Lawrence Gwozdz v. Healthport Technologies, LLC
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 8:15-cv-02251-RWT. [1000008982]. [15-2586]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-2586
LAWRENCE GWOZDZ, Individually and on behalf of Donna Gwozdz
and all others similarly situated,
Plaintiff - Appellant,
v.
HEALTHPORT TECHNOLOGIES, LLC,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, Senior District Judge.
(8:15-cv-02251-RWT)
Argued:
December 9, 2016
Decided:
January 24, 2017
Before WILKINSON, NIEMEYER, and DIAZ, Circuit Judges.
Vacated and remanded with instructions by published opinion.
Judge Wilkinson wrote the opinion, in which Judge Niemeyer and
Judge Diaz joined.
ARGUED:
Jonathan
Barry
Nace,
ANTONOPLOS
&
ASSOCIATES,
Washington, D.C., for Appellant. Alec Winfield Farr, BRYAN CAVE
LLP, Washington, D.C., for Appellee.
ON BRIEF: Barry J. Nace,
PAULSON & NACE, PLLC, Washington, D.C., for Appellant.
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WILKINSON, Circuit Judge:
Lawrence Gwozdz challenges HealthPort’s collection of $23
in sales tax on the sale of medical records. Under the Tax
Injunction Act (TIA), federal courts may 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. Here, Maryland
has established just such a remedy. Because the TIA and the
related principle of federal-state comity operate to deprive us
of jurisdiction, we vacate the judgment of dismissal and remand
to the district court with instructions to return the action to
state court. See Lawyer v. Hilton Head Pub. Serv. Dist. No. 1,
220 F.3d 298, 306 (4th Cir. 2000) (remanding removed portion of
consolidated case to state court due to jurisdictional bar of
TIA).
I.
Gwozdz
Maryland
requested
hospitals,
his
which
wife’s
medical
forwarded
his
records
inquiries
from
to
two
their
contractor, HealthPort Technologies, LLC. Before releasing the
documents,
HealthPort
sent
Gwozdz
two
itemized
invoices
demanding that he pay a total of $23 in sales tax, along with
other fees. Gwozdz protested, insisting that Maryland exempted
the sale of medical records from its general sales tax and that
the $23 charge was therefore unlawful. HealthPort defended the
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tax and refused to send the records unless Gwozdz pre-paid in
full. Despite his misgivings, he did so.
Next,
HealthPort
Gwozdz
in
filed
Maryland
a
class
state
action
court
complaint
seeking
against
damages
and
injunctive relief. HealthPort removed the case under the Class
Action Fairness Act. Instead of requesting a refund, the typical
relief
sought
for
an
improperly
paid
tax,
the
operative
complaint asserts several statutory consumer protection claims
and a hodgepodge of common law claims including fraud, negligent
misrepresentation, and unjust enrichment.
HealthPort moved to dismiss under Fed. R. Civ. P. 12(b)(6).
It
argued
that
Maryland
created
an
exclusive
administrative
procedure for settling tax disputes. Gwozdz responded that the
administrative
remedy
was
inapplicable
because
the
case
concerned an unlawful billing practice, not an improper tax.
Gwozdz sought to have the district court resolve his claims on
the merits.
The
district
HealthPort
and
court,
dismissed
ruling
the
from
complaint
the
in
bench,
its
sided
entirety.
with
The
court concluded that “the exclusive remedy for the recovery of
taxes on the sale of medical records that are alleged to have
been improper is to seek a refund from the comptroller under the
procedures established by Maryland law.” J.A. 221.
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II.
A.
It
is
important
at
the
outset
to
review
Maryland’s
administrative refund procedure inasmuch as the TIA’s operation
depends upon the state’s establishment of an appropriate remedy
for a taxpayer to pursue. The Maryland legislature established
“a
comprehensive
remedial
scheme
for
the
refund
of
taxes
erroneously paid.” White v. Prince George’s Cty., 387 A.2d 260,
264 (Md. 1978). A taxpayer begins by requesting reimbursement
from the Comptroller: the Maryland Tax Code provides that one
who “pays to the State a tax, fee, charge, interest, or penalty
that
is
erroneously,
illegally,
or
wrongfully
assessed
or
collected in any manner” may file a claim with the Comptroller
for a refund. Md. Code Ann., Tax-Gen. § 13-901(a)(2); see also
id.
§
13-508(a)(2).
The
taxpayer
may
request
an
informal
hearing, id. § 13-904(a)(2), and may appeal the Comptroller’s
final
determination
to
the
Maryland
Tax
Court,
id.
§
13-
510(a)(2). Any dissatisfied party may appeal the Tax Court’s
decision to the Maryland circuit court. Id. § 13-532(a)(2). This
administrative remedy encompasses “every type of tax, fee, or
charge improperly collected by a Maryland governmental entity.”
Brutus 630, LLC v. Town of Bel Air, 139 A.3d 957, 967 (Md. 2016)
(emphasis omitted) (quoting Bowman v. Goad, 703 A.2d 144, 146
(Md. 1997)).
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Maryland courts have uniformly held that the administrative
remedy is a taxpayer’s sole route to relief. “[W]here there is
statutory authorization for a refund and a special statutory
remedy
set
forth,”
the
Maryland
Court
of
Appeals
explained,
“that remedy is exclusive.” Apostol v. Anne Arundel Cty., 421
A.2d 582, 585 (Md. 1980); see Halle Dev., Inc. v. Anne Arundel
Cty., 808 A.2d 1280, 1290 (Md. 2002). Beyond the administrative
scheme, “no action lies to challenge the validity of a tax paid
under a mistake of law . . . regardless of the nature of the
legal attack mounted.” Apostol, 421 A.2d at 585.
The Maryland Court of Appeals applied this rule in Bowman
v. Goad, a case with facts similar to those alleged here. The
plaintiff
in
Bowman
brought
a
putative
class
action
against
county sheriffs to recover erroneously charged fees. Bowman, 703
A.2d at 144. If the sheriffs had indeed “unlawfully collected
fees from the plaintiff Bowman and the other members of the
putative class, each one had an administrative remedy [and] that
administrative remedy is exclusive.” Id. at 146.
Gwozdz does not contend in any non-conclusory manner that
the remedial scheme described above was in any way defective.
The
fact
(followed
that
by
his
initial
judicial
remedy
review)
does
is
not
an
administrative
place
it
outside
one
the
TIA’s purview. Nor does the provision of initial administrative
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exclusivity remove the state’s collection procedures from the
protection of the Act.
B.
Gwozdz counters with a sleight of hand, arguing that he is
not
a
taxpayer
disputing
an
improper
tax
but
a
consumer
challenging an unlawful billing practice. But artful pleading
cannot
remove
this
case
from
the
broad
reach
of
Maryland’s
administrative remedy.
First, Gwozdz surmises that buyers like him are ineligible
for an administrative refund because vendors such as HealthPort
are the real taxpayers under the Maryland Tax Code. To reach
this interpretation, Gwozdz has to select some code provisions
and ignore others because the code’s plain language debunks his
theory. The Tax Code unmistakably states that the buyer “shall
pay the sales and use tax to the vendor” and the vendor “shall
collect the . . . tax from the buyer.” Md. Code Ann., Tax-Gen. §
11-403. In collecting the sales tax, a vendor “is a trustee for
the State and is liable for the collection of the sales . . .
tax for and on account of the State.” Id. § 11-401(a). Under
this scheme, then, suits against vendors have the same potential
of disrupting state tax collection efforts as suits against the
state itself. Although a vendor may “assume or absorb” the tax
and pay on the buyer’s behalf, id. § 11-402, HealthPort declined
to do so, identifying the charges as sales tax on its invoices.
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Gwozdz paid the tax to Maryland (via HealthPort) and could have
taken
advantage
of
Maryland’s
administrative
remedy
if
he
thought the tax improper.
Second,
scheme
does
Gwozdz
not
contends
preclude
that
common
the
law
administrative
and
statutory
refund
causes
of
action that are external to the Tax Code, such as his claims
against HealthPort for fraud and consumer protection violations.
We reject, however, Gwozdz’s attempt to characterize this action
as anything but a tax case. In his view, the “gravamen” of the
complaint
“is
not
that
he
paid
unlawful
taxes,
but
that
Health[P]ort has engaged in an unlawful billing practice.” Br.
of Appellant at 18. But each of his assorted claims turns on
whether HealthPort’s collection of the tax was improper under
the Maryland Tax Code. It is perfectly plain that Gwozdz seeks
relief for paying a tax that he believes was improper. *
III.
As noted, the Tax Injunction Act removes the jurisdiction
of federal courts over any action that would “enjoin, suspend or
*
Gwozdz brings claims under the Maryland Consumer
Protection Act, the Maryland Consumer Debt Collection Act, and
the Fair Debt Collection Practices Act as well as claims for
fraud, constructive fraud, negligent misrepresentation, unjust
enrichment, and conversion. As the district court recognized,
none of the assortment of claims in the amended complaint
changes the nature of this lawsuit. It has been, and remains, a
suit against a vendor for wrongly assessing a sales tax on
behalf of a state government.
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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. Like its federal
counterpart,
the
Anti-Injunction
Act,
the
TIA
ensures
that
states are able to “assess and collect taxes as expeditiously as
possible
with
interference.”
a
Bob
minimum
Jones
of
Univ.
v.
preenforcement
Simon,
416
U.S.
judicial
725,
736
(1974). While Gwozdz purports to raise a federal claim under the
Fair Debt Collection Practices Act, the TIA makes no distinction
between federal and state law claims that serve to disrupt the
state’s tax collection efforts.
In Hibbs v. Winn, 542 U.S. 88 (2004), the Supreme Court
entertained a challenge to the constitutionality of a tax credit
for
donations
to
non-profit
organizations
that
award
scholarships for private schools. The Court held that the TIA
did
not
bar
constitutional
challenges
to
the
tax
credits
authorized by state law. Id. at 93. The Court noted that it had
heard
such
cases
jurisdictional
proposition
“without
barrier.”
that
not
conceiving
Id.
every
Hibbs,
of
then,
constitutional
§
1341
stands
claim
as
a
for
the
bearing
even
indirectly on the subject of state taxes is jurisdictionally
barred.
Hibbs, however, stopped well short of stripping the TIA of
all
jurisdictional
force.
In
fact,
8
Hibbs
itself
expressly
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deploys jurisdictional language. It recognizes that the TIA “was
designed expressly to restrict the jurisdiction of the district
courts
of
the
United
States
over
suits
relating
to
the
collection of State taxes.” Id. at 104 (internal quotation marks
omitted); see also id. at 107 (“We have read harmoniously the §
1341
instruction
conditioning
the
jurisdictional
bar
on
the
availability of ‘a plain, speedy and efficient remedy’ in state
court.”).
The
Hibbs
opinion
as
a
whole
underscores
that
the
purpose of the TIA was to “‘limit drastically’ federal-court
interference with ‘the collection of [state] taxes.’” Id. at 105
(quoting California v. Grace Brethren Church, 457 U.S. 393, 408–
09
(1982)).
portends.
Such
interference
is
allegation
that
Gwozdz’s
exactly
the
what
tax
this
was
suit
collected
improperly is the foundation for all of his claims.
Whereas
Clause
Hibbs
challenge
was
to
willing
a
tax
to
entertain
credit
an
allegedly
Establishment
supporting
or
favoring parochial schools, the gravamen of this suit is far
different. Gwozdz’s direct challenge to an actual tax collection
is both far away from the subject matter of Hibbs and much
closer to the heart of state collection activities. (In fact,
invalidation
constitutional
of
the
grounds
tax
credit
would
only
at
have
issue
in
augmented
Hibbs
the
on
state’s
coffers. See id. at 106.) Because Congress enacted the TIA “to
stop
taxpayers,
with
the
aid
of
9
a
federal
injunction,
from
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large
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sums,
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thereby
disrupting
state
government
finances,” id. at 104, the TIA plainly bars Gwozdz’s claims for
equitable relief.
Gwozdz
included
claims
for
damages
in
addition
to
his
claims for equitable relief. The TIA applies by its terms to
suits to “enjoin” or “restrain” state tax collection efforts,
thereby speaking directly to equitable remedies. That does not
mean, however, that the text and purposes of the TIA suddenly
become null and void where a taxpayer’s claim for damages is
advanced. For as we have noted, the Act sounds the sharpest kind
of warning to a federal court that would interfere with the
sovereign
interest
of
the
states
in
their
own
systems
of
taxation. A claim for damages against vendors in the performance
of their tax collection duties has precisely the same potential
as a claim for equitable relief to disrupt a state’s entire
system of revenue collection.
While the Supreme Court has not addressed whether the TIA
forbids damages claims, it has applied a principle of comity to
bar a Section 1983 action by landowners against state and local
officials
seeking
damages
for
the
allegedly
unconstitutional
administration of a state tax system. See Fair Assessment in
Real Estate Ass'n, Inc. v. McNary, 454 U.S. 100, 113 (1981)
(noting that damages actions “would be fully as intrusive as
. . . equitable actions”). The Court has since reaffirmed that
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the comity principle is “more embracive than the TIA.” Levin v.
Commerce Energy, Inc., 560 U.S. 413, 424 (2010).
Moreover,
federal
the
district
Ninth
court
Circuit
lacked
the
recently
power
to
concluded
award
that
damages
a
or
injunctive relief for payroll taxes that were allegedly withheld
unlawfully: “Any award of statutory damages here would have the
same disruptive effect as entry of a declaratory judgment or
issuance
of
an
injunction,
revenue-protective
objectives
thereby
of
undermining
the
Tax
the
state-
Injunction
Act.”
Fredrickson v. Starbucks Corp., 840 F.3d 1119, 1124 (9th Cir.
2016). Indeed, if comity is to mean anything, it would seemingly
restrain
the
prospect
of
federal
court
orders
disrupting
a
state’s efforts to collect its life blood of revenue pursuant to
the state’s own law. Hence, this basic principle of comity bars
Gwozdz’s damages claims.
IV.
It is no secret that “taxpayers may strive to dispute their
tax liability, either armed with valid challenges or equipped
with
unfounded
ones,
beyond
the
avenues
provided
by
the
legislature.” Comptroller of the Treasury v. Zorzit, 108 A.3d
581, 595 (Md. Ct. Spec. App. 2015). But if taxpayers could “seek
relief
collateral
governing
tax
to
the
assessment
detailed
and
administrative
collection
at
their
procedures
will,
tax
litigation would be rampant, thereby vitiating the intent of the
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legislature.”
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Id.
at
596.
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And
if
Gwozdz
prevailed
here,
aggrieved taxpayers could repackage an allegedly unlawful sales
tax collection into a faux consumer protection suit and embroil
vendors
of
every
description
in
litigation,
thus
punishing
sellers for fulfilling their obligations to collect sales taxes
under
Maryland
law.
This
is
precisely
what
Maryland’s
administrative remedy was designed to prevent. While we believe
based upon our reading of Maryland law that a remand to the
administrative process lies in the offing for Mr. Gwozdz, that
clearly
is
a
decision
for
the
Maryland
courts
to
make.
Accordingly, we vacate the district court’s judgment and remand
with instructions to remand the action to state court.
VACATED AND REMANDED WITH INSTRUCTIONS
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