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January 12, 1970

William H. GREEN et al., Plaintiffs,
David M. KENNEDY, Secretary of the Treasury of the United States of America, and Randolph W. Thrower, Commissioner of Internal Revenue, Defendants

Per Curiam


Plaintiffs, Negro Federal taxpayers and their minor children attending public schools in Mississippi, have brought this class action to enjoin the Secretary of the Treasury from granting tax exempt status to private schools in Mississippi which discriminate against Negroes in admissions. They claim that sections 170 and 501 of the Internal Revenue Code of 1954 are unconstitutional to the extent that they support the establishment and maintenance of segregated private schools through tax benefits, and particularly through income tax deductions made available to persons making contributions to such schools. *fn1"

 Plaintiffs also raise non-constitutional arguments against federal tax benefits to segregated private schools based on the claim that such schools serve no public benefit and do not satisfy the statutory requirement of being "organized and operated exclusively for [specified] purposes," and that such deductions and exemptions violate Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d, prohibiting racial discrimination "under any program or activity receiving federal financial assistance."

 The Internal Revenue Service has given attention to the problem of tax benefits to segregated private schools. Since October 15, 1965, applications for tax exemption under § 501(c) (3) of the Code filed by private schools apparently found to be operated on a segregated basis have been forwarded to the National Office for processing. From October 15, 1965 to August 2, 1967, the Service maintained a freeze, suspending action, on a nationwide basis, on such applications, pending review of the legal issues involved. *fn2" This freeze was terminated August 2, 1967, with this announcement of the policy henceforth to be followed concerning segregated private schools:

"* * * [The] Service stated that its general conclusion is that exemption will be denied and contributions will not be deductible if the operation of the school is on a segregated basis and its involvement with the state or political subdivision is such as to make the operation unconstitutional or a violation of the laws of the United States.
"Where, however, the school is private and does not have such degree of involvement with the political subdivision as has been determined by the courts to constitute State action for constitutional purposes, rulings will be issued holding the school exempt and the contributions to it deductible assuming that all other requirements of the statute are met." *fn3"

 The Service is of the view that tax benefits may be denied a private segregated school only if the operation of the school is otherwise unconstitutional by virtue of state involvement. The core of the substantial constitutional question raised in this action is whether the statutory provisions granting tax exemption may constitutionally be extended to segregated private schools even though the operation of such schools is not otherwise unconstitutional because of state involvement.

 Before us now is plaintiffs' motion for a preliminary injunction pending resolution of this issue. We are asked temporarily to compel the defendants to revoke all outstanding exemptions to segregated private schools, to deny deductibility to contributions to such schools, and to enjoin them from granting further exemptions and deductions. For the reasons set out below we think it appropriate to issue a temporary injunction calculated to preserve the status quo pending the final determination of the litigation, and to prevent the defendants from taking further affirmative action likely to result in irreparable harm to the plaintiffs. Accordingly we grant plaintiffs' motion in part by enjoining defendants from issuing further ruling letters under sections 170(c) and 501(c) of the Internal Revenue Code to private schools in Mississippi unless they have affirmatively determined on the basis of adequate investigation that the applicant school does not discriminate against Negroes in its admissions policy.



 A three-judge court was convened in accordance with the requirements of 28 U.S.C. § 2282, which provides: "An interlocutory or permanent injunction restraining the enforcement, operation or execution of any Act of Congress for repugnance to the Constitution" shall not be granted by any district court unless determined by a three-judge district court composed under 28 U.S.C. § 2284.

 Although the jurisdiction of the three-judge district court was not contested by counsel, we have given consideration to the question of jurisdiction, since we are required to stay within the bounds of jurisdiction set by Congress whether counsel raise the point or not.

 In our view the three-judge court was properly convened in view of the substantial constitutional ground for relief stated in the complaint that if the actions of defendant officials are within the authority and interest of the Act, the Act is to that extent unconstitutional. The jurisdiction of the three-judge court to consider this constitutional ground for relief is not negatived by the fact that the complaint also states a non-constitutional ground for relief, that the actions of the defendant officials in certifying private segregated schools for tax exemption are in excess of their authority under the Internal Revenue Code as properly construed and in contravention of other Federal statutory provisions. Flast v. Cohen, 392 U.S. 83, 90, 88 S. Ct. 1942, 20 L. Ed. 2d 947 (1968).

 The requirement of a three-judge court is not avoided even assuming that the class of plaintiffs, residents of Mississippi, focuses the litigation on the application of a federal statutory scheme in that state, since a ruling for plaintiffs on the merits of their constitutional attack in that area casts doubt on the validity of the application of the Federal statute elsewhere. A determination in this action in favor of plaintiffs, though confined to a temporary or permanent decree limited to prohibiting exemptions and deductions for segregated schools in Mississippi, obviously has broader geographical significance, and thus presents the kind of order which Congress mandated be available only from a three-judge district court, with right of direct appeal to the Supreme Court. Flast v. Cohen, supra 392 U.S. at 89-90, 88 S. Ct. 1942.

 There is no jurisdiction of a three-judge court where the charge of unconstitutionality of the statute is not substantial. Brotherhood of Locomotive Firemen & Enginemen v. Certain Carriers, 118 U.S.App.D.C. 100, 331 F.2d 1020 (1964). When the substantial constitutional attack is not upon the statute but rather upon regulations or administrative action thereunder, the three-judge court provision is not applicable. Sardino v. Federal Reserve Bank of New York, 361 F.2d 106, 113-116 (2d Cir. 1966).

 The case before us is not subject to this jurisdictional infirmity. There is a substantial question whether the act, as applied, is unconstitutional and that establishes jurisdiction in this court. There is also an alternative claim that even if the statute is valid the administrative course pursued by the Internal Revenue Service is unauthorized. That alternative claim may very well be sound, and if so relief may be granted by this court in the exercise of its pendent jurisdiction. Flast v. Cohen, supra.

 We take note of defendants' contention that plaintiffs have no standing to bring this action in their capacity as taxpayers. We need not consider that issue at this juncture. This case is properly maintained as a class action, pursuant to Rule 23 of the Federal Rules of Civil Procedure, by Negro school children in Mississippi and the parents of those children on behalf of themselves and all persons similarly situated. They have standing to attack the constitutionality of statutory provisions which they claim provides an unconstitutional system of benefits and matching grants that fosters and supports a system of segregated private schools as an alternative available to white students seeking to avoid desegregated public schools. We follow the precedent on this point of the three-judge District Court for the Southern District of Mississippi in Coffey v. State Educational Finance Commission, 296 F. Supp. 1389 (1969).


 Considerations Calling for Issuance of a Preliminary Injunction

 The issuance of a preliminary injunction, pending determination of the litigation, is called for in the case before us by the convergence of these inter-related considerations: (1) The issue on the merits is grave and substantial, and plaintiffs have a reasonable probability of success. (2) The primary effect of the temporary injunction is to preserve the status quo pendente lite. (3) Plaintiffs are threatened with irreparable injury if the injunction is denied, and the final decree is in their favor. (4) On the other hand if the temporary injunction is granted but final decree is rendered against plaintiffs, little if any permanent injury will be done to others, and such harm as may eventuate is outweighed by the other considerations calling for a temporary injunction. (5) The public interest is served by grant of the temporary injunction.

 That these considerations constitute a showing that calls for issuance of a temporary injunction pendente lite is clear from the precedents. "The general purpose of a preliminary injunction is to preserve the status quo pending final determination of the action after a full hearing." 7 Moore's Federal Practice para. 65.04[1]; Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738 (2d Cir. 1953).

 An injunction pendente lite is properly granted "where the questions presented by an application for an interlocutory injunction are grave, and the injury to the moving party will be certain and irreparable if the application be denied and the final decree be in his favor," and this outweighs any irreparable harm foreseen for defendant if the injunction be granted, but the final decree is in defendant's favor. Ohio Oil Co. v. Conway, 279 U.S. 813, 815, 49 S. Ct. 256, 73 L. Ed. 972 (1929).

 Other decisions require a showing by plaintiffs not only of grave and substantial issues, but of a reasonable probability of success. We need not rule on whether this additional showing is necessary when what is involved is a temporary injunction that in effect maintains the status quo, because in the present case we ...

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