
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                              _________________________          No. 96-2353                               CUMBERLAND FARMS, INC.,                                Plaintiff, Appellant,                                          v.             TAX ASSESSOR, STATE OF MAINE, AND TREASURER, STATE OF MAINE,                                Defendants, Appellees.                              _________________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                              FOR THE DISTRICT OF MAINE                       [Hon. Gene Carter, U.S. District Judge]                                          ___________________                              _________________________                                        Before                               Torruella, Chief Judge,                                          ___________                                Selya, Circuit Judge,                                       _____________                             and Saris,* District Judge.                                         ______________                              _________________________               Sheldon A. Weiss, with whom Joel C. Martin, James B. Haddow,               ________________            ______________  _______________          and Petruccelli & Martin were on brief, for appellant.              ____________________               Janet M. McClintock,  Assistant Attorney  General, State  of               ___________________          Maine, with  whom Andrew  Ketterer, Attorney General,  Lucinda E.                            ________________                     __________          White, Assistant  Attorney General,  and Thomas D.  Warren, State          _____                                    _________________          Solicitor, were on brief, for appellees.                              _________________________                                    June 20, 1997                              _________________________          ____________          *Of the District of Massachusetts, sitting by designation.                    SELYA, Circuit Judge.   Plaintiff-appellant  Cumberland                    SELYA, Circuit Judge.                           _____________          Farms,   Inc.  ("CFI"),   a  Massachusetts-based   processor  and          distributor  of  milk, operates  a  chain  of convenience  stores          throughout the  northeastern states.   In  this case, it  asserts          that  a milk  handling surcharge  imposed by  the State  of Maine          violates  the   Commerce  Clause.    The   defendants  are  state          officials, sued  as such (collectively, "Maine"  or "the State").          In their  view, the milk handling  surcharge is indistinguishable          for  Commerce Clause  purposes  from a  sales  tax and  does  not          discriminate against interstate commerce either on its face or in          its  purpose  and effect.   Because  the  Tax Injunction  Act, 28          U.S.C.   1341 (1994), deprives the federal courts (other than the          Supreme  Court)  of jurisdiction  to  decide the  merits  of this          difficult  (and  interesting)  question, we  vacate  the judgment          below and remand with instructions to dismiss the case.                                          I.                                          I.                                          __                                      Background                                      Background                                      __________                    Our tale begins with the Maine Dairy Farm Stabilization          Act ("the  DFS Act"), Me. Rev.  Stat. Ann. tit. 36,     4541-4547          (repealed  1995).  The  DFS Act had  two components.   On the one          hand, it  imposed a  tax on  packaged fluid  milk  sold in  Maine          (whether produced in  or out of  state).  On  the other hand,  it          provided a rebate  of the  funds so collected  to in-state  dairy          farmers.    The first  handler in  Maine  bore the  obligation of          collecting and paying the  tax, regardless of whether  such first          handler  was a wholesaler or a retailer selling milk packaged out                                          2          of state.  See id. at 4543(1).                     ___ ___                    The  tax  imposed  by  the   DFS  Act  had  an  unusual          structure,  better suited  to price  maintenance than  to revenue          augmentation.  The amount of the tax varied between 0  and 5  per          quart of  milk and increased  as the  "basic price" of  milk fell          below the target price of $16.00 per hundredweight (later changed          to $16.50  per hundredweight).1    See id.  at    4543(2).    The                                             ___ ___          statute directed  the State  Treasurer to segregate  the proceeds          from this tax and distribute 94% of the funds so collected to in-          state  dairy farmers in proportion to their milk production.  See                                                                        ___          id. at    4544(2)(A).   This  tax-and-subsidy scheme  enabled in-          ___          state milk producers to  receive the target price for  their milk          come  what may   first, they received  the basic price from their          customers,  and then  they  received the  difference between  the          target price and the basic price as a rebate from the State   and          thus shielded them from out-of-state competition.                    The  Supreme Court threw a monkey wrench into the gears                                        ____________________               1In  this context, "basic price" is a  term of art.  See Me.                                                                    ___          Rev. Stat. Ann.  tit. 7,   2954.  The  Maine Milk Commission sets          the basic  price of milk, which is the minimum price that must be          paid by milk dealers in Maine (other than those who are federally          regulated) to Maine  dairy farmers.  The basic price is geared to          the price of  milk established for the Boston zone  under the New          England Federal Milk Marketing Order No. 1.  See 7  C.F.R.   1001                                                       ___          et seq. (1997).   The DFS Act provided that  when the basic price          __ ____          was $16.00 or  more per  hundredweight (cwt), a  handler paid  no          tax.   When  the basic price  was $15.50  to $15.99  per cwt, the          handler paid  a tax of  1  per quart.   When the  basic price was          $15.00  to $15.49 per cwt,  the tax rose to  2  per quart, and so          on.   Since  there are about  46.5 quarts  of milk  per cwt, this          mechanism tended to guarantee price stability by keeping  the sum          of  the basic price  plus the tax  in the vicinity  of $16.00 per          cwt.                                          3          of the DFS Act when it decided West Lynn Creamery, Inc. v. Healy,                                         ________________________    _____          512  U.S.  186  (1994).   In  that  case, the  Court  addressed a          Massachusetts  pricing  order   which  was   tailored  to   serve          substantially the same ends as the DFS Act.  The order imposed an          assessment  on fluid  milk  sold by  Massachusetts retailers  and          directed distribution of  the amounts collected  to Massachusetts          dairy farmers.   See  id. at  190-91.  Finding  that the  order's                           ___  ___          purpose  and effect  were  "to enable  higher cost  Massachusetts          dairy farmers to compete  with lower cost dairy farmers  in other          States,"    the   Court   declared   the   arrangement   "clearly          unconstitutional."  Id. at 194.                              ___                    In the  aftermath of West Lynn  Creamery, we considered                                         ___________________          CFI's constitutional  challenge  to  the DFS  Act.    Finding  no          significant constitutional distinction between  that Act and  the          Massachusetts law  invalidated in  West Lynn Creamery,  we struck                                             __________________          down Maine's scheme.   See Cumberland Farms, Inc. v.  LaFaver, 33                                 ___ ______________________     _______          F.3d 1 (1st Cir. 1994) (per curiam) (Cumberland I).                                               ____________                    The   Maine   legislature  responded   with  remarkable          alacrity.  In January of 1995, it enacted "An Act to Continue the          Fee  on the Handling  of Milk," Me.  Rev. Stat. Ann.  tit. 36,             4771-4773  ("the 1995  Act").   The  preamble to  the legislation          recited  that  "the  State  and  its  citizens  are  experiencing          economic difficulties and significant  fiscal problems" such that          "revenues are  necessary to the  State's ability to  address such          difficulties  and  problems."   1995  Me. Laws  ch.  2, Emergency          Preamble.  The  1995 Act  assesses a surcharge  on milk  handlers                                          4          that is nearly identical  to that previously mandated by  the DFS          Act2  but directs that the revenues generated are to be deposited          into Maine's  general fund.  See  Me. Rev. Stat. Ann.  tit. 36,                                         ___          4772(8).                    Shortly after the effective date  of the 1995 Act,  the          plot thickened.   The  state legislature began  systematically to          ensure continued subsidization of Maine's dairy farmers.  As part          of three successive omnibus  spending bills for state government,          the   legislature  appropriated   to   in-state  milk   producers          $1,500,000 for the period March 1995 to June 1996, $4,050,000 for          the  period July to September 1996, and $3,150,000 for the period          July 1996 to  June 1997.  See 1995 Me. Laws  ch. 5,   A-1; id. at                                    ___                              ___          ch. 368,   B-1; id. at ch. 665,   KK-1.                          ___                    CFI  believed  that  this legislative  patchwork  was a          thinly-veiled contrivance aimed at  circumventing the decision in          Cumberland I and that the new legislation, taken in its entirety,          ____________          shared  the same constitutional infirmity which led to the demise          of  the DFS  Act.  Consequently,  it brought suit  in the federal          district  court seeking  injunctive,  declaratory,  and  monetary          relief.  In due season, the district court rejected CFI's plaint.          Although  the  court  believed  that the  state  legislature,  in          passing the 1995 legislative  package (that is, the 1995  Act and                                        ____________________               2The 1995 Act imposes a surcharge that ranges between 0  and          6   per quart of milk.  When the basic price is $16.50 per cwt or          more, there  is no charge.   When  the basic price  is $16.00  to          $16.49 per  cwt,  the charge  is  1   per quart.    This  pattern          continues  until the basic price  drops below $14.00  per cwt, at          which point  the maximum  surcharge (6  per  quart) is  achieved.          Me. Rev. Stat. Ann. tit. 36,   4772(2).                                          5          the  ensuing appropriation  bills), "intended  to circumvent  the          Court's decision  in West Lynn  Creamery by simply  pulling apart                               ___________________          the  two  components  of  the  [DFS]  Act,"  it nonetheless  felt          compelled  to  unwrap the  package  and  analyze  each  piece  of          legislation separately.  Cumberland Farms, Inc. v. Mahany, 943 F.                                   ______________________    ______          Supp.  83, 87  (D.  Me. 1996).   The  court concluded  that, when          examined  independently,  both the  revenue-raising  and spending          bills passed muster under the Commerce Clause.  See id. at 88-90.                                                          ___ ___          Accordingly, it granted summary judgment  in Maine's favor.  This          appeal followed.                                         II.                                         II.                                         ___                                       Analysis                                       Analysis                                       ________                    Federal  courts are courts of limited jurisdiction, and          thus must  take  pains to  act only  within the  margins of  that          jurisdiction.  See National  Ass'n of Social Workers v.  Harwood,                         ___ _________________________________     _______          69 F.3d 622, 628 n.6 (1st Cir. 1995).  Here, Maine interposes the          Tax Injunction Act, 28 U.S.C.   1341 ("the TIA"), as a defense to          CFI's suit.  Although Maine  did not raise this point  below, the          TIA's commands  are jurisdictional in nature and  are not subject          to waiver.  See  Trailer Marine Transp. Corp. v.  Rivera Vasquez,                      ___  ____________________________     ______________          977 F.2d 1, 5 (1st Cir. 1992).  Thus, we start   and finish   our          analysis by discussing this facet of the State's defense.                    The TIA provides in  relevant part that "[t]he 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                                          6          State."   28 U.S.C.   1341.   In one respect, the TIA sweeps more          broadly than the letter of its text suggests.  As authoritatively          construed,  the TIA forbids not only  injunctive relief, but also          declaratory  and monetary  relief.   See  National Private  Truck                                               ___  _______________________          Council,  Inc.  v. Oklahoma  Tax Comm'n,  115  S. Ct.  2351, 2354          ______________     ____________________          (1995).   Hence, the TIA,  if it applies  in this instance,  is a          complete  bar  to maintaining  the  instant action  in  a federal          forum.  We turn, then, to the question of its applicability.                    Two conditions  must be  satisfied before the  TIA will          deprive a  federal court of jurisdiction:   first, the challenged          impost  must constitute a tax; and second, the State must furnish          an  adequate alternative to a federal-court remedy.  Here, we are          concerned only with the first condition, for CFI does not dispute          that Maine  affords  a plain,  speedy, and  efficient anodyne  to          persons putatively aggrieved by the operation of the 1995 Act.3                    The  question  is whether,  for  purposes  of the  TIA,          Maine's  milk handling surcharge is a tax (which would defeat the          exercise of federal jurisdiction) or a fee (which would allow the          exercise of federal jurisdiction).  In San Juan Cellular Tel. Co.                                                 __________________________          v.  Public Serv.  Comm'n, 967 F.2d  683 (1st  Cir. 1992),  we set              ____________________                                        ____________________               3In  all events, CFI could not mount a credible challenge on          this  point.  Under Maine law, CFI can  apply for a refund of any          monies due pursuant  to the 1995 Act within  three years from the          time a return  is filed  or two years  from the time  the tax  is          paid.  See Me.  Rev. Stat. Ann. tit. 36,    144.  If a  refund is                 ___          denied, CFI can seek judicial review in the state superior court,          see id. at   151, and any refund obtained would include interest,          ___ ___          see id. at    186.   This remedy is sufficiently  "plain, speedy,          ___ ___          and efficient" to satisfy  the second condition of the  TIA.  See                                                                        ___          California v. Grace Brethren Church, 457 U.S. 393, 413-15 (1982).          __________    _____________________                                          7          forth  the standard  that  guides  our  analysis of  this  issue.          There, after surveying the case law, we stated that:                    [Courts]  have  sketched  a spectrum  with  a                    paradigmatic   tax   at   one   end   and   a                    paradigmatic  fee at the  other.  The classic                    "tax" is imposed by  a legislature upon many,                    or  all,   citizens.     It   raises   money,                    contributed to a general  fund, and spent for                    the benefit  of the  entire  community.   The                    classic "regulatory  fee"  is imposed  by  an                    agency  upon those subject to its regulation.                    It may serve regulatory purposes directly by,                    for   example,    deliberately   discouraging                    particular   conduct   by   making  it   more                    expensive.   Or  it may  serve such  purposes                    indirectly  by,  for  example, raising  money                    placed in  a special fund to  help defray the                    agency's regulation-related expenses.                    Courts facing cases that  lie near the middle                    of  this  spectrum  have  tended  .  .  .  to                    emphasize the revenue's ultimate  use, asking                    whether  it provides a general benefit to the                    public, of a sort often financed by a general                    tax,  or  whether  it  provides  more  narrow                    benefits  to  regulated companies  or defrays                    [an] agency's cost of regulation.          Id.   at  685   (citations  omitted).     This   formulation  for          ___          distinguishing taxes from fees  has found favor with a  number of          other appellate  courts.  See,  e.g., Bidart Bros.  v. California                                    ___   ____  ____________     __________          Apple Comm'n, 73 F.3d 925, 930 (9th Cir. 1996); Hager  v. City of          ____________                                    _____     _______          W. Peoria,  84 F.3d 865, 870 (7th  Cir. 1996); Travelers Ins. Co.          _________                                      __________________          v.  Cuomo, 14 F.3d  708, 713  (2d Cir.  1994).   We adhere  to it              _____          today.                    The classification of an impost for purposes of the TIA            "tax" versus "fee"   presents a question of law appropriate for          resolution on a properly developed summary  judgment record.  See                                                                        ___          Varrasso  v. Varrasso,  37 F.3d  760, 763 (1st  Cir. 1994).   Our          ________     ________                                          8          task, then, is to apply the San Juan Cellular standard.  The fact                                      _________________          that  the  milk  handling  surcharge was  imposed  by  the  state          legislature rather than by an administrative agency suggests that          it is a tax rather than a fee.  See Bidart Bros., 73 F.3d at 931;                                          ___ ____________          San Juan Cellular, 967 F.2d  at 685.  The fact that  the revenues          _________________          raised  from the surcharge go  into Maine's general  fund and are          thus  spent for  the benefit  of the  citizenry  as a  whole also          favors a  finding that the milk handling surcharge is a tax.  See                                                                        ___          Travelers Ins., 14  F.3d at 713;  San Juan Cellular, 967  F.2d at          ______________                    _________________          685.                    There is  more.  The  fact that the  responsibility for          administering  the statute is assigned to  the State Tax Assessor          cuts  in  the  same direction.    So  too  does  the  fact  that,          throughout the body of the 1995 Act, the legislature consistently          refers to its milk surcharge as a tax.  See, e.g., Me. Rev. Stat.                                                  ___  ____          Ann. tit. 36,   4772 (caption);  id. at   4772(1) (describing the                                           ___          surcharge as  "[a]n excise  tax"); id. at    4772(2)  (discussing                                             ___          "[t]he rate of  the tax  levied"); id. at    4772(3)  (discussing                                             ___          "[c]alculation  of   tax").     Although  such  labels   are  not          conclusive, see Keleher  v. New Eng.  Tel. & Tel.  Co., 947  F.2d                      ___ _______     __________________________          547, 549 (2d Cir. 1991), they  are entitled to some weight in the          calculus  of characterization.4  See  Trailer Marine, 977 F.2d at                                           ___  ______________                                        ____________________               4The weight  is reduced in  this instance because  the Maine          legislature, although  using the  word "tax" roughly  three dozen          times in the body of the statute and not using  the word "fee" at          all, described the legislation, in the Emergency Preamble, as "An          Act to Continue the  Fee on the Handling of Milk."   See 1995 Me.                                                               ___          Laws ch.2, Emergency Preamble.                                          9          6.                    It is  apparent that the surcharge's  stated purpose is          tax-like;   in enacting it, the state legislature described it as          a means of raising  general revenues.  This is  a relevant factor          in deciding  the "tax versus fee"  question.  See Chicago  & N.W.                                                        ___ _______________          Transp.  Co. v. Webster County  Bd. of Supervisors,  71 F.3d 265,          ____________    __________________________________          267  (8th Cir. 1995); Travelers Ins., 14  F.3d at 713.  Still, we                                ______________          recognize that the inverted structure of the surcharge furthers a          regulatory purpose   to ensure  stable (if elevated) milk pricing             and thus  pulls the  other  way.   Finally,  the surcharge  is          imposed only on handlers of milk, not on all citizens (or even on          all  businesses); in this aspect, the  surcharge more resembles a          fee.   See Trailer Marine, 977 F.2d  at 6; San Juan Cellular, 967                 ___ ______________                  _________________          F.2d at 685.                    As  we indicated in San Juan Cellular, 967 F.2d at 685,                                        _________________          the characterization of a  governmental assessment as a tax  or a          fee is  rarely a choice  between black and  white.   Many imposts          fall into the gray area in the center of  the spectrum.  So it is          here.  While the question is  close, we believe that Maine's milk          handling  surcharge falls nearer to  the tax end  of the spectrum          than to  the fee end.   As San  Juan Cellular suggests,  the most                                     __________________          salient factor in  the decisional mix concerns the destination of          the  revenues raised by  the impost    and here, the  revenues go          into  Maine's general fund.   Although this element  alone is not          always decisive, it is particularly important where, as here, the          stated purpose of the impost is to garner revenue.  See Hager, 84                                                              ___ _____                                          10          F.3d at 870-71.   In the circumstances of  this case, this factor          is  sufficient to outweigh the few straws  in the wind that point          in the opposite direction.                    CFI  attempts  to  derail  this  result  by  using  its          "merits"  argument as a jurisdictional  foil.  It  tells us that,          despite the  legislature's declaration,  the purpose of  the milk          handling  surcharge  is  not  to augment  general  revenues,  but          instead "to impose an exaction, akin to a regulatory fee, for the          sole benefit of  Maine dairy farmers."   In order  to reach  this          conclusion, however,  we would  have  to view  the milk  handling          surcharge in conjunction with the  later subsidies to Maine dairy          farmers  as a  single, integrated  scheme, and  we would  have to          disregard  the Maine  legislature's statement  of purpose.   This          extraordinary  step  might  be  appropriate on  the  merits  in a                               _____          Commerce  Clause case.  See  West Lynn Creamery,  512 U.S. at 201                                  ___  __________________          ("Our  Commerce Clause  jurisprudence is  not so  rigid as  to be          controlled  by the  form  by which  a  State erects  barriers  to          commerce.").    But  there  is  neither  any  precedent  nor  any          plausible jurisprudential  basis for analyzing  separate tax  and          subsidy statutes as  an integrated unit under  the Tax Injunction          Act.   Moreover,  the need  for doing  so, while arguable  in the          Commerce Clause context, is  chimerical in the TIA context:   the          risk is infinitesimal that a  state legislature will contrive  an          ingenious  scheme  in  order to  deny  lower  federal  courts the          jurisdiction  to  adjudicate  the  legality  of state  exactions.          Since aggrieved taxpayers may  raise all their claims in  a state                                          11          forum, subject to  eventual review by  the United States  Supreme          Court, the game obviously would not be worth the candle.                                         III                                         III                                         ___                                      Conclusion                                      Conclusion                                      __________                    We  can go no further.  The Commerce Clause question is          for  the Maine  state  courts (and,  perhaps,  the United  States          Supreme  Court)  to  decide.   Because  the  TIA  deprives us  of          jurisdiction to  determine the constitutionality of  Maine's milk          handling surcharge, the judgment of the district court is vacated          and  the case  is remanded  with instructions  to enter  an order          dismissing the  action  without prejudice  to  appropriate  state          proceedings.          Vacated and remanded with instructions.  No costs.          Vacated and remanded with instructions.  No costs.          ______________________________________   ________                                          12
