In City of Maryland Heights v. Trafcone Wireless, Inc., 2013 WL 791866 (E.D. Mo., March 4, 2013), Judge Fleissig declined to exercise CAFA jurisdiction over a case in which a putative class of Missouri municipalities sought declaratory and injunctive relief against a telephone service provider based on its alleged failure to pay certain business licensing taxes. Without reaching the issue of whether the requirements of CAFA removal had been met, the District Court relied on principles of federalism and comity identified in Levin v. Commerce Energy, Inc., 130 S. Ct. 2323, 2331 (2010), to decline to exercise jurisdiction. In Levin, the United States Supreme Court had resolved a circuit split to determine that principles of federalism and comity required federal abstention in certain tax cases beyond the Tax Injunction Act, 28 U.S.C. Section 1341, which prohibits federal courts from issuing injunctions that would enjoin or suspend state taxes, or entertaining damages actions in connection with the administration of state taxes. Judge Fleissig determined that the same considerations that compelled abstention in Levin applied equally in this case:

1. By seeking removal, the Defendant invited federal review of commercial matters over which Missouri enjoys wide regulaltory latitude;
2. Certain defenses implicated Missouri law and the Missouri Constitution;and
3. The Missouri courts were better positioned to correct any violation if the tax ordinances were declared unconstitutional.

As a result, the District Court deferred to the state courts by remanding the case. To state the obvious, this case will make CAFA removal (or any attempt to invoke federal jurisdiction) difficult in any putative class action involving challenges to state taxes.

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