Colonial Pipeline Co. v. Morgan

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 07a0006p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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Plaintiff-Appellant, -

COLONIAL PIPELINE COMPANY,

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No. 06-5220

v.

,

>

JOHN G. MORGAN, Tennessee Comptroller of the -

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Treasury, Individually and as a Member of the

Defendants-Appellees. -

Tennessee State Board of Equalization, et al.,

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Appeal from the United States District Court

for the Middle District of Tennessee at Nashville.

No. 05-00148—Robert L. Echols, Chief District Judge.

Argued: December 6, 2006

Decided and Filed: January 9, 2007

Before: MOORE and CLAY, Circuit Judges; BELL, Chief District Judge.*

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COUNSEL

ARGUED: Ron L. Quigley, DAVIS, MATTHEWS & QUIGLEY, Atlanta, Georgia, for Appellant.

Charles L. Lewis, OFFICE OF THE ATTORNEY GENERAL, Nashville, Tennessee, for Appellees.

ON BRIEF: Ron L. Quigley, DAVIS, MATTHEWS & QUIGLEY, Atlanta, Georgia, for Appellant.

Charles L. Lewis, OFFICE OF THE ATTORNEY GENERAL, Nashville, Tennessee, for Appellees.

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OPINION

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CLAY, Circuit Judge. Colonial Pipeline Company (“Colonial”) appeals the district court’s

dismissal of its complaint under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction.

Colonial challenges the constitutionality of Tennessee’s statutory scheme for classifying real and

personal property for purposes of ad valorem tax assessment under the Equal Protection Clause of

the Fourteenth Amendment of the United States Constitution; Article I, Section 8, Clause 3 (the

Commerce Clause) of the United States Constitution; Article VI, Clause 2 (the Supremacy Clause)

of the United States Constitution; and Article I, Section 8 and Article XI, Section 8 of the Tennessee

*

The Honorable Robert Holmes Bell, Chief United States District Judge for the Western District of Michigan,

sitting by designation.

1

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 2

State Constitution. The district court found that the Tax Injunction Act, 28 U.S.C. § 1341, and

comity principles bar Colonial from suing in federal court. For the following reasons, we AFFIRM

the district court’s decision.

BACKGROUND

Colonial is a corporation “engaged in interstate commerce as a common carrier of refined

petroleum products and operates a large diameter refined petroleum pipeline extending from

Pasadena, Texas, to Linden, New Jersey (New York Harbor), with stub lines serving parts of

Tennessee.” (J.A. 26) Colonial’s pipeline “is the largest refined petroleum products pipeline in the

world,” (J.A. 30), and serves as a “transportation system for . . . heating oil, diesel fuel, kerosene,

jet fuel and gasoline.” (J.A. 29) Colonial has operated the pipeline in Tennessee for more than forty

years.

Under Tennessee Code Annotated (“T.C.A.”) § 67-5-501(8)(G), “Colonial’s real and

personal property is classified and assessed as public utility property.” (J.A. 30) Under T.C.A.

§ 67-5-1301(a)(7), Colonial’s property “is appraised and assessed by the Comptroller of the

Treasury, Office of State Assessed Properties” (“OSAP”). (J.A. 30) OSAP appraises Colonial’s

property as a single unit pursuant to T.C.A. § 67-5-1302. “The unit value of Colonial, which

traverses thirteen states, is apportioned to Tennessee by a recognized apportionment formula.” (J.A.

30; see T.C.A. §§ 67-5-1322 and 67-5-1323) “OSAP then applies the public utility assessment

percentage of 55% to Tennessee’s share of Colonial’s unit value.” (J.A. 30)

The record indicates that in the 1990s, airlines and railroads sued the Tennessee State Board

of Equalization (“the Board” or “the State Board”) “seeking ad valorem tax relief in the form of

equalization of ad valorem taxes.” (J.A. 31-32) Prior to this legal action, “all public utility

operating property in Tennessee was assessed at 55% of its equalized value, whether real property

or person property.” (J.A. 32) On September 30, 1997, the lawsuit resulted in “a new form of

equalization adjustment factor to the personal property portion” of public utility property. (J.A. 33;

137)

The classification of Colonial’s property as either real or personal property before

September 30, 1997 is not legally significant because both the real and personal property of public

utility companies was assessed and taxed at the same rate prior to the equalization adjustment. (J.A.

137; Def. Br. at 6) “On October 9, 1997, Colonial applied to the State Board to classify Colonial’s

operating pipeline property in Tennessee as personal property.” (J.A. 33) “Subsequently, OSAP

recommended to the State Board that substantially all of Colonial’s operating pipeline property be

classified as real property, thereby substantially depriving Colonial of the equalization relief

afforded to personal property by the State Board’s Order of September 30, 1997.” (J.A. 33) The

Board consolidated numerous pipeline classification appeals and on January 25-27, 1999, an

administrative law judge (“ALJ”) conducted a hearing on the appeals. On January 14, 2000, the ALJ

upheld the pipeline classification as real property. On February 14, 2000, Colonial appealed to the

Board. The Board held a hearing on January 31, 2001, and affirmed the ALJ’s decision on March

14, 2001. On May 11, 2001, Colonial appealed the Board’s decision to the Tennessee Court of

Appeals. On December 19, 2002, the Tennessee Court of Appeals reversed the Board’s decision

finding that “the pipelines and surface equipment shall be treated as personal property for purposes

of ad valorem taxation.” ANR Pipeline Co. v. Tenn. Bd. of Equalization, No. M2001-01098-COA-

R12-CV, 2002 WL 31840689, at *4 (Tenn. Ct. App. Dec. 19, 2002) (unpublished case).1 “[O]n

1

In an unrelated action, Colonial challenged Maryland’s classification of Colonial’s pipeline as real property.

“[T]he Maryland Court of Appeals held that the pipeline was personal property under the common law.” (J.A. 35; see

Colonial Pipeline Co. v. State Dep’t of Assessments and Taxation, 371 Md. 16, 39 (2002) (“the pipeline system should

be classified as personal property for Maryland property tax purposes.”))

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 3

February 14, 2003, the State Board filed an Application for Permission to Appeal in the Supreme

Court of Tennessee.” (J.A. 35) The application was denied on June 30, 2003. Pursuant to ANR

Pipeline Co., OSAP classified Colonial’s pipeline as personal property for 2003.

On May 18, 2004, the Tennessee state legislature enacted a law that “effectively nullifies the

2002 decision of the Tennessee Court of Appeals by amending T.C.A. § 67-5-501(9),” and

“deprive[s] Colonial of the equalization relief afforded to centrally assessed owners of personal

property.” (J.A. 37; see 2004 Tenn. Pub. Acts, ch. 719 (effective May 18, 2004)) In pertinent part,

T.C.A. § 67-5-501(9) was amended as follows:

For purposes of classification and assessment of property:

...

(9)(B) Real property includes, but is not limited to, the following:

...

(iii) Mains, pipes, pipelines and tanks permitted or authorized to

be built, laid or placed in, upon, or under any public or private

street or place for conducting steam, heat, water, oil, electricity

or any property, substance or product capable of transportation

or conveyance therein or that is protected thereby, excluding

propane tanks for residential use and above ground storage tanks

which can be moved without disassembly and are not affixed to the

land[.]

T.C.A. § 67-5-501(9) (emphasis added).

On August 11, 2004, Colonial appealed its 2004 ad valorem property tax assessment. On

August 18, 2004, a hearing was held on Colonial’s appeal. On September 7, 2004, Colonial received

a letter from the Comptroller’s officer stating that: “[t]he exception filed on behalf of the company

. . . raised issues regarding equalization and classification. . . . The issue of classification is a matter

pending litigation.” (J.A. 40) Colonial maintains that the letter indicates that the Board “deems

itself not to be the proper forum for an administrative appeal of the classification issued presented

by” the amendment to T.C.A. § 67-5-501(9). (J.A. 40) Colonial filed an appeal with the Board on

September 14, 2004. Since no hearing was scheduled to address the appeal, Colonial sued numerous

Tennessee state agencies and officials in federal court on February 24, 2005, alleging that it “ha[d]

no plain, adequate, or complete remedy at law to redress the wrongs complained of . . . apart from

the filing of this action.” (J.A. 41)

In the district court, Colonial argued that the amendment to T.C.A. § 67-5-501(9) deprives

it of equalization of the ad valorem taxation of its personal property, and maintained that the

pipeline classification as real property is arbitrary, capricious, invidiously discriminatory and

without a rational relation to any legitimate government interest in violation of the Equal Protection

Clause of the Fourteenth Amendment and the Tennessee Constitution. Colonial contended that

while motor carriers – namely, airplanes and trucks – are assessed at a forty percent tax rate for real

property and thirty percent for personal property, Colonial’s property is assessed at fifty-five percent

even though it provides and performs similar transportation and delivery services. “Colonial asserts

it is no different from any other transportation company and should be treated the same for property

tax purposes.” (J.A. 190) Colonial alleges that since Tennessee’s definition of real property was

enacted with a discriminatory purpose and results in discriminatory ad valorem taxation, the

classification constitutes discrimination against and an undue burden on interstate commerce in

violation of the Commerce and Supremacy Clauses.

Colonial sought declaratory and injunctive relief. More specifically, Colonial asked the

district court to 1) declare that Tennessee state statutes governing real property classifications,

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 4

including T.C.A. § 67-5-501(9), are unconstitutional and unenforceable, and 2) enjoin Tennessee

from classifying and assessing Colonial’s property in any way other than as provided in ANR

Pipeline Co., 2002 WL 31840689, at *4.

On March 17, 2005, Defendants moved to dismiss Colonial’s complaint under Fed. R. Civ.

P. 12(b)(1) for lack of subject matter jurisdiction arguing that the Tax Injunction Act, 28 U.S.C.

§ 1341, and comity principles barred Colonial from suing in federal court. Defendants maintained

that Colonial has a plain, speedy and efficient remedy before the Board and Tennessee state courts.

Contrary to Colonial’s allegation that no hearing was scheduled to address its appeal, Defendants

filed an affidavit from an ALJ assigned to Colonial’s appeal indicating that a status conference was

held on September 28, 2004. Defendants proffered an affidavit from the Comptroller’s office stating

that nothing in the September 7, 2004 letter “was intended to indicate that the Board was unable or

unwilling to entertain Colonial’s appeal of the 2004 assessment.” (J.A. 194)

For its part, Colonial maintained that “[a]s shown by the taped transcripts of the [legislative]

committee hearings, the individual Defendants, members of the State Board, acting in concert with

members of the Tennessee General Assembly, actively pursued legislative activity during the 2004

legislative session which culminated in the passage and signing of Chapter 719, the contents of

which are in direct conflict with Colonial’s position.” (J.A. 195) Colonial filed a motion under Fed.

R. Civ. P. 12(d) “asking for an opportunity to discover facts that would support its allegations of

federal jurisdiction.” (J.A. 196)

On November 10, 2005, in a thirty-two page decision, the district court found that:

the facts presented to the Court, while lengthy, are relatively simple

and substantially undisputed. The only material factual dispute

appears to concern the meaning of [the] September 7, 2004 letter.

Taking the . . . letter and the other facts in the light most favorable to

Colonial, as the Court would ordinarily do on a motion for summary

judgment, the Court finds there are no genuine issues of material fact

that require a preliminary hearing or trial before the Court may rule

on Defendants’ Motion to Dismiss under Rule 12(b)(1).

(J.A. 200; see Colonial Pipeline Co. v. Morgan, 231 F.R.D. 518, 528 (M.D.Tenn. 2005)) The

district court noted that “[t]he Tennessee Court of Appeals previously demonstrated that it can and

will consider Colonial’s constitutional claims because it ruled in favor of Colonial and other

pipelines in reversing the Board’s property classification decision in 2002.” (J.A. 208) It further

noted that

Colonial’s last involvement with the state review process took more

than five years from start to finish, but the undisputed record reflects

multiple parties were involved in a complex administrative

proceeding. Colonial began the state review process again in

September 2004, but has allowed the administrative matter to

languish while it pursued relief before the Tennessee Tax Study

Commission, the Tennessee General Assembly, and in this federal

court. Defendants produced evidence that the matter remains

pending on the State’s administrative proceeding calendar.

(J.A. 209) The court found that a “taxpayer’s intentional bypass of state remedies is exactly what

the Tax Injunction Act was designed to ward off [,] and the Act bars federal subject matter

jurisdiction where taxpayers pursue federal litigation to avoid paying state taxes or to gain a refund

of state taxes.” (J.A. 202) (alteration in original) (internal quotation marks and citation omitted).

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 5

The district court granted Defendants’ motion to dismiss holding that “as a matter of law . . .

Colonial does have a plain, speedy and efficient remedy and that the Tax Injunction Act bars this

suit.” (J.A. 201)

On November 28, 2005, Colonial filed a motion for reconsideration. On January 26, 2006,

the district court denied Colonial’s motion. The district court indicated that “the Court assumed in

Colonial’s favor all of the evidence.” (J.A. 58) (emphasis in original). It further indicated that

“[m]ost of the information in [Colonial’s] reply brief [to Defendants’ motion to dismiss] is the same

information Colonial now includes within its Memorandum of Law in Support of Plaintiff’s Motion

to Reconsider and in the hundreds of pages of deposition testimony and exhibits Colonial filed after

this case was closed.” (J.A. 58) “Colonial has not pointed to any intervening change in controlling

law, nor is re-examination of the case necessary to avoid a manifest injustice. The Court carefully

considered all of the parties’ evidence and legal arguments. The Court’s Memorandum and Order

expressly addressed each of the points Colonial now seeks to re-argue in its ‘Motion to Reconsider.’

There is nothing more the Court can add to what it already said.” (J.A. 59) Colonial filed a notice

of appeal on February 2, 2006.

On appeal, Colonial argues that the district court erred in finding that the Tax Injunction Act

was a bar to federal jurisdiction in the instant case. Colonial maintains that Tennessee cannot

provide Colonial with a fair and impartial administrative review because the Board has “prejudged

the issues, has a pecuniary interest in the outcome of this case, and is not independent of the

[Tennessee] executive branch.” (Colonial’s Br. at 3) In addition, Colonial argues that the Board

does not have authority to address the constitutional challenge raised in the instant case, and

highlights that its prior appeal took over five years to complete. Last, Colonial argues that the public

policy concerns which the Tax Injunction Act was enacted to address are not present in the instant

case.

DISCUSSION

I. Standard of Review

This Court reviews de novo the dismissal of a complaint under Fed. R. Civ. P. 12(b)(1) for

lack of subject matter jurisdiction. Am. Landfill, Inc. v. Stark/Tuscarawas/Wayne Joint Solid Waste

Mgmt. Dist., 166 F.3d 835 (6th Cir. 1999). “[E]very federal appellate court has a special obligation

to satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under

review.” Greater Detroit Res. Recovery Auth. v. U.S. E.P.A, 916 F.2d 317, 319 (6th Cir. 1990)

(quoting Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986)) (quotation marks

omitted).

II. The District Court Properly Dismissed Colonial’s Complaint for Lack of Subject

Matter Jurisdiction

1. The Tax Injunction Act

The district court properly dismissed Colonial’s complaint for lack of subject matter

jurisdiction. The Tax Injunction Act prohibits Colonial from challenging T.C.A. § 67-5-501(9) in

federal court. In pertinent part, the Tax Injunction Act provides:

[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 may be had in the courts of such

State.

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 6

28 U.S.C. § 1341. The Tax Injunction Act “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.” Tully v. Griffin, Inc., 429 U.S. 68, 73 (1976). “A federal district court is under an

equitable duty to refrain from interfering with a State’s collection of its revenue except in cases

where an asserted federal right might otherwise be lost.” Id. at 73; see King v. Sloane, 545 F.2d 7,

8 (6th Cir. 1976) (“The federal courts will not entertain actions for relief from State or local taxes

unless federal rights are protected in no other way.”); see also Mandel v. Hutchinson, 494 F.2d 364,

366 (9th Cir. 1974) (“strong public policy of federal noninterference with state taxation schemes has

been statutorily embodied in 28 U.S.C. § 1341.”). “By express statutory provision, Congress . . .

has directed that federal courts shall not enjoin 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 the

State.” King, 545 F.2d at 8. “The overall purpose of the Tax Injunction Act is consistent with the

view that the ‘plain, speedy and efficient remedy’ exception to the Act’s prohibition was only

designed to require that the state remedy satisfy certain procedural criteria.” Rosewell v. LaSalle Nat.

Bank, 450 U.S. 503, 522 (1981). Since the Tax Injunction Act “limit[s] drastically federal district

court jurisdiction to interfere with so important a local concern as the collection of taxes,” California

v. Grace Brethren Church, 457 U.S. 393, 408 (1982) (quotation marks and citation omitted), a

district court does not have jurisdiction over state and local tax matters where a “plain, speedy and

efficient remedy” is available in state court. 28 U.S.C. § 1341.

The Supreme Court has interpreted the “plain, speedy and efficient” exception of the Tax

Injunction Act narrowly. See Grace Brethren Church, 457 U.S. at 413 (“we must construe narrowly

the ‘plain, speedy and efficient’ exception to the Tax Injunction Act”). A state remedy is plain,

speedy and efficient if it provides the aggrieved party with a “full hearing and judicial determination

at which [a taxpayer] may raise any and all constitutional objections to the tax,” with ultimate review

available in the United States Supreme Court. Rosewell, 450 U.S. at 514 (quotation marks and

citation omitted); see also Hedgepeth v. Tennessee, 215 F.3d 608, 615 (6th Cir. 2000) (“The state

need only provide a full hearing at which a taxpayer may present and secure a judicial determination

at which he or she may raise any and all constitutional objections to the tax.”). This Court has found

that “[t]he plain, speedy and efficient remedy contemplated by [the Tax Injunction Act] merely

requires that the state provide certain minimal procedural protections against illegal tax collection.”

Hedgepeth, 215 F.3d at 615 (6th Cir. 2000). “State procedures that call for an appeal to a state court

from an administrative decision meet these minimal criteria.” Northwest Airlines, Inc. v. Tenn. State

Bd. of Equalization, 11 F.3d 70, 72 (6th Cir.1993). “The state remedy need not be the best of all

possible remedies.” Alnoa G. Corp. v. City of Houston, Tex., 563 F.2d 769, 772 (5th Cir. 1977).

“[T]he likelihood of plaintiff’s success in the state court is not a factor to be considered when

determining whether the jurisdictional prohibition of § 1341 applies.” Cities Serv. Gas Co. v.

Oklahoma Tax Comm’n, 656 F.2d 584, 586 (10th Cir. 1981). Although delay in reviewing a

taxpayer’s claim may be troubling, Long Island Lighting Co. v. Town of Brookhaven, 889 F.2d 428,

433 (2d Cir. 1989), “[n]owhere in the Tax Injunction Act did Congress suggest that the remedy just

be the speediest.” Rosewell, 450 U.S. at 520.

2. Tennessee Provides a Plain, Speedy and Efficient Remedy

Colonial argues that A) it does not have a state forum for raising its constitutional challenges

to T.C.A. § 67-5-501, and B) Board proceedings are too lengthy to constitute a plain, speedy and

efficient state remedy. Colonial’s arguments are meritless inasmuch as Colonial has a plain, speedy

and efficient state remedy within the meaning of the Tax Injunction Act.

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 7

A. Colonial Has A State Forum For Raising Constitutional Claims

Under Tennessee law, Colonial may challenge OSAP’s property assessment by filing

exceptions with the Board. T.C.A. §§ 67-5-1301(c), 67-5-1327(c) and 67-5-1328(a). Colonial may

raise a broad range of claims before the Board:

[w]hile the choice of methods for contesting the validity of taxes that

are assessed pursuant to T.C.A. § 67-5-1301, et seq. is extremely

limited, once a taxpayer is in the proper forum, a wide variety of

types of objections may be raised. These include objections based on

federal and state constitutional provisions, statutes and case law.

Northwest Airlines, Inc. v. Tenn. State Bd. of Equalization, 861 S.W.2d 232, 236 (Tenn.1993); see

also Richardson v. Tenn. Bd. of Dentistry, 913 S.W.2d 446, 456-57 (Tenn.1995). In the instant case,

the Board’s final decision may be appealed to the Tennessee Court of Appeals, and ultimately to the

Tennessee Supreme Court or to the United States Supreme Court if federal constitutional issues are

involved. See T.C.A. § 4-5-322(b)(1(B)(ii).

Colonial argues that the Board does not have authority to hear its constitutional claims. This

argument is plainly without merit. To the extent that Colonial raises “as applied” constitutional

challenges to T.C.A. § 67-5-501, the Board has authority to hear and decide these claims.

Richardson, 913 S.W.2d at 456-457. Admittedly, the Board is not authorized to hear and decide

“facial” constitutional claims concerning T.C.A. § 67-5-501. Id. However, “facial” constitutional

claims which the Board is not authorized to hear may be submitted to and argued before the

Tennessee Court of Appeals. Id. The Board’s limited authority to decide constitutional issues

“do[es] not establish that the State fails to provide a plain, speedy and efficient remedy for tax

challenges.” Wilson v. Bredesen, 113 F. App’x 70, 73 (6th Cir. 2004) (unpublished case). Since

state courts will be able to address Colonial’s constitutional challenges regardless of whether the

claims may be characterized as “facial” or “as applied” constitutional challenges, Colonial has a

state forum for raising constitutional claims.

B. Length of Board Proceedings

Colonial contends that Board proceedings are too lengthy to constitute a plain, speedy and

efficient state remedy. In support of this contention, Colonial points to its last administrative

proceeding. Admittedly, Colonial’s last administrative proceeding “took more than five years from

start to finish.” (J.A. 209) However, this last “proceeding involved multiple parties and tax years,

months of discovery, a three-day evidentiary hearing before an administrative law judge during

which the parties introduced extensive testimony and exhibits, and subsequent appeals to the State

Board, the [Tennessee] Court of Appeals, and the Tennessee Supreme Court.” (Def. Br. at 25) The

district court found that “the undisputed record reflects multiple parties were involved in a complex

administrative proceeding.” (J.A. 209) The length of the last proceeding does not appear

unreasonable given the complexity of the administrative proceeding.

Although “Colonial began the state review process again in September 2004,” it “has

allowed the administrative matter to languish while it pursued relief before the Tennessee Tax Study

Commission, the Tennessee General Assembly, and . . . th[e] federal court.” (J.A. 209) In fact, the

district court found that “Defendants produced evidence that the matter remains pending on the

State’s administrative proceeding calendar.” (J.A. 209) Since there is no indication that the Board

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 8

proceedings will be excessively delayed,2 the record does not support Colonia’s contention that the

current appeal before the Board – which involves only one party and one tax year – will take long

to resolve.

Moreover, Colonial’s contention that Tennessee cannot provide a plain, speedy and efficient

remedy is belied by Colonial’s success in the last proceeding. See ANR Pipeline Co., 2002 WL

31840689, at *4. Although the Board ruled against Colonial on the property classification issue in

the last proceeding, the Tennessee Court of Appeals reversed the Board. See id. The amendment

of T.C.A. § 67-5-501 does not establish that the state fails to provide a plain, speedy and efficient

remedy for Colonial’s tax challenges. Since the Tennessee Court of Appeals adequately addressed

Colonial’s concerns in the last proceeding, it is unclear why Colonial now seeks to adjudicate its

claims in federal court.

3. The State Board’s Alleged Bias

Colonial alleges that the State Board A) has asserted a position contrary to its classification

claims, and B) is inherently biased. Colonial’s arguments are meritless.

A. The Board Has Not Asserted a Position Contrary to Colonial’s Claims

Colonial cites the September 7, 2004 letter from the Comptroller’s office in support of its

contention that the Board has asserted a position contrary to Colonial’s claims. It cites Northwestern

Airlines, Inc. for the proposition that it must bring its tax assessment challenge in federal court

because of the Board’s alleged bias. Admittedly, the Comptroller’s September 7, 2004 letter

references pending litigation. However, the reference to pending litigation appears to have been

erroneous. The record indicates that the Board has not been involved in any litigation in which it

has taken a position in conflict with the classification claims made in Colonial’s complaint.

In Northwest Airlines, Inc., this Court permitted an assessment challenge in federal court

because the Board was involved in pending litigation in which it had asserted a position that directly

conflicted with the taxpayer’s claim. 11 F.3d at 72-73. In Wilson, this Court recognized that

[t]he “peculiar” and “unique” facts of [Northwest Airlines, Inc.]

presented “a rare exception” to the jurisdictional bar established by

the Tax Injunction Act for one reason. Id. at 71, 73. In that case, the

Tennessee Board of Equalization had taken a factual position on the

assessment level of personal property in an unrelated case pending in

federal court, and the position conflicted with the position of the

airlines when they appeared before the Board. Id. at 72-73. In this

unusual context, the court held that the Board's concurrent litigation

position “preclud[ed] it from properly considering the evidence

submitted by the airlines in support of their claims” before the Board.

Id. at 73-74.

2

In an unrelated case, Colonial presented evidence to support its contention that “Georgia’s ad valorem tax

system is plagued with . . . problems that render it virtually useless for correcting unequal tax assessments.” Colonial

Pipeline Co. v. Collins, 921 F.2d 1237, 1240 (11th Cir. 1991). More specifically, Colonial argued that “only two part-

time hearing officers are available to hear these appeals which has resulted in a backlog of more than 70 appeals,” id.

at 1240, and that Georgia’s “appeals procedure is excessively burdensome because it creates circumstances where a

centrally-assessed taxpayer must pursue simultaneous . . . appeals in each county in which it owns property.” Id. at 1241.

In the instant case, since Colonial has presented no evidence that would suggest systemic delays or backlogs in matters

pending before the Board, Colonial has a viable state remedy.

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 9

Wilson, 113 F. App’x at 74 (citing Northwest Airlines, Inc., 11 F.3d at 71-74). In Northwestern

Airlines, Inc., the Board adopted a position which prevented it from “properly considering the

evidence submitted by [the taxpayers] in support of their claims.” Wilson, 113 F. App’x at 74

(quoting Northwest Airlines, Inc., 11 F.3d at 73-74).

In the instant case, the Board has not been involved in pending litigation and has not

otherwise asserted a position that directly conflicts with Colonial’s claims. This case is

distinguishable from Northwestern Airlines, Inc., and analogous to Wilson, because no impediment

exists that would preclude the Board from considering Colonial’s classification claims. Like the

taxpayer in Wilson, Colonial cannot circumvent the state remedy by suing in federal court.

B. The Board’s Composition

Colonial maintains that the Board’s composition renders the Board inherently unable to

conduct an impartial administrative appeal. More specifically, it argues that four of the seven

members of the Board are members of the Tennessee government’s executive branch; that three of

the four remaining Board members have executive functions and are elected by the Tennessee

General Assembly; and that five of the seven members have revenue collection responsibilities in

Tennessee. Colonial contends that the Board worked in conjunction with the Comptroller to deny

equalization of ad valorem taxation, and that all Defendants acted jointly and severally and in

cooperation with members of the Tennessee General Assembly in pursuit of common scheme to

amend T.C.A. § 67-5-501(9) and deprive Colonial of equalization of ad valorem taxed. Colonial

alleges that employees and members of the Board and the Comptroller’s office drafted or supported

the legislation that amended T.C.A. § 67-5-501(9).

For their part, Defendants maintain “that none of the[se] employees . . . are members of the

State Board of Equalization who will be in a position to rule on Colonial’s appeal.” (Def. Br. at 31)

Defendants contend that Board members have no pecuniary interest in the outcome of Colonial’s

constitutional challenge because “the property taxes at issue are county and local taxes, not state

taxes.” (Def. Br. at 34) Defendants argue that “the composition of the State Board, as mandated

by statute, see Tenn. Code Ann. § 4-3-5101 (2005), does not appear to depart in any marked way

from the usual composition of such state boards.” (Def. Br. at 35)

With respect to this issue, the district court found that

Colonial has produced no evidence to establish the Board is even

involved in pending litigation on classification issues of interest to

Colonial, let alone that the Board has taken a position in such

litigation contrary to Colonial’s view. While the Board members’

involvement in the passage of Chapter 719 certainly indicates their

support of a change in the law, their involvement does not indicate

any prejudgment of the facts of Colonial’s specific tax case.

(J.A. 207) (emphasis in original) (footnote omitted). The district court properly considered and

rejected Colonial’s bias claims. Indeed, “[a]dministrative decision-makers are presumed to carry

out their duties with honesty and integrity.” Jones v. Greene, 946 S.W.2d 817, 825 (Tenn. Ct. App.

1996); see Doolin Sec. Sav. Bank v. F.D.I.C., 53 F.3d 1395, 1407 (4th Cir. 1995) (“we decline to

abrogate the presumption of honesty and integrity of administrators who serve as adjudicators”).

As the district court stated, “[a]n agency’s support of a public opinion on a policy issue does not

disqualify the agency on the grounds of bias from later acting in its adjudicative role.” (J.A. 206)

It is important to remember that “[e]ven if the Board had taken a position contrary to [the taxpayer]

on this issue, moreover, the Board’s position is a legal one subject to de novo review in state court,

which again would provide her an ample avenue of state relief.” Wilson, 113 F. App’x at 74

No. 06-5220 Colonial Pipeline Co. v. Morgan, et al. Page 10

(emphasis in original). Since the Tennessee Court of Appeals will conduct a de novo review of the

Board’s legal conclusion, Colonial’s allegations of bias are unpersuasive. As Colonial’s last appeal

illustrates, the state court may reverse the Board’s decision. Therefore, we decline to accept

Colonial’s bias claims.

4. Public Policy Concerns

Last, Colonial argues that this case does not present any of the public policy concerns which

the Tax Injunction Act was enacted to address. More specifically, Colonial maintains that it has not

withheld the payment of taxes. “The taxes for ad valorem tax year 2004 were paid under protest,

but paid nonetheless.” (J.A. 148) Colonial contends that since the state has not experienced a

revenue interruption, this “case does not involve any of the dangers that the Tax Injunction Act was

enacted to address.” (Colonial’s Br. at 58) Colonial does not cite any case law in support of this

proposition. The Tax Injunction Act “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.” Tully, 429

U.S. at 73. Comity principles bar Colonial from suing in federal court because

the state’s interest in administration of its judicial system is important

. . . [and] federal court interference would be an offense to the state’s

interest, and . . . such interference would both unduly interfere with

the legitimate activities of the state and readily be interpreted as

reflecting negatively upon the state courts’ ability to enforce

constitutional principles.

Gilbertson v. Albright, 381 F.3d 965, 972 (9th Cir. 2004). Therefore, even if tax payments have not

been withheld, the Tax Injunction Act bars the instant action.

CONCLUSION

As discussed above, Colonial’s claims are the precise type of claims the Tax Injunction Act

was intended to bar. The district court lacks subject matter jurisdiction because the Tax Injunction

Act, 28 U.S.C. § 1341, and comity principles prohibit the district court from issuing an injunction

enjoining the collection of state taxes. For the foregoing reasons, we AFFIRM the district court’s

decision.