Opinion

TECO Barge Line, Inc., n/k/a U.S. United Barge Line, LLC v. Justin P. Wilson, Tennessee Comptroller of the Treasury

Court: Court of Appeals of Tennessee
Filed: Jul 9, 2010
Status: Published
On the bench: Judge Richard H. Dinkins
Cited by: 0 cases
Authority: More cited than 29.3%

applying the Mount Healthy burden-shifting analysis to inmate First Amendment retaliation case and explaining that many other circuits have applied such in other non-employment cases

How later courts described this case

applying the Mount Healthy burden-shifting analysis to inmate First Amendment retaliation case and explaining that many other circuits have applied such in other non-employment cases
inmate moved allegedly in retaliation for his effort to litigate the claim of another inmate was actionable
“Rejection of the defendant’s proffered reasons will permit the trier of fact to infer the ultimate fact of intentional discrimination.”
“The boundary between Tennessee and Arkansas lies generally in the Mississippi River.”

Written by the judges who cited it.

The opinion

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

April 16, 2010 Session

TECO BARGE LINE, INC. , N/K/A U. S. UNITED BARGE LINE, LLC v.

JUSTIN P. WILSON, TENNESSEE COMPTROLLER OF THE TREASURY,

ET AL.

Appeal from the Tennessee State Board of Equalization

Assessment Appeals Commission

Kelsie Jones, Executive Secretary

No. M2009-01675-COA-R12-CV - Filed July 9, 2010

Taxpayer, an interstate water transportation carrier company operating boats and barges over

various waterways including the Mississippi and Tennessee Rivers, was assessed an ad

valorem tax on personal property for the tax year 2005. Taxpayer appealed the assessment

to the State Board of Equalization. Following the filing of Taxpayer’s appeal, Taxpayer was

retroactively assessed for the two tax years immediately preceding the original assessment,

2003 and 2004. Taxpayer appealed these assessments as well as assessments in subsequent

tax years 2006, 2007 and 2008. A hearing was held before an Administrative Law Judge,

who upheld both the regular as well as the retroactive assessments. Taxpayer appealed to the

State Board of Equalization Assessment Appeals Commission and, following a hearing, the

Commission affirmed the ALJ’s decision. Taxpayer appeals; we affirm in part and reverse

in part.

Tenn. R. App. P. 12 Direct Review of Administrative Proceedings by the Court of

Appeals; Judgment of the Tennessee State Board of Equalization Assessment

Appeals Commission Affirmed in Part, Reversed in Part

R ICHARD H. D INKINS, J., delivered the opinion of the court, in which F RANK G. C LEMENT,

J R. and ANDY D. BENNETT, JJ., joined.

Everett B. Gibson and Joni K. Roberts, Memphis, Tennessee, for the appellant, TECO Barge

Line, Inc. n/k/a U.S. United Barge Line, LLC.

Robert E. Cooper, Jr., Attorney General and Reporter, Michael E. Moore, Solicitor General,

Mary Ellen Knack, Senior Counsel, for the appellees, Tennessee Comptroller of the Treasury

and the Assessment Appeals Commission of the State Board of Equalization.

OPINION

I. Background

The Appellant, TECO Barge Line, Inc. n/k/a U.S. United Barge Line, LLC

(“United”),1 is a water transportation carrier company registered with the U.S. Army Corps

of Engineers that owns and operates tugboats and barges for hire over waterways throughout

the central and southeastern portions of the United States. United’s barges mostly carry coal,

grain, aggregate grain and steel over the Ohio, Illinois and Mississippi Rivers. Within

Tennessee, the majority of United’s boats and barges traverse the Mississippi River, though

it regularly utilizes the Tennessee River for its barges traveling between Alabama and

Kentucky. United is not domiciled in Tennessee nor does it own or lease any real property

in Tennessee.

In 2000 and 2002, the Office of State Assessed Properties (“OSAP”), a division of the

Tennessee Comptroller of the Treasury, sent an ad valorem tax report questionnaire to United

to determine United’s tax liability. United completed and returned the questionnaires each

year, but OSAP did not assess any tax in those years. In 2005, OSAP again required United

to complete an ad valorem tax report questionnaire and in July 2005, OSAP issued a notice

assessing an ad valorem personal property tax for the 2005 tax year.2 United appealed the

assessment to the Tennessee State Board of Equalization.3 In August 2006, OSAP assessed

United for the tax year 2006 and retroactively assessed or “back assessed” United for tax

years 2003 and 2004. United also appealed these assessments, which were then consolidated

with United’s appeal of the 2005 assessment.

In January 2008, a hearing was conducted by an Administrative Law Judge to consider

United’s appeal of the 2005 and 2006 assessments as well as the 2003 and 2004 back

assessments. The ALJ determined that United was subject to taxation under Tenn. Code

Ann. § 67-5-1301 because it is a water transportation carrier company that operates boats and

barges over the waterways of Tennessee for hire that is also registered with the U.S. Army

Corps of Engineers; consequently, the ALJ upheld the tax assessments for 2005 and 2006.

In the Fall of 2007, U.S. United Barge Line, LLC, acquired all of the assets of TECO Barge Line,

Inc., including its rights of appeal in this case. Prior to 2002, TECO Barge Line, Inc., was named Mid-South

Towing Company, Inc., which was changed by charter amendment in 2002.

The notice was not received by United because it was directed to the incorrect zip code; United

learned of the assessment through a conversation with an OSAP analyst on September 28, 2005.

Despite being untimely under the statute, United requested in letter to the Board of Equalization

on October 24, 2005, that the Board defer “certification” of the assessment and allow United’s appeal due

to fact that United did not receive proper notice of the assessment. Although the record contains no response

from either OSAP or the Board, it is apparent that the Board allowed United’s appeal to go forward.

-2-

The ALJ found that OSAP had the authority to retroactively assess taxes and found no proof

that OSAP had selectively enforced its authority or issued the back assessments in retaliation

for United’s appeal of the 2005 assessment; the ALJ found, therefore, that United was liable

for the 2003 and 2004 assessments. United appealed the ALJ’s decision to the Assessment

Appeals Commission of the State Board of Equalization. Following a hearing, the

Commission issued its Final Decision and Order, which upheld the tax assessments for 2005

through 20084 on the grounds that United was properly classified as a water transportation

carrier company and that application of the classification statute did not violate the

Commerce Clause; the decision also upheld the back assessments for 2003 and 2004 finding

insufficient proof to establish a constitutional violation. United appeals the Commission’s

Final Decision and Order.

II. Standard of Review

This is a direct appeal from a final decision of the Tennessee State Board of

Equalization Assessment Appeals Commission pursuant to Tenn. Code Ann. § 4-5-

322(b)(1)(B)(iii). Judicial review of decisions of commissions is governed by the narrow

standard contained in Tenn. Code Ann. § 4-5-322(h) rather than the broad standard of review

used in other civil appeals. Wayne County v. Tenn. Solid Waste Disposal Control Bd., 756

S.W.2d 274, 279-80 (Tenn. Ct. App. 1988). A court may modify or reverse the decision of

the commission if the petitioner’s rights have been prejudiced because the administrative

findings, inferences, conclusions or decisions are:

1) In violation of constitutional or statutory provisions;

2) In excess of the statutory authority of the agency;

3) Made upon unlawful procedure;

4) Arbitrary or capricious or characterized by abuse of discretion or clearly

unwarranted exercise of discretion; or

5) (A) Unsupported by evidence which is both substantial and material in the

light of the entire record.

(B) In determining the substantiality of evidence, the court shall take into

account whatever in the record fairly detracts from its weight, but the court

shall not substitute its judgment for that of the agency as to the weight of the

evidence on questions of fact.

Tenn. Code Ann. § 4-5-322(h).

United was assessed ad valorem property taxes by OSAP in 2007 and 2008 for those tax years.

United appealed of each of these assessments, which appeals were consolidated with United’s original appeal

of the 2005 tax assessment.

-3-

III. Analysis

As a preliminary matter, we must determine the extent to which the Commission had

the authority to consider and decide United’s challenge to the assessments on the

constitutional bases asserted. The matter before us was brought before the Board of

Equalization to challenge the classification of the taxpayer and the resulting assessment of

taxes imposed in 2005 and subsequent years pursuant to Tenn. Code Ann. § 67-5-1301. In

addition, United challenged the assessment of taxes for 2003 and 2004, which were imposed

pursuant to the power granted at Tenn. Code Ann. § 67-1-1002.

The powers of the state board of equalization are set forth at Tenn. Code Ann. §§ 4-3-

5103 and 67-1-305. Under both statutes, the board is authorized, inter alia, to consider

evidence and determine appeals relative to the “value, classification and assessment of

property.”5 The ability of administrative tribunals such as the board to hear constitutional

claims was before our Supreme Court in Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827

(Tenn. 2008), and the following discussion gives guidance to our consideration of this

question:

Administrative tribunals do not lack the authority to decide every

constitutional issue. It is essential, however, to distinguish between the

various types of constitutional issues that may arise in an administrative

context. In Richardson [v. Board of Dentistry, 913 S.W.2d 446 (Tenn. 1995)],

we developed three broad categories of constitutional disputes: (1) challenging

the facial constitutionality of a statute authorizing an agency to act or rule, (2)

challenging the agency’s application of a statute or rule as unconstitutional, or

(3) challenging the constitutionality of the procedure used by an agency.

[Citation omitted]. Administrative tribunals have the power to decide

constitutional issues falling into the second and third categories, but the first

category falls exclusively within the ambit of the judicial branch.

The language of Tenn. Code Ann. § 4-3-5103 applicable to the instant proceeding is as follows:

The state board of equalization has the following duties and functions to: . . .

(4) Receive, hear, consider and act upon complaints and appeals made to the board regarding

the valuation, classification and assessment of property in the state;....

The applicable language of Tenn. Code Ann. § 67-1-305 is:

(a) The board is vested with the power to : . . .

(2) Obtain such evidence, information and statistics as may be deemed material as to the

values, classifications and assessments of properties to be equalized.

-4-

263 S.W.3d at 843.

Before the Commission, United contended that the tax imposed by Tenn. Code Ann.

§ 67-5-1301, as applied to it, violated the Commerce Clause of the U.S. Constitution.6

United also contended that taxes assessed pursuant to Tenn. Code Ann. § 67-1-1002 were

imposed in retaliation for its appeal of the 2005 assessment, thereby penalizing United for

the exercise of its First Amendment right to petition for the redress of grievances. The

Commission rejected the constitutional challenges and upheld both assessments. In so doing,

the Commission acknowledged that United was not making a facial attack on the

constitutionality of Tenn. Code Ann. §§ 67-5-1301 or 67-1-1002. The Commission properly

confined its consideration of the constitutional concerns to the limits set in Colonial Pipeline.

Our review of the Commission’s decision necessarily involves a three-step analysis.

McEwen v. Tenn. Dept. of Safety, 173 S.W.3d 815, 820 (Tenn. Ct. App. 2005). We first

determine whether the Commission identified the appropriate legal principles applicable to

the case and then examine the Commission’s factual findings, if any, to determine whether

the findings are supported by substantial and material evidence. Id. Finally, we examine

how the Commission applied the law to the facts. Id. The application of the law to the facts

is a highly judgmental process involving mixed questions of law and fact. Miller v. Civil

Service Comm’n of Metropolitan Government of Nashville and Davidson County, 271

S.W.3d 659, 664 (Tenn. Ct. App. 2008) (citing Armstrong v. Metro. Nashville Hosp. Auth.,

No. M2004-01361-COA-R3-CV, 2006 WL 1547863, at *2 (Tenn. Ct. App. Jun. 6, 2006).

Consequently, courts may neither reweigh the evidence nor substitute their judgment for the

commission’s, rather courts “must determine whether a reasonable person could

appropriately have reached the same conclusion reached by the commission, consistent with

a proper application of the controlling legal principles.” Miller, 271 S.W.3d at 664;

McEwen, 173 S.W.3d at 820.

Commerce Clause Claim

In determining Commerce Clause challenges, we are instructed by the U.S. Supreme

Court to evaluate the validity of state law pursuant to the four-pronged standard established

in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977). Under the Complete Auto test,

state taxes are upheld as nonviolative of the federal Commerce Clause provided that (1) the

In addition to its “as applied” constitutional claim, United also asserted before the Commission

that its classification as a water transportation carrier company under Tenn. Code Ann. § 67-5-1301(a)(13)

was improper based on United’s interpretation of the language of the statute. The parties’ appellate briefs

included arguments on this issue; however, during oral argument, United’s attorney informed the Court that

it did not intend to pursue its statutory construction argument. Consequently, we do not address the parties’

statutory construction arguments.

-5-

tax is applied to an activity with a substantial nexus with the taxing state, (2) is fairly

apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related

to the services provided by the state. Id. at 279; accord Maryland v. Louisiana, 451 U.S.

725, 754 (1981); see also General Motors Corp. v. Washington, 377 U.S. 436 (1964);

Northwestern Cement Co. v. Minnesota, 358 U.S. 450 (1959); Memphis Gas Co. v. Stone,

335 U.S. 80 (1948); Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444 (1940). In announcing

this four-part test, “the court . . . rejected the line of cases holding that the direct taxation of

interstate commerce was impermissible and adopted instead a ‘consistent and rational method

of inquiry [that focused on] the practical effect of [the] challenged tax.’” Quill Corp. v.

North Dakota By and Through Heitkamp, 504 U.S. 298, 303-04 (1992) (quoting Mobil Oil

Corp. v. Comm’r of Taxes of Vt., 445 U.S. 425, 443 (1980)) (emphasis added).

The Supreme Court made it clear in Quill Corp. that the “four-part test [of Complete

Auto] . . . continues to govern the validity of state taxes under the Commerce Clause” and

confirmed that under our current Commerce Clause jurisprudence, “with certain restrictions,

interstate commerce may be required to pay its fair share of state taxes.” 504 U.S. at 310;

D.H. Holmes Co. v. McNamara, 486 U.S. 24, 31 (1988); see also Commonwealth Edison Co.

v. Montana, 453 U.S. 609, 623-24 (1981) (“It was not the purpose of the commerce clause

to relieve those engaged in interstate commerce from their just share of [the] state tax burden

even though it increases the cost of doing business.”).

United does not assert that the tax assessment at issue discriminates against interstate

commerce or that it was unfairly apportioned in this case; rather, United contends that the

assessment violates the first and fourth prong of the Complete Auto test. We, therefore,

address these specific contentions.

1. Substantial Nexus

The tax at issue, Tenn. Code Ann. § 67-5-1301, authorizes and directs the comptroller

of the treasury to assess for taxation property within the state that is owned, used, and/or

leased by certain types of companies including:

water transportation carrier companies which operate boats and barges over the

waterways of this state for hire, which are registered with the United States

army corps of engineers or any other federal or state agency and/or domiciled

in this state and/or owning or leasing real or personal property located in this

state.

Tenn. Code Ann. § 67-5-1301(a)(13). The tax expressly applies only to property used within

the State.

-6-

United’s President, David O’Neill, testified before the ALJ that, during the tax years

at issue, United owned and operated 20 tugboats and 700 barges, which principally traveled

over the Ohio, Illinois and Mississippi Rivers, including the portion of the Mississippi River

that flows through Tennessee. Mr. O’Neill explained that 95-98 percent of United’s

operations within Tennessee consisted of boat and barge traffic on the Mississippi River.

The other two to five percent consisted of barges that traveled over the Tennessee River from

points in Alabama, through Tennessee, to a facility owned by United in Paducah, Kentucky;

United did not operate any tugboats on the Tennessee River. Mr. O’Neill testified that in

2005, the first year the tax was assessed, United loaded forty-four barges in Alabama that

traveled through Tennessee along the Tennessee River destined for Kentucky; United loaded

two barges on the Tennessee River within Tennessee borders. With respect to loadings on

the Mississippi River, Mr. O’Neill testified that none of United’s barges terminated in

Tennessee, but that in 2005, United had seventeen loadings of products originating from

Tennessee; Mr. O’Neill did not testify as to the total number of United’s boats and barges

that traveled on the Mississippi River through Tennessee in 2005. Mr. O’Neill testified that

the loadings in Tennessee were not scheduled or part of United’s “normal operating

procedure”; rather, they were done at the request of other barge lines and only represented

.02-.03 percent of United’s 5,561 barge loadings system wide. While United’s loadings

within Tennessee represented a small portion of its system-wide loadings, Mr. O’Neill’s

testimony supports the Commission’s determination that United regularly traveled within

Tennessee over the Mississippi and Tennessee Rivers to conduct its boat and barge

operations during the tax years in question.

United contends, without citation to any authority, that “[v]essels must habitually use

a state’s ports in substantial numbers to justify requiring the vessels to share in the tax

burden.” (Emphasis added). United argues that substantial use of a state’s ports, as opposed

to merely “regular traffic,” should be the basis for finding a substantial nexus with respect

to taxes levied on boats and barges because boats and barges floating along a river do not

burden a state’s infrastructure to the same extent as trucks or railroads.

We find no support for such a contention in either state or federal law. To the

contrary, the U.S. Supreme Court has repeatedly held that water transportation carriers are

held to the same constitutional standards as other interstate transportation carriers. Ott v.

Mississippi Valley Barge Line Co., 336 U.S. 169, 174 (1949) (“We can see no reason which

should put water transportation on a different constitutional footing than other interstate

enterprises.”); Standard Oil Co. v. Peck, 342 U.S. 382, 384 (1952). Since Ott, both state and

federal courts have held that regular traffic through a state, including boat and barge traffic

over a state’s waterways, is sufficient to create a substantial nexus. See Central R.R. Co. of

Pa. v. Commonwealth of Pa., 370 U.S. 607, 614 (1962); Braniff Airways, Inc. v. Nebraska

Board of Equalization, 347 U.S. 590, 600 (1954); Standard Oil, 342 U.S. at 384; Jack Cole

-7-

Co. v. Ellington, 372 S.W.2d 204, 208 (Tenn. Ct. App. 1961); see also Union Barge Line

Corp. v. Marcum, 360 S.W.2d 130, 132-33 (Ky. Ct. App. 1962).

In Central Railroad, the U.S. Supreme Court, relying in part on its prior ruling in

Standard Oil, held that “the State through which the regular traffic flowed could impose a

property tax measured by some fair apportioning formula.” Central R.R. Co. of Pa., 370 U.S.

at 614. The Court noted that the record in Standard Oil showed that the boats and barges

which Ohio sought to tax in full had been traveling along three regular routes on the

Mississippi and Ohio Rivers: from Memphis, Tennessee, to Mt. Vernon, Indiana; from

Memphis, Tennessee, to Bromley, Kentucky; and from Baton Rouge or Gibson’s Landing,

Louisiana, to Bromley, Kentucky. The Court then observed that “[t]he States in which the

vessels landed, as well as those through which they regularly traveled, could undoubtedly

have traced these regular trips and levied appropriately apportioned ad valorem taxes.” Id.

at 615, n. 6 (emphasis added). Applying the principles of Central Railroad to this case, we

find that United’s regular traffic over both the Mississippi and Tennessee Rivers through the

State of Tennessee provide the substantial nexus required to allow Tennessee to impose a

property tax measured by a fair apportioning formula.

United also suggests that, because more than 95 percent of its River traffic within

Tennessee is on the Mississippi River and since the Mississippi River is a federally regulated

waterway, there is insufficient nexus with Tennessee. This argument also lacks merit. While

it is true that navigation of the Mississippi River is regulated by Congress, such regulation

does not divest Tennessee of title to the beds and banks of the river or the authority to tax

vessels traveling over the river through the territory of the State. See, e.g., Braniff, 347 U.S.

at 596-97. In Braniff, the U.S. Supreme Court analogized planes flying interstate with boats

traveling inland waters and explained a state’s authority to tax such enterprises thusly:

The commerce power, since Gibbons v. Ogden, 9 Wheat. 1, 193, 6 L.Ed. 23,

has comprehanded [sic] navigation of streams. Its breadth covers all

commercial intercourse. But the federal commerce power over navigable

streams does not prevent state action consistent with that power. Since, over

streams, Congress acts by virtue of the commerce power, the sovereignty of

the state is not impaired. The title to the beds and the banks are in the states

and the riparian owners, subject to the federal power over navigation. Federal

regulation of interstate land and water carriers under the commerce power has

not been deemed to deny all state power to tax the property of such carriers.

Braniff, 347 U.S. at 596-97 (internal citations omitted); see also Bean Dredging Corp. v.

Olsen, 742 S.W.2d 259 (Tenn. 1987) (“The boundary between Tennessee and Arkansas lies

generally in the Mississippi River.”); Higman Towing Co. v. Cocreham, 70 F.Supp. 628, 636

(D.C.La. 1947) (“[T]he fee of the beds of navigable waters became the property of the

-8-

individual states when admitted into the Union, by virtue of their inherent sovereignty. This

ownership, however, was subject to the paramount control of the Federal Government over

navigation and commerce on those waters.”). As aforestated, we find that United’s habitual

and systematic utilization of and presence on the waterways of Tennessee established a

substantial nexus with Tennessee to subject United to the State’s taxation.

2. Fairly Related to Services Provided

Under the Complete Auto test, a state’s tax will be upheld if, along with the other three

criteria, it is “fairly related to the services provided by the state.” Complete Auto Transit,

430 U.S. at 279. “The validity of the tax rests upon whether the State is exacting a

constitutionally fair demand for that aspect of interstate commerce to which [it] bears a

special relation.” Commonwealth Edison, 453 U.S. at 625. There is no requirement,

however, that the amount of the tax collected from a particular activity be reasonably related

to the value of the services provided to the activity. Id. at 622. In Commonwealth Edison,

the U.S. Supreme Court examined this prong of the Complete Auto test in detail and

explained that:

The relevant inquiry under the fourth prong of the Complete Auto Transit test

is not . . . the amount of the tax of [sic] the value of the benefits allegedly

bestowed as measured by the costs the State incurs on account of the

taxpayer’s activities. Rather, the test is closely connected to the first prong of

the Complete Auto Transit test. Under this threshold test, the interstate

business must have a substantial nexus with the State before any tax may be

levied on it. Beyond that threshold requirement, the fourth prong of the

Complete Auto Transit test imposes the additional limitation that the measure

of the tax must be reasonably related to the extent of the contact, since it is the

activities or presence of the taxpayer in the State that may properly be made

to bear a “just share of [the] state tax burden.”

Id. at 626 (internal citations omitted). Consequently, the Court explained, “[t]he simple but

controlling question is whether the state has given anything for which it can ask return.” Id.

at 625 (quoting Wisconsin v. J.C. Penney Co., 311 U.S. at 444).

United asserts that it “derives no benefits from state and local governments in its

Tennessee operations with very few sporadic exceptions.” United relies on Mr. O’Neill’s

testimony that United’s boats and barges do not use local assistance while “in transit.” United

argues that it has no need for Tennessee emergency services such as police or firefighters as

its boats and barges would use federal assistance if such services were needed while in

-9-

transit.7 United also asserts that it does not regularly purchase supplies from vendors located

in Tennessee nor does it regularly use any maintenance or repair facilities located in

Tennessee. Finally, United again attempts to distinguish its operation of vessels over inland

waterways from those of railroads and trucks that travel across the state on rails and roads

by asserting that the Federal government, not the State, maintains and controls navigation of

the Mississippi River. United asserts that its boats and barges “just go[] up and down a river

contiguous to Tennessee without stopping, without taking on crew, without taking on

provisions and without obtaining repairs or maintenance services.”

United’s attempt to quantify the exact services, such as police and fire protection, that

it does not regularly use while traversing the State is misplaced. United’s actual use or non-

use of these services is irrelevant to the inquiry. See Commonwealth Edison, 453 U.S. at 628.

So long as there is some service or benefit provided by the State and the tax levied is

apportioned to the extent of the contact with the State the tax does not run afoul of the

Commerce Clause. Id. Further, we remain unpersuaded by United’s argument that water

transportation carriers are different from other interstate transportation carriers in the context

of government provided services. We acknowledge that vessels traveling over inland

waterways may not use all of the same services that vehicles traveling on an interstate

highway or railroad may use, but such differences do not change the analysis as “interstate

commerce may be required to contribute to the cost of providing all governmental services,

including those services from which it arguably receives no direct benefit.” Id. at 628, n. 16.

“The only benefit to which the taxpayer is constitutionally entitled [is] that derived from his

enjoyment of the privileges of living in an organized society, established and safeguarded by

the devotion of taxes to public purposes.” Id. at 628-29 (quoting Carmichael v. Southern

Coal & Coke Co., 301 U.S. 495, 521-22 (1937)).

The tax here was levied on United’s personal property located within the State of

Tennessee. There is no dispute that the tax was not properly apportioned to the property

actually located within the borders of Tennessee. We find, therefore, that the tax is in

“proper proportion” to United’s activities within the State and, as a result, to its “consequent

enjoyment of the opportunities and protections which the State has afforded” in connection

with those activities. See Commonwealth Edison, 453 U.S. at 626-27. Having also found

that a substantial nexus exists between United and the State of Tennessee, we find that the

ad valorem property tax assessments from 2005 through 2008 satisfy the four prongs of the

Complete Auto test and, thus, are nonviolative of the Commerce Clause. Consequently, we

affirm the Commission’s Final Decision and Order holding the same.

Mr. O’Neill testified that if United was in need of law enforcement, it would contact the U.S. Coast

Guard. He also testified that under federal law, water transportation companies like United were required,

as a condition to operate on inland waterways, to provide their own fire suppressant systems and certified

fire suppressant operators.

-10-

First Amendment Claim

United argued before the Commission that, in assessing taxes for 2003 and 2004,

OSAP selectively enforced Tenn. Code Ann. § 67-1-1002, et. seq., in violation of the Equal

Protection Clause of the Fourteenth Amendment and that such enforcement “evidence[d]

retaliation for United’s exercise of its First Amendment right to redress grievances.” The

majority of the Commission8 found that there was “[in]sufficient proof to establish a

constitutional violation,” holding:

We believe the assertion that OSAP’s actions were vindictive or selective is

not borne out by the record. The proof does not establish that [United] was

singled out by OSAP and does not establish that OSAP’s actions rested on an

impermissible consideration or purpose. Nor can OSAP be estopped from

carrying out is duty under Tenn. Code Ann. §[§] 67-5-1301(c),

67-1-1002(a)(1), and 67-1-1005(a) on the basis of presumably innocent

misinterpretations of the statue by its employees and/or [United].

On appeal, United does not assert that OSAP’s assessment for prior tax years was selective,

only that the back assessments were issued in retaliation for United’s appeal of the original

tax assessment in 2005, which United characterizes as its First Amendment right to redress

grievances.

It is well-established that governmental action, which standing alone does not violate

any law or constitution, may nonetheless be a tort if motivated in substantial part by a desire

to punish an individual for exercise of a statutory or constitutional right. See, e.g., Mount

Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 283-84 (1977) (untenured

teacher who could have been fired for no reason may nonetheless establish a claim if the

decision not to rehire him was made because of his exercise of First Amendment freedoms);

Thaddeus-X v. Blatter, 175 F.3d 378, 386 (6th Cir. 1999) (inmate moved allegedly in

retaliation for his effort to litigate the claim of another inmate was actionable); Board of

County Comm’rs, Wabaunsee County v. Umbehr, 518 U.S. 668 (1996) (nonrenewal of

plaintiff’s government contract in retaliation for his exercise of free speech is actionable);

Valot v. Southeast Local Sch. Dist. Bd. of Educ., 107 F.3d 1220, 1225 (6th Cir. 1997) (“[A]

claim of retaliation for exercise of the constitutional right of access is cognizable under

Two of the five members of the Commission dissented from the conclusion that the back

assessments for the years 2003 and 2004, as applied to United under the circumstances, were constitutionally

sound.

-11-

[U.S.C.] § 1983.”); Zilich v. Longo, 34 F.3d 359, 365 (6th Cir. 1994) (“retaliation under color

of law for the exercise of First Amendment rights is unconstitutional”).

A person making a claim that governmental action was improperly motivated, e.g.,

in retaliation for that person’s exercise of statutory or constitutionally protected rights, bears

the initial burden of establishing a prima facie case that the challenged action was so

motivated.9 Mount Healthy, 429 U.S. at 287; McDonnell Douglas v. Green, 411 U.S. 792

(1973). This can be done either by presenting direct evidence of retaliation or through

circumstantial evidence. In this case, the evidence relied upon by United in support of its

claim was circumstantial.10 When the claim is based on circumstantial evidence, such as the

timing of events or the disparate treatment of similarly situated individuals, courts are to

apply the burden-shifting analysis established in McDonnell Douglas. 411 U.S. at 802;

McClain v. Nw. Community Corr. Ctr. Judicial Corr. Bd., 440 F.3d 320, 332 (6th Cir. 2006);