USCA1 Opinion
UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
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No. 96-2353
CUMBERLAND FARMS, INC.,
Plaintiff, Appellant,
v.
TAX ASSESSOR, STATE OF MAINE, AND TREASURER, STATE OF MAINE,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
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Before
Torruella, Chief Judge,
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Selya, Circuit Judge,
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and Saris,* District Judge.
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Sheldon A. Weiss, with whom Joel C. Martin, James B. Haddow,
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and Petruccelli & Martin were on brief, for appellant.
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Janet M. McClintock, Assistant Attorney General, State of
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Maine, with whom Andrew Ketterer, Attorney General, Lucinda E.
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White, Assistant Attorney General, and Thomas D. Warren, State
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Solicitor, were on brief, for appellees.
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June 20, 1997
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*Of the District of Massachusetts, sitting by designation.
SELYA, Circuit Judge. Plaintiff-appellant Cumberland
SELYA, Circuit Judge.
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Farms, Inc. ("CFI"), a Massachusetts-based processor and
distributor of milk, operates a chain of convenience stores
throughout the northeastern states. In this case, it asserts
that a milk handling surcharge imposed by the State of Maine
violates the Commerce Clause. The defendants are state
officials, sued as such (collectively, "Maine" or "the State").
In their view, the milk handling surcharge is indistinguishable
for Commerce Clause purposes from a sales tax and does not
discriminate against interstate commerce either on its face or in
its purpose and effect. Because the Tax Injunction Act, 28
U.S.C. 1341 (1994), deprives the federal courts (other than the
Supreme Court) of jurisdiction to decide the merits of this
difficult (and interesting) question, we vacate the judgment
below and remand with instructions to dismiss the case.
I.
I.
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Background
Background
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Our tale begins with the Maine Dairy Farm Stabilization
Act ("the DFS Act"), Me. Rev. Stat. Ann. tit. 36, 4541-4547
(repealed 1995). The DFS Act had two components. On the one
hand, it imposed a tax on packaged fluid milk sold in Maine
(whether produced in or out of state). On the other hand, it
provided a rebate of the funds so collected to in-state dairy
farmers. The first handler in Maine bore the obligation of
collecting and paying the tax, regardless of whether such first
handler was a wholesaler or a retailer selling milk packaged out
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of state. See id. at 4543(1).
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The tax imposed by the DFS Act had an unusual
structure, better suited to price maintenance than to revenue
augmentation. The amount of the tax varied between 0 and 5 per
quart of milk and increased as the "basic price" of milk fell
below the target price of $16.00 per hundredweight (later changed
to $16.50 per hundredweight).1 See id. at 4543(2). The
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statute directed the State Treasurer to segregate the proceeds
from this tax and distribute 94% of the funds so collected to in-
state dairy farmers in proportion to their milk production. See
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id. at 4544(2)(A). This tax-and-subsidy scheme enabled in-
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state milk producers to receive the target price for their milk
come what may first, they received the basic price from their
customers, and then they received the difference between the
target price and the basic price as a rebate from the State and
thus shielded them from out-of-state competition.
The Supreme Court threw a monkey wrench into the gears
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1In this context, "basic price" is a term of art. See Me.
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Rev. Stat. Ann. tit. 7, 2954. The Maine Milk Commission sets
the basic price of milk, which is the minimum price that must be
paid by milk dealers in Maine (other than those who are federally
regulated) to Maine dairy farmers. The basic price is geared to
the price of milk established for the Boston zone under the New
England Federal Milk Marketing Order No. 1. See 7 C.F.R. 1001
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et seq. (1997). The DFS Act provided that when the basic price
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was $16.00 or more per hundredweight (cwt), a handler paid no
tax. When the basic price was $15.50 to $15.99 per cwt, the
handler paid a tax of 1 per quart. When the basic price was
$15.00 to $15.49 per cwt, the tax rose to 2 per quart, and so
on. Since there are about 46.5 quarts of milk per cwt, this
mechanism tended to guarantee price stability by keeping the sum
of the basic price plus the tax in the vicinity of $16.00 per
cwt.
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of the DFS Act when it decided West Lynn Creamery, Inc. v. Healy,
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512 U.S. 186 (1994). In that case, the Court addressed a
Massachusetts pricing order which was tailored to serve
substantially the same ends as the DFS Act. The order imposed an
assessment on fluid milk sold by Massachusetts retailers and
directed distribution of the amounts collected to Massachusetts
dairy farmers. See id. at 190-91. Finding that the order's
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purpose and effect were "to enable higher cost Massachusetts
dairy farmers to compete with lower cost dairy farmers in other
States," the Court declared the arrangement "clearly
unconstitutional." Id. at 194.
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In the aftermath of West Lynn Creamery, we considered
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CFI's constitutional challenge to the DFS Act. Finding no
significant constitutional distinction between that Act and the
Massachusetts law invalidated in West Lynn Creamery, we struck
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down Maine's scheme. See Cumberland Farms, Inc. v. LaFaver, 33
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F.3d 1 (1st Cir. 1994) (per curiam) (Cumberland I).
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The Maine legislature responded with remarkable
alacrity. In January of 1995, it enacted "An Act to Continue the
Fee on the Handling of Milk," Me. Rev. Stat. Ann. tit. 36,
4771-4773 ("the 1995 Act"). The preamble to the legislation
recited that "the State and its citizens are experiencing
economic difficulties and significant fiscal problems" such that
"revenues are necessary to the State's ability to address such
difficulties and problems." 1995 Me. Laws ch. 2, Emergency
Preamble. The 1995 Act assesses a surcharge on milk handlers
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that is nearly identical to that previously mandated by the DFS
Act2 but directs that the revenues generated are to be deposited
into Maine's general fund. See Me. Rev. Stat. Ann. tit. 36,
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4772(8).
Shortly after the effective date of the 1995 Act, the
plot thickened. The state legislature began systematically to
ensure continued subsidization of Maine's dairy farmers. As part
of three successive omnibus spending bills for state government,
the legislature appropriated to in-state milk producers
$1,500,000 for the period March 1995 to June 1996, $4,050,000 for
the period July to September 1996, and $3,150,000 for the period
July 1996 to June 1997. See 1995 Me. Laws ch. 5, A-1; id. at
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ch. 368, B-1; id. at ch. 665, KK-1.
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CFI believed that this legislative patchwork was a
thinly-veiled contrivance aimed at circumventing the decision in
Cumberland I and that the new legislation, taken in its entirety,
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shared the same constitutional infirmity which led to the demise
of the DFS Act. Consequently, it brought suit in the federal
district court seeking injunctive, declaratory, and monetary
relief. In due season, the district court rejected CFI's plaint.
Although the court believed that the state legislature, in
passing the 1995 legislative package (that is, the 1995 Act and
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2The 1995 Act imposes a surcharge that ranges between 0 and
6 per quart of milk. When the basic price is $16.50 per cwt or
more, there is no charge. When the basic price is $16.00 to
$16.49 per cwt, the charge is 1 per quart. This pattern
continues until the basic price drops below $14.00 per cwt, at
which point the maximum surcharge (6 per quart) is achieved.
Me. Rev. Stat. Ann. tit. 36, 4772(2).
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the ensuing appropriation bills), "intended to circumvent the
Court's decision in West Lynn Creamery by simply pulling apart
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the two components of the [DFS] Act," it nonetheless felt
compelled to unwrap the package and analyze each piece of
legislation separately. Cumberland Farms, Inc. v. Mahany, 943 F.
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Supp. 83, 87 (D. Me. 1996). The court concluded that, when
examined independently, both the revenue-raising and spending
bills passed muster under the Commerce Clause. See id. at 88-90.
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Accordingly, it granted summary judgment in Maine's favor. This
appeal followed.
II.
II.
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Analysis
Analysis
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Federal courts are courts of limited jurisdiction, and
thus must take pains to act only within the margins of that
jurisdiction. See National Ass'n of Social Workers v. Harwood,
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69 F.3d 622, 628 n.6 (1st Cir. 1995). Here, Maine interposes the
Tax Injunction Act, 28 U.S.C. 1341 ("the TIA"), as a defense to
CFI's suit. Although Maine did not raise this point below, the
TIA's commands are jurisdictional in nature and are not subject
to waiver. See Trailer Marine Transp. Corp. v. Rivera Vasquez,
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977 F.2d 1, 5 (1st Cir. 1992). Thus, we start and finish our
analysis by discussing this facet of the State's defense.
The TIA provides in relevant part that "[t]he district
courts shall not enjoin, suspend, or restrain the assessment,
levy or collection of any tax under State law where a plain,
speedy and efficient remedy may be had in the courts of such
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State." 28 U.S.C. 1341. In one respect, the TIA sweeps more
broadly than the letter of its text suggests. As authoritatively
construed, the TIA forbids not only injunctive relief, but also
declaratory and monetary relief. See National Private Truck
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Council, Inc. v. Oklahoma Tax Comm'n, 115 S. Ct. 2351, 2354
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(1995). Hence, the TIA, if it applies in this instance, is a
complete bar to maintaining the instant action in a federal
forum. We turn, then, to the question of its applicability.
Two conditions must be satisfied before the TIA will
deprive a federal court of jurisdiction: first, the challenged
impost must constitute a tax; and second, the State must furnish
an adequate alternative to a federal-court remedy. Here, we are
concerned only with the first condition, for CFI does not dispute
that Maine affords a plain, speedy, and efficient anodyne to
persons putatively aggrieved by the operation of the 1995 Act.3
The question is whether, for purposes of the TIA,
Maine's milk handling surcharge is a tax (which would defeat the
exercise of federal jurisdiction) or a fee (which would allow the
exercise of federal jurisdiction). In San Juan Cellular Tel. Co.
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v. Public Serv. Comm'n, 967 F.2d 683 (1st Cir. 1992), we set
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3In all events, CFI could not mount a credible challenge on
this point. Under Maine law, CFI can apply for a refund of any
monies due pursuant to the 1995 Act within three years from the
time a return is filed or two years from the time the tax is
paid. See Me. Rev. Stat. Ann. tit. 36, 144. If a refund is
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denied, CFI can seek judicial review in the state superior court,
see id. at 151, and any refund obtained would include interest,
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see id. at 186. This remedy is sufficiently "plain, speedy,
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and efficient" to satisfy the second condition of the TIA. See
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California v. Grace Brethren Church, 457 U.S. 393, 413-15 (1982).
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forth the standard that guides our analysis of this issue.
There, after surveying the case law, we stated that:
[Courts] have sketched a spectrum with a
paradigmatic tax at one end and a
paradigmatic fee at the other. The classic
"tax" is imposed by a legislature upon many,
or all, citizens. It raises money,
contributed to a general fund, and spent for
the benefit of the entire community. The
classic "regulatory fee" is imposed by an
agency upon those subject to its regulation.
It may serve regulatory purposes directly by,
for example, deliberately discouraging
particular conduct by making it more
expensive. Or it may serve such purposes
indirectly by, for example, raising money
placed in a special fund to help defray the
agency's regulation-related expenses.
Courts facing cases that lie near the middle
of this spectrum have tended . . . to
emphasize the revenue's ultimate use, asking
whether it provides a general benefit to the
public, of a sort often financed by a general
tax, or whether it provides more narrow
benefits to regulated companies or defrays
[an] agency's cost of regulation.
Id. at 685 (citations omitted). This formulation for
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distinguishing taxes from fees has found favor with a number of
other appellate courts. See, e.g., Bidart Bros. v. California
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Apple Comm'n, 73 F.3d 925, 930 (9th Cir. 1996); Hager v. City of
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W. Peoria, 84 F.3d 865, 870 (7th Cir. 1996); Travelers Ins. Co.
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v. Cuomo, 14 F.3d 708, 713 (2d Cir. 1994). We adhere to it
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today.
The classification of an impost for purposes of the TIA
"tax" versus "fee" presents a question of law appropriate for
resolution on a properly developed summary judgment record. See
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Varrasso v. Varrasso, 37 F.3d 760, 763 (1st Cir. 1994). Our
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task, then, is to apply the San Juan Cellular standard. The fact
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that the milk handling surcharge was imposed by the state
legislature rather than by an administrative agency suggests that
it is a tax rather than a fee. See Bidart Bros., 73 F.3d at 931;
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San Juan Cellular, 967 F.2d at 685. The fact that the revenues
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raised from the surcharge go into Maine's general fund and are
thus spent for the benefit of the citizenry as a whole also
favors a finding that the milk handling surcharge is a tax. See
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Travelers Ins., 14 F.3d at 713; San Juan Cellular, 967 F.2d at
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685.
There is more. The fact that the responsibility for
administering the statute is assigned to the State Tax Assessor
cuts in the same direction. So too does the fact that,
throughout the body of the 1995 Act, the legislature consistently
refers to its milk surcharge as a tax. See, e.g., Me. Rev. Stat.
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Ann. tit. 36, 4772 (caption); id. at 4772(1) (describing the
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surcharge as "[a]n excise tax"); id. at 4772(2) (discussing
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"[t]he rate of the tax levied"); id. at 4772(3) (discussing
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"[c]alculation of tax"). Although such labels are not
conclusive, see Keleher v. New Eng. Tel. & Tel. Co., 947 F.2d
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547, 549 (2d Cir. 1991), they are entitled to some weight in the
calculus of characterization.4 See Trailer Marine, 977 F.2d at
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4The weight is reduced in this instance because the Maine
legislature, although using the word "tax" roughly three dozen
times in the body of the statute and not using the word "fee" at
all, described the legislation, in the Emergency Preamble, as "An
Act to Continue the Fee on the Handling of Milk." See 1995 Me.
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Laws ch.2, Emergency Preamble.
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6.
It is apparent that the surcharge's stated purpose is
tax-like; in enacting it, the state legislature described it as
a means of raising general revenues. This is a relevant factor
in deciding the "tax versus fee" question. See Chicago & N.W.
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Transp. Co. v. Webster County Bd. of Supervisors, 71 F.3d 265,
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267 (8th Cir. 1995); Travelers Ins., 14 F.3d at 713. Still, we
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recognize that the inverted structure of the surcharge furthers a
regulatory purpose to ensure stable (if elevated) milk pricing
and thus pulls the other way. Finally, the surcharge is
imposed only on handlers of milk, not on all citizens (or even on
all businesses); in this aspect, the surcharge more resembles a
fee. See Trailer Marine, 977 F.2d at 6; San Juan Cellular, 967
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F.2d at 685.
As we indicated in San Juan Cellular, 967 F.2d at 685,
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the characterization of a governmental assessment as a tax or a
fee is rarely a choice between black and white. Many imposts
fall into the gray area in the center of the spectrum. So it is
here. While the question is close, we believe that Maine's milk
handling surcharge falls nearer to the tax end of the spectrum
than to the fee end. As San Juan Cellular suggests, the most
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salient factor in the decisional mix concerns the destination of
the revenues raised by the impost and here, the revenues go
into Maine's general fund. Although this element alone is not
always decisive, it is particularly important where, as here, the
stated purpose of the impost is to garner revenue. See Hager, 84
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F.3d at 870-71. In the circumstances of this case, this factor
is sufficient to outweigh the few straws in the wind that point
in the opposite direction.
CFI attempts to derail this result by using its
"merits" argument as a jurisdictional foil. It tells us that,
despite the legislature's declaration, the purpose of the milk
handling surcharge is not to augment general revenues, but
instead "to impose an exaction, akin to a regulatory fee, for the
sole benefit of Maine dairy farmers." In order to reach this
conclusion, however, we would have to view the milk handling
surcharge in conjunction with the later subsidies to Maine dairy
farmers as a single, integrated scheme, and we would have to
disregard the Maine legislature's statement of purpose. This
extraordinary step might be appropriate on the merits in a
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Commerce Clause case. See West Lynn Creamery, 512 U.S. at 201
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("Our Commerce Clause jurisprudence is not so rigid as to be
controlled by the form by which a State erects barriers to
commerce."). But there is neither any precedent nor any
plausible jurisprudential basis for analyzing separate tax and
subsidy statutes as an integrated unit under the Tax Injunction
Act. Moreover, the need for doing so, while arguable in the
Commerce Clause context, is chimerical in the TIA context: the
risk is infinitesimal that a state legislature will contrive an
ingenious scheme in order to deny lower federal courts the
jurisdiction to adjudicate the legality of state exactions.
Since aggrieved taxpayers may raise all their claims in a state
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forum, subject to eventual review by the United States Supreme
Court, the game obviously would not be worth the candle.
III
III
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Conclusion
Conclusion
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We can go no further. The Commerce Clause question is
for the Maine state courts (and, perhaps, the United States
Supreme Court) to decide. Because the TIA deprives us of
jurisdiction to determine the constitutionality of Maine's milk
handling surcharge, the judgment of the district court is vacated
and the case is remanded with instructions to enter an order
dismissing the action without prejudice to appropriate state
proceedings.
Vacated and remanded with instructions. No costs.
Vacated and remanded with instructions. No costs.
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