Fair Assessment In Real Estate Assn. v. Mcnary - Oral Argument

ORAL ARGUMENT OF DAVID J. NEWBURGER, ESQ., ON BEHALF OF THE PETITIONERS

Chief Justice Burger: We will hear arguments next in Fair Assessment in Real Estate Association against McNary.

Mr. Newburger, I think you may proceed whenever you are ready.

Mr. Newburger: Thank you, Mr. Chief Justice.

May it please the Court, in 1974, David and Lynn Cassilly bought a new home in St. Louis County, Missouri.

In 1975, they with other citizens of St. Louis County initiated a series of litigations in the state court system to attempt to obtain a reassessment of real property taxes in St. Louis County and in the state of Missouri.

A series of decisions by the state courts have been rendered on that subject and a process of reassessment is now under legislative and court mandate going forward in the state of Missouri.

In the middle of the process of raising the issue of reassessment in the state of Missouri, the Cassillys, together with a citizen organization in which they were involved, initiated this action, a 1983 action, in which they sought damages against certain state and county officials for what they viewed as a violation of their constitutional rights.

Particularly, they alleged two violations of rights.

First, they alleged that they had been placed in a category of classification of homeowners that was separate from homeowners in general, that is, new homeowners, and that as new homeowners their real property was assessed at the rate of 33 and a third percent of its fair market value when other homeowners were assessed on average at a prevailing market rate of approximately 22 percent of its fair market value.

Secondly, they alleged that in the course of appealing certain assessments over the years, and particularly in one particular year, they were successful in their appeal and their assessed value was reduced, but that they and everybody else who had appealed in that year through the state process had been automatically called up for reassessment in the second year, thus that they were put in a classification of people who had exercised their right to appeal and when people exercised their right to appeal they were separated into a separate class and subjected to a reassessment that raised them back to where they had been assessed in the first place.

Unidentified Justice: Mr Newburger, is there any issue here of whether your complaint stated a cause of action in 1983?

Mr. Newburger: I do not believe that anybody has seriously challenged whether we stated a cause of action.

Unidentified Justice: I am just wondering whether we ought not get that.

Mr. Newburger: As far as I can see, we have in fact alleged a cause of action, and the District Court dismissed us out exclusively on the subject of the Tax Injunction Act, and, Mr. Justice Brennan, in connection with that, I would also like to narrow today's discussion in another respect.

While one of the Petitioners is an association of citizens, this Act... this lawsuit has been determined solely on the basis of the Cassillys' claim, and the question that we come down to is the interest today of these homeowners in their right to pursue their 1983 action in light of the Tax Injunction Act in Federal Court.

Unidentified Justice: In other words, whether, in spite of the fact that the Tax Injunction Act has been extended to declaratory judgments, it should also be extended to monetary relief?

Mr. Newburger: Yes.

Judge Nangle, the District Court Judge who heard the case, dismissed the case on the grounds, stating that this was like a tax refund action, on the grounds that the Tax Injunction Act barred this action, an action at law for damages.

Unidentified Justice: Was he suggesting, when he said it was like a tax refund action, that that in any event would be the limit of any 1983 damages?

A refund of the excess tax?

Mr. Newburger: Again, Your Honor, when one gets into a situation that a case is being decided on a motion to dismiss, it is difficult sometimes to know what facts really will be material.

In Petitioners' complaint, they allege damages in excess of the amount of tax refund, and I am speaking specifically about the Cassillys, wholly aside from Fair Assessment in Real Estate.

Unidentified Justice: Including punitive damages?

Mr. Newburger: I'm sorry?

Unidentified Justice: Including punitive?

Mr. Newburger: Including, but not exclusively.

We have assessed both excessive taxes and other monetary damages in some of the years of the complaint and punitive damages, and seek to recover those.

I think that when we have the discussion from Judge Nangle, when he says this is like a tax refund action, I think we should recognize another element of his decision, and that is, he said compared to Younger against Harris.

Without much analysis of what that meant, he was suggesting, I think, that the difficulty in this case is the difficulty of Federalism, that it is a question of whether the Federal Courts, the lower Federal Courts should hear a Section 1983 action at law for damages in the context of a claim that the entire process is a part of the state taxation process, which is obviously terribly important to keep within the confines of state law.

Unidentified Justice: Well, that was certainly the thrust of Great Lakes versus Huffman, wasn't it, that just because it said injunction didn't mean that it was limited to injunction.

Mr. Newburger: That is right, Mr. Justice Rehnquist.

In Great Lakes against Huffman, the Court confined itself to the subject of declaratory judgment actions, which was the question presented, and our tradition is to recognize that declaratory judgments actions are not quite equity actions but certainly are in the realm that is somewhat similar to equity actions, and indeed the argument that I would present to this Court, is that on the language and the legislative history and the precedents, like the Great Lakes case itself, that on all of those terms, that Section 1341, the Tax Injunction Act, bars the Federal Courts from hearing cases in which the claim is for the exercise of anything in the order of equity jurisdiction.

But I likewise submit that there is nothing in the statute or the legislative history or the precedents to suggest that the claim for damages should be barred.

Unidentified Justice: Well, Mr. Newburger, before we ever had 1341, I gather the jurisprudence of this Court was, at the very least, wasn't it, that you had to do administrative exhaustion, administrative exhaustion in the state, and that that was a jurisdictional prerequisite to a tax suit, was it not?

Mr. Newburger: That is right, Your Honor.

Unidentified Justice: That was Weld County, wasn't it?

Mr. Newburger: Yes.

Unidentified Justice: Now, do you think that 1341 in any way affected that jurisdictional requirement?

Mr. Newburger: I do not think that the question of exhaustion was determined in any way by 1341.

I think that it--

Unidentified Justice: So that left standing, Weld County would still be good law, notwithstanding 1341.

Mr. Newburger: --I would take the view that Monroe against Pape and the cases that followed from that have determined the exhaustion question in respect to this matter.

I certainly do not believe that the Federal Courts in a diversity case simply based on an argument of some inappropriate taxation or taxation contrary to state law would be able to hear that case without going through the processes of administrative exhaustion.

Unidentified Justice: At 21 of your brief, you cite Matthews and Rodgers.

Mr. Newburger: Yes, Your Honor.

Unidentified Justice: And the conclusion of the quotation you cite from suggests that a suit at law in the Federal Courts, if the essential elements of Federal jurisdiction are present.

Now, didn't that at least contemplate that you had to exhaust your administrative remedies, as a Federal jurisdictional prerequisite, before you could maintain a suit at law in the Federal Courts?

Mr. Newburger: In a proper case in which the question of exhaustion of administrative or judicial remedies is presented.

Unidentified Justice: Incidentally, did you exhaust the administrative remedies in this--

Mr. Newburger: Your Honor, the position that we take is that exhaustion is not required.

Unidentified Justice: --No, my question was, did you.

Did you attempt to exhaust--

Mr. Newburger: The trouble with the question is... again relates back to the facts of the case.

There are a number of things that have happened.

In two of the years that we have made a complaint on, we did not appeal the assessment.

In two of the years we have complained of, we did appeal and complete the appeal of the assessment.

Unidentified Justice: --That is an administrative appeal, is it?

Mr. Newburger: That went through the administrative appeal process.

Unidentified Justice: I see.

Mr. Newburger: And in one of the years, the appeal was started, but I do not believe that it was carried to completion.

But, Your Honor, I would suggest that there is another very important question here, when we talk about exhaustion, and that is the question of exhaustion of what remedy, because the remedy that is being claimed here is the constitutional remedy to be protected from violations of the equal protection clause, and I do not believe that there is any proceeding that could be had in state court other than an analogous 1983 action, perhaps, in state court that would--

--Have the Missouri courts passed on whether 1983 suits may be brought?

To be perfectly honest, I am of the opinion that it can be done in Missouri, but I don't i think that it is necessarily 100 percent clear.

But the fact remains that--

Unidentified Justice: Well, even if it does--

Mr. Newburger: --That's right.

Unidentified Justice: --even it it can, if you could have brought your suit in state court under 1983, you say that is no answer in any event.

Mr. Newburger: That's right, Your Honor, because--

Unidentified Justice: You may still go into Federal Court.

Mr. Newburger: --quite clearly under the train of cases that have developed around 1983 following Monroe against Pape, this is an election that a plaintiff has under the circumstances.

The other fact that is terribly important to the question that you are pressing me on is whether, if we do proceed with our case, we actually are posing a problem with the administration of state taxes, and I think that it is very important to recognize that the case that we have prosecuted here has only minimal impact on the exercise of the taxation processes in the State of Missouri.

The only thing we are asking for is damages arising out of our constitutional breach by individual defendants, not by any public authority.

We are asking from the damages from institutional defendants, and we are asking from those damages based upon the fact, as we allege, that those individual defendants in bad faith, because, of course, there is official immunity in the picture, in bad faith--

Unidentified Justice: They are state officials?

Mr. Newburger: --I am sorry?

Unidentified Justice: They are state officials?

Mr. Newburger: They are state and county officials.

Unidentified Justice: And to sue state and county officials does not interfere with their work.

Is that your position?

Mr. Newburger: No, Your Honor.

I am certain that it is possible... well, I have no doubt but that the litigation itself has some possibility of a chilling impact on the exercise of discretion that they would pursue.

I would point out to the Court that the Court has developed a doctrine of official immunity, Wood v. Strickland and the cases that are associated with that, which I suggest is a doctrine developed to protect state officials so that they do properly exercise their discretion.

Unidentified Justice: You haven't sued the county or any municipality as such, have you?

Mr. Newburger: That is right, Your Honor.

Unidentified Justice: So that there is no Owen and Independence problem here.

Mr. Newburger: That is right, Your Honor.

In fact, this case came down before the decision... this case was initiated before the decision in Independence, but I doubt that Independence would be relevant because this is an exercise of the county taxing authority, which is in a direct administrative line from state taxing authority, and I don't think that there is the presence of a municipal corporation in the circumstance to create that problem.

I think that it is important to recognize because of the official immunity doctrine that the liability of these defendants can only be established if we establish first the equal protection violation and second that they acted in bad faith, because when we worry about whether the officials' exercise of discretion will be hindered, the answer to that question has to be that while it may be hindered, it is in a very limited way, and it is certainly no more hindered than governors and police officers and other officials who under the official immunity doctrine may have some possibility of liability in some circumstances where their bad faith is established.

Unidentified Justice: Mr. Newburger, may I interrupt you?

The references to bad faith in this context are somewhat... a little bit unusual, it seems to me.

Supposing there was a statute in the state that said new homes shall be assessed at 33 percent of market value, and after a year they shall be assessed at 20 percent of market value.

Is it your view that that statute would violate the equal protection clause?

Mr. Newburger: If there were some reasonable basis for that classification--

Unidentified Justice: That is all we know.

All we know is that there is a statute that says that, and then the people who work in the Tax Department are trying to collect taxes on that basis.

Mr. Newburger: --The question, as I am sure you recall, Mr. Justice Stevens, relates back to the question of whether such a classification is palpably arbitrary, and indeed that is the reason that I am using the word "bad faith" in this discussion.

I would take the view that that kind of classification has no apparent justification on its face unless there is some kind of legitimate public policy of discouraging the construction of new homes which I have a very hard time contemplating.

Unidentified Justice: Well, what if the statute had a preamble reciting that the additional expense in connection with new construction, building permits, inspections, and so forth, justified this?

Would you have any problem with it then?

There are additional expenses for new homes, are there not?

Mr. Newburger: Yes, certainly there are expenses for new homes, including a building permit, which indeed could be characterized as a tax.

Unidentified Justice: And building inspections.

Mr. Newburger: And building inspections could be characterized as a tax.

If there were that kind of rational basis for the distinction, then it may be that the classification is not palpably arbitrary, but it seems to me that it is important for us to remember a couple of facts.

One, under the law and the constitution of Missouri, there is no classification of real property to be recognized.

That is a ground rule in the State of Missouri.

Unidentified Justice: Yes, but if we are talking about the Federal Constitution, does it really matter to us whether the classification is made by the legislature or by the people who collect the taxes, if they do it on a uniform basis and make the particular rule?

Mr. Newburger: The second argument that I would make arises out of Sioux City against Breckenridge, which is a 1923 decision of this Court, and that is that if you have by happenstance a development in which there are some people who are assessed at a much higher rate than the prevailing rate throughout the country, that that is a palpably arbitrary distinction that creates a classification that is not consistent with the equal protection clause.

Unidentified Justice: But this one by your own allegation is not a happenstance or an accident.

They have a state policy of treating new homes at one rate and older homes at a different rate, and it seems you have conceded that it is not palpably arbitrary.

Mr. Newburger: No, I didn't mean to concede--

Unidentified Justice: If there was a statute, you conceded it, I mean.

Mr. Newburger: --I am suggesting that there are circumstances in which a program can be established in which distinction can be drawn in different kinds of real property.

I would suggest that in the exact circumstances of this case, that it is necessary for me to prove in the District Court, if I am going to be heard on this case, that these classifications are palpably arbitrary.

My intention in making that proof is that what had happened was, because of an absence of reassessment in the county, the county permitted old properties to continue at their level of assessment for some 20 years, and at the same time engaged in an activity of assessing new property at 33 and a third percent of the fair market value of that property.

Now, that, I suggest, is not a decision that was based upon a rational basis, that there is not a distinction to be drawn between that old property and the new property.

I think that is exactly what the case was in Sioux City, and the Court in that case taught all of us that that was a classification that was unconstitutional within the equal protection clause.

Unidentified Justice: When was the last time anybody cited Sioux City?

I haven't read it, to be honest with you.

Mr. Newburger: Well, it is interesting.

Sioux City was cited in 1978, I believe is the year, by the Supreme Court of Missouri, to tell the assessors that in fact that is the controlling law of the land, and that they ought to have either been assessing property at that lower 22 percent or they ought to be assessing everybody at the higher 33 percent.

The important question, though, here, is a question of Federal jurisdiction, and while it is certainly fair and fair game to take after me on the question of whether I am going to prove that equal protection violation if I am returned to District Court, that is not what Judge Nangle did in dismissing me, and what he did in dismissing me was to determine that I was barred either by the Tax Injunction Act or by some analogy to the Younger against Harris doctrine.

Unidentified Justice: Was there an answer in this case, or just a motion to dismiss?

Mr. Newburger: There are two different sets of Respondents and Defendants in this case.

Unidentified Justice: Well, let me ask you my ultimate question.

Was immunity pleaded in any of the answers?

Mr. Newburger: I don't recall.

Unidentified Justice: Because I thought our qualified immunity rule under... and I think it was in Procuniae against Naverett out of Illinois, wasn't it?

Mr. Newburger: Are you thinking of Bridgewell, Your Honor?

Unidentified Justice: No, I am not.

I am thinking of the qualified immunity case.

Unless the defendant knew or should have known that this was a violation of the equal protection clause, he is immune.

Mr. Newburger: I believe that is right.

Unidentified Justice: And we have several times said that unless the law was clearly established, especially on a constitutional basis, he shouldn't be held liable to damages.

Mr. Newburger: I believe that is correct.

Unidentified Justice: So, I just wonder why in this case, if you are going to have to prove... if there is any doubt about the equal protection violation, I would think the immunity defense is going to be fairly solid.

Mr. Newburger: Well, I agree with that, Your Honor, except that if you go back through the history of what has gone on in this case in the state Courts, I believe that the defendants fully understood that they were violating the constitutional rights of the individual.

Unidentified Justice: Well, then, why should you--

Mr. Newburger: In 1975--

Unidentified Justice: --You are not going to have to prove it then, I take it.

Mr. Newburger: --Well, that is right, but I mean, I believe that that is a matter of defense, and certainly I expect to raise that issue in a trial.

Perhaps I am assuming that they will defend on all issues and they will not.

Unidentified Justice: Well, do you know any cases that come right out and hold that this differential in assessment violates the equal protection clause?

Mr. Newburger: Sioux City and Breckenridge, and Sioux City is the decision of this Court in 1923, and Breckenridge is a decision of the Missouri Supreme Court in 1978.

In addition to that there was a decision of the Missouri--

Unidentified Justice: And yet the Missouri administrative appeal system gives you no relief, says it is not, I take it.

Mr. Newburger: --The practice of the defendants in this case has been to continue--

Unidentified Justice: Well, I know, but you appealed it.

You appealed it in a couple of the years, didn't you?

Mr. Newburger: --And in the years it was involved there was partial relief but there was not total relief.

In fact, if I have my years straight, in 1978 there was a partial relief; in 1979, the Assessor's Office issued a computer letter which, incidentally, is in the allegations within the record here, a computer letter that said, since you got relief and your taxes were reduced last year, we are automatically raising your taxes for next year, and did not do that to anybody except those people who had exercised their right of appeal, and I must say, Justice Stevens, it seems to me that this is another classification in which I may be able to clearly establish constitutional rights violation.

Unidentified Justice: Have you ever presented the constitutional question to any Illinois authorities?

Mr. Newburger: Missouri, Your Honor.

Unidentified Justice: I mean Missouri.

Mr. Newburger: The entire question of whether there should be a reassessment is in the Missouri legal process, where it belongs.

This Court and the Federal District Courts should not be hearing the question of reassessment as a general policy matter within this Court.

Unidentified Justice: Is the equal protection question pending in the Missouri Court?

Mr. Newburger: I... no.

I do not believe the question is pending at all, because I believe it was decided by the Missouri Supreme Court in Breckenridge, and in another case which is Estate of Cassilly against Reining, and by the lower Courts on numerous occasions--

Unidentified Justice: Mr. Newburger, I saw your light go on.

I just wanted to ask one more question.

Mr. Newburger: --Certainly.

Unidentified Justice: If we can get back to the jurisdictional question, namely, jurisdiction of the Federal Court to entertain a 1983 action in cases like this.

Mr. Newburger: Yes.

Unidentified Justice: Is there anything in this quotation from Rosewell?

You just mentioned Rosewell.

Mr. Newburger: Yes, Your Honor.

Unidentified Justice: Page 21, in which we said,

"It is true that post-1937 Court cases have suggested that the Tax Injunction Act recognized and sanctioned the pre-existing Federal equity practice."

And we said that

"it was a long-standing rule of Federal equity to keep out of state tax matters as long as a plain, adequate, and complete remedy could be had at law."

Does that bear at all on our question here?

Mr. Newburger: I believe it bears most importantly on the question in this regard.

We are not raising the question of litigating the presence or absence of a plain, speedy, or adequate remedy.

Unidentified Justice: So we assume that there is one.

Mr. Newburger: Well, we assume that--

Unidentified Justice: Yes.

Mr. Newburger: --without making inappropriate concessions.

What we are arguing is that the Tax Injunction Act which refers to the Federal Courts in joining, suspending, or restraining the actions related to tax assessment is simply unrelated to damage actions, and that the Tax Injunction Act nor the doctrines of comity, as this Court has developed them over the years, in the absence of any suggestion of a claim for the exercise of equity jurisdiction, should bar this action.

Unidentified Justice: But suppose the Missouri Supreme Court were to say, yes you may maintain a 1983 action in our state court for the damages that you are seeking in the Federal Courts.

Would that have any relation to this?

Mr. Newburger: Unless this Court were to adopt a new precedent, which it has not so far done, that requires the pursuit of a 1983 action in--

Unidentified Justice: That is your Monroe and Pape argument, isn't it?

Mr. Newburger: --I am sorry?

Unidentified Justice: That is your Monroe and Pape argument.

Mr. Newburger: Yes.

Unidentified Justice: Yes.

Mr. Newburger: Okay.

If I may reserve two minutes for rebuttal.

Chief Justice Burger: Very well.

Mr. Wehrle?

ORAL ARGUMENT OF THOMAS W. WEHRLE, ESQ., ON BEHALF OF THE RESPONDENT

Mr. Wehrle: Mr. Chief Justice, may it please the Court, I would just like to make one comment on Mr. Newburger's statement that he felt that this case could have a chilling effect upon the tax officials of St. Louis County and of the State of Missouri.

I believe that is why we are here, because we feel that this Court and all the other Courts as well as Congress, that their intent was when they passed the Tax Injunction Act, was to keep Federal District Courts from interfering with the collection of state taxes as far as the method, assessment, levy, and collection was concerned, and when he says that no doubt that this cause of action will have a chilling effect upon tax officials, then we submit to you that it is the reason, that is the reason why Judge Nangle said what he said, because he said he could not in any way go into this lawsuit without actually becoming an Appellate Court in regard to the assessment of taxes in St. Louis County.

Unidentified Justice: Well, Mr. Wehrle, the statute, of course, in words, deals only with enjoining, suspending, or restraining, doesn't it?

And here what you have is an action for money damages.

Is that an action to suspend or enjoin or restrain?

Mr. Wehrle: I think it would be an action to restrain and suspend, not to enjoin, because when we look at what the meanings of those words are, restrain, to restrain and suspend, restrain, you know, to pull the effect back.

And so if any cause of action, be it an injunction suit, declaratory judgment suit, a suit for a tax refund, or just a plain damage suit like this, it is going to have the effect of pulling back what the tax official is going to do in his job.

Unidentified Justice: There is a considerable difference between declaratory judgment and damages.

Mr. Wehrle: Yes, sir, but--

Unidentified Justice: So the declaratory judgment case does not help you at all.

Mr. Wehrle: --Mr. Justice, I think it does.

Unidentified Justice: Well, the only difference between a declaratory judgment and an injunction is one piece of paper.

That is the only difference, right?

Mr. Wehrle: No, sir, I think--

Unidentified Justice: What else do you need after you get a declaratory judgment?

Mr. Wehrle: --Well, the declaratory judgment is--

Unidentified Justice: All you need is a motion to turn it into a permanent injunction.

Mr. Wehrle: --But the Courts have looked on it as different, Judge, and I think that if we look at the history--

Unidentified Justice: There is a little difference between that and damages, isn't there?

Mr. Wehrle: --There is a difference, yes, sir, but when we look at the history--

Unidentified Justice: Can you get a declaratory judgment for damages?

Mr. Wehrle: --No, sir.

Unidentified Justice: Well, how does it help you on damages?

Mr. Wehrle: It helps us on damages for this reason.

I submit to the Court that when the Tax Injunction Act was passed, what Congress had in mind at that time was the fact that there was discrimination against state--

Unidentified Justice: But they limited it to injunctions.

Mr. Wehrle: --Yes, sir, but the--

Unidentified Justice: They could have said, the Federal Courts shall take no action on state cases.

Mr. Wehrle: --That is right.

Unidentified Justice: But they did not.

They limited it to injunctions.

Mr. Wehrle: But they limited it to injunctions, but, Judge, the Court has extended it to declaratory judgments.

The Courts have extended it to declaratory judgments, and I think if Congress--

Unidentified Justice: So eventually we will extend it to probate.

Mr. Wehrle: --Possibly.

Yes, sir.

Unidentified Justice: Can declaratory judgments become a predicate for money damage judgments?

Mr. Wehrle: It could.

Yes, Judge, yes.

Unidentified Justice: Not only that, to get damages you certainly are going to have to have a judgment that this assessment system is illegal.

Mr. Wehrle: Yes, sir.

You first have to have a declaratory judgment saying that this act or this act or some statute is unconstitutional.

Unidentified Justice: May I disagree that you don't need a declaratory judgment to recover actions on a case that asks for damages.

You can get damages without a declaratory judgment, can't you?

Mr. Wehrle: Well, Judge--

Unidentified Justice: When you sue for damages, can't you get it without a declaratory judgment?

Mr. Wehrle: --Yes, sir, but in this case--

Unidentified Justice: Can't you?

Mr. Wehrle: --Yes, sir.

Unidentified Justice: Can't you?

I thought so.

Mr. Wehrle: Yes, sir, you could, but I--

Unidentified Justice: I don't want to give back a whole lot of judgments I have delivered.

You can't get damages without a judgment.

Mr. Wehrle: --You've got to have a judgment.

Unidentified Justice: I said declaratory--

Mr. Wehrle: Yes, sir.

Unidentified Justice: --and that is what you also said, declaratory.

I said judgment.

I said judgment.

Well, take declaratory out.

Mr. Wehrle: In this case, I think before, under these facts, which was a motion to dismiss... this is here on a motion to dismiss, no question about it.

There are two sets of defendants here.

One, the county defendants, the county assessor, the county collector of revenue, and the county executive.

There is also a set of defendants of the Missouri State Tax Commission.

Now, the Missouri State Tax Commission filed an answer, I call them the state defendants.

The county defendants filed a motion to dismiss on comity and the Tax Injunction Act, and Judge Nangle sustained that motion to dismiss, and that is why we are here, on the motion to dismiss.

Judge, I might point out that the Breckenridge case was decided on a motion to dismiss.

It had never been tried.

It came back on a motion to dismiss, and we submit that, Judge, before any damages could be sustained in this case, we submit that the Trial Court, the District Judge first is going to have to go into the manner of assessment, how the assessment was arrived at comparing new homes to old homes, and how it was applied, and then we submit, then you are getting back into an attack on tax assessment, and this Court as well as all other Federal Courts, the history has been that they have deferred to the state Courts.

They say, you have a plain, speedy, efficient remedy in the state Courts, you take your matter to the state Courts, do not come to the Federal Courts.

That has been the history, even before the Tax Injunction Act, and we submit that since that Tax Injunction Act, that the Courts have... they started out with injunction suits, but then they have gone to declaratory judgment suits, they have gone to tax refund suits.

The Ninth Circuit and the Eighth Circuit have said that on a tax refund suit, which was not... there was no such thing as a tax refund suit as far as when the Tax Injunction Act was passed, but in those two Circuits they have said that what Congress intended, what the Federal Courts have done in the past, we now extend to a tax refund suit, and therefore the Tax Injunction Act would bar us.

Unidentified Justice: You don't need the Tax Injunction Act.

In your argument you don't need it.

Mr. Wehrle: No, sir, we wouldn't, but we do have it.

Unidentified Justice: And you did not urge it.

The Court just took it.

Mr. Wehrle: Not with one of our motions to dismiss.

It was based on this.

Unidentified Justice: It was?

Mr. Wehrle: Yes, sir.

Unidentified Justice: I thought it was on comity.

Mr. Wehrle: No, sir, that is what the Court found on both of them.

Unidentified Justice: Oh, I see.

Mr. Wehrle: Judge Nangle said--

Unidentified Justice: But you would be satisfied with comity, wouldn't you?

Mr. Wehrle: --Yes, sir, we would be satisfied with a tax refund or comity.

Unidentified Justice: There is a refund remedy, is there, under Missouri practice?

Mr. Wehrle: Yes, sir.

Unidentified Justice: What is it, that you have to pay your tax?

Mr. Wehrle: You pay your tax under protest, and within 90 days you file a suit in the Circuit Court, and at that point we say, besides that, they take an appeal, the County Board of Equalization, to the State Tax Commission, and we submit that that is their plain, speedy, and efficient remedy at law which the Tax Injunction Act--

Unidentified Justice: Does that Commission have the authority to decide the constitutional question of whether the classification is--

Mr. Wehrle: --I think... yes, sir, Judge, yes.

That is how the Breckenridge case went up.

It was on a tax protest case.

Unidentified Justice: --If instead of this being a discrimination between new homeowners and old homeowners, if the discrimination was based on, say, racial classification or national origin or something like that, and there was an allegation that all the persons of a given race were assessed at a different basis, and that was state policy and so forth, you would still say that claim had to be asserted in the state Court?

Mr. Wehrle: Yes, sir, because, Judge, I think the Tax Injunction Act would come in for this reason.

I do not believe that there is any way you could arrive at that decision without going into the matter of assessment.

You have to do it.

Unidentified Justice: The only issue would be whether the principle of taxing at different rates because, in this case, they are new homeowners as opposed to old, or in the other case because they are members of Race A instead of Race B, that that principle is either right or wrong.

You couldn't raise that issue at all in a Federal Court under your view.

Mr. Wehrle: That is right, Judge, because of the fact of, I think, Bland versus McHann.

That was a case in which they... of course, that was an injunction case and for damages, and that was one of our allegations, that because of their race, and because of the demonstrations, that their property tax assessments had been increased, but the Court said, we have to inquire into the method of assessment, and because we have to inquire into the method of assessment, then the Tax injunction Act comes into play, and would bar the cause of action.

Unidentified Justice: Mr. Wehrle, you have relied primarily on the Tax Injunction Act, 1341--

Mr. Wehrle: Yes, sir.

Unidentified Justice: --as barring this 1983 suit for damages.

Mr. Wehrle: Yes, sir.

Unidentified Justice: Have you any other ground for barring jurisdiction in the Federal Court?

Mr. Wehrle: I think on the question of comity, deferring to the Court, and I think--

Unidentified Justice: Is that jurisdictional, comity?

Mr. Wehrle: --Sir?

Unidentified Justice: Is comity jurisdictional?

Mr. Wehrle: Well, I think Judge Nangle was saying that because of the history of the Federal Courts deferring questions of state taxation to the state Courts, then that is where they should be; even though we have the Tax Injunction Act, they still should be in the state Courts.

Unidentified Justice: Pre-1341--

Mr. Wehrle: Yes, sir.

Unidentified Justice: --there was a Federal principle to stay out of state tax cases.

Mr. Wehrle: Yes, sir.

Unidentified Justice: But that was equity.

Mr. Wehrle: I am sorry, sir?

Unidentified Justice: That was equity, wasn't it?

Mr. Wehrle: That was equity, yes, sir, but he was extending it, saying, well, since that has been the history, and that has been, as the Court said in Bland versus McHann, the long-standing judicial policy, and Congressional restriction of Federal jurisdiction in cases involving state tax administration makes it the duty of Federal Courts to withhold relief, and I think that is what Judge Nangle had, the long-standing policy of the Federal Courts and Congressional restraint.

Unidentified Justice: I take it you would be willing to win this case on either ground.

Mr. Wehrle: Yes, sir.

I think either ground would apply, sir.

Yes.

Unidentified Justice: Why do you think the Eighth Circuit found it so difficult and divided equally?

Mr. Wehrle: I don't know.

I can't answer that, Judge.

I know they did not come down with any opinion, so we don't know.

Unidentified Justice: But they expressed, and I think it is very unusual, they expressed their division.

Mr. Wehrle: Yes, sir.

Unidentified Justice: And did not hide it behind a general statement of an equally divided Court.

Mr. Wehrle: I believe, Judge, the only thing I might say, and it might be speculation on my part, is, right before that the Court, I think it was the Seventh Circuit, came out with the Fulton Market case, in which they permitted a damage suit under 1983, and said that the Tax Injunction Act would not bar it, and I say possibly four of the Judges on the Eighth Circuit thought maybe they should follow that and four might think they could distinguish it, and I think it can be distinguished.

I do not think it is so applicable.

Unidentified Justice: Was Monroe and Pape argued in the Eighth Circuit?

Mr. Wehrle: I am sorry, Judge?

Unidentified Justice: Was Monroe and Pape argued in the Eighth Circuit?

Mr. Wehrle: That I am not going to say, Judge, because I am not sure whether they were or not.

Unidentified Justice: Mr. Wehrle, I will ask one other question, if I may.

Do I correctly assume that in your view, anyway, your opposition does not take the position that the state remedy is inadequate in any way?

Mr. Wehrle: No, sir, we say that the state remedy is adequate.

Yes, sir.

Unidentified Justice: Do they agree with you on that?

Mr. Wehrle: Well, I know that for two years they have appealed in the state and it is still pending.

Two years, they did not.

1975 and 1976 they did not appeal; on 1978 and 1979 they have appealed.

So I assume that they feel it is adequate.

Unidentified Justice: I should ask them, but I wanted to get your impression.

Mr. Wehrle: Yes, sir.

Unidentified Justice: Mr. Wehrle--

Mr. Wehrle: Yes, ma'am.

Unidentified Justice: --would you agree that Congress simply wasn't thinking of a damages suit under Section 1983 when it enacted the Tax Injunction Act?

Mr. Wehrle: Well, I would have to say sort of a qualified yes, because at that time I think all you had in the Federal Courts were injunction actions, and I don't think they thought sitting back then that somewhere along the line, maybe back in 1981, that somebody was going to come in and ask for damages, because what they were doing, in my opinion, they were putting into a statute what the Federal Courts had been doing.

They were concerned, I believe, about a number of things, and I think one of the things they were concerned about was at that time cases against local officials, but since there had not been that type of action, only injunction suits, I think that is why they worded it the way they did, but I think we must look at the fact that it was taken after the Johnson Act, as we state in our brief.

It was almost the exact wording of the Johnson Act, and there is no question, I don't think, about that Act being a complete bar to any case filed in a Federal District Court in regard to an administrative agency setting utility rates in a state, and when we look at that history and see that that was the Act that the Tax Injunction Act was patterned after, then I don't think there is any question, and when we look at the report that came out of the Senate and the House, they didn't just say the reports say that this was an action where the Federal District Courts cannot enjoin.

They said this is going to apply to the jurisdiction of the Federal Courts.

I submit that when you look at what Senator Bohn said with regard to it, because he read, he was a sponsor and he read from the Johnson Act in his statement to Congress, and he said, this Act is patterned after that one, so if we look at that history, and we look at the intent, and then what the Federal Courts have done over the years--

Unidentified Justice: That is the question I wanted to ask you, Mr. Wehrle, about what the Federal Courts have done.

In their reply brief... I haven't read the cases, but your opponent on Page 16 cites some cases in which he says, in diversity cases the Federal Courts had rendered damage awards prior to the enactment of the statute, and that that should be taken into consideration.

Mr. Wehrle: --Judge, I think if you read those cases, they were applying state law.

Unidentified Justice: Well, but they were damage... there was Federal jurisdiction to enter a damage judgment, even if it was applying state law.

We do not have an issue about what kind of law.

Mr. Wehrle: They were applying state law, but I think--

Unidentified Justice: And the objection in the Tax Injunction Act was to enjoin even in diversity cases applying state law.

Mr. Wehrle: --Yes, sir.

Yes, sir.

Unidentified Justice: And they limited the statute to the injunction remedy, because they were concerned about the Federal Courts interpreting the state law and giving that remedy.

Mr. Wehrle: But most of those, I think you will see, they called them damages.

They were refund actions, but now we have some of these Circuits that actually have held that the Tax Injunction Act applies even on refund actions.

I think it is the case out in California where the Court said that this is going to affect the tax--

Unidentified Justice: I was just questioning your analysis of the state of the law at the time the statute was passed, is all, and apparently there were precedents at that time--

Mr. Wehrle: --There were precedents in regard to--

Unidentified Justice: --for Federal Courts both enjoining and granting monetary relief--

Mr. Wehrle: --Yes, sir.

Unidentified Justice: --and Congress clearly foreclosed further injunctive relief, but did not, at least not as clearly, foreclose--

Mr. Wehrle: Not as clearly, but I think Congress knew at that time that there were suits under state law for state refunds, but I do not think they felt at that time there was going to be, say, a civil rights action brought against a state official, and I think that--

Unidentified Justice: --Well, if I understood your answer to an earlier question of mine, Mr. Wehrle, you take the position that the Tax Injunction Act barred not only injunction suits but also, and the Congress intended also to bar--

Mr. Wehrle: --Yes, sir.

Unidentified Justice: --by the Tax Injunction Act damage suits, don't you?

Isn't that your position?

Mr. Wehrle: Yes, sir, but see, those cases were not based upon a Federal statute.

state statutes.

They were based upon state statutes.

Unidentified Justice: But neither were the injunction cases that had been previously decided.

They were also based on state law.

Mr. Wehrle: Well, not necessarily.

They were--

Unidentified Justice: Some of them were.

Some of them.

The major difficulty that Congress was concerned with was foreign corporations coming in having the advantage of diversity jurisdiction and getting injunctive relief under state law.

They didn't want that.

Mr. Wehrle: --Well, they were getting injunction relief from the Federal Court, though.

Unidentified Justice: That is right.

Mr. Wehrle: That is right.

Unidentified Justice: Well, these people are in Federal Court, too.

Mr. Wehrle: Yes, but I would still submit that the Tax Injunction Act, because of Congress' intention at the time, and what the Federal Courts have done, not only before but since then, they have extended it.

We go from injunction, to declaratory judgment, to refund, and now we come to damage suits, and I submit that when we look at the cases that have been decided in your various Circuits, we look at the case involving... the Monman case, out of the City of Cambridge, and we are talking about suits for declaratory judgments.

When they said that declaratory judgment action as well as this damage claim... as well as this damage claim... is predicted upon the invalidity of the assessment, and it is in essence an attack upon the tax assessment, then they say that the Tax Injunction Act would be a bar even though, even though it is brought under 1983, and we look at the District Court case, the Advertiser claim against Governor Wallace, that was a damage suit, strictly a damage suit, and the Court found there, and let me quote for just a moment from that,

"The same principles which preclude awarding anticipatory relief or a refund should also preclude an award of damages sought in this case."

They say

"The damage award Plaintiff seeks, especially its request for punitive damages, still is designed to deter collection of the taxes now being assessed by Defendants."

I think that... we submit that when we are talking about this cause of action, that if it has been any deterrent effect upon the assessment, the collection, or the levy of taxes by state officials or by county officials, because the county officials in the first instance did the things they complained about, then I think that what was said in Advertiser is true.

It is designed to deter the collection of taxes being assessed by defendants, and we submit that even though it as an eight to eight, we submit that what Judge Nangle held in his decision, when he said that he would in effect become an Appellate Court for appeals from the local tax assessor, if he had to hear this case, we submit that he is correct, he is right, and when we look at the language of the Tax Injunction Act, we look at the legislative history, we look at what the Courts have done prior to it and since then, and we submit to this Court that Judge Nangle should be affirmed in this case.

Unidentified Justice: Before you sit down, may I ask one other question?

Mr. Wehrle: Yes, sir.

Unidentified Justice: Is there anything in this record that is put in in behalf of the Defendants to explain the reason, if there is one, for the classification that they challenge, that is, the distinction between new homes and older homes?

Mr. Wehrle: As Mr. Newburger said, there had not been a reassessment of all property in St. Louis County until some time in the sixties.

The new homes, so I don't know how you look at it, Judge, but you could say the... actually, and so the homes were being assessed at 33 and a third percent of their market value, but because of inflation the value had gone up.

All homes were assessed at 33 and a third, and the new homes came on at their market value, and they were assessed at 33 and a third.

The appeal to the Board of Equalization, they reduced the assessment.

Now, under Missouri law the assessor is to assess property at 33 and a third, and so that is why the assessor was faced with this.

Under Missouri law, I must assess property at 33 and a third percent of its true market value.

Now, even though the Board of Equalization reduced that percentage last year, I think I must follow state law, and that is why he put it back at 33 and a third, because he must do that under state law, and the notice goes out because that gives them a chance... under state law they must be notified if their assessments increase, so they would have a right, and time to take their appeal to the Board of Equalization or the State Tax Commission.

Unidentified Justice: Incidentally, this does not apply to taxes within the City of St. Louis, this case.

Mr. Wehrle: No, sir.

St. Louis County and St. Louis City are two separate entities, Judge.

Chief Justice Burger: Do you have anything further, Mr. Newburger?

ORAL ARGUMENT OF DAVID J. NEWBURGER, ESQ., ON BEHALF OF THE PETITIONER -- REBUTTAL

Mr. Newburger: Thank you, Your Honor.

There are a couple of points that I would like to specifically address that the Justices raised in the course of the argument.

If I might, Justice O'Connor, address the question that you asked first, don't we think that Congress really wasn't thinking about injunctions, I must admit that there are two answers to that.

First of all, we have specified these two cases at Page 16 of the reply brief, in which the Courts quite clearly took the view that a damage action could be brought.

I think that Congress could have found those cases.

Whether they found them or didn't, I don't know, but that leads me perhaps to the second most important portion of the answer to that question, and that is that Congress very clearly established the jurisdictional bar, and specified with specific words what the jurisdictional bar was going to be.

The jurisdictional bar was against actions or suits, rather, to enjoin, suspend, or restrain.

It says nothing about actions for damages.

I think the language of the statute is terribly plain, and under those circumstances I think if the bar is to be extended because of policy considerations, that it should be extended by Congress and not the Court.

That brings me to the question that Justice Blackmun raised.

What speculation can one have for why the Eighth Circuit evenly divided on the question?

And I think that what... and I, if I may, will exercise the discretion to speculate myself.

I think that the telling argument that makes the case terribly convincing on behalf of Petitioners is that there is no precedent in the comity cases, and there is no way to read the Tax Injunction Act to draw the conclusion that this action should be barred.

The comity cases have confined themselves to areas of equity.

This is not an equity action.

The Tax Injunction Act, as I suggest, is plain on its face.

Well, what was the concern?

Why was it a four-four split?

I submit that the reason that it is a four-four split is because we are raising a troublesome question.

We are suggesting that the Federal Courts in some way may become involved in reviewing what is going on in the state assessment processes.

I submit that that concern, however, was overstated or overworried in the Eighth Circuit for these reasons.

First of all, this is not an effort to take money from the state coffers.

It is an action against individuals.

Second, there are all kinds of good faith defenses that are available.

If we get to the merits and we can't prove what we are saying, we are going to lose.

Unidentified Justice: Don't you agree, though, that in the course of your litigation, to succeed you are going to have to prove that the assessment was illegal, that it violated the equal protection clause?

Mr. Newburger: Two answers to that.

First of all, as far as the second claim for relief is concerned, I won't have to prove that, the second claim being this computer letter that automatically picked people up.

As far as the first claim for relief is concerned, I will have to show that the classification that occurred was palpably arbitrary.

Unidentified Justice: And have a judgment of the Court that it violated the equal protection clause.

Mr. Newburger: That's right, Your Honor, but the point that I would make in light of that, when one talks about our worrying about being in the state processes, if what we are going for is simply a new political process or a new policy process within the state, we would not undertake the burden of proving palpably arbitrary classification.

The question, if we are going to the future policy of what is going to go on to the state, we will do that in the state Courts.

We have done that in the state Courts.

What we are saying here is that in the course of going through the process of raising the question in the state Courts, these people became mad at us, and they took out after us, and in the course of doing that they violated our constitutional rights, and we have a right under Section 1983 to obtain the Federal Court protection of our constitutional rights if we can show that they purposely set about to violate those rights.

If we can't prove that, then we can't prevail.

We ask the Court to send us back and give us our day in Court so that we can demonstrate that we can indeed prove that.

Thank you very much, Your Honor.

Chief Justice Burger: Thank you, Counsel.

The case is submitted.