United States v. State of Oregon , 503 F. App'x 525 ( 2013 )

FILED
NOT FOR PUBLICATION JAN 02 2013
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA and No. 11-35184
BONNEVILLE POWER
ADMINISTRATION, D.C. No. 3:10-cv-00528-HA
Plaintiffs - Appellants,
MEMORANDUM *
v.
STATE OF OREGON and CLACKAMAS
COUNTY,
Defendants - Appellees.
UNITED STATES OF AMERICA, No. 11-35776
Plaintiff - Appellant, D.C. No. 3:11-cv-00452-HZ
v.
STATE OF OREGON and COUNTY OF
CLACKAMAS,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Oregon
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Ancer L. Haggerty, Senior District Judge, Presiding
Marco A. Hernandez, District Judge, Presiding
Argued and Submitted October 12, 2012
Portland, Oregon
Before: SILVERMAN, CLIFTON, and N.R. SMITH, Circuit Judges.
We have jurisdiction over Case Nos. 11-35184 (“Oregon I”) and 11-35776
(“Oregon II”), which are consolidated for appeal, pursuant to 28 U.S.C. § 1291.
For the reasons set forth below, we affirm the district court in both cases.
Oregon I
Federal courts have a “virtually unflagging” obligation to adjudicate claims
within their jurisdiction. Colo. River Water Conservation Dist. v. United States,
424 U.S. 800, 817 (1976); United States v. Morros, 268 F.3d 695, 703 (9th Cir.
2001). As such, “abstention is permissible only in a few carefully defined
situations with set requirements.” Morros, 268 F.3d at 703 (internal quotation
marks omitted); see also Colo. River, 424 U.S. at 813 (noting that abstention is
proper only in “exceptional circumstances” (quoting Cnty. of Allegheny v. Frank
Mashuda Co., 360 U.S. 185, 188-89 (1959)). “We review de novo whether the
facts of the instant case conform to these requirements.” Morros, 268 F.3d at 703.
“If they do, we review the district court’s decision to abstain for an abuse of
discretion.” Id.2
We conclude that the facts of this case meet the “requirements” for
abstention under Levin v. Commerce Energy, Inc., 130 S. Ct. 2323 (2010). Like
the plaintiffs in Levin, the plaintiffs in these consolidated cases (the “United
States”) bring a federal constitutional challenge to a state tax exemption. See 130
S. Ct. at 2328-29, 2336. In Levin, the Supreme Court held that abstention was
appropriate based on general “[c]omity considerations” including deference to state
regulation of its own tax policy. See id. at 2330 & n.2, 2336-37. While the
plaintiffs in Levin were private businesses and a private citizen, see id. at 2328, not
the United States, this distinction is not material given the Levin court’s comity
rationale. Accordingly, we reject the United States’ argument that this distinction
renders Levin inapplicable as a matter of law.
The district court did not abuse its discretion in abstaining under Levin.
Here, like the state in Levin, the State of Oregon enjoys “wide regulatory latitude”
over its tax policy. See id. at 2336. Similarly, the Oregon state courts are “better
positioned than their federal counterparts to correct any violation because they are
more familiar with state legislative preferences . . . .” Id. Indeed, the Supreme
Court has shown a strong preference for allowing states to fashion their own
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remedy once a tax is deemed discriminatory and unconstitutional. See Davis v.
Mich. Dep’t of Treasury, 489 U.S. 803, 817-18 (1989).1
Oregon II
Because the sole relief sought in Oregon II is a declaration that the state tax
exemption is unconstitutional, Oregon II implicates the Wilton/Brillhart abstention
doctrine. The Wilton/Brillhart doctrine allows “district courts broad discretion [to
abstain] as long as it furthers the Declaratory Judgment Act’s purpose of enhancing
judicial economy and cooperative federalism.” See R.R. Street & Co. Inc. v.
Transport Ins. Co., 656 F.3d 966, 975 (9th Cir. 2011) (internal quotation marks
omitted); see also Wilton v. Seven Falls Co., 515 U.S. 277, 286-90 (1995);
Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 494-95 (1942). We reject the
United States’ argument that the Wilton/Brillhart discretionary standard does not
apply and that the district court erred under the Colorado River “exceptional
circumstances” test. See Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1366
(9th Cir. 1991) (“The Colorado River test . . . does not apply where the Declaratory
Judgments Act, 28 U.S.C. § 2201, is involved.”). Accordingly, we review the
district court’s decision to abstain for abuse of discretion. Gov’t Emps. Ins. Co. v.
1
Because we affirm the district court under Levin, we do not reach the other
abstention doctrines, or the justiciability arguments, raised by the State of Oregon.
4
Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998) (“[O]ur review of a district court’s
decision to entertain an action under the Declaratory Judgment Act is deferential,
under the abuse of discretion standard.”).
The district court did not abuse its discretion in abstaining under the factors
identified by the Supreme Court in Wilton and Brillhart, and by this court in Dizol.
See Dizol, 133 F.3d at 1225 & n.5. The district court properly found that a number
of factors weighed in favor of abstention, including the risk of duplicative
litigation, forum shopping, and needless entanglement between federal and state
courts. See Smith v. Lenches, 263 F.3d 972, 977-78 (9th Cir. 2001); Dizol, 133
F.3d at 1225 & n.5. This finding was supported by the fact that the United States
initially had its choice of federal or state forums. The United States chose to
initiate proceedings with the Oregon Department of Revenue, proceedings which
are presently pending in state court on appeal. The United States only filed suit in
federal district court after receiving an unfavorable declaratory ruling from the
Oregon Department of Revenue.
While the predominately federal nature of the United States’ claim, and its
status as the plaintiff in this case, arguably weigh in favor of retaining jurisdiction,
they are insufficient to demonstrate that the district court abused its discretion.
This is especially true given the Supreme Court’s preference for allowing state
5
courts to fashion their own remedy for discriminatory taxation. See Levin, 130 S.
Ct. at 2333-35 & n.11; Davis, 489 U.S. at 817-18.
AFFIRMED
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