McCoy v. Morgan

Filing 16

ORDER granting 4 Motion to Dismiss for Lack of Subject Matter Jurisdiction. Signed by District Judge Carlton W. Reeves on 09/11/2014. (AC)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
JON C. MCCOY, INDIVIDUALLY AND
ON BEHALF OF UNITED
CONSTRUCTION COMPANY, INC.
V.

PLAINTIFF

CAUSE NO. 3:13-CV-593-CWR-FKB

ED MORGAN, IN HIS OFFICIAL
CAPACITY AS THE COMMISSIONER
OF REVENUE OF THE MISSISSIPPI
DEPARTMENT OF REVENUE

DEFENDANT

ORDER
Before the Court is the defendant’s motion to dismiss. After considering the allegations,
arguments, and applicable law, the motion will be granted.
I.

Factual and Procedural History
According to the complaint, Jon C. McCoy is being investigated by the Mississippi

Department of Revenue (the Department) for state tax deficiencies. Docket No. 1, at 2. In
September 2013, during an audit held at the office of McCoy’s attorney, an agent of the
Department allegedly became “belligerent” and “unruly”; stated that federal law did not apply to
him; and refused to honor Mississippi Rule of Professional Conduct 4.2, which prohibits
attorneys from speaking with parties represented by other attorneys about the subject of the
representation. Id. at 3-4, 7. Before being asked to leave the attorney’s office, the agent
demanded additional financial data from McCoy. Id. at 4.
This suit was filed nine days later. In it, McCoy contends that the Mississippi statutes
which permitted that audit to be conducted violate the United States Constitution. Id. at 5-9. His
primary concerns are the “immediate” criminal penalties the state statutes make available against
persons who fail to provide the Department with requested documents, records, or testimony. Id.

at 6-8. Because “every [Department] examination carries with it the probability of criminal
penalties for offences as minor as refusing to answer a question, . . . any examination by [the
Department] should carry with it the protections afforded individuals subject to a custodial
interrogation under the Fourth, Fifth, Sixth, and Fourteenth Amendments to the United States
Constitution,” he reasons. Id. at 5-6.
McCoy seeks a declaration that Department examinations and audits conducted pursuant
to Mississippi Code §§ 27-7-1 et seq. and §§ 27-65-1 et seq. are custodial interrogations. Id. at 9.
He also requests a declaration that Department demands for documents or records are prohibited
unless the taxpayer consents. Id. McCoy further demands a declaration that Mississippi Code §§
27-7-87 and 27-65-85 are unconstitutionally overbroad and violate the Fourth, Fifth, Sixth, and
Fourteenth Amendments. Id. Finally, he seeks a declaration that the Sixth Amendment prohibits
Department employees from contacting taxpayers after a taxpayer has retained counsel. Id. at 910.1
II.

Present Arguments
The State has moved to dismiss for lack of subject matter jurisdiction. Docket No. 4. It

argues that the Tax Injunction Act prohibits federal courts from hearing cases which would
interfere with state tax collection systems. Id. Alternatively, it asks that the Court abstain from
hearing the case under Younger v. Harris. Id.
McCoy responds that the doctrine of anomalous jurisdiction gives this Court the inherent
power to police the actions of officers of the Court, including defendant Ed Morgan. Docket No.
7, at 3. Regarding the Tax Injunction Act, he denies that his suit is an attempt “to prevent the
assessment or collection of any taxes.” Id. at 4. Rather, it is “simply seeking to require” the

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An exhibit to McCoy’s complaint shows that he has notified the Attorney General of Mississippi of his
constitutional challenge to §§ 27-7-87 and 27-65-85. Docket No. 1-1.

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Department to “obtain the information in accordance with the law and without violating the
Plaintiffs’ Constitutional Rights in the process.” Id. at 5. McCoy adds that jurisdiction is vested
by the exception in Ex Parte Young. Id. at 5-6. He then contends that Younger abstention is
inapplicable because the nature of his audit is regulatory, not judicial. Id. at 6-7.
III.

Legal Standard
“Motions filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure allow a party

to challenge the subject matter jurisdiction of the district court to hear a case.” Ramming v.
United States, 281 F.3d 158, 161 (5th Cir. 2001). Such a motion “should be granted only if it
appears certain that the plaintiff cannot prove any set of facts in support of his claim that would
entitle plaintiff to relief.” Id. (citation omitted). The party asserting jurisdiction “constantly bears
the burden of proof that jurisdiction does in fact exist.” Id. (citation omitted).
IV.

Discussion
The Tax Injunction Act states that “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.
“According to the Supreme Court, this statutory text should be interpreted to advance its
purpose of confining federal-court intervention in state government. . . . In short, the Tax
Injunction Act is a broad jurisdictional impediment to federal court interference with the
administration of state tax systems.” ANR Pipeline Co. v. Louisiana Tax Comm’n, 646 F.3d 940,
946 (5th Cir. 2011) (citations, quotation marks, and brackets omitted). “[T]he plain language of
the Tax Injunction Act’s jurisdictional limitation is not focused on taxes only, but rather the
broader activities of assessing, levying, and collecting taxes.” Washington v. Linebarger,
Goggan, Blair, Pena & Sampson, LLP, 338 F.3d 442, 444 (5th Cir. 2003). “The Act also

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prohibits declaratory relief when such relief would thwart state tax collection.” ANR Pipeline,
646 F.3d at 947.
McCoy’s response brief recognizes that there are state remedies available to persons who
challenge the results of Department audits. Docket No. 7, at 6-7. As a result, the only remaining
question concerning the applicability of the Tax Injunction Act is whether McCoy’s suit would
interfere with the Department’s “activities of assessing, levying, and collecting taxes.”
Washington, 338 F.3d at 444.
There is little doubt that a declaration from this Court invalidating the Mississippi statutes
which set forth the penalties for income and sales taxes payment violations, Miss. Code Ann. §§
27-7-87 and 27-65-85, as unconstitutionally overbroad and contrary to four Amendments to the
United States Constitution, would interfere with the administration of Mississippi’s state tax
system. See ANR Pipeline, 646 F.3d at 946. The same would be true if this Court declared that all
Department examinations and audits conducted pursuant to two entire chapters of Mississippi
law, Mississippi Code §§ 27-7-1 et seq. and §§ 27-65-1 et seq., constituted custodial
interrogations.
The Tax Injunction Act simply prohibits this Court from entertaining the declaratory
judgments McCoy seeks. The doctrine of anomalous jurisdiction and the Ex Parte Young
exception are not to the contrary. See, e.g., In re Grand Jury Proceedings, 115 F.3d 1240, 1246
(5th Cir. 1997) (setting forth factors for the exercise of anomalous jurisdiction); Johnson v.
Georgia Dep’t of Revenue, 20 F. Supp. 2d 1351, 1354 (N.D. Ga. 1997), aff’d, 161 F.3d 22 (11th
Cir. 1998) (dismissing case under the Tax Injunction Act, notwithstanding the plaintiff’s
qualification for the Ex Parte Young exception).

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Because the Tax Injunction Act prohibits this suit in this forum, the Department’s
Younger abstention argument need not be considered.
V.

Conclusion
For these reasons, the motion to dismiss is granted. A Final Judgment will issue this day.
SO ORDERED, this the 11th day of September, 2014.

s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE

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