United States District Court, D. Utah, Central Division
MEMORANDUM DECISION AND ORDER
A. KIMBALL UNITED STATES DISTRICT JUDGE
matter comes before the court on Plaintiff Union Pacific
Railroad Company's “Motion to Dismiss Intervening
Counties' Crossclaim and to Deny Intervening
Counties' Request for Stay” [Docket No. 72].The
court held a hearing on the motion on July 9, 2019. At the
hearing, David J. Crapo represented the Plaintiff, Bridget K.
Romano represented Intervening Defendant Salt Lake County,
David W. Scofield and Thomas William Peters represented the
other County Defendants, and Tyler R. Green, John C.
McCarrey, and Michelle A. Lombardi represented the Tax
Commission Defendants. Having fully and carefully considered
the motion and memoranda submitted by the parties, as well as
the facts and law relevant to this motion, the court enters
the following Memorandum Decision and Order denying
Plaintiff's Motion to Dismiss.
Union Pacific Railroad Company (“UPRR”) engages
in interstate commerce as a common carrier by railroad. UPRR
is duly qualified to do business in the State of Utah and
owns property subject to ad valorem taxation in Utah.
Defendant Utah State Tax Commission
(“Commission”) is the agency of the State of Utah
that assesses and enforces property taxes, Defendant John L.
Valentine is a Commissioner and Chair of the Commission, and
Defendant State of Utah is the government entity ultimately
responsible for the assessment and enforcement of the
property taxes at issue in this case (collectively
“State Defendants”). Intervening Defendants
(collectively “Counties”) are Salt Lake County,
Beaver County, Box Elder County, Carbon County, Emery County,
Grand County, Millard County, and Tooele County.
accordance with Utah law, the Commission determines the value
of all rail transportation property by May 1st of each year.
By May 1st of 2018, the Property Tax Division of the
Commission issued a property tax assessment to UPRR
determining that the fair market value of UPRR's taxable
Utah rail transportation property was $1, 678, 511, 732 for
the 2018 tax year. After a Section 306 reduction based on a
sales ratio study, the resulting taxable amount was $1, 552,
959, 050. However, UPRR alleges that the true market value of
its Utah rail transportation property should not be higher
than approximately $885, 000, 000, and therefore its property
is being assessed at a ratio of 175% its true market value,
while other commercial and industrial property in Utah is
assessed at a ratio of 92.52%.
27, 2018, UPRR filed a Request for Agency Action and Petition
for Redetermination with the Commission to request a
redetermination lowering its assessed value. Then, August 10,
2018, UPRR filed the instant action, seeking injunctive and
declaratory relief for violations of 49 U.S.C. § 11501
(the “4-R Act”). Specifically, UPRR seeks a
determination of the true market value of its Utah rail
transportation property. In August and September of 2018,
multiple counties filed separate objections and appeals with
the Commission, requesting that the Commission re-determine
and increase the assessed value of UPRR's taxable Utah
rail transportation property. On October 26, 2018, nearly all
of these counties filed motions to intervene in this federal
4-R Act proceeding. UPRR opposed the motions to intervene,
but on January 2, 2019, Magistrate Judge Pead granted the
Counties' motions and allowed the Counties to become
intervenor defendants in this action.
March 14, 2019, the Counties answered UPRR's Complaint
and included a Crossclaim against the Commission. The
Crossclaim, asserted under Fed.R.Civ.P. 13(g) and Utah Code
Ann. § 59-2-1007, identifies only the Commission as a
defendant, and challenges and objects to the Commission's
2018 Appraisal for Ad Valorem Taxation of UPRR's taxable
property. The Counties asserted jurisdiction under 28 U.S.C.
§ 1367. By its Crossclaim, the Counties assert that the
Commission undervalued UPRR's Utah property in violation
of Utah law (Article XIII, §§ 2 and 3 of the Utah
Constitution and Utah Code Ann. § 59-2-201) and seek an
order determining the Utah taxable value of UPRR's
properties to be at least $2, 200, 000, 000 in accordance
with Utah law. For alternative relief, the Counties request
this court to stay action on Plaintiff's principle
Complaint, pending resolution of the Counties' Objections
and Petitions before the Commission. In response, UPRR filed
the instant motion, seeking to dismiss the Intervening
Counties' Crossclaim for lack of jurisdiction and to deny
their request for stay.
brings a Motion to Dismiss Intervening Counties'
Crossclaim, pursuant to Federal Rules of Civil Procedure
12(b)(1) and (2), on the grounds that the court does not have
subject-matter jurisdiction over the Crossclaim nor personal
jurisdiction over the Utah State Tax Commission. UPRR also
requests, pursuant to the 4-R Act, that the court deny the
Counties' request for a stay of the federal proceedings
as alternative relief. A motion to dismiss a claim for lack
of subject matter jurisdiction is grounded in Federal Rule of
Civil Procedure 12(b)(1). It is axiomatic that a federal court
must have jurisdiction over the subject matter of the claim
in order to hear a civil case. To determine if subject matter
jurisdiction is authorized, the court must examine applicable
federal statutes and constitutional limitations.
instant case, the court must determine whether the Tax
Injunction Act, 28 U.S.C. § 1341 (“TIA”)
applies to the Counties' ancillary Crossclaim, because
the TIA prohibits federal jurisdiction over the majority of
state tax claims. If the TIA applies, the court must then
determine whether the 4-R Act allows the court to exercise
jurisdiction over the Crossclaim. If neither federal statute
prohibits the court from hearing the Crossclaim, the court
must decide whether supplemental jurisdiction over the
Crossclaim is proper under 28 U.S.C. § 1367. To make
this decision, the court must ascertain whether the
Commission has waived (or Congress has abrogated by federal
statute) sovereign immunity over the Crossclaim. Otherwise,
sovereign immunity is a constitutional limitation that would
prohibit the court from hearing the Crossclaim.
reasons discussed below, the court finds that the TIA, the
4-R Act, and sovereign immunity do not restrict the
court's jurisdictional authority over the Counties'
Crossclaim and that supplemental jurisdiction is proper under
28 U.S.C. § 1367. Therefore, the court concludes that
jurisdiction over the Crossclaim is proper and denies
UPRR's motion. Because the court denies the motion, the
Counties' request to stay is moot.
The Tax Injunction Act (28 U.S.C. § 1341)
dispute in this case is whether the TIA bars the court from
exercising jurisdiction over the Counties' Crossclaim.
The TIA mandates that “district courts shall not
enjoin, suspend or restrain the assessment, levy or
collection of any tax under State law where a plain, speedy
and efficient remedy may be had in the courts of such
State.” 28 U.S.C. § 1341. The TIA was enacted to
limit federal court jurisdiction over state tax cases and to
bar jurisdiction when federal court action would reduce state
tax revenue, so that state taxpayers could not seek
federal-court orders to avoid paying state taxes. See
Hibbs v. Winn, 542 U.S. 88, 104-07 (2004); Burns v.
Conley, 526 F.Supp.2d 235, 240-41 (D.R.I. 2007).
argues that the TIA and supporting case law prohibit federal
courts from exercising supplemental jurisdiction over state
tax law claims in 4-R Act cases. UPRR asserts that the TIA
bars the application of supplemental jurisdiction (including
ancillary jurisdiction) under 28 U.S.C. § 1367, and that
the Counties did not allege any independent jurisdiction that
might abrogate the TIA's jurisdictional bar of the
Crossclaim in this court. However, the Counties argue that
the TIA does not bar supplemental jurisdiction over their
Crossclaim because the Crossclaim falls under an exception to
the TIA that allows for federal court jurisdiction over state
tax claims where there is no sufficient, alternative state
court remedy. The Counties assert that this exception applies
because UPRR's 4-R Act filing in this court had the
immediate effect of staying, and thus precluding, the
Commission from considering the Counties' Objections and
Cross-Petitions that the Commission undervalued UPRR's
taxable property, thereby leaving the Counties with no
effective state court remedy. The Counties also argue that
the TIA does not ...