ROSEWELL v. LASALLE NATIONAL BANK
Legal provision: 28 U.S.C. 1341
ORAL ARGUMENT OF HENRY A. HAUSER, ESQ., ON BEHALF OF THE PETITIONERS
Chief Justice Burger: We will hear arguments next in Rosewell v. LaSalle National Bank.
Mr. Hauser, you may proceed whenever you're ready.
Mr. Hauser: Mr. Chief Justice, and may it please the Court:
My name is Henry Hauser and I'm an Assistant State's Attorney, and I represent the petitioners in this certiorari petition.
Certiorari was granted to the 7th Circuit last March.
This is a 1983 tax injunction case that was filed in the federal court and it deals with 1977 local real estate taxes which are assessed and contended to be unconstitutionally assessed on the taxpayer in the case at bar.
The response of the county tax officials... and that's Mr. Edward J. Rosewell, who is one of the petitioners.
He is the County Collector.
He has duties under the Illinois statutes to collect real estate taxes which were assessed for 1977 against the property owned by the taxpayer in this case.
Mr. Tully is no longer the County Assessor; he's been replaced by Mr. Thomas Hynes.
The response that the petitioners filed for this 1983 action was a motion to dismiss, which was premised among other things on the federal anti-tax injunction statute.
The motion to dismiss which is set out at Appendix, page 11, also sets out grounds that there was not a claim stated, and that there was available to the taxpayer, again, a plain, speedy, and efficient remedy in the state courts, and also a remedy available pursuant to the state statutory tax system.
Secondly, it was contended in that motion that the state taxpayer had available to her in this case a 1983 action in which she could have raised all of the claims which she desired to raise in the federal court injunctive action.
Unidentified Justice: A 1983 action in the state court, are you referring to, now?
Mr. Hauser: Yes.
Our contention is, Your Honor, that the taxpayer had available to her a remedy under 1983 which could have been filed in the state court under the Illinois case of Alberty v. Daniel.
Unidentified Justice: Any other remedies besides 1983 in the state court?
Mr. Hauser: She certainly did.
She had... one of the facts which needs to be made clear in this case is that the taxpayer alleges in her complaint that she had the funds to pay the tax in this case.
Therefore, because the taxpayer had the funds available to her to pay the tax in this case and sue for a refund, there is no threatened loss of the property and there is also available to her the possibility of filing a specific objection in the Collector's annual application for the sale of delinquent tax property.
So that she clearly had available to her the statutory Illinois proceeding.
Unidentified Justice: Well, her response to that in part is that since the State pays no interest on the tax while the refund's being litigated, that that's not an efficient remedy.
What do you have to say about that?
Mr. Hauser: Well, our response is that the taxpayer would have a right to file a 1983 action in a state court raising that precise claim.
So that even if that claim was not available, and the difficulty with part of this issue is that the Illinois Supreme Court has not had a chance... in fact, it's not been given a chance... to rule on the 1983 portion of a claim to interest.
The predicate of the taxpayer's argument in this case is basically the Illinois Supreme Court's holding in Clarendon Associates v. Korzen, and Lakefront Realty v. Lorenz.
Unidentified Justice: How far behind is your Cook County civil calendar these days?
Mr. Hauser: It's... well, we're about five years behind right now.
The difficulty... I need to make it clear that the specific objections are treated separately from the entire civil calendar in the Circuit Court of Cook County.
Unidentified Justice: You would call five years' delay a speedy remedy?
Mr. Hauser: Well, it's speedy in the sense that if the taxpayer... it's available to the taxpayer, and the taxpayer has a damage remedy that... at least a taxpayer who can pay has a damage remedy available to her.
And if the... I think the ruling of the district court was based on Tully v. Griffin.
The question in the anti-tax injunction statute is whether there would be a federal right which would otherwise be lost?
And there is no right under Illinois law to interest.
So the question comes down to, and it's a question that's not been resolved in Illinois, and the question is... and it's, I don't think, presented in this case... whether there is a constitutional right to interest.
Now, the way this case has been pled, the taxpayer has not asserted, we suggest, a constitutional right to interest, but it's--
Unidentified Justice: Mr. Hauser, isn't it possible that there's no constitutional right to interest, but that nevertheless, the denial of interest when you have to wait four or five years to get your money back, would prevent the remedy from being speedy, adequate, and efficient, or whatever the statutory language is?
Mr. Hauser: --Well I think that in that aspect one has to balance the threatened harm from a federal tax injunction against the delay or the harm that's caused to the taxpayer.
Now if the taxpayer has available to her in this case, as she did, a federal damage remedy, or--
Unidentified Justice: What is the federal damage remedy?
What will that give her?
Doesn't that raise the same question?
She only gets interest if she has a constitutional right to the interest.
Mr. Hauser: --Well, she would have to show that, judge.
Unidentified Justice: I don't think that responds to my question that one might assume there's no federal constitutional right to interest, and nevertheless feel that a remedy which denies interest on withheld money for a five-year period is not an adequate remedy, within the meaning of the statute.
Mr. Hauser: Well, again we argue the policy that under Tully v. Griffin, as long as long as the taxpayer suffers no irreparable injury, that whatever one might want to say qualitatively--
Unidentified Justice: Well, it's surely irreparable if you lose the use of the money for five years.
You're never going to get it back.
Maybe it isn't serious enough to trouble you but it is irreparable.
Mr. Hauser: --No, Your Honor.
It can be a serious matter, and it certainly can support a damage claim.
Unidentified Justice: Well, but it only supports a damage claim if there's a constitutional right to interest.
Mr. Hauser: Well, then, what's the... I question the policy behind the other side of the argument that there is some reason why there should be, why that must lay?
Unidentified Justice: Well, the reason would be that an adequate remedy ought to make the litigant who's been harmed whole.
That would be the reasoning, I suppose.
Mr. Hauser: Well, the damage remedy certainly does that, Your Honor.
Unidentified Justice: Well, five years at 15 percent a year, or even ten, to make it easier to compute, at least for me, that doesn't make them very whole, does it?
Mr. Hauser: Well, let me refocus that.
If the taxpayer can demonstrate an unconstitutional overassessment and if in fact the interest is a measure of damages, then the taxpayer will have a right to interest, and a taxpayer is therefore made whole.
Unidentified Justice: Yes, but these are all "ifs".
You don't concede on behalf of the County, do you, that she's entitled to interest?
Mr. Hauser: No, we don't, Your Honor.
We do not... the difficulty--
Unidentified Justice: You just say she's got a right to file another lawsuit and see if she can get it?
Mr. Hauser: --Right.
That's exactly right.
In the argument that lawsuit has indeed already been filed and that cause of action basically acknowledged by the 7th Circuit.
So we have a disappearance here of... you have a federal tax injunction where the taxpayer has available to her a federal damage remedy.
I need to make one thing clear--
Unidentified Justice: But only predicated on a constitutional violation?
Mr. Hauser: --Well, that's so; that's so.
But why else?
In other words, the policy is, the real question is the policy behind the federal injunction for state taxes.
Unidentified Justice: Right.
Mr. Hauser: And we respectfully submit that the risk... the complaint alleges, and I need to clarify this, the complaint alleges a two-year delay, not a five-year delay.
When I responded to one of the Justices' questions, the very last year that's still open in Cook County is five years old, but the average delay which is alleged under this remedy is two years, and that's admitted for the purpose of the motion to dismiss.
This doesn't take into account the fact that the taxpayer has 90 days within the filing of a specific objection to arrange a pre-trial settlement discussion with the lawyers for the County.
Unidentified Justice: What's the calendar like in the federal court for Cook County?
Mr. Hauser: The calendar of the federal court?
It's probably as crowded as any federal district court in the nation.
Unidentified Justice: Well, is it slower than... is it as slow as the state court?
Mr. Hauser: Well, we don't have any federal tax cases, Your Honor, with which we can measure this.
This is a leading case.
Unidentified Justice: What's the civil calendar generally?
Mr. Hauser: That I couldn't say, Your Honor.
That I couldn't say.
Unidentified Justice: Well, now, what's the interval from the filing of the complaint to trial in the federal court?
Mr. Hauser: I have no idea, Your Honor.
The record doesn't show it.
I wish I could help you out there but I can't.
Unidentified Justice: It's probably pretty long, isn't it?
Mr. Hauser: Well, it's probably... the question is whether that, whether the federal remedy is any speedier than the state, if we're talking about damage remedies.
The question is, what has the taxpayer lost if she gets all of the interest back?
In other words, if the delay deprives the taxpayer of the use--
Unidentified Justice: Mr. Hauser, you keep saying, if she gets the interest back.
But your position is she's not entitled to interest.
Isn't that correct?
Mr. Hauser: --Except that her position is that she--
Unidentified Justice: I know what her position is, but your position is that she's not entitled to interest.
Isn't that correct?
Mr. Hauser: --Under Illinois law.
Unidentified Justice: Under Illinois law or under the Federal Constitution?
Mr. Hauser: Well, we argue that also.
Unidentified Justice: Yes.
You say she's not entitled to interest, so how can you rely on the fact that she might win her lawsuit as the reason why she should lose her lawsuit?
Mr. Hauser: Well, if she can demonstrate the right to the interest, she ought not... unless she can demonstrate the right to interest--
Unidentified Justice: Yes, I know, but you don't concede she has any right to interest.
Mr. Hauser: --I couldn't, Your Honor, because we oppose that position, and I... but I say this, that unless the taxpayer can demonstrate a right to interest and demonstrate... or, let's say, interest may be the wrong word.
Perhaps the taxpayer must demonstrate a right to the recompense or the damages for the loss of the use value of the money that's tied up during the tax proceedings.
Now, that's the... that's argued in the taxpayer's brief.
Unidentified Justice: Well, then she wouldn't... you can turn that argument on its head too, and say that if she can't demonstrate that she has a right to what she's claiming, she's not entitled to the injunction that she's claiming, not because of the anti-injunction statute, but because of a shortcoming in her pleadings.
Mr. Hauser: We argue that too, Your Honor.
We argue that the allegations that are made in the complaint are not sufficient to demonstrate a violation of her Fourteenth Amendment rights.
Unidentified Justice: Isn't the real question, how soon should she get a hearing?
And you're arguing... you certainly are arguing the merits of her case but isn't the question whether she should be able to get an earlier hearing in a federal court than she could in the state?
Mr. Hauser: --Well, the question is whether she's entitled to an injunction in a federal court.
Unidentified Justice: Yes.
Mr. Hauser: And the question in the federal court is whether... not only whether there's a plain, speedy, and efficient remedy in the state court, but also whether there's a remedy in the federal court.
Now, she must of course be able to demonstrate that right, because, if in other words you--
Unidentified Justice: Well, is it true that in her administrative remedy, is the remedy provided by the Illinois tax statutes and refund statutes, there is no interest allowable in those, is there?
Mr. Hauser: --Not... the way--
Unidentified Justice: Is that right or not?
Mr. Hauser: --As a matter of Illinois statutory construction, that's correct, Your Honor.
Unidentified Justice: All right.
So you rely on the availability of an adequate remedy in the state courts on 1983?
Mr. Hauser: Or the availability in federal court of a similar damage remedy which is the predicate for our state argument.
The point that's raised is that if... the question is, and I think I need to at the outset distinguish between the limitation that's contained in 1341, which is a limitation on injunctions.
It creates no jurisdiction.
1341 is a limitation on the exercise of federal injunctive power, but it is a limitation which was necessitated initially by the abuse of diversity jurisdiction, where taxpayers from outside of states would tie up state taxes, like has happened in Illinois, and has happened in this case, effectively, where the taxes have been tied up now for nearly two years without even the matter being decided.
But there's a further view when you have a 1983 action being made, being stated, because that's different from a diversity case.
In other words, the focus in a 1341 action where diversity is involved is solely upon the state remedies, because the federal court had no right to make federal remedies for the state courts under diversity jurisdiction.
But under 1341, and under the Civil Rights Act, where you have a jurisdictional predicate based on federal statute, then the question has to go back really to the historical precedent.
Cases like Matthews v. Rodgers, and Great Lakes Dredge & Dock v. Huffman.
And Tully v. Griffin is a situation where that question is met.
And the articulation of the equity rule is that a federal court is under an equitable duty to refrain from interfering with a state's collection of its revenue except in cases where an assertive federal right might otherwise be lost.
Now, the question is where--
Unidentified Justice: Mr. Hauser, it's a little late in the argument, but how are you going to get under 1983?
Mr. Hauser: --Well, that's my question too, Your Honor.
I suggest that--
Unidentified Justice: That was another question.
That leads to my more threshold question, and that is this: that in the petition for certiorari you listed only one question.
Mr. Hauser: --That's correct, Your Honor.
Unidentified Justice: And the Court of Appeals for the 7th Circuit referred to that question as the sole question.
Mr. Hauser: That's right.
Unidentified Justice: I'm looking at page 2a of the certiorari petition.
Mr. Hauser: That's correct, Your Honor.
Unidentified Justice: Now, all of a sudden, on the argument, we have three questions.
How'd that happen?
Mr. Hauser: Well, here's how it happened, Your Honor.
Unidentified Justice: One of those questions is the one to which my brother Marshall has just directed your attention.
Mr. Hauser: --Yes.
One of those has split, and the last two questions are the 1983, state 1983 and the state statutory remedy.
The question about 1983 was raised before the district court.
Unidentified Justice: But it's not a question, then, on which we granted certiorari, nor fairly subsumed within it, is it?
Mr. Hauser: Well, it's not... we suggest that it is.
Unidentified Justice: We granted certiorari to consider a single question and the Court of Appeals for the 7th Circuit said they had a single, and to use their word, s-o-l-e, sole question.
Isn't that correct?
Mr. Hauser: Well, that's correct, Your Honor, although I suggest that if the decision of the 7th Circuit is incorrect, then if the decision of Judge Bua in the district court was correct but for the wrong reasons, then it simply makes sense to reach that issue as a matter of judicial economy.
Now, I pointed out, and I did argue and I did set out in my brief that we were raising a question that arguably might not be available below, and we did argue in our brief that we perceived the question to be subsumed within that question.
Unidentified Justice: Then the only question presented in the certiorari petition and the only question that the Court of Appeals undertook to decide was whether or not there was a plain, speedy, and efficient remedy in the state courts.
Is that correct?
Mr. Hauser: --My response to that is that--
Unidentified Justice: Isn't that correct?
Mr. Hauser: --Well, that's the question that they decided, but--
Unidentified Justice: Yes.
And the only question presented on your petition for certiorari.
Mr. Hauser: --Well, no, there's two questions.
Unidentified Justice: Well, I only see one, and I'm looking at page 2 of your petition for certiorari: "Question presented".
And there's only one question.
Mr. Hauser: --That's correct, Your Honor.
However, that question includes both whether the plain, speedy, and efficient remedy is included in a state 1983 action which in Illinois state--
Unidentified Justice: Yes.
Whether or not there was a plain, speedy, and efficient remedy in the state courts.
Mr. Hauser: --Right.
Unidentified Justice: But your point is, your question did include two alternative state remedies, is it not?
Mr. Hauser: Yes, it really did.
Unidentified Justice: Yes, but it didn't include the propriety of a federal 1983 action.
Mr. Hauser: That's correct, Your Honor, although that's a fundamental question which is--
Unidentified Justice: Well, that's a fundamental and quite a different question from the one embraced in your certiorari petition on which we granted.
Mr. Hauser: --It is a different question, although I think that if there is federal jurisdiction lacking, again, the district court ruled in the favor of the County, on granting the motion to dismiss, and it doesn't seem to make a lot of sense to allow a judge to be reversed, if he was right for the wrong reason.
I think that might be more the failure to articulate the reasons for a decision and it might be more appropriate to encourage district courts to articulate the reasons for their opinions.
Unidentified Justice: Don't you really... just like in this case, the question of the power to issue the injunction, was reached before decisions on whether the complaint stated a cause of action.
Mr. Hauser: Well, the difficulty--
Unidentified Justice: Which is rather normal, isn't it?
Mr. Hauser: --Well, the difficulty is that the usual way that these tax cases go is under a 1341 analysis of the federal tax injunction statute.
And the other questions get subsumed, in fact, lost.
And if there are underlying difficulties and those cases present important issues, then it's the underlying issues that that case is going to be cited as authority for.
I think that for that reason we thought it important not to raise for the court, to give Your Honors a chance to rule on it.
And we indicated that we were raising the issues that had not been particularly presented to the district court.
Fundamentally, the problem that I need to return to is the relationship between 1341 and the historical overview that is set forth in Tully v. Griffin, where a federal court is said to be under an equitable duty to refrain from interfering with the state's collection of its revenues except in cases where an asserted federal right might otherwise be lost.
Unless the taxpayer can demonstrate an asserted federal right, demonstrate that right, assert it, and prove it, then there ought not to be a federal injunction.
If the facts and if the complaint indicates that the taxpayer will not suffer irreparable injury, that is, that the taxpayer will not suffer an injury which can't be recompensed by money... and we're talking about money here; we're not talking about the loss of the taxpayer's property.
In other words, because the taxpayer had available to her the state... the damage remedy, because she was able to pay, a state refund remedy, there is no threat in this case of loss of the property.
If the property isn't lost, then we're only talking about interest, and if that's the federal right that's going to be lost, then the taxpayer can certainly assert that right, that there's no threat of the loss of that federal right, then we respectfully suggest that under Tully v. Griffin there is no right to a federal injunction.
Unidentified Justice: Is a 1983 action available in state courts in this kind of tax case?
Mr. Hauser: Well, we don't know that, Your Honor, because it's never been filed.
Unidentified Justice: You don't know it.
I gather from your brief you question whether 1983... we've never held that a state court must entertain a 1983.
Mr. Hauser: --That's correct.
Unidentified Justice: We've held it in Thiboutat last term that it may.
Mr. Hauser: That it may.
Unidentified Justice: Now, if there's no requirement that... you don't know whether it will or won't, does that bear on the plaintiff's speedy and efficient remedy?
Mr. Hauser: Yes.
Well, Hillsborough v. Cromwell says that if the remedy in the state court is uncertain, then 1341 is avoided.
But our argument is that the facts in Hillsborough were a situation where the uncertainty was not the result of a failure of any taxpayers to file the suit.
In other words, you can't establish a state remedy, particularly a new remedy under 1983 unless some taxpayers file it.
And there's never been a 1983 tax case filed in the state court, because the history has been that those get filed in the federal court.
It's only after cases when people start thinking along the lines of filing 1983 cases in the state court, as occurred in Martinez, and it's occurred in Thiboutat, that you have this clash--
Unidentified Justice: My question really is, it's clear that the action is available in the federal court; no doubt about that.
If it's uncertain whether it's available in the state court, then why can't the taxpayer seek an injunction in federal court with a 1983 suit?
Mr. Hauser: --The question is, there's a failure, I think, to distinguish between injunctive relief as against damage relief.
Now, Alberty was a damage case, and there's a federal case... Fulton Market, the 7th Circuit; Fulton Market v. Cullerton, which is a damage case also, which deals with allegations very similar to this case.
We respectfully submit that the analysis has to be in view of the disruption that's created to a state tax system by a tax injunction, where tax machinery is disrupted, where there's an obstruction of revenue, perhaps damaging the budget, where there's a risk, of taxpayer insolvency which is shifted to the state, and where there are state law questions that need to get sorted out all along.
Those are all factors which were set out in your Perez concurrence in the dissenting opinion.
In that situation it's necessary to balance the damages threatened to the state, as against what we might consider the best Illinois damage remedy.
And if the fact is that the taxpayer will not suffer any irreparable injury, that the taxpayer will not lose her property and must merely wait to be recompensed by damages for a claim which she must establish under Tully, because if she can't establish the claim under Tully then there's no federal right which will be lost, then we respectfully submit that the policy underlying federal tax injunctions and the limit of those federal tax limitation injunctions--
Unidentified Justice: Does this imply that were this 1983 action of the taxpayer in federal court limited to a claim of a damage remedy, you wouldn't be making this argument?
Mr. Hauser: --I'm not sure that I understand that.
If there was no--
Unidentified Justice: Well, would you be resisting the 1983 suit, seeking only damages in federal court?
Mr. Hauser: --We resisted that in federal court and we lost in the 7th Circuit and certiorari was denied.
I think with two justices dissenting from the denial.
So the law as it stands... and we accept the law as it stands... is that there is a federal damage remedy that's available in the northern district of Illinois for any money damages that we felt--
Unidentified Justice: But it's an availability under federal law.
You're in a state court but you're appealing the federal law.
And do you have any authority that 1341 should be construed to include remedies in state courts under federal law as well as under state law?
Mr. Hauser: --I think that--
Unidentified Justice: After all, it will be federal law, won't it?
Mr. Hauser: --Well, the difficulty we--
Unidentified Justice: Well, will it or not?
Mr. Hauser: --I think it might--
Unidentified Justice: If it's under 1983 it is a federal statute, it will be federal law.
Mr. Hauser: --It will be a state determination of the federal law.
Unidentified Justice: Well, that the action substantively will proceed under federal law?
Mr. Hauser: Right.
And I think that supports my position, because when the Illinois courts look to the--
Unidentified Justice: Oh, I don't know.
It's a question of construction of 1341.
Mr. Hauser: --Well, yes--
Unidentified Justice: A remedy in the state courts.
Does it mean under federal law as well as under state law?
Mr. Hauser: --Well, here's what I would say to that--
Unidentified Justice: I know what your answer is, but... your answer is, yes.
Mr. Hauser: --The answer is that the state court will look to federal law, much the same way that federal courts look to state law in diversity jurisdictions.
You have a straight example of reverse diversity jurisdiction, and that is, I think that once Martinez is decided the way it is and once Maine v. Thiboutat is decided the way it is, that's a problem that's created.
And I don't think it's a problem because if you look at the final, in the final analysis, the taxpayer indeed has a choice.
The taxpayer, who is not threatened with irreparable injury, has a choice of filing either in the state court or in the federal court to recoup the damages which are monetary damages threatened by those parts of the Illinois remedy to which she objects.
Unidentified Justice: But if the remedy you're relying on to get you out from under 1341 is a damage suit in federal court, it simply doesn't come within the language of 1341.
Mr. Hauser: That's correct, Your Honor.
And the reason why that's so is because initially 1341 was directed to diversity actions.
Unidentified Justice: Well, however it may be, you can't invoke 1341 by saying that she has an adequate damage remedy in federal court.
Because it doesn't come in under the terms of 1341.
Mr. Hauser: But we do argue that in Tully v. Griffin, a 1341 case that under the broader view of equity law, that a federal court is under an equitable duty to refrain from interfering with a state's collection of its revenue, except in cases where a federal right may otherwise be lost, and the view is not restricted solely to the state remedy, but to the federal remedy too.
Unidentified Justice: Mr. Hauser, I think my brother Rehnquist's point is that the plain language of 1341 says that a federal court does not have the power to enjoin the collection of state taxes where there is a speedy, a plain, speedy, and efficient remedy in the state courts, in the state courts.
Mr. Hauser: That's right.
My response to that is, Your Honor, that unless you distinguish between 1341 and the traditional limitations put on any federal district court in dispensing injunctions, you will end up with a plain, speedy, and efficient federal damage remedy, as we have in this case, that will--
Unidentified Justice: Well, there might be reasons not to issue an injunction in various cases, depending upon--
Mr. Hauser: --Yes.
Unidentified Justice: --In any particular case, depending upon the generally applicable maximus of equity with respect to irreparable damage and no adequate remedy at law and the rest of it.
But the question in this case is whether or not such an injunction is barred by 1341, and that's the only question, isn't it?
Mr. Hauser: Well, no.
We think the question is broader because of the language in Tully v. Griffin, in Tully v. Griffin.
And that's because you have the limitation of diversity jurisdiction.
As you start creating more federal rights, either in federal question jurisdiction by statutes or in 1983 by expanding that jurisdiction, it's necessary to view the equitable powers of the district courts in the broader view, the one that's articulated in Tully v. Griffin, which is clearly a 1341 case.
Unidentified Justice: Well, what case is there that fits in to say that you do have a remedy in the state courts of Illinois under 1983?
What case do you have that says that?
Mr. Hauser: I have a case, I cited it in my brief, Your Honor, Alberty v. Daniel.
And Alberty v. Daniel indicates the willingness of Illinois courts to accept 1983--
Unidentified Justice: I didn't say, willingness; I said, that says it can be done.
Mr. Hauser: --Well, Your Honor, if Your Honor demands a case, me to demonstrate a case that's never been filed, I can't.
And no taxpayer--
Unidentified Justice: Well, isn't that what the statute requires?
Mr. Hauser: --No, I don't think so, because I think that is--
Unidentified Justice: Well, I think the statute requires either a case or a statute which says that the courts of Illinois are open for this point, 1983.
And you don't have either.
Mr. Hauser: --The only point I would make, Your Honor, is that as far as 1983 is concerned, the Illinois appellate court in the district in which the taxpayer's property is located has accepted jurisdiction of a 1983 action arising out of employment claims.
It wasn't a tax case; but no Illinois court has ever denied a 1983 tax claim.
Unidentified Justice: I know a lot of other things they've never denied.
They've never denied an admiralty case either, have they?
Mr. Hauser: That's correct, Your Honor.
Unidentified Justice: Mr. Hauser, just one question, if I may.
This argument that you're now making really depends on our agreeing with the 7th Circuit decision in the Fulton Market case, doesn't it?
Mr. Hauser: Yes, that's correct, Your Honor.
If there's a disagreement with that, then that changes the availability of remedies altogether.
Thank you very much, Your Honors.
Chief Justice Burger: Mr. Fox?
ORAL ARGUMENT OF JAMES L. FOX, ESQ., ON BEHALF OF THE RESPONDENT
Mr. Fox: Mr. Chief Justice, and may it please the Court:
As it has been remarked, there is one basic question before the Court today.
That is, is there a plain, speedy, and efficient remedy at hand, available without doubt... Cromwell... in the courts of Illinois?
Counsel has maintained in his petition for cert that, one, the present statutory remedy which returns a taxpayer's money as alleged and procedurally admitted, after about two years without interest, is adequate; it is plain, speedy, and efficient, and he merely reiterates the holdings, not the dicta but the holdings of the Supreme Court of Illinois in Lakefront, reiterated in the Clarendon decision, and in a host of other decisions in Illinois.
The Illinois court has unequivocally determined that the nonpayment of interest does not render a remedy inadequate.
Unidentified Justice: Do you equate inadequate with inefficient?
Mr. Fox: Yes, sir.
Mr. Chief Justice, with the PS&E> ["], plain, speedy, and efficient.
I believe if we go back into cases like Great Lakes and into Matthews v. Rodgers and the extensions of those,
"plain, speedy, and efficient. "
has been declared coterminous with or the same, has the same meaning as "adequate".
Unidentified Justice: Well, there are a great many claims against the United States in which no interest is allowed.
Not in this context, but would you say that that's not an adequate remedy that might lay a foundation for some other type of relief such as equitable relief?
Mr. Fox: Sir, in the context of the United States, first of all, we do have the question of the sovereign.
And interest allowable against the sovereign is by statute, as witness the Internal Revenue Code.
Unidentified Justice: Well, haven't you got a sovereign here?
Mr. Fox: We are not claiming, Mr. Chief Justice, that Illinois is compelled to award interest.
That question is not specifically within this case.
I refer, for instance, to Judge Haynsworth's remarks in the Livingston case which we have cited in our brief wherein he said South Carolina may elect to pay interest or not.
It is a sovereign and it doesn't have to award interest on tax refunds.
But if it does not, it then opens its door to federal jurisdiction by not providing a plain, speedy, and efficient remedy.
In the 7th Circuit we had the same thing in Olin Mathieson.
Unidentified Justice: Well, there's a certain circularity to that, though, counsel, isn't there?
Because if it opens the doors to federal courts but is not required to pay interest, all you get is the same relief in federal court as you would have gotten in state court, that is, your refund without interest.
Mr. Fox: No, sir, because we do not sue for a refund... 1341 is directed only to injunctive relief and this case stands on that particular proposition which we have alleged.
We seek injunctive relief and we maintain that injunctive relief is the only relief which will maintain this taxpayer whole.
We maintain that if we're going to keep it--
One, we have an admitted, we believe, constitutional deprivation of--
Unidentified Justice: Now, what is that?
Mr. Fox: --No, sir.
The constitutional deprivation is the inequitable tax assessment we're under, under a system--
Unidentified Justice: It's an equal protection claim?
Mr. Fox: --An equal protection and due process, no matter how you call it.
It's due process in this respect, that a lien for taxes affixes against a person's property on the first day of January in any particular tax year, and therefore amounts to a taking, as it were, of the taxpayer's property without due process of law, and it of course subsumes the equal protection--
Unidentified Justice: You're... the lack of provision for interest is simply the reason why the remedy is inadequate?
Mr. Fox: --The remedy is inadequate.
As I said before--
Unidentified Justice: And the merits of your constitutional claim are not here at all, are they?
Mr. Fox: --I think they are procedurally admitted.
Unidentified Justice: Yes, but the only question is, whether or not 1341 bars an injunction.
Mr. Fox: Exactly.
Unidentified Justice: There's no question here about whether or not, for some other reason, you may not be entitled to an injunction.
Mr. Fox: That is correct.
At least not in the petition for cert. This matter, by the way, came on below on a petition for a preliminary injunction, which was denied and the case dismissed under the grounds which are set forth in the Appendix by the district judge.
The elementary question is not really... again, I want to emphasize that... not whether or not we have a constitutional right to interest.
We are not litigating that particular question today.
Unidentified Justice: But then, why should it be of any importance in the administration of the anti-injunction statute that a state doesn't allow interest, if you have no constitutional right to it?
Mr. Fox: Because, I believe that to take a man's money today... to paraphrase Judge Learned Hand about 50 years ago in the Procter & Gamble case, to take a man's money today as a condition of his going into court and being able to sue for a refund and then two or more years later giving back that same money, is giving back less than the state took.
Unidentified Justice: So, even though it is not a constitutional violation, it brings into play, it relieves you from the bar of 1341?
Mr. Fox: Yes, sir.
Now, it would be a second story if we were to go into the condition which obtains in the financial world today... and it is not without some degree of irony that the day on which this Court granted certiorari the prime rate was set at 19 percent, which is not available to the average taxpayer, of course, at prime.
Now, is it... and this is a second question, or a sequel.
Does it deny due process to the citizenry of Illinois merely to have a remedy which merely after an hiatus of two or more years gives back far less than the state took, meanwhile allowing the state to use that taxpayer's money to generate interest for the state which the county treasurer is allowed to do?
Unidentified Justice: Now you're talking about a Fifth Amendment taking?
Mr. Fox: Yes, sir.
It is not in this case and I don't mean to go far afield.
Unidentified Justice: Well, but you've said it's not in this case, but you've put it in the case.
Mr. Fox: I apologize--
Unidentified Justice: All right.
Mr. Fox: --because one of the justices had asked me--
Unidentified Justice: I'm not saying this critically.
Mr. Fox: --I see.
Unidentified Justice: I hope it's analytically.
Mr. Fox: It is.
Unidentified Justice: You're really raising a taking point when you make that argument, a point which you then say is not in the case.
Mr. Fox: But under the circumstances of this case, where we allege, and it is admitted, there was an unconstitutional taking, we believe that a remedy which does not give back everything that is taken, making the party whole, is itself constitutionally infirm.
Unidentified Justice: But I thought you said a minute ago that Illinois was not required to pay interest?
Mr. Fox: It is not.
Unidentified Justice: Then did I misunderstand you just now in saying that it is?
I mean, what's less, less than what?
You said they got back less.
Mr. Fox: Why?
Because let's merely assume a 12 percent inflation rate and give it back in two years, you're giving back 75 cents for the dollar you took.
Unidentified Justice: You got less because of inflation, not because you were denied interest.
Mr. Fox: Because of inflation.
That's one aspect, one prong.
The other prong is this, as Judge Learned Hand says, that a dollar a year from now is not worth a dollar today.
And if they take a dollar today, even absent inflation, and give it back a year from now without interest, they have not given me my dollar back.
Unidentified Justice: Well, this is still a question of the construction of 1341, isn't it?
Mr. Fox: That's right.
I grant you, Mr. Justice White--
Unidentified Justice: And so you will argue that that is not a plain, speedy, and adequate remedy, or whatever the words are.
Mr. Fox: --That's what this appeal is all about.
Unidentified Justice: I suppose one relevant question is, what the Congress had in mind in what an inadequate remedy might be.
Wasn't it, historically, the notion that interest isn't allowable against the government, absent some specific statute?
Mr. Fox: That is correct.
There is a... if you go down and make a tally of the states, some do, some don't.
Many of the states which don't allow interest allow declaratory or injunctive relief.
In fact, even in Illinois, sir, in the--
Unidentified Justice: Well, is there any... have you got any evidence at all, any legislative history or any other indications that Congress thought the unavailability of interest was tantamount to the lack of a speedy and adequate remedy?
Mr. Fox: --No, sir, the legislative history of 1341 which I have been able to read is not indicative of that particular point.
It merely recites the problem of out-of-state corporations coming in and interrupting the tax collection procedures.
Unidentified Justice: Well, what you're saying, it seems to me, is that you treat "efficient" as a synonym for "adequate".
And this remedy is not efficient, that is, adequate, because it isn't speedy.
Mr. Fox: Nor is it plain.
Unidentified Justice: Well, I'm not sure what plain means in this setting.
Mr. Fox: I think the 7th Circuit views that... I think the 7th Circuit, Mr. Chief Justice, used the term "plain" in its decision.
Unidentified Justice: Well, I'm not sure what it means.
Plain or fancy wouldn't make much difference.
The important thing is whether it's speedy and whether it's adequate.
And speedy and adequate are really interrelated, aren't they?
Mr. Fox: I believe so; yes.
I think they are subsumed, that speedy is subsumed under the word adequate, which seems to be more generic.
Unidentified Justice: If it were speedy so that you got it in 60 days, you wouldn't be making all this argument about the dollar and the inflation and the use of the money.
Mr. Fox: On the other hand... I would not say that either, sir, quite; because if we're looking at a basic constitutional deprivation to begin with, somehow or other that... For instance: let us suppose that this constitutional deprivation of high taxes or high assessments were motivated by ethnic or religious or racial considerations on the part of the Assessor of Cook County, is it proper relief, is it adequate relief to say, oh, go ahead, Mr. Polish, or Mr. Irish, or Mr. Italian taxpayer, in this particular neighborhood, pay your taxes in full under protest, sue for refund, and then in 60 days you can get your money back?
Unidentified Justice: Well, that's just what 1341 says, isn't it?
You cannot enjoin in federal court the situation that you specify, if it's a tax... if it's limited to taxation.
Mr. Fox: I think, Mr. Justice Rehnquist, that the fact that this insult occurs as a result of a constitutional deprivation removes so-called irreparable injury, removes this period of time, pure time.
For instance... and I would refer, let's say, to the case of Henry v. Greenville Airport, which was cited in our brief, which states that when a constitutional right is invaded like this, that questions of irreparable injury and the like are not even properly considered.
Unidentified Justice: But 1341 purports to impose a prohibition over and above the normal injunctive precautions, doesn't it?
Mr. Fox: That is right.
And again, however, we are in a theoretical area when we say, if the next day you could get your money back... which is absolutely impossible under the Cook County collection procedures, because you pay your taxes over a period of six months and are not able to sue until about nine months after the taxes have been paid in the first instance.
Unidentified Justice: What would be a reasonable limit, in your mind?
Presumably there isn't a jurisdiction in the country that is going to give you your taxes back on the same day you pay them under protest.
Would 20 days be sufficient?
Mr. Fox: I think... may I answer this in another way?
I think that there is... personally, that injunctive relief should lie at either the state level to provide an adequate remedy, immediate injunction at the state level to provide an adequate remedy, or some other remedy than requiring a taxpayer, as here, to pay 3-1/2 times the just taxes merely to have the right to go in to sue to have them come back.
Unidentified Justice: So you say the state remedy contemplated by 1341 must be injunctive in nature?
That a payment under protest and ultimate refund, even in a very short period of time, isn't adequate?
Mr. Fox: That's right.
My own personal opinion, however, I think that if Illinois paid reasonable interest on tax refunds, commensurate with the market today, I do not think that we would be before this Court today.
Unidentified Justice: And you didn't do it because you knew you couldn't make them pay it.
Mr. Fox: We couldn't make it, we couldn't make it.
I have to cite... we have been told that there is a possibility out there of a 1983 action, but we have three cases in Illinois in which the issue has been presented to the Illinois court... and the Illinois court has... with these federal equal protection due process claims, and the Illinois Supreme Court came back and said, you can test those claims by paying your taxes in full and suing out a refund, and you can get an answer to your constitutional claims.
It did that in the case of La Salle National v. the County of Cook in the 57 Illinois 2d, which we have cited.
It did the same thing in the case of Fulton Market Cold Storage Company at the appellate level and then at the Supreme Court level, again a case cited in our brief.
And as recently as this last year in Chrysler Corporation v. Gunderson, the Illinois court, the appellate court, aware of the decision of the 7th Circuit in this case, said, furthermore, our own state Supreme Court's clear rulings in Lakefront and Lorenz, and Clarendon, stating that the remedy is adequate without interest, remain controlling precedent on us, as on all Illinois courts, unless reversed by that court or by the United States Supreme Court.
Unidentified Justice: That case is not in your brief, is it, counsel?
Mr. Fox: Sir?
Unidentified Justice: Chrysler Corporation?
Mr. Fox: It's in the response to the petition, sir.
Unidentified Justice: I see.
All this discussion, and I've contributed to it, talking about the specific words, has maybe taken us off of what was the genesis of the Anti-Injunction Act?
Wasn't it to mandate a direction to the federal courts to keep hands off of state tax procedures?
Just let the states work it out on their own?
Mr. Fox: Mr. Chief Justice, the genesis of that Act was the problem encountered under 1332 jurisdiction, where foreign corporations were coming into the several states and enjoining state tax collections.
That's in Senator Bone's remarks in the legislative history.
I think there are... at least through that entire discussion.
It is not a protection, really, as/or against citizens of the state itself bringing actions.
Unidentified Justice: Well, but the Act doesn't make any distinction, does it?
Mr. Fox: No, it does not.
But the genesis which you referred to is found in the problems of big interstate companies coming in, using diversity where people couldn't do it locally, and if you recall at that time, they couldn't use 1343 because this was all pre-Household v. Lynch.
Unidentified Justice: Could I ask you, if you paid the tax and sued for a refund and it was... in the state courts?
Mr. Fox: Yes, sir?
Unidentified Justice: Or do you do it administratively?
You do file it in a state court?
Mr. Fox: In a state court it's the statutory procedure.
Unidentified Justice: And in that case you could present your federal constitutional question?
Mr. Fox: Yes.
And the court said that, and La Salle testified--
Unidentified Justice: Yes, well, all right, but now, if you won on your constitutional argument, your colleague suggested that the state would pay interest.
Mr. Fox: --No, sir, because the State has unequivocally stated in all--
Unidentified Justice: I know, but I thought the State had said only that without adjudicating the constitutional point.
Suppose the state courts had themselves decided that the assessment was unconstitutional, and that you deserved a refund.
Have the state courts then said there would be no interest payable?
Mr. Fox: --Yes.
There is no interest payable, because the Illinois law is, no interest without a statute providing for interest, and there is no statute in Illinois.
Unidentified Justice: Whether or not the assessment is constitutional?
Mr. Fox: That's right.
Furthermore, the Illinois Legislature has had before it twice within the last four or five years bills to provide interest on tax refunds.
Unidentified Justice: Well, didn't you understand the State to argue to the contrary or not?
Did I miss any... I must have misunderstood your colleague, here for the State?
Mr. Fox: I did not understand him to say that.
Unidentified Justice: Okay.
Mr. Fox: There is no interest payable in Illinois without a statute, and there is no statute and the Illinois Legislature has turned down such a statute twice within the last three or four legislative sessions.
I will not address, because of Mr. Justice Stewart's interrogation of my colleague here, the collateral issues which were raised on this particular, in the briefs, such as as the 1343 argument and the other arguments that were raised.
Counsel has adverted, however, on several occasions to the question of the state remedies of 1983.
There is no grounds for a state 1983 remedy.
In fact in a damage action, as Mr. Justice Marshall pointed out, there just isn't any case to which you can point.
There is no rule, of course, as Note 1 in Maine v. Thiboutat pointed out, that the state must hear a 1983 action, and I can think of nothing more intrusive by the federal judiciary into the state than to require the State of Illinois, let's say, first to hear that kind of 1983 action; secondly, to grant an injunction or damages; thirdly, perhaps, to grant attorneys' fees, which are not provided for under the statute, or to pay interest, or to waive its exhaustion of administrative remedies, which the State absolutely declined, the court in the State absolutely declined to do in the Fulton Market case, which we have cited, because that was taken up on a 1983 case, citing Monroe v. Pape, Damico, McNeese, and the other cases, for failure to exhaust notwithstanding a constitutional deprivation.
The Supreme Court of Illinois shook its head and said, no, after the appellate court had overruled the trial court.
The Supreme Court reversed and said, no, we don't have to reach that issue, the plaintiff here did not exhaust his administrative remedies, and notwithstanding any federal claims and so forth which were briefed and argued, we're not going to waive our exhaustion relief.
Counsel, I think, has been most forthright in saying that he cannot speak for the Illinois court, that he cannot assure us that there would be any remedy under 1983 or any other remedy in the Illinois court.
And Cromwell has been good law for years and years in the United States.
Unidentified Justice: If you win... if you're allowed to maintain your action in the federal court and you get an injunction, you win on your equal protection ground; you wouldn't expect to get interest?
Mr. Fox: No, sir.
The only possibility, Mr. Justice White, under those circumstances would be that under the rationale of Fulton Market v. Cullerton, that we might go back at a later date and sue for whatever other expenses we had.
But, note, that under an injunction, under an injunction--
Unidentified Justice: You're asking for the injunction, and even if you ask for damages you wouldn't get interest as damages.
Mr. Fox: --Well, you see, truthfully, if we got an injunction, one, we would not have to pay the unjust moiety.
Unidentified Justice: All right.
Mr. Fox: Secondly, under 1988, we would be entitled to our client's attorneys' fees, so that the client would be made whole with an injunction.
She would not have to lay out her money, and her attorneys' fees and costs would be paid.
Unidentified Justice: Yes.
Mr. Fox: And, by the way, there is no such provision under Illinois law, allowing the so-called rule of attorneys' fees in prevailing in a case such as this.
There is no interest, there are no attorneys' fees, there is nothing.
Neither, as we pointed out, is there any interest even after judgment.
Unidentified Justice: Mr. Fox, if the State of Illinois amended its procedure to allow interest at something that may be less than the prime rate, provided no recovery of attorneys' fees or anything else, would it then be an adequate remedy, in your judgment?
Mr. Fox: If it were... Mr. Justice Stevens, if it were reasonable interest in the line with the market.
I merely point out--
Unidentified Justice: Say, it's the same provision they have, whatever the interest rate is, on judgments now?
I don't know what it is.
Mr. Fox: --That really does not square with reality in Illinois at the present time.
On judgments against the State, it's six percent.
The Internal Revenue Service under Section 482 is now talking a range of 11 to 13 percent.
I think the court would then have to face a due process question in the amount of interest.
If they allowed four percent or five percent in a day when we have a 15-1/2 percent prime, this is another question.
I mean, I think it's a... is it reasonable?
Unidentified Justice: Well, this isn't a due process question.
It's a statutory question--
Mr. Fox: It's a statutory, yes.
Unidentified Justice: --of whether or not there exists a plain, speedy, and efficient remedy in the courts of the State.
Mr. Fox: But again, and I hate to bring the question up, Mr. Justice Stewart, but is the payment... is the taking of money today and giving it back in a lesser amount sometime hence, is that itself a denial of due process?
Unidentified Justice: That's a separate question.
Mr. Fox: And as I say, we'll leave that to fight for another day.
Chief Justice Burger: Thank you, gentlemen.
The case is submitted.
Unidentified Justice: The honorable court is now adjourned until Wednesday next at ten o'clock.