
USCA1 Opinion

	




          March 2, 1993     UNITED STATES COURT OF APPEALS                                For The First Circuit                                 ____________________          No. 92-1876                        BANK OF NEW ENGLAND OLD COLONY, N.A.,                                Plaintiff, Appellant,                                          v.                          R. GARY CLARK, TAX ADMINISTRATOR,                            FOR THE STATE OF RHODE ISLAND                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF RHODE ISLAND                    [Hon. Ronald R. Lagueux, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                              Torruella, Circuit Judge,                                         _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Stahl, Circuit Judge.                                         _____________                                _____________________               Lawrence  H. Richmond,  Counsel,  Federal Deposit  Insurance               _____________________          Corporation, with whom Ann  S. DuRoss, Assistant General Counsel,                                 ______________          Colleen  B. Bombardier,  Senior  Counsel, David  N. Wall,  Senior          ______________________                    ______________          Counsel, Federal  Deposit Insurance  Corporation, Mark A.  Pogue,                                                            ______________          Alfred  S. Lombardi  and  Edwards &  Angell,  were on  brief  for          ___________________       _________________          appellant Federal Deposit Insurance  Corporation, as receiver for          New Bank of New England, N.A.               Bernard J. Lemos, Legal Officer (Taxation), with whom Marcia               ________________                                      ______          McGair Ippolito, Chief Legal Officer (Taxation), was on brief for          _______________          appellee.                                 ____________________                                    March 2, 1993                                 ____________________                    TORRUELLA,  Circuit  Judge.   In  this  appeal we  must                                ______________          resolve a  seemingly irreconcilable  clash between  two statutes.          One vests the Federal Deposit Insurance Corporation ("FDIC") with          the  power to remove "any action, suit, or proceeding" to federal          court.  12  U.S.C.   1819(b)(2)(B).  The other  commands that the          district court "shall not" grant relief in cases involving issues          of state tax  law.   28 U.S.C.    1341.  In  this case, the  FDIC          removed a Rhode Island tax dispute to the district court, and the          district court remanded the case to the state court under   1341,          finding that the statute required abstention.  Because we  concur          with the district court's result, we affirm.                                        FACTS                                        FACTS                                        _____                    Appellant bank claimed a refund of $419,025 on its 1987          Rhode Island  Bank  Institution Excise  Tax  Return.   The  Rhode          Island  Tax Division,  however, issued  only a partial  refund of          $285,347.    The  bank filed  an  administrative  appeal for  the          balance,  but the  partial  refund was  upheld.   The  bank  then          resorted to  the Rhode  Island state  court for  relief, alleging          only state law grounds for relief.                     In 1991,  while that action  was pending, the  bank was          declared insolvent.   The  Comptroller of the  Currency appointed          the  FDIC  as receiver  and created  a  "bridge bank"  to provide          continued  service to the  bank's former  customers.   The bridge          bank assumed the tax  refund claim from the insolvent bank.  When          the  Comptroller later  declared the  bridge bank  insolvent, the          FDIC as  receiver took  possession of the  bridge bank's  assets,                                         -3-          including the pending tax refund suit.                    Pursuant  to    1819(b)(2)(B),1  the  FDIC removed  the          pending state court suit  to the federal district court  in Rhode          Island.2   The  state moved  to remand  or dismiss,  arguing that            1341,  otherwise known as  the Tax Injunction  Act ("the Act"),          required the federal court to remand the case to the Rhode Island                                        ____________________          1  Section 1819(b) provides in relevant part:                      (1)  Status                      The Corporation, in  any capacity,  shall                      be  an agency  of  the United  States for                      purposes of  section  1345 of  Title  28,                      without regard to whether the Corporation                      commenced the action.                      (2)  Federal court jurisdiction                      (A)  In general                      Except as provided  in subparagraph  (D),                      all suits of a civil nature at common law                      or in equity to which the Corporation, in                      any capacity, is a party shall  be deemed                      to  arise under  the laws  of the  United                      States.                      (B)  Removal                      Except as provided  in subparagraph  (D),                      the  Corporation  may,  without  bond  or                      security,  remove  any  action, suit,  or                      proceeding  from  a  State court  to  the                      appropriate United States district court.          It is undisputed that subparagraph (D) does not apply here.          2    Apparently  the  FDIC took  this  action  one  day  before a          discovery hearing  and three days before trial.   The case was to          be heard  together with  a related case  involving another  Rhode          Island bank and the same counsel.                                          -4-          state court.3     The  FDIC,  in response,  claimed  that it  was          exempt from the operation of the Act under the judicially-created          "federal instrumentalities" exception, which establishes that the          Act does  not bar  access to  the  federal courts  by the  United          States  or its instrumentalities.   A magistrate  agreed that the          FDIC  was  a federal  instrumentality exempt  from  the Act.   On          review, however, the district court determined  that (1) the FDIC          was not entitled to  claim the federal instrumentality exemption;          (2)  section 1819  vested the  court with  jurisdiction over  the          matter; and (3) the Act nonetheless required the court to abstain          from deciding  the case.   The district court  therefore remanded          the  case  to  the Rhode  Island  state  court,  and this  appeal          followed.                                    LEGAL ANALYSIS                                    LEGAL ANALYSIS                                    ______________                                          I.                                          I.                    We   begin   by   addressing   the   district   court's          determination that the  Act is an abstention statute,  as opposed          to a jurisdictional statute.  If the district court is correct in          this ruling, then the apparent conflict between the two  statutes          is  resolved by  the workable  solution that  the district  court          proposed.   Unfortunately,  we  must conclude  that the  district          court erred in characterizing the Act as an abstention statute.                    The Supreme Court has instructed us, and  we have held,                                        ____________________          3  The Act states that federal 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.                                         -5-          that the Act is "jurisdictional" in nature, and therefore  serves          to oust the federal  courts of jurisdiction in those  cases which          fall  within its reach.  California v. Grace Brethren Church, 457                                   __________    _____________________          U.S. 393,  418-19 (1982)  (because of  Act, "no federal  district          court  had  jurisdiction");  Trailer  Marine  Transport  Corp. v.                                       _________________________________          Rivera  V zquez,  977  F.2d  1,  4-5  (1st  Cir.  1992)  (Act  is          _______________          "jurisdictional" and "not subject to waiver").                    The  policies behind  the Act  explain  the need  for a          strong  limitation on  federal jurisdiction  in state  tax cases.          With  the Act, Congress sought  "to protect tax  collection as an          'imperative  need' of government."  Trailer Marine, 977 F.2d at 5                                              ______________          (quoting  Tully v. Griffin,  Inc., 429 U.S.  68, 73 (1976)).   By                    _____    ______________          divesting  the federal  courts of jurisdiction,  Congress ensured          against  interference "with so  important a local  concern as the          collection of state taxes."   Grace Brethren Church, 457  U.S. at                                        _____________________          408-09 (citing Rosewell v.  LaSalle National Bank, 450  U.S. 503,                         ________     _____________________          522 (1981)).  It  was the paramount importance of  state taxation          to  state  governments  that  led Congress  to  restrict  federal          jurisdiction.                    Given this  authority, the district court  was wrong to          abstain.  The distinction  between abstention and jurisdiction is          important.   When a court lacks jurisdiction, it has no authority          to grant relief; when a court abstains, it has authority to grant          relief but does  not exercise it.  The fact  that the Act negates          jurisdiction creates  an apparent conflict with  the FDIC removal          statute, which grants jurisdiction.                                           -6-                                         II.                                         II.                    Before  directing our  attention to  this conflict,  we          must first  determine  whether  the  Act applies  in  this  case.          Specifically,  we  must address  whether  the FDIC  is  a federal          instrumentality entitled  to  an exemption  under the  Act.4   On          this issue, we agree with the district court that the FDIC cannot          escape from  the requirements of the  Act due to its  status as a          federal agency exempt from state taxation.                    Though  written in  absolute  terms, the  Act does  not          apply  to every  state tax  case.   The courts have  recognized a          significant  exception,  the  federal instrumentality  exception,          which allows the United States and its instrumentalities to bring          suits  on state tax issues in federal  court in spite of the Act.          Department of Employment v. United  States, 385 U.S. 355,  357-58          ________________________    ______________          (1966).  The exception arises out of the assumption that Congress          would not have  denied the federal  government access to  federal          courts without a clear statement to that effect.  Id.                                                            ___                    Courts  differ on  whether the  FDIC qualifies  for the          exception.  Compare Federal Deposit Insurance Corp. v. New  York,                      _______ ______________________________     _________          928 F.2d 56, 61 (2d Cir. 1991) (FDIC not federal instrumentality)          with Federal Deposit Insurance  Corp. v. City of New  Iberia, 921          ____ ________________________________    ___________________          F.2d 610, 613  (5th Cir. 1991) (FDIC is federal instrumentality).          See generally Pima Financial  Service Corp. v. Intermountain Home          _____________ _____________________________    __________________                                        ____________________          4   The parties agree that only  state tax issues are involved in          this  case, and do not  seriously argue that  Rhode Island courts          are inadequate under the  Act.  See Keating v.  Rhode Island, 785                                          ___ _______     ____________          F. Supp. 1094, 1097 (D. R.I. 1992).                                         -7-          Systems, Inc., 786 F. Supp. 1551 (D. Colo. 1992) (cataloging FDIC          _____________          federal  instrumentality   cases;   holding  FDIC   not   federal          instrumentality).                    In this circuit, we have outlined no "bright line" rule          for  whether  a  particular  agency  is  entitled  to  claim  the          exception.  Federal Reserve  Bank v. Commissioner of Corporations                      _____________________    ____________________________          and  Taxation, 499 F.2d 60, 64 (1st  Cir. 1974).  Rather, we have          _____________          instituted a flexible test in which "each instrumentality must be          examined  in light  of its  governmental role  and the  wishes of          Congress as expressed  in relevant  legislation."  Id.   We  find                                                             ___          that  this  test  does  not  allow  the  FDIC  to  claim  federal          instrumentality status.                    The FDIC's  governmental role in this  case is minimal.          Rhode  Island taxed a  private bank, not  the federal government.          The  FDIC  only  became  involved  when  the  bank  was  declared          insolvent.  As such, no issues  of intergovernmental tax immunity          exist in the case.  Furthermore, if successful, the benefits from          the refund  claim will flow  principally to the  bank's creditors          and depositors, not to the federal treasury.                    The   relevant  legislation  does   not  indicate  that          Congress  intended  to  accord the  FDIC  federal instrumentality          status  for the purposes of the Act.   We note that   1819(b)(1),          titled "Status,"  only  grants the  FDIC  agency status  for  the          purposes of   1345, not for all purposes.  Section 1345, in turn,          creates "agency  jurisdiction,"  a different  statutory grant  of          jurisdiction  than the  removal statute  in  question here.   See                                                                        ___                                         -8-          Federal Savings and Loan Insurance Corp. v. Ticktin, 490 U.S. 82,          ________________________________________    _______          85-87  (1989) (statutory  grant  of  agency jurisdiction  treated          differently   than   grant  of   "arising   under"   and  removal          jurisdiction).    In  contrast,  the  Federal  Savings  and  Loan          Insurance  Corporation  ("FSLIC"),  the  FDIC's  predecessor, was          granted agency  status for all  purposes, including for  the Act.          12 U.S.C.   1730(k)(1)(A) (repealed 1989).                     It is apparent that Congress knew how to make an agency          a federal instrumentality  in the present context.   We therefore          must assume  that Congress chose not  to do so with  the FDIC, as          the  pertinent language is missing from the statute.  Because the          FDIC cannot claim to  be a federal instrumentality in  this case,          the Act applies.                                         III.                                         III.                    Having  determined   that  the  Act  applies   in  this          situation,   we  come   to  the   apparent  conflict   between             1819(b)(2)(B)  and the Act.5   For the  FDIC to prove  that the            1819(b)(2)(B) removal statute  trumps the Act, it  must show that          Congress  clearly and  manifestly intended the  statute to  be an          exception to the  Act.6   This substantial burden  arises out  of          two sources.                                        ____________________          5    As stated  previously,    1819(b)(2)(B)  allows the  FDIC to          "remove any action, suit, or proceeding," while the Act  commands          that the  district court "shall not" adjudicate state tax issues.          See supra notes 1 and 3 for the full text of these statutes.           ___ _____          6   Alternatively  it must show  that the  Rhode Island  does not          provide a "plain, speedy and efficient remedy," as required under            1341.  See supra note 4.                   ___ _____                                         -9-                    First, in Franchise Tax  Board v. Construction Laborers                              ____________________    _____________________          Vacation Trust, 463 U.S. 1 (1983), the Supreme Court noted that a          ______________          statute  granting   federal  court  jurisdiction   over  Employee          Retirement Income  Security Act  ("ERISA") cases only  trumps the          Act  in  two  situations.    The  party  claiming  federal  court          jurisdiction  can show  that the  state remedy  is not  speedy or          efficient, or the  party can show  that the jurisdiction  statute          was intended to be an exception to the Act.   While the Court did          not  resolve this  issue in  the case,  id. at  20 n.21,  and its                                                  ___          statements were therefore dicta,  we find its approach persuasive          in light of the strong policy embodied by the Act.                    Second, the  Court's statements in  Franchise Tax Board                                                        ___________________          are   consistent  with   the  well-settled  canon   of  statutory          interpretation   disfavoring   the   repeal  of   a   statute  by          implication, especially  if that statute is  a long-standing one.          Andrus v. Glover Construction Co., 446 U.S. 608, 618 (1980).  The          ______    _______________________          same  principle applies to  partial repeals.   Kremer v. Chemical                                                         ______    ________          Construction  Corp., 456  U.S.  461, 468  (1982).   As  has  been          ___________________          frequently stated, there are                       two well-settled categories of repeals by                      implication  --  (1) where  provisions in                      the  two  acts   are  in   irreconcilable                      conflict . . .; and (2) if the  later act                      covers the whole  subject of the  earlier                      one   and  is   clearly  intended   as  a                      substitute . . . .  But,  in either case,                      the  intention  of  the   legislature  to                      repeal must be clear and manifest . . . .          United States v. Commonwealth  of Puerto Rico, 721 F.2d  832, 836          _____________    ____________________________          (1st  Cir. 1983) (citations omitted).  The FDIC, as a consequence                                         -10-          of this canon and  the Franchise Tax  Board case, must show  that                                 ____________________          Congress  clearly   and  manifestly  intended  to   override  the          provisions of the Act by passing the FDIC removal statute.                      We turn first to the language of the removal statute to          determine   what  Congress   intended.     The  mere   fact  that            1819(b)(2)(B)  states that  the FDIC  may remove  "all" actions          does not in itself  demonstrate the clear and manifest  intent of          Congress to  trump the  Act.   See Moe  v. Confederated  Salish &                                         ___ ___     ______________________          Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 472 (1976)          _______________________________________          (conflict between Indian tribe removal statute and Tax Injunction          Act).   Such language, rather, is consistent with a general grant          of jurisdiction which did not take into account the provisions of          the Act.  Id.                    ___                    The structure of   1819(b) does not demonstrate a clear          and  manifest intent  to override  the Act.   This lack  of clear          intent is underscored  by the contrast  between the FDIC  removal          statute, and  the removal statute applicable  to its predecessor,          the FSLIC.  The FSLIC statute began by stating "[n]otwithstanding          any other provision of law . . .," manifesting a  clear intent to          override any conflicting statutes in existence.  The FDIC statute          contains no such clause.  As  we stated above, it is obvious that          Congress knew how to  exempt the FSLIC from the operation  of the          Act when it so desired.   The absence of similar language  in the          revisited statute indicates to us that Congress did not intend to          override the Act.                     Congress has  limited the FDIC's  jurisdiction in other                                         -11-          ways.   Agency jurisdiction,  pursuant  to    1345, is  expressly          subject  to the  provisions of  "other law."   Assuming  that the          federal instrumentality exception to the Act does not  apply, the          Act would be such  "other law" limiting the FDIC's  access to the          federal  courts.    The structure  of     1819(b)  thus does  not          demonstrate a clear and manifest intent to override the Act.                    We turn now to  the legislative history of  the removal          statute  for whatever light  it may shed  on the issue.   In this          regard, the parties  have directed us  to, and we have  found, no          reference in the relevant legislative history on how the  removal          statute affects the  operation of the Act.   Indeed, there is  no          reference  to the Act in  the extensive history  of the Financial          Institutions  Reform and  Recovery Act  ("FIRREA"), of  which the          removal statute forms a part.                    In support  of its position that  Congress intended the          removal statute as  an exception to the Act, the  FDIC directs us          to portions of  the legislative history stating that  the statute          expanded the scope of federal jurisdiction for the FDIC.  Indeed,          we  have already  acknowledged this  purpose in  another context.          Capizzi,  937 F.2d  8, 10-11  (1st Cir.  1991) (FIRREA  "expanded          _______          federal jurisdiction"  beyond previous  removal provision).   The          fact  of expansion begs the  question, however, of  what, if any,          limits  on federal  jurisdiction exist.   We  must find  that the          expansion  specifically  reverses   the  prohibition  on  federal          jurisdiction mandated  by  the Act  for  the FDIC  to win.    The          absence of such concrete evidence, however, convinces us that the                                         -12-          removal statute does not trump the Act.                    Given the uncertainties we  have found in the language,          structure and  legislative history of    1819(b),  we cannot  say          that  the statute  clearly and  manifestly evinces  an  intent to          trump the  Act.  We  thus construe    1819(b) as  subject to  the          limitation on federal jurisdiction  in the Act.  As  the district          court  was correct in determining that this case belongs in state          court, we affirm.                    Affirmed.                    ________                                         -13-
