City of Baton Rouge v. Centroplex Ctr. Convention Hotel, L.L.C.

105 F.4th 683

CITY OF BATON ROUGE/PARISH OF EAST BATON ROUGE DEPARTMENT OF FINANCE;

Linda Hunt, Director, City of Baton Rouge/Parish of East Baton Rouge Department of Finance, Plaintiffs—Appellees, v. CENTROPLEX CENTRE CONVENTION HOTEL, L.L.C., Defendant—Appellant,

City of Baton Rouge/parish of East Baton Rouge Department of Finance;

Linda Hunt, Director, City of Baton Rouge/Parish of East Baton Rouge Department of Finance, Plaintiffs—Appellees, v. PNK (Baton Rouge) Partnership; PNK Development 8, L.L.C.;

PNK Development 9, L.L.C., Defendants—Appellants.

No. 23-30690

consolidated with No. 23-30696

United States Court of Appeals, Fifth Circuit

FILED June 18, 2024

Appeals from the United States District Court for the Middle District of Louisiana, USDC Nos. 3:22-CV-94, 3:22-CV-93, Shelly Deckert Dick, John W. deGravelles, U.S. District Judges

Drew M. Talbot (argued), Talbot Law Firm, Baton Rouge, LA, Alejandro Raeshod Perkins, Esq., Hammonds, Sills, Adkins, Guice, Noah & Perkins, L.L.P., Baton Rouge, LA, for Plaintiffs—Appellees.

Gregory Thomas Stevens, Alfred Paul LeBlanc (argued), Jr., Esq., Phelps Dunbar, L.L.P., Baton Rouge, LA, for Defendant—Appellant Centroplex Centre Convention Hotel, L.L.C. in No. 23-30690.

Gregory Thomas Stevens, Alfred Paul LeBlanc (argued), Jr., Esq., Phelps Dunbar, L.L.P., Baton Rouge, LA, for Defendants—Appellants PNK (Baton Rouge) Partnership, PNK Development 8, L.L.C., PNK Development 9, L.L.C. in No. 23-30696.

Before Clement, Engelhardt, and WILSON, Circuit Judges.

Per Curiam:

PNK (Baton Rouge) Partnership, PNK Development 8 LLC, and PNK Development 9 LLC (together, "PNK"), own and operate the L'Auberge Casino and Hotel in Baton Rouge, Louisiana. Centroplex Centre Convention Hotel, LLC ("Centroplex") also owns and operates a hotel and casino in Baton Rouge called the Belle of Baton Rouge. PNK and Centroplex (together, "Owners") incentivize their gambling patrons to return frequently by offering them rewards, sometimes in the form of complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and Linda Hunt (in her official capacity as director of the department) (together, the "City") conducted an audit and learned that the Owners never remitted state and local taxes associated with these complimentary hotel stays for a period of years. The City says that the Owners needed to pay these taxes, while the Owners put forth myriad arguments why they didn't. The City filed suit in state court, then the Owners removed it to federal court on diversity jurisdiction, which undisputedly exists. But the City filed a Motion to Remand anyway, arguing that the tax abstention doctrine ("TAD"), as put forth in Levin v. Commerce Energy, Inc., 560 U.S. 413, 130 S.Ct. 2323, 176 L.Ed.2d 1131 (2010), warranted abstention here.

The District Court agreed, and doing so was not an abuse of discretion. All five TAD factors counsel in favor of abstention here: (1) Louisiana enjoys wide regulatory latitude over its taxation structure; (2) the Owners' express invocation of their due process rights under the Louisiana Constitution does not invoke heightened federal court scrutiny; (3) the Owners may seek an improved competitive position in the federal court system; (4) Louisiana courts are more familiar with Louisiana's tax regime and the legislature's intent in crafting it; and (5) the Tax Injunction Act constrains the remedies available in federal court. We therefore AFFIRM.

I. BACKGROUND

The Owners operate full service casinos attached to full service hotels, and casino patrons often stay at the attached hotel. The Owners incentivize their casino patrons to continue gaming at their establishments by rewarding them with points, credits, offers, and complimentary goods and services, including the complimentary stays at the Owners' hotels out of which this dispute arises. The single sales and occupancy tax collector for all taxes levied by the local taxing authorities within the City conducted an audit for taxes owed from January 1, 2016 to February 28, 2021. That audit revealed that the Owners neither charged nor collected city sales and occupancy taxes connected with their furnishing complimentary hotel rooms through their rewards programs for that period.

The City filed suit against both Owners in two separate suits in Louisiana state court, alleging that the Owners were "dealers" who, in failing to properly charge and collect local sales and occupancy taxes, became liable for those taxes themselves. See LA. STAT. ANN. § 47:337.17.C. The Owners denied owing any taxes on complimentary hotel rooms and claimed that the City violated their procedural due process rights by failing to notify them of the amount of taxes allegedly due and not affording them an opportunity to "administratively challenge" the amount or otherwise "proceed before the Louisiana Board of Tax Appeals" before filing suit. The Owners removed their respective suits to federal court under diversity jurisdiction, and no one disputes that the requirements for diversity jurisdiction are met. So, the City filed a Motion to Remand on a different basis: that the TAD weighed in favor of this tax dispute being litigated in Louisiana state court.¹ The District Court agreed, so the Owners appealed in this consolidated case.

II. STANDARD OF REVIEW

"This Court reviews an abstention ruling for abuse of discretion, but it reviews de novo whether the requirements of a particular abstention doctrine are satisfied. Because the exercise of discretion must fit within the specific limits prescribed by the particular abstention doctrine invoked, a court necessarily abuses its discretion when it abstains outside of the doctrine's strictures." Elec. Reliability Council of Tex., Inc. v. Just Energy Tex., L.P., 57 F.4th 241, 247 (5th Cir. 2023) (cleaned up). And, in removal actions like here, "[t]he removal statute is . . . strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand." Gasch v. Hartford Acc. & Indem. Co., 491 F.3d 278, 281-82 (5th Cir. 2007) (citing Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000)).

III. DISCUSSION

A. The District Court Invoked the TAD within Levin's Bounds

Abstention often implicates questions of comity. Generally, comity concerns "a proper respect for state functions" and is a "continuance of the belief that the National Government will fare best if the States and their institutions are left free to perform their separate functions in separate ways." Fair Assessment in Real Est. Ass'n, Inc. v. McNary, 454 U.S. 100, 112, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981) (quoting Younger v. Harris, 401 U.S. 37, 44, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971)). Examining comity vis-à-vis state taxation, the Supreme Court held: "More embracive than the TIA, the comity doctrine applicable in state taxation cases restrains federal courts from entertaining claims for relief that risk disrupting state tax administration." Levin, 560 U.S. at 417, 130 S.Ct. 2323. Because states "chiefly rely" on "taxation . . . to carry on their respective governments," courts should interfere with it "as little as possible." Id. at 421-22, 130 S.Ct. 2323 (quoting Dows v. City of Chicago, 78 U.S. 108, 110, 11 Wall. 108, 20 L.Ed. 65 (1870)). And courts look to Levin when faced with whether they should abstain from state taxation disputes. See, e.g., Normand v. Cox Commc'ns, LLC, 848 F. Supp. 2d 619, 623-27 (E.D. La. 2012) (discussing and applying Levin factors when abstaining from a similar Louisiana state taxation matter).

The Owners argue that Levin does not apply, submitting that Quackenbush v. Allstate Insurance Co., 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996) controls. The Owners claim this is the case because, in their view, "[t]here is no request for discretionary or injunctive relief in this case, which the Supreme Court [in Quackenbush] has held is a necessary precondition for the application of any abstention doctrine arising from principles of comity and federalism." This is wrong for two reasons.

First, the Owners fail to read Quackenbush in a post-Levin context, as Levin was handed down nearly fourteen years afterward. Applying that context makes clear that the Owners read Quackenbush overbroadly. The Quackenbush court was discussing Younger and Burford abstention when it held that "federal courts have the power to dismiss or remand cases based on abstention principles only where the relief being sought is equitable or otherwise discretionary." Quackenbush, 517 U.S. at 731, 116 S.Ct. 1712. In contrast, Levin discusses the TAD comity analysis to be performed by federal courts. 560 U.S. at 430-32, 130 S.Ct. 2323.

Second, and more importantly, even Quackenbush notes that remand based on comity principles is available in declaratory actions concerning state taxation (like those at issue here). As the Supreme Court explained, "federal courts have the power to refrain from hearing . . . cases whose resolution by a federal court might unnecessarily interfere with a state system for the collection of taxes," and this abstention doctrine "require[s] federal courts to decline to exercise jurisdiction over certain classes of declaratory judgments." Quackenbush, 517 U.S. at 716-17, 116 S.Ct. 1712 (citing Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 297, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943), for the proposition that a "federal court must abstain from hearing [a] declaratory judgment action challenging constitutionality of a state tax"). Simply put, the very case that the Owners claim forbids the consideration of abstention doctrines here says the opposite.

Because Levin applies, we consider the factors it laid out when deciding whether the District Court invoked the TAD within its bounds: (1) whether plaintiff seeks review regarding matters over which the state enjoys wide regulatory latitude; (2) whether the claimed constitutional violation requires heightened judicial scrutiny; (3...