United States District Court, D. Kansas
MEMORANDUM AND ORDER
W. BROOMES UNITED STATES DISTRICT JUDGE
case comes before the court on responses to the court's
show cause order (Docs. 43, 44, 45, 46, 47, 48, 49, 50.) On
October 17, 2018, this court entered an order to show cause
as to why this matter should not be remanded to state court
pursuant to the Tax Injunction Act (“TIA”), 28
U.S.C. § 1341, or the principle of comity. The matter
has been fully briefed. This action is REMANDED to state
court for the reasons stated herein.
Facts and Procedural History
notice of removal was filed by Defendant Kutak Rock LLP
(“Kutak”) which alleges that the court has
original jurisdiction over this case pursuant to 28 U.S.C.
§ 1331. (Doc. 1 at 5.) Plaintiffs filed a class action
petition in Sedgwick County, Kansas, bringing both state law
claims and claims pursuant to 42 U.S.C. § 1983 against
the City of Wichita, members of the Wichita City Council,
Kutak, and several other Defendants. (Doc. 1, Exh. A.) With
respect to Plaintiffs' claims under section 1983,
Plaintiffs allege violations of their Fifth Amendment rights
and their Equal Protection rights under the Fourteenth
Amendment. Essentially, Plaintiffs allege that the City of
Wichita (“the City”) issued general obligation
and special obligation bonds under Kansas law to finance
payment of certain improvements within the Remington Place
City issues general obligation and special obligation
municipal bonds under the General Improvement and Assessment
Laws of Kansas, K.S.A. § 12-6a01, et seq. A
governing body of a city is authorized under Kansas law to
make improvements that confer a special benefit to a property
and then to “levy and collect special assessments upon
property in the area deemed by the governing body to be
benefited by such improvement….” K.S.A. §
12-6a02. The statute goes on to list the improvements which
are allowed, including sewer systems and paving of streets.
2003, Plaintiffs purchased property in Remington. Prior to
Plaintiff's purchase, Peake, the developer of Remington,
petitioned the City “for the financing of street, sewer
and water improvements by the issuance of general obligations
bonds” under Kansas law. (Doc. 1, Exh. A at 11.)
Peake's petition was accepted and general obligation
bonds (“bonds”) were issued. In 2004, the City
spread special assessments across all of the lots in
Remington to pay for the bonds issued, including
Plaintiffs' lot. Plaintiffs have paid special assessments
levied by the City. The special assessments have not been
reduced. (Id. at 11-12.)
later, the bonds were refinanced and the City has allegedly
reaped savings of more than $60 million as of December 2017
due to interest savings. (Id. at 11.) Plaintiffs
allege that this resulted in the misappropriation of their
tax payments and that the City should have refunded the tax
payments by reassessing the special assessments levied
against their property. Plaintiffs have brought this action
on behalf of themselves and all other landowners who are
paying “excess special assessments levied under K.S.A.
12-6a01 et seq. and/or other” statutes and ordinances.
(Id. at 34.) Plaintiffs seek a declaratory judgment
that Defendants have “fraudulently, intentionally and
willfully misappropriated the millions of dollars of
‘saved' tax payments gained from the refinancing of
general obligation and special obligation bonds.”
(Id. at 36.) Plaintiffs further seek judgment in an
amount equal to the special assessments paid and an order
requiring Defendant Linda Kizzire, the Sedgwick County
Treasurer, “to remit all excess special assessment
funds collected.” (Id. at 38.)
have all moved to dismiss on various grounds (Docs. 27, 29,
31, 34.) Plaintiffs have moved to remand this action to state
court on the basis that it is not ripe for federal review
(Doc. 39.) On October 17, 2018, this court entered an order
to show cause as to why this matter should not be remanded to
state court under the TIA or the principle of comity. (Doc.
42.) Defendant Kizzire and Plaintiffs have no objection to
remanding this action for the reasons stated by the court in
its show cause order. (Docs. 43, 45.) Defendant Kutak filed a
response brief asserting that the TIA or the principle of
comity is not applicable as the special assessments levied in
this action are not taxes or, alternatively, Plaintiffs do
not have an adequate remedy under state law. (Doc. 44.) The
remaining Defendants joined in Kutak's response. (Docs.
46, 47, 48, 49.)
court has an independent obligation to satisfy itself that
jurisdiction is proper. Henderson ex rel. Henderson v.
Shinseki, 562 U.S. 428, 434 (2011). The TIA provides
that the “district courts shall not enjoin, suspend or
restrain the assessment, levy or collection of any tax under
State law where a plain, speedy and efficient remedy may be
had in the courts of such State.” 28 U.S.C. §
1341. The Tenth Circuit has held that section “1341 is
a broad prohibition against the use of the equity powers of
federal courts involving state tax matters.” Heuser
v. San Juan Cty. Bd. of Cty. Comm'rs, 162 Fed.Appx.
807, 809 (10th Cir. 2006) (citing Brooks v. Nance,
801 F.2d 1237, 1239 (10th Cir. 1986)). The TIA “applies
to claims seeking declaratory judgments, injunctive relief,
and refunds of taxes paid.” Mobil Oil Corp. v. U.S.
Dep't of Energy (In re Dep't of Energy Stripper Well
Exemption Litig.), 739 F.Supp. 1449, 1451 (D. Kan. 1990)
(citing Brooks, 801 F.2d at 1239 and Cities
Serv. Gas Co. v. Okla. Tax Comm'n, 656 F.2d 584, 586
(10th Cir.), cert. denied, 454 U.S. 1124 (1981)).
Moreover, the “principle of comity prohibits federal
district courts from exercising jurisdiction over § 1983
damage claims where the taxpayer has a plain, adequate, and
complete remedy in state court to correct any violations of
their federal rights.” Heuser, 162 Fed.Appx.
at 809 (citing Fair Assessment in Real Estate Ass'n
v. McNary, 454 U.S. 100, 116 (1981)).
“TIA is to be read as a ‘broad jurisdictional
barrier' and is ‘first and foremost a vehicle to
limit dramatically federal district court
jurisdiction.'” Hill v. Kemp, 478 F.3d
1236, 1246 (10th Cir. 2007) (quoting Arkansas v. Farm
Credit Servs. of Centr. Ark., 520 U.S. 821, 825 (1997)).
The TIA, or the related principle of comity, is applicable
when the challenged action concerns the “assessment,
levy or collection of any tax under State law.” 28
U.S.C. § 1341. The label that Kansas provides to the
assessment does not resolve “the question whether or
not it is a tax…. But that does not mean that the
phrase ‘under State law' is surplusage
either.” Hill, 478 F.3d at 1247.
Tenth Circuit has held that the critical inquiry on whether
an assessment is a tax under the TIA “focuses on the
purpose of the assessment and the ultimate use of
funds.” Id. At 1245 (citing Marcus v.
Kan., Dept. of Rev., 170 F.3d 1305, 1312 (10th Cir.
1999)). In determining whether it is a tax, the Tenth Circuit
has identified the following characteristics of state taxes:
[T]he classic tax sustains the essential flow of revenue to
the government, while the classic fee is linked to some
regulatory scheme. The classic tax is imposed by a state or
municipal legislature, while the classic fee is imposed by an
agency upon those it regulates. The classic tax is designed
to provide a benefit for the entire community, while ...