Joseph, et. al v. Hyman, et. al

10-3943-cv
Joseph, et. al v. Hyman, et. al
UNITED STATES COURT OF APPEALS 1
2
F OR THE S ECOND C IRCUIT 3
4
5
6
August Term, 2011 7
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(Argued: September 12, 2011 Decided: October 12, 2011) 9
10
Docket No. 10-3943-cv 11
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13
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C HARLES J OSEPH , individually and on behalf of all others 15
similarly situated, J EFFREY U NGER , individually and on behalf 16
of all others similarly situated, S TEFAN W OLKENFELD , 17
individually and on behalf of all others similarly situated, 18
R OCK S TORE LLC, B RUCE G LICKMAN , individually and on behalf of 19
all others similarly situated, B RUCE S CHWARTZ , individually 20
and on behalf of all others similarly situated, 21
22
Plaintiffs - Appellants, 23
-v.- 24
25
M ICHAEL H YMAN , individually and in his official capacity as 26
Commissioner of the Department of Finance of the City of New 27
York, M ARTHA E. S TARK , J AIME W OODWARD , individually and in her 28
official capacity as Commissioner of the Department of 29
Taxation and Finance of the State of New York, R OBERT L. 30
M EGNA , B ARBARA G. B ILLET , C ITY OF N EW Y ORK , S TATE OF N EW Y ORK , M ICHAEL 31
B LOOMBERG , individually and in his official capacity as Mayor 32
of the City of New York, E LIOT L. S PITZER , G EORGE P ATAKI , D AVID 33
P ATERSON , D AVID M. F RANKEL , individually and in his official 34
capacity as Commissioner of the Department of Finance of the 35
City of New York, 36
37
Defendants - Appellees. 38
39
40
Before: 41
Calabresi, Wesley, and Lohier, Circuit Judges. 42
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2
Appeal from an order and judgment of the United States 1
District Court for the Southern District of New York 2
(Sullivan, J.), which granted Defendants’ motion to dismiss 3
Plaintiffs’ complaint pursuant to Federal Rules of Civil 4
Procedure 12(b)(1) and 12(b)(6). The district court found 5
that comity precluded federal court adjudication of 6
Plaintiff’s claims. We conclude that the district court 7
properly dismissed the complaint. 8
9
A FFIRMED . 10
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H ARLEY J. S CHNALL , Law Office of Harley J. Schnall, 14
New York, NY (Brian Lewis Bromberg, Bromberg Law 15
Office P.C., New York, NY, on the brief), for 16
Plaintiffs-Appellants. 17
18
S TEVEN C. W U , Assistant Solicitor General, (Barbara 19
D. Underwood, Solicitor General, Benjamin N. 20
Gutman, Deputy Solicitor General, Cecilia C. 21
Chang, Assistant Solicitor General, on the brief), 22
for Eric T. Schneiderman, Attorney General of the 23
State of New York, New York, NY, for State 24
Defendants-Appellees. 25
26
J OSHUA M. W OLF , Assistant Corporation Counsel, 27
(Andrew G. Lipkin, Assistant Corporation Counsel, 28
on the brief), for Michael A. Cardozo, Corporation 29
Counsel of the City of New York, New York, NY, 30
for City Defendants-Appellees. 31
32
33
34
WESLEY, Circuit Judge: 35
This case requires us to examine the role federal 36
courts should play in settling challenges to state tax 37
schemes. For the reasons that follow, we affirm the 38
district court’s well-written opinion declining to exercise 39

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3
jurisdiction over plaintiffs’ challenge to a New York state 1
tax scheme that exempted New York City residents from a tax 2
levied on parking services rendered in Manhattan. Pursuant 3
to Levin v. Commerce Energy, Inc., 130 S. Ct. 2323 (2010), 4
comity concerns counsel against federal court adjudication 5
of plaintiffs’ claims. 6
Background 7
New York State imposes, or authorizes New York City to 8
impose, taxes of 18.375% on parking lots and garages in 9
Manhattan. These taxes include various statewide, citywide, 10
and mass-transit-funding taxes. Also included in that rate 11
is a city-implemented 8% surtax on parking services rendered 12
in Manhattan. N.Y. Tax Law § 1212-A. In 1985, the state 13
legislature amended the tax law to provide an exemption from 14
the 8% surtax for Manhattan residents for one parking space 15
leased for one month or longer. N.Y. Tax Law § 1212- 16
A(a)(1). Appellants include a group of commuters from New 17
Jersey and New York outside of Manhattan, and a Queens 18
resident who does not commute to Manhattan. Appellants sued 19
New York City and the State, along with a number of city and 20
state officials, challenging the tax exemption granted to 21
Manhattan residents but not the 8% surtax. 22
The exemption is narrow. It exempts Manhattan 23

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1We typically review a district court’s decision to dismiss a complaint
on jurisdictional grounds de novo. See Rivers v. McLeod, 252 F.3d 99, 101 (2d
Cir. 2001). But, where, as here, a district court dismisses the action based
on comity, we review the decision for abuse of discretion. AEP Energy Servs.
Gas Holding Co. v. Bank of America, N.A., 626 F.3d 699, 719 (2d Cir. 2010).
4
residents from the 8% surtax only at their primary parking 1
location and only where the resident can demonstrate: 2
(1) that Manhattan is their primary residence; (2) that they 3
pay for parking services rendered on a monthly or 4
longer-term basis; (3) that the vehicle is not used to carry 5
on any trade, business, or commercial activity; and (4) that 6
the vehicle is registered to the individual’s primary 7
residence in Manhattan. N.Y. Tax Law § 1212-A(a)(1)(i)(B); 8
N.Y.C. Admin. Code § 11-2051(d). Appellees filed a motion 9
to dismiss, arguing, among other things, that comity barred 10
the federal courts from hearing plaintiffs’ challenge to the 11
state law; the district court granted the motion. The 12
district court held that comity concerns, explained by the 13
Supreme Court in Levin v. Commerce Energy, Inc., 130 S. Ct. 14
2323 (2010), counseled against hearing Appellants’ claims in 15
federal court. 16
Discussion1
17
I. The Comity Doctrine 18
Federal courts generally abstain from cases that 19
challenge state taxation schemes on the basis that those 20

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claims are more appropriately resolved in state court. See 1
Nat’l Private Truck Council, Inc. v. Oklahoma Tax Comm’n, 2
515 U.S. 582, 590 (1995); Boise Artesian Hot & Cold Water 3
Co. v. Boise City, 213 U.S. 276, 281-82 (1909). In 1937, 4
Congress partially codified the “federal reluctance to 5
interfere with state taxation” with the Tax Injunction Act 6
(“TIA”). Nat’l Private Truck Council, Inc., 515 U.S. at 7
590; see also 28 U.S.C. § 1341. The TIA provides that 8
“[t]he district courts shall not enjoin, suspend or restrain 9
the assessment, levy or collection of any tax under State 10
law where a plain, speedy and efficient remedy may be had in 11
the courts of such State.” 28 U.S.C. § 1341. 12
The Supreme Court has interpreted the TIA as 13
prohibiting only those challenges to state tax schemes that 14
would inhibit state collection of taxes, as opposed to those 15
that would increase taxes a state could collect. Hibbs v. 16
Winn, 542 U.S. 88, 101-10 (2004). After Hibbs, a number of 17
circuit courts, relying on a footnote in Hibbs, held that 18
Hibbs cabined the comity doctrine, holding that it, like the 19
TIA, did not bar federal courts from adjudicating challenges 20
to state tax schemes that would result in an increase in the 21
state’s tax revenue. See, e.g., Commerce Energy, Inc. v. 22
Levin, 554 F.3d 1094 (6th Cir. 2009); Levy v. Pappas, 510 23

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6
F.3d 755 (7th Cir. 2007); Wilbur v. Locke, 423 F.3d 1101 1
(9th Cir. 2005). Other circuits disagreed, and the Supreme 2
Court resolved the issue in Levin. See Levin, 130 S. Ct. at 3
2329-30; DIRECTV, Inc. v. Tolson, 513 F.3d 119 (4th Cir. 4
2008). In Levin, the Court abrogated the post-Hibbs cases 5
that had crimped the comity doctrine and held that comity is 6
“[m]ore embracive” than the TIA because it restrains federal 7
courts from hearing not only cases that decrease a state’s 8
revenue, but also those that “risk disrupting state tax 9
administration.” Levin, 130 S. Ct. at 2328. 10
In Levin, the plaintiffs (natural gas companies) 11
challenged tax exemptions granted to some of their 12
competitors. Like Appellants here, the Levin plaintiffs 13
challenged a state tax scheme; their challenge, if 14
successful, would have increased the flow of taxes to the 15
state. The Court rejected their claim, holding that even if 16
the TIA did not bar the suit (because striking the exemption 17
would not decrease the state’s tax revenues), comity 18
counseled against “the exercise of original federal-court 19
jurisdiction.” Id. at 2332-33. In rejecting the propriety 20
of federal adjudication of plaintiffs’ claims, Levin 21
explained that “[c]omity’s constraint has particular force 22
when lower federal courts are asked to pass on the 23

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7
constitutionality of state taxation of commercial activity.” 1
Id. at 2330. 2
The Court differentiated Hibbs on its facts. It held 3
that Hibbs was appropriately heard in federal court because 4
it was not a “run-of-the-mine tax case” and was “not 5
rationally distinguishable from a procession of pathmarking 6
civil-rights controversies in which federal courts had 7
entertained challenges to state tax credits without 8
conceiving of the TIA as a jurisdictional barrier.” Id. at 9
2335, 2332 (internal quotation marks omitted). Levin, on 10
the other hand, was distinguishable from Hibbs based on 11
three factors present in Hibbs, but absent in Levin, that 12
counseled in favor of federal court adjudication despite the 13
general rule of comity: (1) the legislation at issue 14
“employ[ed] classifications subject to heightened scrutiny 15
or impinge[d] on fundamental rights”; (2) the plaintiffs 16
were true “‘third parties’ whose own tax liability was not a 17
relevant factor”; and (3) both federal and state courts had 18
access to identical remedies because the claim concerned tax 19
credits and thus was not subject to the constraints of the 20
TIA. Id. at 2333-35. 21
22
23

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8
II. Applying Levin v. Commerce Energy, Inc. 1
Here, dismissal of Appellants’ complaint was proper. 2
Hibbs, unlike Levin, involved a right that was 3
unquestionably fundamental, concerning the establishment of 4
religion. At the time Hibbs was decided, moreover, the 5
Supreme Court had accorded special deference to that right. 6
See Flast v. Cohen, 392 U.S. 83 (1968) (relaxing taxpayer 7
standing requirements for plaintiffs asserting Establishment 8
Clause violations). In this case, the rights asserted can 9
hardly be seen as fundamental in the relevant sense. The 10
exemption burdens but one mode of travel, and not that 11
drastically. “[M]inor restrictions on travel simply do not 12
amount to the denial of a fundamental right.” Town of 13
Southold v. Town of E. Hampton, 477 F.3d 38, 54 (2d Cir. 14
2007) (quoting Cramer v. Skinner, 931 F.2d 1020, 1031 (5th 15
Cir. 1991)(internal quotation marks omitted). 16
There is, moreover, no authority that the right to park 17
one’s vehicle at a particular rate relative to others is 18
sufficiently fundamental to trigger protection under the 19
Privileges and Immunities Clause. See United Bldg. & 20
Constr. Trades Council of Camden Cnty. v. City of Camden, 21
465 U.S. 208, 221 (1984); Lai v. New York City Gov’t, 991 F. 22
Supp. 362, 365 (S.D.N.Y. 1998), aff’d 163 F.3d 729 (2d Cir. 23
1998). 24

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2One of the plaintiffs, Bruce Schwartz, is not in Levin’s terms a
competitor and therefore this aspect of the Levin decision does not apply to
him. There are serious questions as to whether Schwartz would have standing.
See Arizona Christian Sch. Tuition Org. v. Winn, 131 S. Ct. 1436 (2011). But,
in any event, since the other two Levin factors apply as much to Schwartz as
they do to the other plaintiffs, we do not believe the district court
committed reversible error in applying the comity doctrine to Schwartz, as
well as to the other plaintiffs.
9
Appellants are not true third parties to the tax 1
measure in question. They argue that their challenge is 2
restricted to the exemption and the exemption impacts 3
Manhattan residents’ tax liability, rather than their own. 4
Levin foreclosed that argument. The Levin plaintiffs also 5
objected to an exemption awarded to another taxpayer, but 6
the Court noted that they were not true third parties 7
because they were “object[ing] to their own tax situation, 8
measured by the allegedly more favorable treatment accorded” 9
to the other taxpayers. Levin, 130 S. Ct. at 2335. 10
Appellants here do the same; although they claim to be third 11
parties challenging tax exemptions, they are really 12
challenging their own relative tax liability by asserting 13
that an exemption granted to a competitor was 14
unconstitutional. 2
15
Lastly, because the TIA prevents federal courts from 16
eliminating a source of tax revenue, federal courts are 17
limited in the remedies they may grant when deciding a 18
challenge to a state taxation scheme. For this reason, 19

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3The Levin court noted that, in state tax cases on review from state
high courts, the Supreme Court, for reasons of “federal-state comity,” will
remand the case to the state court to formulate an interim solution if the tax
scheme suffers from a constitutional defect. 130 S. Ct. at 2334. The Court
noted the same is not true for matters begun in district court:
If lower federal courts were to give audience to the
merits of suits alleging uneven state tax burdens,
however, recourse to state court for the interim
remedial determination would be unavailable. That is
so because federal tribunals lack authority to remand
to the state court system an action initiated in
federal court. Federal judges, moreover, are bound by
the TIA; absent certain exceptions the Act precludes
relief that would diminish state revenues, even if such
relief is the remedy least disruptive of the state
legislature’s design.
Levin, 130 S. Ct. at 2334 (citations and footnotes omitted).
10
Levin held that where the state court has more flexibility 1
to determine and choose a remedy, and where an adequate, 2
speedy, and efficient remedy exists in state court, the 3
federal courts should abstain from hearing the case. Id. at 4
2328, 2339. 3
5
Appellants assert that the New York courts are unable 6
to grant any remedy that differs from that available in 7
federal court. But Appellants misinterpret New York law. 8
Appellants rely on Tennessee Gas Pipeline v. Urbach, 96 9
N.Y.2d 124, 134 (2001), for the proposition that a New York 10
court is also limited in its ability to deal with an 11
unconstitutional taxing scheme. Appellants read too much 12
into that case and improperly separate the court’s ruling 13

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11
from its context. Tennessee Gas merely stands for the 1
proposition that the state legislature cannot delegate its 2
law-making responsibilities to New York courts. Id. at 134. 3
In Tennessee Gas, the court held that a savings provision in 4
the statute was invalid 5
because it requires the Court to define the 6
parameters of the credit and the manner in which it 7
will be implemented. This violates fundamental 8
separation of powers principles. The savings 9
provision would require us to rewrite the statute and 10
create quasi-judicial tax regulations. We are not 11
well suited as an institution for such a task. 12
13
Id. That the court did not feel it should (or could) 14
rewrite a statute does not mean that New York courts cannot 15
prevent enforcement of tax provisions if the result would 16
decrease a state’s revenue. 17
New York courts can, and do, enjoin the enforcement of 18
tax provisions. See Day Wholesale, Inc. v. New York, 51 19
A.D.3d 383, 384 (N.Y. App. Div. 4th Dep’t 2008). New York 20
courts are not powerless to strike down unconstitutional 21
laws or otherwise prevent enforcement of unconstitutional 22
taxes. See, e.g., Urbach, 96 N.Y.2d at 124 (striking a 23
natural gas tax as unconstitutional). 24
Because New York state courts have the ability to 25
implement a remedy that the federal court cannot, Levin 26
counsels in favor of dismissing the complaint pursuant to 27

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comity because “limitations on the remedial competence of 1
lower federal courts counsel that they refrain from taking 2
up cases of this genre, so long as state courts are equipped 3
fairly to adjudicate them.” Levin, 130 S. Ct. at 2334. The 4
New York state courts are able to efficiently remedy an 5
unconstitutional tax statute, and the Supreme Court has long 6
held that New York law affords a “plain, speedy and 7
efficient” means to address constitutional challenges to 8
state tax actions. Tully v. Griffin, Inc., 429 U.S. 68, 76- 9
77 (1976). 10
We have considered the plaintiffs’ remaining arguments, 11
including their argument under the Dormant Commerce Clause, 12
and find them unavailing. Because none of the Hibbs factors 13
are present here, the district court wisely recognized that 14
Levin counseled it to dismiss Appellants’ complaint on 15
comity grounds. The district court’s decision to do so is 16
affirmed. 17
Conclusion 18
The district court’s order that dismissed Appellants’ 19
Complaint without prejudice is AFFIRMED. 20

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