APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA D.C. Civil No. 74-2103
Before GIBBONS, FORMAN, and ROSENN, Circuit Judges
Black and poor residents in urban areas across the county have evinced in recent years a growing concern that property tax assessments discriminate against them.*fn1 Litigation against this discrimination has been notably unsuccessful, primarily due to the bar of the federal Tax Injunction Act of 1937.*fn2 See, e.g., Bland v. McHann, 463 F.2d 21 (5th Cir. 1972), cert. denied, 410 U.S. 966, 35 L. Ed. 2d 700, 93 S. Ct. 1438 (1973). This appeal questions whether that statute wihholds any federal remedy in an action claiming that the assessment method, as distinguished from the levy or collection of taxes, of the Board of Assessment Appeals of Berks County, Pennsylvania, is racially discriminatory. The district court held that the action was barred and dismissed the complaint. Garrett v. Bamford, 394 F. Supp. 902 (E.D. Pa. 1975). We reverse.
Since this case comes to us from a jurisdictional dismissal granted on defendants' motion pursuant to Fed. R. Civ. P. 12(b)(1), the only "facts" are the allegations of the complaint. These must be taken as true for the purposes of our review. Walker, Inc. v. Food Machinery, 382 U.S. 172, 174-5, 15 L. Ed. 2d 247, 86 S. Ct. 347 (1965); Curtis v. Everette, 489 F.2d 516, 518 (3d Cir. 1973), cert. denied sub nom. Smith v. Curtis, 416 U.S. 995, 40 L. Ed. 2d 774, 94 S. Ct. 2409 (1974).
The named plaintiffs*fn3 are one non-white and two white homeowners residing in a predominantly non-white area of the City of Reading, Berks County, Pennsylvania. Named as individual defendants are members of the Board of Assessment Appeals of Berks County; the Board is also named as a defendant.Defendants are responsible for assessing the homes of plaintiffs and others residing in Berks County. The gravamen of the complaint is that the method of assessing the value of plaintiffs' property, on which real estate and school taxes are based, is intentionally racially discriminatory in violation of 42 U.S.C. §§ 1981, 1983 (1970), and the Fourteenth Amendment.
Plaintiffs allege that their properties are assessed at values which are higher than the values assigned to similar properties in predominantly or exclusively white areas of Berks County. They further contend that their assessments constitute a greater percentage of their properties' actual value than do the assessments of properties in white areas generally. They claim that the result of the discriminatory assessments is that plaintiffs bear a disproportionately heavy burden in their city and county real estate and school taxes. Plaintiffs aver that this discrimination is systematic and intentional.*fn4 Cf. Washington v. Davis, 426 U.S. 229, 96 S. Ct. 2040, 48 L. Ed. 2d 597, 44 U.S.L.W. 4789, 4794 (1976).
The chief method of accomplishing this discrimination, according to plaintiffs, is defendants' failure to make annual assessments of property values as required by state law. See 72 P.S. § 5344(a) (Supp. 1975). Plaintiffs claim that property values in non-white areas of the county are declining, while values in white neighborhoods are increasing. Failure to make the annual assessments thus results in a tax based on higher than actual value in nonwhite areas and one based on lower than actual values in white neighborhoods. Accordingly, the principal relief plaintiffs seek is an injunction requiring defendants immediately to cause the assessment of all residential property within the county on a non-discriminatory basis, and to make an annual assessment with proofs submitted to the court to demonstrate that the assessment is uniform and non-discriminatory.
Problems such as those presented in this case did not become part of our jurisprudence until the Supreme Court's landmark decision in Ex Parte Young, 209 U.S. 123, 52 L. Ed. 714, 28 S. Ct. 441 (1908). By holding that federal courts could enjoin the unconstitutional acts of state officials, the Court caused a major shift in the jurisprudential relationship between the federal government and the states. That decision spurred efforts by the courts and the Congress to limit the broad scope of its application.*fn5 The Tax Injunction Act has roots in federal equity and comity doctrine developed in Supreme Court decisions after Ex Parte Young. The legislative history of the Act, however, demonstrates that Congress addressed the statute to a more circumscribed range of concerns than the broad federalism doctrine developed in the judicial decisions. Our analysis of the current § 1341's applicability to this case must begin with an examination of the legislative and judicial policies underlying the statute.
The Congressional materials revealing the purposes of the Tax Injunction Act are brief but clear. Congress became concerned with the practice of large out of state corporations' using diversity jurisdiction to litigate the validity of state taxes in federal courts. The foreign corporations thus gained an advantage over state citizens who generally, under state law, had to pay the tax and then sue for a refund. Furthermore, federal litigation was time consuming and costly; municipalities often became strapped for funds and the corporations were able to reach extremely favorable settlements. Local financing was disrupted and foreign corporations escaped a large part of their tax burdens.*fn6
It thus appears that the statute had a twofold purpose: eliminating unfair advantage of foreign corporations over citizens of the state and eliminating the ability of foreign corporations interminably to withhold payment of local taxes and to disrupt local financing. See Tramel v. Schrader, 505 F.2d 1310, 1315-6 (5th Cir. 1975); Hargrave v. McKinney, 413 F.2d 320, 325-6 (5th Cir. 1969).
An additional point is worthy of note. In his Senate floor discussion of the Tax Injunction Act, its chief sponsor, Senator Bone, introduced portions of the Judiciary Committee report on the prior Johnson Act,*fn7 which applied similar restraints to federal injunctions against orders of state administrative agencies. Senator Bone stated that the following quotation was "applicable to [the Tax Injunction Act] in the same manner that [it was] applicable to the Johnson bill." 81 Cong. Rec. at 1416 (1937).
The wealthy individual or corporation is thus often enabled to wear out his opponent and compel him to settle or submit to an unjust judgment for the very reason that his opponent is not financially able to follow him through the tortuous and expensive route through the Federal court to the Supreme Court of the United States at Washington. And all the time in this dispute there is no Federal question involved. There is a dispute arising under a State statute or law of other origin and nothing more.
Id. at 1417 [emphasis supplied]. This excerpt from the Congressional Record, coupled with Congress' apparent concern to limit the ability of foreign corporations to use the diversity jurisdiction, at least suggests that Congress did not intend the Tax Injunction Act to bar federal courts from ...