                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-28-2004

Berne Corp v. Govt of VI
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-2549




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                                                            NOT PRECEDENTIAL

                 UNITED STATES COURT OF APPEALS
                      FOR THE THIRD CIRCUIT


                                 No. 03-2549


   BERNE CORP; B&B CORP; TWENTY-ONE QUEEN QUARTER, INC.
       MILLER PROPERTIES, INC.; *EQUIVEST ST. THOM AS, INC.;
ROBERT SCHMIDT; KIM HOLSWORTH; ROBERT SCHMIDT DEVELOPMENT
     CORP; DORI P. DERR; CYRIL V FRANCOIS ASSOCIATES; SHELL
    SEEKERS, INC.; CHARLES W. CONSOLVO; LINDA B. CONSOLVO;
    SNEGLE GADE ASSOCIATES; YVETTE LEDERBERG; ARTHUR B.
   CHOATE; STEWART LOVELAND; STACY LOVELAND; ELISABETH
  SHARP; LINDON CORP; GORDON L. COFFELT; SORAYA D. COFFELT;
                          ONE STOP INC.;

                                      v.

    GOVERNMENT OF THE VIRGIN ISLANDS; ROY MARTIN, IN HIS
    OFFICIAL CAPACITY AS TAX ASSESSOR; VIRGIN ISLANDS TAX
                       REVIEW BOARD,

                                             Appellants

      (D.C. Civil Nos. 00-00141, 00-00167, 01-00151, 01-00155, 01-00181,
                      01-00196, 01-00197, 01-00228 & 02-00057)

                       *Amended Per Clerk's Order dated 8/8/03


             Appeal from the District Court of the Virgin Islands
                    Division of St. Thomas and St. John
                    (D.C. Civil Action No. 00-cv-00141)
                District Judge: Honorable Thomas K. Moore


                            Argued May 5, 2004

           Before: BARRY, AM BRO, and SMITH, Circuit Judges
                               (Opinion filed June 28, 2004)

Charles B. Klein, Esquire (Argued)
Peter N. Hiebert, Esquire
Timothy M. Broas, Esquire
Krista M. Enns, Esquire
Winston & Strawn
1400 L Street, N.W.
Washington, DC 20005

Iver A. Stridiron
  Attorney General
Elliott McIver Davis
  Solicitor General
Kerry E. Drue
  Chief, Civil Division
Douglas J. Juergens, Esquire
Office of Attorney General of Virgin Islands
Department of Justice
34-38 Kronprindsens Gade, GERS
Building, 2 nd Floor
Charlotte Amalie, St. Thomas
USVI, 00802

      Attorneys for Appellants

David E. Nichols, Esquire
100 Blackbeard’s Hill, Suite 8E
Charlotte Amalie, St. Thomas
USVI, 00802

James M. Derr, Esquire (Argued)
P.O. Box 664
Charlotte Amalie, St. Thomas
USVI, 00804

David A. Bornn, Esquire
The Bornn Firm
8 Norre Gade, 2 nd Floor
Charlotte Amalie, St. Thomas

                                            2
USVI, 00802

Soraya D. Coffelt, Esquire
51B Kongen Gade
Charlotte Amalie, St. Thomas
USVI, 00802

       Attorney for Appellees

Chad C. Messier, Esquire (Argued)
Dudley, Topper & Feuerzeig
P.O. Box 756
1A Fredericksberg Gade
Charlotte Amalie, St. Thomas
USVI, 00804

       Attorney for Appellee
       Equivest, St. Thomas




                                         OPINION


Ambro, Circuit Judge

       The Government of the Virgin Islands appeals the District Court’s order: (a)

enforcing the Settlement Agreement the V.I. Government previously entered into with

respect to a tax dispute; (b) enjoining the Virgin Islands Tax Assessor from calculating

real property taxes using a certain appraisal method; and (c) enjoining the V.I.

Government from issuing tax bills based on tax assessments calculated in accordance

with that appraisal method. The District Court found that the V.I.’s method of assessing

real property taxes was in violation of federal law because it did not reliably determine



                                             3
the actual value of the properties. The V.I. Government does not dispute this factual

finding but challenges the legal bases for District Court’s order. For the reasons that

follow, we affirm.

                                              I.

       In July 2000, two commercial real property owners, Berne Corp. (“Berne”) and

B&B Corp. (“B&B”), sued the V.I. Government and the V.I. Tax Assessor, alleging that

the V.I. appraisal system did not assess their real properties at actual value as required by

federal law. In September 2000, the District Court of the V.I. preliminarily enjoined the

V.I. Tax Assessor from collecting taxes against the real properties owned by the plaintiffs

until he could establish at trial that the property taxes had been assessed on the properties’

actual value. Berne Corp. v. Government of the Virgin Islands, 120 F. Supp. 2d 528

(D.V.I. 2000) (“Berne I”).

       While the appeal of the preliminary injunction was pending, the parties settled.

Under the Settlement Agreement (approved by the District Court in December 2000), the

V.I. Government agreed to reform its commercial real property tax assessment system

within two years, subject to a special independent Master’s review and certification. The

Settlement Agreement provided, among other things, that under the reformed process the

V.I. Tax Assessor would appraise commercial properties pursuant to the Uniform

Standards of Professional Appraisal Practice (“USPAP”).

       In September 2001, after the V.I. Government issued the 2000 property tax bills



                                              4
based on the same method of assessment as before, the Berne I plaintiffs moved to

enforce the Settlement Agreement. The District Court denied the plaintiffs’ motion,

pointing out in doing so that the Settlement Agreement gave the V.I. Government two

years to bring its assessment system into compliance.

         Meanwhile, other V.I. real property owners filed similar suits, claiming that their

real property tax bills were not based on the actual value of the properties being taxed.

One of the new plaintiffs, Equivest St. Thomas, Inc. (“Equivest”),1 moved for a

preliminary injunction. In June 2002, the District Court granted Equivest’s motion,

enjoining the V.I. Government from collecting taxes against Equivest’s properties until

the V.I. Tax Assessor could establish at trial that the property taxes assessed represented

the properties’ actual value. Equivest St. Thomas, Inc. v. Government of the Virgin

Islands, 208 F. Supp. 2d 545 (D.V.I. 2002).

         The V.I. Government appealed, arguing that the District Court lacked subject

matter jurisdiction. In February 2003, we affirmed. Bluebeard’s Castle, Inc. v.

Government of the Virgin Islands, 321 F.3d 394 (3d Cir.), cert. denied, 124 S.Ct. 153

(2003). Specifically, we concluded that: (a) 48 U.S.C. § 1401a2 was still controlling and


  1
   Equivest was formed by the merger of Bluebeard’s Castle, Inc. and Castle Acquisition,
Inc.
  2
      Section 1401a provides:

                § 1401a. Valuation of real property for assessment; uniformity of rates
                For the calendar year 1936 and for all succeeding years all taxes on real
         property in the Virgin Islands shall be computed on the basis of the actual value of
                                                5
required all taxes on the V.I. real properties be computed on their actual value; and (b)

Equivest adequately alleged a violation of its right under §1401a. Accordingly, we held

that the District Court had subject matter jurisdiction. Id. at 402.

         On remand, the District Court consolidated the Berne I plaintiffs’ motion with

Equivest’s case and other similar individual suits for the purpose of trying the common

issue–whether the V.I. tax assessment system was in violation of federal law. In May

2003, the District Court held that the V.I. Tax Assessor violated § 1401a because the tax

assessment system employed by the Assessor unreasonably inflated the actual value of

real properties. Berne Corp. v. Government of the Virgin Islands, 262 F. Supp. 2d 540

(D.V.I. 2003) (“Berne II”). The District Court, as remedies, (a) enforced the Settlement

Agreement from Berne I, (b) entered a permanent injunction against the V.I. Government

and the V.I. Tax Assessor, and (c) extended the scope of its injunction to all similarly

situated taxpayers in the V.I. under 5 V.I. Code Ann. § 80.3 The Court later modified its

order by lifting the portion of its injunction that prohibited the V.I. Government from




         such property and the rate in each municipality of such islands shall be the same
         for all real property subject to taxation in such municipality whether or not such
         property is in cultivation and regardless of the use to which such property is put.
  3
      This provision reads:

                 § 80 Taxpayers’ suits
                 A taxpayer may maintain an action to restrain illegal or unauthorized
         acts by a territorial officer or employee, or the wrongful disbursement of
         territorial funds.

                                               6
issuing tax bills not based on the actual value of properties to non-plaintiff taxpayers. In

re Tax Litigation, 276 F. Supp. 2d 435 (D.V.I. 2003). The V.I. Government appeals.4

                                             II.

                                             A.

       The V.I. Government first challenges the District Court’s subject matter

jurisdiction.5 We do not entertain this issue because it has been decided already by our

Court in Bluebeard’s Castle, wherein we held that the District Court had subject matter

jurisdiction. 321 F.3d at 402 (“Because plaintiff’s claims ‘arise under’ § 1401a, [the

defendants] are subject to the jurisdiction of the District Court under 48 U.S.C. § 1612

and 28 U.S.C. § 1331.”).

       Absent extraordinary circumstances (which are not present here), we abstain from

revisiting this issue already decided by the prior panel. Council of Alternative Political

Parties v. Hooks, 179 F.3d 64, 69 (3d Cir. 1999) (“[A]n appeals court should generally




  4
   We have jurisdiction under 28 U.S.C. § 1291. The District Court’s grant of a
permanent injunction after a trial on the merits (as opposed to the preliminary injunction,
which is an interlocutory order) is a final order appealable under § 1291. See Freethought
Society, of Greater Philadelphia v. Chester County, 334 F.3d 247, 255 (3d Cir. 2003);
AmeriSteel Corp. v. Int’l Brotherhood of Teamsters, 267 F.3d 264, 267 (3d Cir. 2001).
Therefore, we reject the V.I. Government’s contention that the issues not challenged in
the current appeal–such as the District Court’s factual findings–are preserved for another
appeal.
  5
   The V.I. Government provides two alternative reasons for claiming the District
Court’s lack of subject matter jurisdiction. It asserts that § 1401a had been repealed by
the Revised Organic Act of 1954. 48 U.S.C. § 1541 et seq. Alternatively, it contends, §
1401a did not confer a private right of action to the plaintiffs.
                                              7
decline to reconsider an issue that another panel has decided on a prior appeal in the same

case.”) (citations omitted); see generally Public Interest Research Group of New Jersey,

Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 117 (3d Cir. 1997) (identifying several

‘extraordinary circumstances’ that warrant a court’s reconsideration of an issue decided

earlier) (citations omitted).

         Morever, there is an alternative ground for the District Court’s federal jurisdiction.

The record shows that the plaintiffs pleaded in their complaint that their rights under the

Due Process and Equal Protection Clauses of the United States Constitution were

violated. The District Court did not address these constitutional claims because it was

unnecessary to do so after it determined that the plaintiffs prevailed on their statutory

claims. 262 F. Supp. 2d at 565 n.23. For the purpose of determining the District Court’s

federal subject matter jurisdiction, however, we look to the face of the plaintiffs’

complaint to decide whether a federal claim has been raised. Caterpillar Inc. v. Williams,

482 U.S. 386, 392 (1987). As the plaintiffs adequately presented the constitutional claims

on the face of their complaint, this alone conferred subject matter jurisdiction on the

District Court.

                                              B.

         The V.I. Government next asserts that the District Court issued an advisory

opinion when it struck down 33 V.I. Code Ann. § 2402(a)6 , claiming that whether §


  6
      Section 2402(a) provides in pertinent part:

                                                8
2402(a) violated federal law was a dispute of a hypothetical character. We disagree.

       Federal courts may not issue an opinion unless there is an actual controversy

between adverse parties. Coffin v. Malvern Federal Savings Bank, 90 F.3d 851, 853 (3d

Cir. 1996). Here, one of the controversies between the parties was whether the V.I.

residential property tax assessment system violated federal law. The District Court’s

finding that § 2402(a) restricts the V.I. Tax Assessor’s ability to determine the actual or

fair market value of residential property decided the actual controversy between the

parties: whether the V.I. Government failed to appraise residential properties at their

actual value as required by federal law. Furthermore, we agree with the plaintiffs that §

2402(a) is merely an example of the V.I. Government’s violations of § 1401a, and thus

that it would not have survived the general relief entered, under which the V.I.

Government is required to establish a new tax assessment system that appraises real

property at its actual value.

                                             C.

       The V.I. Government also claims that the plaintiffs lacked standing to sue under §

80 on behalf of non-plaintiff real property taxpayers in the V.I. This issue essentially has

been mooted by the District Court’s order of August 13, 2003 lifting the May 2003




              (a) The tax assessor shall at least once every five (5) years, upon
       actual view, value and assess all noncommercial property subject to taxation
       in the Virgin Islands. Provided, however that the tax assessor shall not
       increase the valuation and assessment of noncommercial property more than
       10% over the previous valuation and assessment . . . .
                                               9
injunction as to all non-plaintiff real property taxpayers to allow the V.I. Government to

issue tax bills to them based on the 1998 assessments reflected in the 1999 tax bills. 276

F. Supp. 2d at 436. It is well established that we do not entertain an appeal if there is no

longer “a live case or controversy [that] extends through all phases of litigation,

including appellate review.” County of Morris v. Nationalist Movement, 273 F.3d 527,

533 (3d Cir. 2001) (citation omitted). Accordingly, we dismiss the appeal of this issue.7

       The V.I. Government further contends that the plaintiffs lack standing to sue on

behalf of themselves under § 80. In doing so, it challenges the District Court’s decision

in Berne I. As the V.I. Government relinquished its right to appeal that case by entering

into the Settlement Agreement, it cannot now appeal Berne I. Moreover, even if the

settlement in Berne I was reopened in Berne II, this standing argument comes too late

(and in any event presents too little merit).

                                                D.

       The V.I. Government next contends that the District Court awarded the plaintiffs

mutually exclusive remedies. It claims that the District Court could have enforced

specific performance of the Settlement Agreement or entered the permanent injunction,

but not both. Because we conclude that there is no practical difference between the two

remedies, and in any event the relief granted appears to be specific to each of the



  7
   Likewise, the question of whether the District Court properly entered a permanent
injunction with regard to non-plaintiffs has also been mooted. Hence we also do not
review this issue.
                                             10
consolidated cases, we affirm.

       The District Court concluded that the V.I. Government materially breached the

Settlement Agreement by failing to correct the appraisal practice in a way that would

produce actual value assessments. 262 F. Supp. 2d at 575. Based on this finding, which

is not challenged on appeal, the District Court ordered the V.I. Government to perform its

obligation under the Settlement Agreement to reform its system of appraising properties

so that the assessments would reflect their actual value. Id.

       True, the plaintiffs in Berne I were also awarded injunctive relief even though they

dismissed their case with prejudice when they agreed to settle. The injunction, however,

does nothing more than require the V.I. Government to establish a “system that will

appraise real property consistently at its actual, market value.” 262 F. Supp. 2d at 571.

Since the injunction has the same consequence for the plaintiffs as the enforcement of the

Settlement Agreement, we conclude that the two remedies are not mutually exclusive.8

                                             E.

       Finally, the V.I. Government argues that the District Court violated the principle of

separation of powers when it specifically enforced the Settlement Agreement by, inter

alia, ordering the Government to set up a fund to finance implementation of the

Settlement Agreement. Again we disagree.


  8
   For the same reason, we reject the argument that the District Court erred when it
extended the terms of the Settlement Agreement to benefit non-commercial property
owners. In fact, the V.I. Government itself represented that the new procedure resulting
from the Settlement Agreement would be implemented for all property owners.
                                            11
       In general, court-approved settlement agreements are “specifically enforceable and

broadly interpreted.” Pennwalt Corp. v. Plough, Inc., 676 F.2d 77, 80 (3d Cir. 1982); see

also D.R. v. East Brunswick Bd. of Educ., 109 F.3d 896, 901 (3d Cir. 1997) (explaining

the strong federal policy in favor of enforcing voluntary settlement agreements). The V.I.

Government nonetheless asserts that the order of specific performance in this case

violates the doctrine of separation of powers, relying on Huntt v. Government of Virgin

Islands, 382 F.2d 38 (3d Cir. 1967). The V.I. Government characterizes its obligations

under the Settlement Agreement as matters of discretion and claims that the District Court

substituted its own judgment for that of an executive officer when it ordered the V.I.

executive officers to perform specifically the Settlement Agreement and to provide

adequate funding for that purpose.

       But Huntt is distinguishable from the case before us. There the District Court

found that the V.I. Government entered into a contract to issue certain government bonds

and ordered specific performance of the contract. Id. at 40-41. We reversed the specific

performance order because we concluded that the V.I. Government had no such

contractual obligation. Id. at 47. We emphasized that, although the executive branch of

the V.I. was authorized to issue the bonds, it was not bound to do so because their

issuance makes it a discretionary act that “involves the exercise of extensive judgment

and investigation, calling for the consideration and decision of many matters . . . .” Id. at

46. Thus we held that the District Court “transcended the scope of permissible judicial

action” when it ordered the V.I. Government to issue the bonds. Id.
                                             12
       In our case, the binding nature of the Settlement Agreement and the V.I.

Government’s breach of its terms are undisputed.9 Morever, the Settlement Agreement

itself provided that the District Court retained jurisdiction to supervise and enforce its

terms and conditions. Accordingly, we conclude that the District Court did not exceed its

judicial power when it enforced the Settlement Agreement and ordered the V.I.

Government to provide adequate funding for the purpose of its implementation.

                                     *    *   *    *   *

       For these reasons, we affirm the District Court’s order enforcing the

Settlement Agreement and grant of the permanent injunction as later modified.




  9
    Thus, we are puzzled by the V.I. Government’s assertion that under Huntt it is free not
to respect the terms of the Settlement Agreement (such as reforming its tax assessment
system pursuant to USPAP). We agree with the District Court that the V.I. Government
provided no basis for claiming that USPAP is inapplicable to the V.I. Tax Assessor.
                                            13
