("DBS") providers. Both types of service

DIRECTV, INC. v. TOLSON 3

provide substantially the same programming, but each uses a different

means to deliver that programming to subscribers.

Cable providers deliver their programming through networks of

coaxial or fiber optic cables laid in trenches, alongside roads, or hung

on utility poles. These networks are physically connected to subscrib-

ers’ homes. Thus, cable providers rely on the use of public rights-of-

way for the delivery of their programming. Historically, cable provid-

ers in North Carolina have been required to obtain franchises from

city and county governments entitling them to operate within desig-

nated franchise areas. In exchange for these franchises, local govern-

ments, with the authorization of the North Carolina General

Assembly, have typically levied franchise taxes on cable providers.

By contrast, DBS providers transmit their programming from satel-

lites orbiting the earth from space directly to satellite dishes mounted

on or near subscribers’ homes. Accordingly, DBS providers do not

rely on public rights-of-way for the delivery of their programming,

and federal law prohibits local governments from charging franchise

taxes or fees to DBS providers. Telecommunications Act of 1996,

Pub. L. No. 104-104, Title VI, § 602(a), 110 Stat. 144 (1996)

(reprinted at 47 U.S.C. § 152, historical and statutory notes).

B.

North Carolina has amended its taxation of multi-channel televi-

sion programming several times in recent years. Prior to 2002, neither

satellite nor cable TV providers were subject to sales tax on their

gross receipts. At the same time, cities and counties had statutory

authority to grant franchises to cable operators, see N.C. Gen. Stat.

§§ 160A-319 and 153A-137 (West 2001), and to levy a "franchise

tax" — typically 5% of cable operators’ gross receipts in the franchise

area — in exchange for those franchise rights. See N.C. Gen. Stat.

§§ 160A-214 and 153A-154 (West 2001).

Beginning in 2002, North Carolina imposed a 5% sales tax on the

gross receipts of DBS providers. See N.C. Gen. Stat. § 105-

164.4(a)(6) (West 2005). Cable operators continued to pay franchise

taxes to localities as they had done before. The net effect of the tax,

therefore, was that both cable and DBS providers paid 5% of their

4 DIRECTV, INC. v. TOLSON

gross receipts to the State and/or its political subdivisions. Plaintiffs

unsuccessfully challenged this scheme on Commerce Clause grounds

in North Carolina state court. See DIRECTV, Inc. v. State, 632 S.E.2d

543 (N.C. Ct. App. 2006).

Beginning in 2005, North Carolina imposed a sales tax of 7% on

the gross receipts of both cable and DBS providers. See N.C. Gen.

Stat. §§ 105-164.3(4a) and 105-164.4(a)(6) (West 2006). Cable pro-

viders continued to pay franchise taxes to local governments, but

were permitted to take a credit against the state sales tax in the

amount they paid in local franchise taxes. See N.C. Gen. Stat. § 105-

164.21B (West 2005). The net effect of this scheme was that both sat-

ellite and cable providers paid 7% of their gross receipts to the State

and/or its political subdivisions.

In 2006, further amendments to North Carolina’s taxation of multi-

channel television providers created the tax scheme at issue in this

lawsuit. See An Act to Promote Consumer Choice in Video Service

Providers and to Establish Uniform Taxes for Video Programming

Services, 2006 N.C. Sess. Laws 2006-151 (the "2006 Amendments").

The 2006 Amendments revoked the authority of local governments to

charge franchise taxes to cable providers and vested franchising

authority with the North Carolina Secretary of State. See id. §§ 1, 10-

13. At the same time, the 2006 Amendments eliminated the tax credit

available to cable providers, subjecting them to the full 7% state sales

tax on gross receipts. See id. § 9. The 2006 Amendments also provide

that a portion of the proceeds of the state sales tax on cable and DBS

providers be distributed to local governments. For those local govern-

ments that previously imposed franchise taxes on cable providers, the

amount of this distribution is based on the revenue formerly generated

by those taxes. See id. § 8, (adding N.C. Gen. Stat. § 105-164.44I).

Counties or cities that did not charge franchise taxes also receive a

portion of the state tax revenue under the 2006 Amendments, in

amounts based on their populations. See id. Accordingly, just as they

did in 2005, both cable and DBS providers now pay taxes equal to 7%

of their gross receipts. Those taxes, however, are paid only to the

State, which in turn distributes a portion of the proceeds to local gov-

ernments according to state law.

DIRECTV, INC. v. TOLSON 5

II

A.

We turn briefly to a discussion of the constitutional principles

underlying Plaintiffs’ claims. The Commerce Clause provides that

Congress "shall have the power . . . [t]o regulate Commerce . . .

among the several states." U.S. Const. art. I, § 8, cl. 3. This grant of

affirmative Congressional authority carries with it an implied or "dor-

mant" restriction of the power of states to regulate interstate com-

merce, prohibiting them from enacting laws that impose "substantial

burdens" on commerce between the states. Dennis v. Higgins, 498

U.S. 439, 447 (1991) (internal quotation and citation omitted). The

clearest example of a state law that violates the Dormant Commerce

Clause is one that facially discriminates against interstate commerce,

such as a protective tariff or customs duty. West Lynn Creamery, Inc.

v. Healy, 512 U.S. 186, 193 (1994); see also Brown-Forman Distill-

ers Corp. v. New York State Liquor Auth., 476 U.S. 573, 579 (1986).

Even a facially neutral state law, however, violates the Dormant Com-

merce Clause "when its effect is to favor in-state economic interests

over out-of-state interests." Brown-Forman, 476 U.S. at 579. Like-

wise, a state runs afoul of the Dormant Commerce Clause even when

it joins an otherwise constitutional tax with an otherwise constitu-

tional subsidy in a way that benefits in-state economic interests and

burdens out-of-state interests. Thus, in West Lynn, the Supreme Court

struck down a Massachusetts milk pricing order that combined a non-

discriminatory tax on milk sales with an otherwise permissible sub-

sidy of Massachusetts dairy farmers because, taken together, the two

provisions had a discriminatory effect. 512 U.S. at 199-202. The

Court emphasized that state economic regulation must be considered

as a whole, and found particularly troubling the fact that the proceeds

from the tax were used to create a "subsidy to one of the groups hurt

by the tax" — i.e., the in-state dairy farmers. Id. at 200.

B.

Plaintiffs are the two main providers of DBS service in North Car-

olina and nationally and are two of only three companies that own and

operate DBS satellites. They brought this suit in 2005 under 42

U.S.C. § 1983, alleging that North Carolina’s tax credit for cable pro-

6 DIRECTV, INC. v. TOLSON

viders violated the Dormant Commerce Clause because the credit was

granted to companies based on their in-state distribution of television

programming. After the 2006 Amendments became effective, Plain-

tiffs amended their complaint to challenge North Carolina’s present

tax scheme. Plaintiffs seek a declaratory judgment that sections 8

through 15 of the 2006 Amendments violate the Dormant Commerce

Clause, a permanent injunction barring the State from enforcing sec-

tion 8 of the 2006 Amendments, and attorneys’ fees and costs.

Plaintiffs argue that North Carolina’s present taxation scheme is no

different from that struck down by the Supreme Court in West Lynn,

because it combines an evenhanded tax on sales of subscription multi-

channel television programming with a subsidy available only to

cable providers and funded from the proceeds of the tax. Although no

distributions of sales tax proceeds are made directly to cable provid-

ers, and although not all localities that do receive these distributions

previously charged franchise taxes, Plaintiffs argue that an unconsti-

tutional subsidy exists because "[c]able providers no longer have to

pay franchise fees, but continue to receive the valuable right of access

to publicly owned rights-of-way they formerly obtained through the

payment of such fees." J.A. 126. There is no constitutional difference,

Plaintiffs claim, between payments directly to cable providers and the

distributions made to North Carolina’s political subdivisions under

the 2006 Amendments. Plaintiffs argue that the alleged subsidy

imposes a significant cost disadvantage on DBS providers, who are

forced to fund the subsidy. Plaintiffs further claim that because DBS

providers use out-of-state distribution facilities and cable operators

necessarily use in-state distribution facilities, the subsidy discrimi-

nates against DBS providers in violation of the Dormant Commerce

Clause.

The district court dismissed Plaintiffs’ amended complaint on sev-

eral grounds. First, the district court held that Plaintiffs’ suit is barred

by the Tax Injunction Act, 28 U.S.C. § 1341, (TIA or the "Act") and

related principles of comity. Second, the district court held that even

if the suit were not barred, Plaintiffs lack standing to challenge North

Carolina’s taxation scheme because they lack an injury in fact and

because the injury they claim cannot be redressed by the relief they

seek. Third, the district court held that even if Plaintiffs did have

standing, their amended complaint failed to state a claim upon which

DIRECTV, INC. v. TOLSON 7

relief could be granted. In so holding, the district court concluded that

the 2006 Amendments provide no subsidy to cable operators and

therefore do not discriminate against interstate commerce. Plaintiffs

now appeal. We review de novo the district court’s dismissal of Plain-

tiffs’ amended complaint. Palmer v. City Nat. Bank of W. Virginia,

498 F.3d 236, 244 (4th Cir. 2007).

III

A.

The Supreme Court long ago "recognized the important and sensi-

tive nature of state tax systems and the need for federal-court restraint

when deciding cases that affect such systems." Fair Assessment in

Real Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 102 (1981). As the

Court has explained:

It is upon taxation that the several States chiefly rely to

obtain the means to carry on their respective governments,

and it is of the utmost importance to all of them that the

modes adopted to enforce the taxes levied should be inter-

fered with as little as possible. Any delay in the proceedings

of the officers, upon whom the duty is devolved of collect-

ing the taxes, may derange the operations of government,

and thereby cause serious detriment to the public.

Dows v. City of Chicago, 78 U.S. (11 Wall.) 108, 110 (1871). Accord-

ingly, the Court has articulated a principle of comity that reflects the

"scrupulous regard for the rightful independence of state governments

which should at all times actuate the federal courts," requiring federal

courts, when the comity principle applies, to deny relief in challenges

to state tax laws "in every case where the asserted federal right may

be preserved without it." Fair Assessment, 454 U.S. at 108 (internal

quotation and citation omitted).

This comity principle found legislative voice in the enactment of

the Tax Injunction Act, which provides that "[t]he 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

8 DIRECTV, INC. v. TOLSON

may be had in the courts of such State." 28 U.S.C. § 1341. But while

the TIA reflects the antecedent comity principle, the principle itself

is broader than the Act and "was not restricted by its passage." Fair

Assessment, 454 U.S. at 110. Indeed, the Supreme Court has contin-

ued to apply it in tax cases, see, e.g., id. at 116; Great Lakes Dredge

& Dock Co. v. Huffman, 319 U.S. 293 (1943), as well as in other con-

texts. See, e.g., Younger v. Harris, 401 U.S. 37 (1971) (holding that

comity principles prohibit federal courts from enjoining pending state

criminal prosecutions except in extraordinary circumstances).

In Fair Assessment, the Supreme Court addressed the applicability

of the comity principle to suits bringing constitutional challenges to

state tax laws under 42 U.S.C. § 1983. The Court acknowledged that

§ 1983 and its jurisdictional counterpart, 28 U.S.C. § 1343, authorize

"immediate resort to a federal court whenever state actions allegedly

infringe[ ] constitutional rights." 454 U.S. at 104 (citing Monroe v.

Pape, 365 U.S. 167 (1961)). Nevertheless, the Court explained that

§ 1983 actions challenging state tax laws are inherently intrusive,

threatening to disrupt state tax collection and to chill even good-faith

actions of state officials. Id. at 114-15. Therefore, the Court held that

"taxpayers are barred by the principle of comity from asserting § 1983

actions against the validity of state tax systems in federal courts" so

long as "plain, adequate, and complete" remedies are available in the

state courts. Id. at 116. It is clear that this holding applies to claims

for both legal and equitable relief under § 1983. See id.; Great Lakes,

319 U.S. 293; Lawyer v. Hilton Head Pub. Serv. Dist. No. 1, 220 F.3d

298, 302 (4th Cir. 2000).

B.

In applying these principles to this case, we begin our analysis with

the relief sought by Plaintiffs. In their prayer for relief, Plaintiffs ask

the district court to "declare that Sections 8 through 15 of the 2006

Amendments violate the Commerce Clause of Article I and Article VI

of the United States Constitution." J.A. 130. As explained above,

these sections repealed the system of local franchise taxation previ-

ously in place in North Carolina, repealed the tax credit formerly

available to cable providers, and provide for the distribution of part

of the proceeds of the state sales tax to local governments in lieu of

the franchise taxes those governments collected previously. Accord-

DIRECTV, INC. v. TOLSON 9

ingly, the relief requested in Plaintiffs’ amended complaint would

have the effect of restoring the system of local franchise taxation cou-

pled with state-level tax credits to cable providers that existed prior

to the enactment of the 2006 Amendments.

On appeal, Plaintiffs contend that they never meant to ask for a

declaration that section 9 of the 2006 Amendments — the provision

restoring the tax credit to cable providers that Plaintiffs claimed was

unconstitutional in their original complaint — is unconstitutional.

They characterize the inclusion of section 9 in their prayer for relief

as "inadvertent" and urge us to "construe the[ir] complaint liberally"

to effectively eliminate this request. Notably, although Plaintiffs inti-

mate that the district court erred in not affording them an opportunity

to amend, the record reflects that Plaintiffs themselves made no

motion to do so in the district court.

We need not resolve the matter, however, because we conclude that

even if we ignore Plaintiffs’ request to restore the tax credit to cable

providers, principles of comity nevertheless preclude the federal

courts from entertaining Plaintiffs’ suit. Plaintiffs admit that they seek

"an order declaring that the provisions in the 2006 Amendments

repealing local government authority to charge franchise fees be

declared unconstitutional." Brief of Appellants at 25-26. As Plaintiffs

explain, such an order "would restore the power of local governments

to determine, in their own discretion, whether or not to charge such

fees for the benefits they confer on cable systems." Id. at 26. In

essence, Plaintiffs ask us to mandate the reinstatement of local fran-

chise taxing authority, a prerogative that North Carolina’s General

Assembly has seen fit to reserve to itself. It is just this sort of heavy-

handed federal court interference in state taxation that the principle of

comity is intended to avoid.

Plaintiffs, however, contend that tax comity considerations do not

apply to their requested relief because franchise taxes are really not

taxes at all, but instead are "rent" or "fees" paid to local governments

for the use of public rights-of-way. Thus, we turn our analysis to the

nature of the franchise charges at issue here.

Because the principle of comity reflects the recognition that states

should be free from federal interference in the administration of their

10 DIRECTV, INC. v. TOLSON

fiscal operations, we interpret the term "tax" broadly for purposes of

our jurisdictional inquiry. See Valero Terrestrial Corp. v. Caffrey,

205 F.3d 130, 134 (4th Cir. 2000). We have previously considered the

factors a court should consider in determining whether a government-

imposed charge constitutes a "tax" or a "fee":

The "classic tax" is imposed by the legislature upon a large

segment of society, and is spent to benefit the community at

large. 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. (internal citations omitted). Accordingly, we consider three fac-

tors: (1) what entity imposes the charge; (2) what population is sub-

ject to the charge; and (3) what purposes are served by the use of the

monies obtained by the charge.1 Id. When this inquiry places the

charge somewhere between the "classic tax" and the "classic fee," it

is the purpose behind the statute that imposes the charge, as reflected

in the ultimate use of its proceeds, that is the most important factor.

Id.

We conclude that — at least for purposes of our comity analysis

— the charges levied on cable providers by North Carolina’s political

subdivisions prior to the 2006 Amendments were taxes. These

charges were imposed not by an administrative or regulatory agency,

but by North Carolina’s political subdivisions with the authorization

of the General Assembly. See N.C. Gen. Stat. §§ 153A-154, 160A-

214 (West 2005). Franchise charges are also spread among a wide

proportion of the population, because cable providers are authorized

by statute to pass along the costs of franchise charges to their custom-

ers. 47 U.S.C. § 542(c); see also Valero, 205 F.3d at 134 (noting pass-

ing of waste disposal charges from users of landfills to generators of

1

We note that while the North Carolina statutes authorizing localities

to charge for franchises refer to these charges as "taxes," see N.C. Gen.

Stat. §§ 153A-154, 160A-214 (West 2005), this consideration is not dis-

positive. See Valero, 205 F.3d at 134 (focus is on factual circumstances

surrounding the charge, not the nomenclature used).

DIRECTV, INC. v. TOLSON 11

the waste weighed in favor of finding those charges to be taxes). In

addition, the only evidence in the record demonstrates that the pro-

ceeds of franchise charges go into the general operating funds of the

localities that levy them, rather than into discrete funds established for

the maintenance of public rights-of-way.2 J.A. 150-61. Moreover, we

note that the fact that the 2006 Amendments replaced franchise taxes

with a state-level tax also supports the conclusion that North Caroli-

na’s franchise charges are taxes, not fees.3

C.

Having concluded that the franchise charges at issue here are taxes,

we also conclude that the relief sought by Plaintiffs is of the very sort

that comity principles prevent federal courts from granting. In this

regard, we find the First Circuit’s decision in United States Brewers

2

Plaintiffs argue that we should permit this case to move to the eviden-

tiary stage because the factual record concerning the purpose and use of

the franchise taxes levied by localities is underdeveloped. The problem

with this approach is that it permits the very evil that the comity principle

is intended to avoid: intrusive federal litigation that threatens to compro-

mise state tax systems. For purposes of our broad construction of "tax"

in the context of comity, the record before us is sufficient.

3

We find the cases cited by Plaintiff to the contrary — none of which

involved comity considerations — to be unpersuasive. City of Dallas v.

FCC, 118 F.3d 393 (5th Cir. 1997), did not analyze any of the factors

discussed in Valero, but rather likened franchise charges to fees because

cable providers receive something in exchange for them: the right to use

public rights-of-way. See id. at 397-98. Taxpayers, however, often

receive something of value in exchange for their taxes — such as access

to landfills as in Valero — and therefore we find that this singular con-

sideration is not dispositive. City of St. Louis v. Western Union Tele-

graph Co., 148 U.S. 92 (1893), involved a five-dollar-per-pole charge

levied by St. Louis on telegraph companies for the use of the city’s tele-

graph poles. In determining that this charge was rent, as opposed to a tax,

the Supreme Court relied on the fact that the charge was not "graduated

by the amount of the business, nor is it a sum fixed for the privilege of

doing business," and expressly distinguished city taxes levied on the

gross income of telegraph companies. Id. at 97. By contrast, the franchise

charges at issue here are tied to the gross receipts of cable providers and

are charged for the privilege of obtaining a franchise.

12 DIRECTV, INC. v. TOLSON

Ass’n, Inc. v. Perez, 592 F.2d 1212 (1st Cir. 1979), to be instructive.

In Perez, mainland beer producers sought an injunction to prevent

Puerto Rico from collecting an increase in the internal revenue tax on

beer or, in the alternative, to enjoin Puerto Rico from granting an

exception to the tax to beer producers whose total production did not

exceed 31,000,000 wine gallons. Id. at 1213. In effect, the alternative

relief sought by the plaintiffs in Perez would have required Puerto

Rico to collect a tax its legislature had declined to impose. Relying

on comity principles, the First Circuit held that the case must be dis-

missed:

[A]n order of a federal court requiring [Puerto Rico] offi-

cials to collect taxes which its legislature has not seen fit to

impose on its citizens strikes us as a particularly inappropri-

ate involvement in the state’s management of its fiscal oper-

ations. This is neither a case in which a court orders

reluctant state officials to collect taxes authorized by the cit-

izens of the state, nor one in which officials have failed to

perform their "special responsibility" to levy taxes for a cru-

cial public purpose and consequently have violated federal

constitutional rights. As appellees point out, the invalidation

of the [tax] exemption . . . is an awkward and heavy-handed

remedy, producing a broad taxing statute for which [Puerto

Rico] may have believed there was no need or which was

actually detrimental to its domestic policy. Sound equity

practice and a concern for interests of federalism thus bar

both the injunctive and declaratory relief sought by appel-

lants.

Id. at 1215 (internal citations omitted).

We conclude that principles of comity apply with even more force

to the relief Plaintiffs seek here. While the relief sought in Perez

would have required Puerto Rico not to enforce a single tax exemp-

tion, what Plaintiffs ask for here is a federal court-ordered redistribu-

tion of intra-state taxation authority. This relief would be heavy-

handed indeed, and would be a particularly inappropriate intrusion by

the federal courts into North Carolina’s tax laws.

Relying on a footnote in Hibbs v. Winn, 542 U.S. 88 (2004), a case

interpreting the TIA, Plaintiffs argue that their suit is not barred by

DIRECTV, INC. v. TOLSON 13

principles of comity because those principles "do[ ] not apply to tax-

payer suits that do not disrupt state tax collection." Brief of Appel-

lants at 28. In Hibbs, Arizona taxpayers brought an Establishment

Clause challenge to certain income tax credits available to those who

made contributions to nonprofit organizations that provided scholar-

ship grants to children attending private schools, including religious

schools. The Supreme Court held that the TIA did not bar the suit

because (1) the plaintiffs did not contest their own tax liability and (2)

the relief they sought would not impede Arizona’s collection of tax

revenue. Hibbs, 542 U.S. at 93. Explaining its prior tax comity cases,

the Court stated that it "has relied on ‘principles of comity’ to pre-

clude original federal-court jurisdiction only when plaintiffs have

sought district-court aid in order to arrest or countermand state tax

collection." Id. at 107 n.9 (citing Fair Assessment, 454 U.S. 100;

Great Lakes, 319 U.S. 293).

We do not read this footnote as limiting the comity principle in the

way Plaintiffs suggest. As the Court of Appeals for the Tenth Circuit

has observed, Hibbs’ characterization of prior tax cases was intended

to underscore the unusual claim before the Court in Hibbs, not to dis-

avow those earlier holdings. See Hill v. Kemp, 478 F.3d 1236, 1249

& n.11 (10th Cir. 2007) (citing Valero, 205 F.3d 130).

Furthermore, in discussing the scope of the TIA, the Hibbs Court

explained that Congress’s particular concern in enacting § 1341 was

to prevent plaintiffs from challenging their own state tax liabilities in

federal court. 542 U.S. at 108-09. Thus, "[t]here was no articulated

concern about federal courts’ flogging state and local governments to

collect additional taxes" animating the TIA itself. Id. at 109 (internal

quotation and citation omitted). As we have already explained, how-

ever, the comity principle underlying the TIA is broader than the Act

itself, and its scope is not restricted by § 1341. See Fair Assessment,

454 U.S. at 110. Thus, nothing in the Supreme Court’s conclusion

that § 1341 was motivated by the specter of federal court challenges

to state tax liabilities suggests that broader comity principles would

not bar suits attempting to force state tax collection, to say nothing of

suits seeking federal court-ordered reallocation of taxation authority

14 DIRECTV, INC. v. TOLSON

between a state and its political subdivisions.4 The question was sim-

ply not before the Supreme Court in Hibbs.5

D.

The final question we must address is whether Plaintiffs have a

"plain, adequate, and complete" remedy available for the constitu-

tional violations they allege in North Carolina’s courts. We have no

difficultly concluding that they do, and Plaintiffs do not argue other-

wise. Plaintiffs have already challenged an earlier version of North

Carolina’s taxation scheme in state court, see DIRECTV, Inc. v. State,

632 S.E.2d 543 (N.C. Ct. App. 2006), and they are free to do so again,

with ultimate appeal to the Supreme Court of the United States.6

IV

We hold that principles of comity prevent the federal courts from

ordering North Carolina to restore taxing authority to its political sub-

divisions that it has seen fit to revoke. Plaintiffs thus may not main-

tain their challenge under § 1983 in the federal courts while the courts

of North Carolina remain available to hear it. We therefore affirm the

order of the district court dismissing Plaintiffs’ amended complaint.7

AFFIRMED

4

In light of our conclusion that comity precludes us from mandating

reinstatement of local franchise taxing authority in North Carolina, and

therefore bars Plaintiffs’ suit, we need not address Defendant’s argument

that suits seeking federal court-ordered redistribution of state tax revenue

are likewise barred.

5

Indeed, the Hibbs Court fully understood the First Circuit’s holding

in Perez. In distinguishing Perez from the case before it in Hibbs, the

Court merely observed that Perez was not a TIA case and therefore could

not support the argument that the TIA barred suits aimed at forcing state

collection of taxes. Hibbs, 542 U.S. at 109 n.11.

6

Indeed, this is the way that West Lynn, the case primarily relied on by

Plaintiffs in their Dormant Commerce Clause argument, reached the

Supreme Court. 512 U.S. at 192; see also Bacchus Imports, Ltd. v. Dias,

468 U.S. 263 (1984) (Dormant Commerce Clause challenge to Hawaii

liquor tax proceeded through Hawaii courts).

7

In light of our disposition, we need not consider the other bases for

the district court’s dismissal.