Kuhnhein v. Kenton County Public Library Board of Trustees
Filing
13
MOTION to Dismiss by Kenton County Public Library Board of Trustees (Attachments: # 1 Memorandum in Support, # 2 Proposed Order)(Hawkins, Michael)
UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF KENTUCKY,
NORTHERN DIVISION AT COVINGTON
CIVIL ACTION NO. 2:12-cv-00035
GARTH KUHNHEIN, ON BEHALF
OF HIMSELF AND OTHERS
SIMILARLY SITUATED
PLAINTIFF
V.
KENTON COUNTY PUBLIC LIBRARY
BOARD OF TRUSTEES
DEFENDANT
DEFENDANT'S MEMORANDUM IN SUPPORT OF ITS
MOTION TO DISMISS PLAINTIFF'S COMPLAINT
The Defendant, Kenton County Library Board
Memorandum
I.
in Support
of Trustees, by
and through counsel, for its
of its Motion to Dismiss, states as follows:
FACTUAL BACKGROUND
On January 20, 2012, Garth Kuhnhein
Jury Trial Demand and Declaration
Library Board
filed a Class Action Complaint with
of Rights ("Complaint" ) against the Kenton County Public
of Trustees (the "Library" )
alleges he is a resident and property
("Plaintiff')
in Kenton Circuit Court. In relevant
owner in the County
of Kenton,
taxes to the Library as set forth on his yearly county tax bill.
Plaintiff, KRS 173.790 governs the increase or decrease
Kentucky, and has paid
Complaint,
of the tax
part, Plaintiff
$ 2. According to
levy for the Library and states
that the ad valorem tax rate "shall not be increased or decreased unless a duly certified petition
requesting
an increase or decrease in the tax rate
of a specifically stated amount is
one (51'/o of the number of duly qualified voters voting in the last general
signed by fifty
election...."
Id. at
tt
7. At the time of the formation of the Library, the ad valorem tax rate was set as the
of $ 0.60 per one
thousand dollars
of value
equivalent
on a home. Id. at $ 8.
Plaintiff alleges that from 2007-2011 the Library has incrementally
increased
its ad
valorem tax rate from $ 0.82 to $ 0.113.Id. at $ 9. In enacting these increases, Plaintiff asserts that
the Library has disregarded
KRS 173.790 (Id. at $$ 17-18), which has resulted
with the rates being over the authorized
in many years
$ .060 per one thousand dollars rate. Id. at $ 10. Further,
Plaintiff alleges that, as a result of the purported
improper tax increases, he and the proposed
class members are owed not only a refund of $ 5,125,466.97 for the year 2011, but also for all
other years where the tax has been increased above $ .060 per one thousand dollars tax rate (a.k.a
2007-2011). Id. The putative class consists of "All property owners/or taxpayers, who have paid
Kenton County Library taxes in excess
of the last
lawfully
set rate set by certified petition." Id.
at $ 19.
Plaintiff asserts four causes
Library concerning
the assessment
of action
in his Complaint:
and collection
of
declaratory judgment against the
ad valorem
taxes in excess of the rate
established by KRS Chapter 173 (Count I); Conversion (Count II); unlawful taking per 42 U.S.C.
$
1983 (Count III); and unjust enrichment
Plaintiff seeks injunctive
relief requiring
collected in excess of the statutorily
relief preventing
compensatory
(Count IV). Id. at f[$ 28-46. In terms of relief,
the Library
approved rate
to issue refunds
of $ 0.60 per one
for taxes billed and
thousand
dollars; injunctive
the Library from increasing its tax rate unless KRS 173.790 is complied with;
damages in the form
of refunds,
with interest; a declaratory
judgment
that KRS
173.790 governs the tax rate and the ability to increase or decrease the rate; prejudgment interest,
court costs and attorneys fee, per 42 U.S.C. $ 1983; and certification
2
of a class.
On February 2, 2012, the Library removed the action to this Court because
of the federal
claims asserted in the Complaint and it now seeks to dismiss the Complaint pursuant to Fed. R.
Civ. P. 12(b)(6) because Plaintiff has failed to state a claim upon which relief can be granted.
II.
ARGUMENT
Plaintiff s Complaint
should be dismissed
because he fails to state a claim upon which
relief can be granted. First, Plaintiff has not alleged that he exhausted his administrative
prior to filing this lawsuit, as mandated by KRS 134.590. Second, even
his administrative
claim for tax refunds
dismissed because the two-year statute
immunity
had exhausted
remedies, he is precluded from asserting a class action for tax refunds under
KRS 134.590. Third, Plaintiff's
Finally, Plaintiff's
if Plaintiff
remedies
conversion
of limitations
for the years prior to 2010 should be
in KRS
claim should be dismissed
134.590 has
run on those refunds.
because the Library has sovereign
from all tort claims.
Because Plaintiff does not allege that he filed a claim requesting a tax refund
prior to filing this lawsuit, he has failed to exhaust his administrative
remedies.
A.
Plaintiff's Complaint should be dismissed because he does not allege that he filed a claim
requesting
a tax refund under KRS 134.590 prior to filing suit. Before filing a lawsuit seeking a
refund for excess payment
of ad valorem taxes, a taxpayer
must first exhaust administrative
remedies, as mandated by KRS 134.590. Cromwell Louisville Assoc. v. Kentucky, 323 S.W.3d 1,
7 (Ky. 2010) (citing Ky. Rev. Stat. $ 134.590 and holding that "a taxpayer must exhaust the
administrative
remedy procedures
before seeking a refund"); Bischoff
S.W.2d 762 (Ky. App. 1987). If a plaintiff fails to exhaust administrative
a lawsuit for a tax refund, the complaint should be dismissed.
Accord:
Department
of Revenue
v. Curtsinger,
3
v. City
of Newport, 733
remedies prior to filing
Bischoff, 733 S.W.2d at 764.
No. 2006-CA-001379 and 2006-CA-001462,
2007 Ky. App. Unpub. LEXIS 699, at *16-17 (Ky. App. Oct. 26, 2007) (acknowledging
that
when a taxpayer alleges that an ad valorem tax was paid where the taxes were not owed, the
taxpayer is required to exhaust the administrative
of KRS 134.590 prior to
remedies
filing suit).
KRS 134.590(6) states, in relevant part:
No refund for ad valorem taxes, except those held unconstitutional, shall be made
unless the taxpayer has properly followed the administrative remedy procedures
established through the protest provisions of KRS 131.110,the appeal provisions
of KRS 133.120,the correction provisions of KRS 133.110and 133.130,or other
administrative remedy procedures.
In Bischoff, the City
of Newport enacted
ordinances establishing
the city's ad valorem tax
rates for the years 1980 to 1985. 733 S.W.2d at 763. The plaintiff filed suit challenging
ordinances
as violating
the
KRS 132.027, which limited the tax rate a city could set. Id. The
complaint requested the circuit court to declare the ordinances invalid and require the refund
of
the excess taxes paid for those years. Id. The city moved to dismiss, arguing that the plaintiff
failed to exhaust
his administrative
remedies
as required
by KRS
134.590 prior to filing a
lawsuit. Id. The circuit court granted the city's dismissal. On appeal, the appellate court upheld
the circuit court's dismissal. Id, The court rejected the plaintiff's contention that the circuit court
should have declared whether the tax rates were valid merely because it was a proper subject for
a declaration of rights; instead holding that a declaration of rights is appropriate
only where an
"actual controversy" exists. Id. The court found that, where the taxpayer has paid a tax which he
or she later concludes was based upon an illegal rate and seeks a refund, "the tax payer must
exhaust that remedy [in KRS 134.590] before seeking a refund
Bischoff court found that since "the timely administrative
precedent to entitlement
judicially...."
Id. at 764. The
application for a refund is a condition
to recover a tax already paid, it must follow that such application is also
necessary to create an actual controversy with respect to the rate upon which that tax is based."
4
Id. Accord: Light
v. City
of Louisville, 93 S.W.3d 696, 697 (Ky. App. 2002); City of Somerset
v.
Bell, 156 S.W.3d 321, 330 (Ky, App. 2005).
Like the plaintiffs in Bischoff, Light and Bell, Plaintiff is asking this court to declare that
the Library increased its ad valorem tax rate in violation
refund.'pecifically,
of a Kentucky
statute and he seeks a
Plaintiff asserts that "KRS 173.790 governs any increases or decreases to
said [ad valorem tax] rate" and that the Library has increased the rate "in violation
of KRS
30-31. As a result, Plaintiff seeks a refund of taxes collected
in excess
173.790." Complaint,
of the proposed
statutorily
Nowhere
administrative
ptt
in his
approved rate
Complaint,
remedy procedures
the appeal provisions
or other administrative
of $ 0.60 per one
does Plaintiff
however,
established
through
of property value.
thousand dollars
allege
he has
the protest provisions
"followed
the
of KRS 131.110,
of KRS 133.120, the correction provisions of KRS 133.110and 133.130,
remedy procedures
[such as filing a claim for a refund]," prior to filing
this lawsuit, as is required under KRS $ 134.590. See Complaint, tttt 1-46. Therefore, Plaintiff's
Complaint must be dismissed for failure to exhaust administrative
B.
remedies.
Because Plaintiff cannot maintain a class action for a refund of the alleged
excess taxes paid, his request for compensatory damages on behalf of the
class should be dismissed.
Plaintiff seeks to represent a class of "All property owners/or
Kenton County Library taxes in excess of the last lawfully
Complaint, $
taxpayers, who have paid
set rate set by certified petition."
19. As part of the class wide relief sought, Plaintiff requests "judgment
and award
'ecause Plaintiff s lawsuit seeks to recover money paid as excess taxes by an allegedly illegal assessment, this
Court is not divested of jurisdiction by the Tax Injunction Act, 28 USC $ 1341. See Central Stee! & Wire Co. v.
Detroit, 99 F. Supp. 639, 640-641 (D. Mich. 1951) ("It is not apparent to this Court that a statute which in plain
language prohibits a District Court from enjoining, suspending or restraining the assessment, levy or collection of
any tax under state law had any conceivable application to this cause of action. A suit to recover money paid as
taxes by an allegedly illegal assessment is far removed from an action to enjoin, suspend or restrain the assessment,
levy or collection of a tax, and to hold that Section 1341, Title 28 U.S.C. controls such an action at law would
require this Court to ignore well established principles of statutory construction.").
5
of compensatory damages,
in the form
of refunds,
with interest, against the Defendant Library in
by the finder." Complaint, p. 8.
the amount to be determined
Class relief is not available to obtain a refund of ad valorem taxes because in Kentucky
each taxpayer is required
to apply for a refund of taxes individually
before seeking judicial
redress. KRS 134.590(6) provides:
"(6) No
refund shall be made unless each taxpaver individuallv applies within two
(2) years from the date payment was made. If the amount of taxes due is in
litigation, the taxpaver shall individuallv applv for refund within two (2) years
from the date the amount due is finally determined. Each claim or application for
a refund shall be in writing and state the specific grounds upon which it is based,
No refinid for ad valorem taxes, except those held unconstitutional, shall be made
unless the taxpayer has properly followed the administrative remedy procedures
established through the protest provisions I 1„ the appeal provisions I 1, the
remedv procedures."
correction provisions
1 and, or other administrative
(emphasis added).
I
The current
apply for a
individually
of
the statute
refund..."
could not be any clearer. "[T]he taxpayer
(emphasis added).
Indeed, in Board
of Education of Fayette
shall
KRS 134.590(6) provides a mandatory
procedure for seeking refunds from the Department
administrative
agencies,
language
of Revenue
and other taxing
County v. Taulbee, 706 S.W.2d. 827, 828-29
(Ky. 1986), the Kentucky Supreme Court, addressing this very issue and statute, held that since
KRS 134.590(6) provided a specific, mandatory
was unavailable
procedure to seek refunds, class action relief
for the refund of taxes, The Taulbee holding
was re-affirmed
in the later
Kentucky Supreme Court decision, Griggs v. Dolan, 759 S.W.2d. 593, 597 (Ky. 1988).
In 2005, the Kentucky Court
of Appeals,
in City
of Somerset
v.
Bell, 156 S.W.3d. 321
(Ky. App. 2005) appeared to reverse direction from the Kentucky Supreme Court precedent set
forth in Taulbee and Griggs. In Bell, a group
of Somerset,
of taxpayers,
living in an area annexed by the City
brought a class action lawsuit alleging that the City
of Somerset
had improperly
collected ad valorem property taxes from them. The trial court, relying upon Taulbee, supra.,
6
concluded
the taxpayers
that although
were entitled to a refund,
Taulbee, the Kentucky
from
of Appeals
however, held that
because in 1996, and after the Supreme
Court decision in
recovering funds in a class-action lawsuit.
class action relief vvas available
they were precluded
Legislature
each case." Thus, the Kentucky
The Kentucky Court
had amended
KRS 134.590(6) and removed the phrase "in
of Appeals
Court
in Bell concluded
that
the Kentucky
Legislature had in effect repealed the Taulbee holding.
Significantly,
after the Court
of Appeal's decision
in Bell, the Kentucky Legislature again
re-visited KRS 134.590(6). In 2006, the Kentucky Legislature amended the statute to add in the
words "each taxpayer
individually
Preamble to this amendment,
applies for a [refund]." KRS 134.590. Moreover,
in the
the General Assembly stated that it:
"wishe[d] to make it clear that each taxpayer must file an individual refund
claim and that the filing of a class action lawsuit does not constitute a timely
filing for each member or the class...." (emphasis added)
It is clear that the Bell decision was an aberration; and that the current version of KRS
134.590, much like the language in the statute prior to the Kentucky Court of Appeal's decision
in Bell, prohibits taxpayers from maintaining
Plaintiff's
class action complaint
class action lawsuits to recover tax refunds.
must be dismissed
as a matter
of
law, because KRS
134.590 precludes recovery of ad valorem tax refunds on a class action basis. Even
cases where courts have determined
that a local government
invalid ad valorem tax, the relief sought
v.
excessive or
—
has been denied because
namely class action refund —
each taxpayer is required to apply for a refund individually
KRS 134.590(6); Griggs
charged an improper,
in those
under Kentucky's
statutory scheme.
Dolan, 759 S.W.2d 593, 597 (Ky. 1988); Board
'RS 134.590(6) currently
of Education
reads in part "No refund shall be made unless each taxvaver individuallv
two (2) years from the date payment was made."
7
v.
avplies within
Taulbee, 706 S.W.2d 827, 829 (Ky. 1986). Accordingly,
Library raised the ad valorem
even
if
this Court found that the
tax rate in violation of KRS 173.790, Plaintiff cannot obtain
refiUids on a class wide basis. Thus, Plaintiff s request for class wide compensatory
the form
of refunds
C.
damages in
must be dismissed.
Plaintiff's claim for tax refunds prior to 2010 is barred by the statute of
limitations.
Plaintiff seeks tax refunds for all alleged excessive taxes due from 2007 to the present.
Complaint, $
9. KRS 134.590, however, provides for a two-year statute of limitations.
if Plaintiffs were successful
filed this action on January 20, 2012. Therefore, even
their claims seeking a tax refund for alleged excess tax payments
Plaintiffs
on the merits,
made prior to 2010 must be
dismissed.
Pursuant to KRS 134.590(6), "No refund shall be made unless each taxpayer individually
applies within two (2) years from the date payment was made." Accordingly,
as each class member individually,
Plaintiff, as well
is required to seek a refund within two years from the date he
allegedly made the excessive tax payment.
While the statute also provides that
taxes due is in litigation, the taxpayer shall individually
"if the
amount
of
apply for a refund within two (2) years
from the date the amount due is finally determined," this provision does not save any claim for a
tax refund Plaintiff may have had prior to January 20, 2012, the date he filed this lawsuit.
litigation is filed in two years, the time for administrative
application will expire after two years
elapse from the date payment was made." Griggs, 759 S.W.2d at 596. Thus, subsequent
challenging
the amount
of taxes owed
not benefit the taxpayer
Translated
individually
into present circumstances,
"If no
litigation
that is filed more than two years after the tax is paid "will
by extending
the time for applying
for a refund." Id.
Plaintiff's right to file for a refund under KRS 134.590
8
prior to this lawsuit expired two years after the taxes were paid because no litigation was filed
that would have otherwise tolled the statute
of limitations. Id.
A taxpayer is required to comply with the two-year statute
even
if the
results are "harsh." Department
of Revenue
v.
of limitations
in KRS
134.590,
Curtsinger, No. 2006-CA-001378 and
2006-CA-001462, 2007 Ky. App. Unpub. LEXIS 699, at *13 (Ky. App. Oct. 26, 2007). "The
two-year statute
of limitations is necessary to protect the state's fiscal security,
from having to repay to taxpayers millions
various requirements
of the state's
shielding the state
of dollars, which had presumably been allocated to
budget, years after a tax was collected." Revenue Cabinet v.
Gossum, 887 S.W.2d 329, 335 (Ky. 1994).
D.
because the Library
Plaintiff's conversion claim must be dismissed
sovereign immunity against tort liability.
has
Plaintiff's conversion claim against the Library fails to state a claim upon which relief
because the Library
can be granted
has sovereign
sovereign state cannot be held liable in a court
committed
by its agents." Calvert Investments,
immunity
against
of law for either intentional or
Inc. v. Louisville
ck
"[T]he
tort liability.
unintentional
torts
Jefferson Co. Metro. Sewer
Dist., 805 S.W.2d 133, 139 (Ky. 1991). If an entity is a state agency, then it "is entitled to
immunity
proprietary,
from tort liability to the extent that is performing
function." Yanero
v.
of the Commonwealth,
It is well-settled
with sovereign
that the
of the Kentucky Board of Education,
and therefore, qualifies for sovereign immunity).
law that counties are state agencies, and that, not only are they cloaked
immunity,
likewise enjoy sovereign
as opposed to a
Davis, 65 S.W.3d 510, 519 (Ky. 2001) (holding
Kentucky High School Athletic Association is the agent
which is an agent
a governmental,
but agencies which derive their genesis from county
immunity
from tort claims. See Caneyville
Volunteer
government
Fire Dept.
Green 's Motorcycle Savage, Inc., 286 S.W.3d 790, 805 (Ky. 2009) (finding that fire departments
9
v.
are government
agents engaging in governmental
functions, and thus, "are cloaked in immunity
from suit in tort"); Comair Inc. v. I.exington-Fayette
Urban County Airport Corporation,
S.W.3d 91 (Ky. 2009) (holding that a city-county airport board has sovereign immunity).
key to the inquiry
government.
immunity
state
is whether
Thus, in Comair,
"extend...
should
the entity
supra,
the Kentucky
to departments,
as to come within
government
is exercising
295
The
a function that is integral to state
Supreme
Court observed that sovereign
boards or agencies that are such integral parts
regular
patterns
of
administrative
organization
of
and
structure." 801 S.W,2d at 332 (internal quotation marks omitted). The focus, however, is on state
level governmental
those concerns
concerns that are common to all of the citizens
may be addressed
by smaller
geographic
entities
of this state,
even though
(e.g., by counties). Such
concerns include, but are not limited to, police, public education, corrections, tax collection, and
public highways.
Applying
the Comair analysis,
sovereign immunity
clearly extends to protect a library
from tort claims, in the same manner as it does for all other similarly-situated
departments,
operation
state agencies,
or boards. Indeed, at least one Kentucky court has expressly acknowledged
of a
county library
a "governmental
"is manifestly a governmental
capacity." Alvey
v.
that
function" and a library board acts in
Birgham, 150 S.W.2d 935, 940 (Ky. App. 1940). County
of providing public
library services
on a state-wide basis to the general public, and are subject to state administrative
regulation and
libraries were created by state statutes solely for the purpose
control. Therefore, the Library, and its governing
and cannot be held liable on Plaintiff's
must be dismissed as a matter
tort claims.
of law.
10
board are cloaked with sovereign immunity,
Consequently,
Plaintiff s conversion claim
III.
CONCLUSION
For the foregoing reasons, the Library's Motion to Dismiss should be granted, and the
Plaintiff s Complaint should be dismissed, with prejudice at Plaintiff's cost.
Respectfully submitted,
Is/ Michael 8'. Hawkins
Michael W. Hawkins, Esq. (82949)
Cori R. Stirling (81447)
Dinsmore
Shohl LLP
255 East Fifth Street, Suite 1900
Cincinnati, Ohio 45202
Phone: (513) 977-8200
2
Fax: (513) 977-8141
Mary Ann Stewart
ADAMS, STEPNER,
WOLTERMANN
DUSING, PLLC
40 W. Pike Street
P.O. Box 861
Covington, KY 41012
Phone: (859) 394-6200
4
Fax: (859) 392 7364
Email: mstewart@aswdlaw.corn
Attorneys for Defendant Kenton County
Public Library Board of Trustees
CERTIFICATE OF SERVICE
I hereby certify that on February 23, 2012, I electronically filed the foregoing with the
Clerk
of Court using the CM/ECF system which
following:
will send notification
of such
filing to the
Brandon N. Voelker, THE VOELKER FIRM, 4135 Alexandria Pike, Suite 109,
Cold Spring, KY 41076, Attorney for Plaintiff.
3s( Michael 8'. Hawkins
2090507vl
11
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