The opinion of the court was delivered by: John D. Bates United States District Judge
District Lock and Hardware, Inc., and its principal shareholder, Michael Horwatt (collectively "plaintiffs"), have brought suit against the District of Columbia and D.C. Office of Tax Revenue Officers Sabrina Cobb and Beddell Terry (collectively "defendants") regarding the defendants' tax sale of District Lock and Hardware property. Plaintiffs seek damages pursuant to 42 U.S.C. § 1983 and common-law theories of negligent training, negligent and intentional infliction of emotional distress, and conversion.*fn1 Plaintiffs originally brought suit in the Superior Court of the District of Columbia, but defendants removed the action based on the federal § 1983 claim. Defendants have now moved to dismiss for failure to state a claim, Fed. R. Civ. P. 12(b)(6), or, in the alternative, for summary judgment, Fed. R. Civ. P. 56(b). Defendants also argue that this Court lacks subject matter jurisdiction due to the Federal Tax Injunction Act, 28
U.S.C. § 1341, and under the related principle of comity. This Court will remand this case to the Superior Court of the District of Columbia based on comity in deference to the District of Columbia tax system.
Plaintiffs' claims arise from defendants' tax sale of District Lock and Hardware property to recover back sales taxes. The focus of plaintiffs' argument is that defendants "fail[ed] to give [them] any written notice of a tax bill." Am. Compl. ¶ 14. Plaintiffs do not deny that defendants "informed [them] that [District Lock and Hardware] owed . . . $975,117.85 in back sales taxes." Id. ¶ 11. Nor do they deny defendants "notified [them] . . . that the business was going to be seized and auctioned off," even if they contend that the notification was "cryptic and hurried." Id. ¶ 16.
Plaintiffs, however, do take issue with the adequacy of defendants' notification, the amount of their purported tax liability, and irregularities in the negotiation and the tax sale processes. Specifically, plaintiffs allege that defendants informed them orally, but never in writing, regarding the business's tax liability and the tax sale. Moreover, they contend that the business's "outstanding tax debt was less than . . . $75,000" and that the "[a]mount represented to [them] . . . was significantly inflated, erroneous, unfounded, and fraudulent." Id. ¶¶ 22-23. Regarding the negotiation process, plaintiffs allege that "[d]efendants . . . steadfastly and repeatedly refused to allow them to enter into a negotiation of their purported tax debt unless . . . they paid up front . . . $50,000." Id. ¶ 13. As to the tax sale, plaintiffs claim that it was "irregular and suspect" because "there [were] in effect two auctions" and "one of [p]laintiffs' business competitors" won the auction. Id. ¶ 19.
Based on these allegations, plaintiffs brought suit in the Superior Court of the District of Columbia seeking damages under 42 U.S.C. § 1983 and various common law theories. Defendants removed the action due to the federal claim. Defendants have now moved to dismiss for failure to state a claim, Fed. R. Civ. P. 12(b)(6), or, in the alternative, for summary judgment, Fed. R. Civ. P. 56(b). Although defendants do not specifically move pursuant to Rule 12(b)(1) to dismiss for lack of subject matter jurisdiction, defendants contend that this "Court lacks subject matter jurisdiction under the Federal Tax Injunction Act" and "under the principle of comity." Defs.' Mot. to Dismiss [Docket Entry 19] at 9, 15.
Because the Court remands for lack of subject matter jurisdiction, the Rule 12(b)(1) standard is the only relevant standard of review. Under that rule, the party seeking to invoke the jurisdiction of a federal court -- plaintiffs here -- bears the burden of establishing that the court has jurisdiction. See US Ecology, Inc. v. U.S. Dep't of Interior, 231 F.3d 20, 24 (D.C. Cir. 2000) (citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103-04 (1998)); see also Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001) ("[A] Rule 12(b)(1) motion imposes on the court an affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority."); Pitney Bowes, Inc. v. U.S. Postal Serv., 27 F. Supp. 2d 15, 19 (D.D.C. 1998). Although a court must accept as true all the factual allegations contained in the complaint when reviewing a motion to dismiss pursuant to Rule 12(b)(1), Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993), "'plaintiff[s'] factual allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim." Grand Lodge, 185 F. Supp. 2d at 13-14 (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed. 1990)). At the stage of litigation when dismissal is sought, a plaintiff's complaint must be construed liberally, and the plaintiff should receive the benefit of all favorable inferences that can be drawn from the alleged facts. See EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997). Additionally, a court may consider material other than the allegations of the complaint in determining whether it has jurisdiction to hear the case, as long as it still accepts the factual allegations in the complaint as true. See Jerome Stevens Pharmaceuticals, Inc. v. FDA, 402 F.3d 1249, 1253-54 (D.C. Cir. 2005); St. Francis Xavier Parochial Sch., 117 F.3d at 624-25 n.3; Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir.1992).
Although defendants have removed this case from the Superior Court of the District of Columbia based on federal question jurisdiction, they now argue that this "Court lacks subject matter jurisdiction under the Federal Tax Injunction Act" and "under the principle of comity." Defs.' Mot. to Dismiss 9, 15. The Federal Tax Injunction Act ("FTIA") provides that "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341. Plaintiffs' action, however, does not fall within the plain language of the FTIA because they seek to recover damages rather than to "enjoin, suspend or restrain the assessment, levy or collection of any tax." Id.*fn2 Although the Supreme Court has not decided "whether the Act [itself] covers damages suits under 42 U.S.C. § 1983," Wright v. Pappas, 256 F.3d 635, 636 (7th Cir. 2001), the Supreme Court has found "that taxpayers are barred by the principle of comity from asserting § 1983 actions against the validity of state tax systems in federal courts," Fair Assessment in Real Estate Ass'n, Inc. v. McNary, 454 U.S. 100, 116 (1981). As the Supreme Court explained in McNary, the principle of comity embodies "Our Federalism" and reflects "'a proper respect for state functions" in "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.'" Id. at 112 (quoting Younger v. Harris, 401 U.S. 37, 44 (1971)).
Jurisdiction over plaintiffs' suit turns on whether the District of Columbia tax system is entitled to comity, whether comity precludes federal court jurisdiction over local tax sale challenges, and whether defendants waived a comity argument by removing the case. The D.C. Circuit has not yet addressed whether the FTIA, let alone the related principle of comity, bars federal court challenges to District of Columbia taxes in the same manner that it bars federal court challenges to state taxes. Because the D.C. Circuit treats the District of Columbia as a state for purposes of assessing comity in the Younger abstention context, this Court concludes that comity bars challenges to District of Columbia taxes in federal court such as plaintiffs pursue here. There is some division of authority regarding whether a federal court may entertain a challenge to the adequacy of the process in a local tax sale. This Court, however, has previously found, and maintains despite Second Circuit precedent to the contrary, that considerations of comity bar challenges to the adequacy of the process in tax sales because a challenge to the process of a tax sale is effectively a challenge to the "collection of a tax." 28 U.S.C. § 1341. Finally, there is the question here whether the District of Columbia waived any jurisdictional objection based on comity by removing this case from Superior Court. Although the District of Columbia may theoretically waive an objection based on the principle of comity, it would be inappropriate for this Court to find waiver when neither party believes the case should be in this Court. Accordingly, this Court concludes that plaintiffs' action does not properly lie in this Court, and will remand the case to Superior Court.
A. The District of Columbia Tax System is Entitled to the Same Considerations of Comity as a State Tax System.
No court has resolved whether the principle of comity bars "§ 1983 actions against the validity of [the District of Columbia] tax system." McNary, 454 U.S. at 116. In fact, "the D.C. Circuit has not definitively resolved whether the District of Columbia qualifies as a state for purposes of the [FTIA]." Miller v. District of Columbia, 2007 WL 1748890, at *3 n.1 (D.D.C. 2007). Nevertheless, this Court has previously found that the FTIA "appl[ies] to cases involving District taxes" because "courts have generally indicated that the District of Columbia resembles a state within the framework of a comity analysis." Jenkins v. Washington Convention Ctr., 59 F. Supp. 2d 78, 81-82 (D.D.C. 1999) (affirmed on other grounds by Jenkins v. Washington Convention Ctr., 236 F.3d 6 ...