Clackamas County v. Airbnb, Inc. et al

Filing 37

ORDER - The Findings and Recommendation (ECF 30 ) is ADOPTED, except as noted herein, and as supplemented in this Order. Defendants' Joint Motion to Dismiss (ECF 14 ) is GRANTED and this case is dismissed with prejudice. Plaintiff's Motion to Strike (ECF 19 ) is DENIED. Signed on 8/3/2018 by Judge Michael H. Simon. (mja)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

CLACKAMAS COUNTY,
Plaintiff,

Case No. 3:17-cv-1611-PK
ORDER

v.
AIRBNB, INC., et al.,
Defendants.
Michael H. Simon, District Judge.
United States Magistrate Judge Paul Papak issued Findings and Recommendation in this
case on April 25, 2018. ECF 30. Judge Papak recommended that Defendants’ Joint Motion to
Dismiss be granted with prejudice and that Plaintiff’s Motion to Strike be denied.
Under the Federal Magistrates Act (“Act”), the Court may “accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C.
§ 636(b)(1). If a party files objections to a magistrate judge’s findings and recommendations,
“the court shall make a de novo determination of those portions of the report or specified
proposed findings or recommendations to which objection is made.” Id.; Fed. R. Civ. P. 72(b)(3).
For those portions of a magistrate judge’s findings and recommendations to which neither
party has objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474
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U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to
require a district judge to review a magistrate’s report to which no objections are filed.”); United
States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding that the court
must review de novo magistrate judge’s findings and recommendations if objection is made, “but
not otherwise”). Although in the absence of objections no review is required, the Act “does not
preclude further review by the district judge[] sua sponte . . . under a de novo or any other
standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Fed. R. Civ.
P. 72(b) recommend that “[w]hen no timely objection is filed,” the Court review the magistrate
judge’s recommendations for “clear error on the face of the record.”
Plaintiff timely filed an objection (ECF 35), to which Defendants responded. ECF 36.
Plaintiff objects to the portions of Judge Papak’s recommendation finding that: (A) the Tax
Injunction Act (“TIA”) does not remove the Court’s jurisdiction over this case; (B) comity does
not warrant remanding this case to state court; (C) Defendants have standing to challenge
§ 8.02.070 of the Clackamas County Code (“CCC”); and (D) the enactment of CCC § 8.02.070
violated Oregon Revised Statute (“ORS”) § 203.055. The Court reviews de novo the portions of
Judge Papak’s Findings and Recommendation to which Plaintiff has objected.
The Court notes that no party has objected to, and the Court finds no clear error with, the
Legal Standards and Material Facts sections of the Findings and Recommendation. Accordingly,
the Court adopts those portions of the Findings and Recommendation.
A. The Court’s Jurisdiction
Plaintiff argues that the Court does not have jurisdiction over this case under the TIA.
The TIA “does not bar collection suits [in the district court], nor does it prevent taxpayers from
urging defenses in such suits that the tax for which collection is sought is invalid.” Jefferson
Cty., Alabama v. Acker, 527 U.S. 423, 435 (1999). Plaintiff argues, however, that although
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Plaintiff seeks to collect taxes in the future, the TIA bars jurisdiction in this case because
Plaintiff did not seek to collect taxes in this particular action. Plaintiff cites to Orange Cty. v.
Expedia, Inc., which held that “[m]erely because the end goal of the Plaintiffs will be a
collection of taxes in a future suit against Defendants does not mean that this particular suit is a
collection action.” 440 F. Supp. 2d 1341, 1344 (M.D. Fla. 2006) (emphasis in original) (holding
that the TIA barred jurisdiction when a tax collector brought an action seeking declaratory
judgment regarding the application of a tax to the defendants). Thus, Plaintiff argues, the Court
should reject the finding that the TIA does not bar jurisdiction merely because Plaintiff’s goal is
for Defendants collect and remit taxes in the future.
Plaintiff filed its complaint in state court, alleging that CCC Chapter 8.02 creates a
County transient lodging tax of six percent, this tax is to be charged by the operator or
intermediary of transient or short-term rentals, such operators or intermediaries must register
with the County, Defendants are such operators, Defendants have failed to register, and
Defendants have failed to collect the six percent tax or pay it to the County. For its remedy,
Plaintiff requests a declaration that: (1) each Defendant is subject to the registration requirements
of CCC § 8.02.070; (2) each Defendant has failed to register as required; (3) each Defendant is
required to register or cease all intermediary business activity; and (4) each Defendant is
assessed a penalty of $2,000 or $500 per day until registered and in compliance with CCC
Chapter 8.02. Plaintiff also requests its costs and prevailing party fees. Defendants then removed
the case to this Court.
Under the circumstances of this case, the Court finds Orange County to be both
distinguishable and unpersuasive. First, Orange County is distinguishable because the plaintiff in
Orange County sought a declaration clarifying that it had the authority to seek the taxes it was

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ultimately going to request. That is not the case here. Clackamas County is not requesting a
declaration that it has the authority to seek the six percent transient tax. Instead, Clackamas
County’s allegations demonstrate that it presumes its authority to collect that tax.
Second, the reasoning of Orange County is brief, conclusory, and inconsistent with the
reasoning of Jefferson County. In Jefferson County, the Supreme Court determined that the TIA
was not intended “to prohibit taxpayers from defending suits brought by a government to obtain
a collection of tax” because “a suit to collect a tax is surely not brought to restrain state
action.” 527 U.S. at 433-35 (emphasis added). The Supreme Court in Jefferson County noted that
the TIA was “shaped by state and federal provisions barring anticipatory actions by taxpayers to
stop the tax collector from initiating collection proceedings.” Id. at 435. This case is not an
anticipatory action by a taxpayer to stop the tax collector from initiating a collection
proceeding—it is a case brought by Clackamas County to obtain declaratory relief and impose
fines and penalties. Further, the discussion in Jefferson County supports a finding that there is no
meaningful difference between a suit brought by a tax collector to collect taxes and a suit
brought by a tax collector to impose fines, penalties, or other obligations, because neither suit is
brought to restrain state action.
The Court also notes that Orange County appears to be the only post-Jefferson County
case to hold that the TIA bars jurisdiction over a case initiated by a taxing authority. Moreover,
the Eighth Circuit has criticized Orange County, noting that the court failed to “analyz[e] the text
of [the TIA], its purpose, or its legislative history.” City of Jefferson City, Mo. v. Cingular
Wireless, LLC, 531 F.3d 595, 604 (8th Cir. 2008).
The Court rejects Plaintiff’s other arguments in support of the proposition that the TIA
strips this Court of jurisdiction to adjudicate Plaintiff’s claims. Accordingly, the Court adopts the

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portion of the Findings and Recommendation relating to the TIA and concluding that it does not
bar the Court’s jurisdiction to adjudicate Plaintiff’s claims.1
B. Comity
Plaintiff argues that the Court should abstain from hearing this case based on the
principle of comity. Plaintiff cites Levin v. Commerce Energy, Inc., 560 U.S. 413 (2010), and
Fredrickson v. Starbucks Corp., 840 F.3d 1119, 1126 (9th Cir. 2016), both of which remanded
cases involving state tax law to state courts. The courts in those cases, however, remanded the
cases only because the issues of state tax law were complicated, and state courts were better
equipped to handle those issues. See Levin, 560 U.S. at 431 (noting that cases need not be
remanded if “state courts would have no greater leeway than federal courts to cure the alleged
violation”); Fredrickson, 840 F.3d at 1125 (noting that state courts were better able to handle the
issues in the case that related to “nuances of state tax law”). By contrast, this case does not
require an analysis of complicated state tax law. The only state law at issue is ORS § 203.055(1),
which simply requires voter approval before any ordinance imposing taxation can take effect.
Accordingly, the Court adopts the portion of the Findings and Recommendation relating to the
principle of comity and concluding that it does not warrant remanding the case to state court.
C. Defendants’ Standing To Challenge CCC § 8.02.070
Plaintiff argues that Defendants do not have standing to challenge CCC § 8.02.070
because they have not suffered an injury in fact. See Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547
(2016). Plaintiff argues that the cases relied on in the Findings and Recommendation involved
plaintiff tax-collectors seeking to impose taxes on the defendants, whereas here Plaintiffs do not
request any taxes from Defendants.
1

The Court does not adopt the portion of the Findings and Recommendation that cites to
Orange County in support of that conclusion.
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Although it does not appear that the ordinance will require Defendants directly to pay
taxes, the ordinance at a minimum will cause Defendants to suffer other injuries. As Judge Papak
noted, “the potential fine of $500 per day . . . is sufficient by itself to be a concrete and imminent
injury establishing that Defendants have standing.” Thus, the Court adopts the portion of the
Findings and Recommendation relating to standing.
D. Violation of ORS § 203.055
The Court has reviewed de novo the portion of the Findings and Recommendation
relating to the validity of the enactment of CCC § 8.02.070 and whether it violated ORS
§ 203.055. The Court adopts this portion of the Findings and Recommendation.
CONCLUSION
The Findings and Recommendation (ECF 30) is ADOPTED, except as noted herein, and
as supplemented in this Order. Defendants’ Joint Motion to Dismiss (ECF 14) is GRANTED and
this case is dismissed with prejudice. Plaintiff’s Motion to Strike (ECF 19) is DENIED.
IT IS SO ORDERED.
DATED this 3rd day of August, 2018.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge

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