144 So. 3d 876
La.2014Background
- Plaintiffs (Jackson, Hardin, and KSD) paid delinquent Orleans Parish ad valorem taxes for various years and were assessed penalties, interest, and a 9.5% "collection fee" under New Orleans Ordinance No. 22207; KSD paid some amounts under protest, Jackson and Hardin did not.
- Plaintiffs filed a class action seeking a declaration that Ordinance 22207 (and collected penalties/fees) violated La. Const. art. VII, § 25(A)(1) and federal due process/equal protection; they sought refunds and injunctive relief.
- District court granted summary judgment for KSD (finding Ordinance 22207 unconstitutional insofar as it authorized outside collectors, methods other than tax sale, or levied penalties/collection fees) and sustained no-cause-of-action exceptions dismissing Jackson and Hardin for failing to pay under protest.
- City appealed, arguing the collection fee represents recoverable tax-sale costs, that public‑private cooperative endeavors (La. Const. art. VII, § 14(C)) allow outsourcing, and that factual issues exist about whether the 9.5% fee equals actual costs.
- Supreme Court applied Fransen precedent, held Ordinance 22207’s outsourcing and across‑the‑board penalty/collection fee provisions unconstitutional (penalties/outsourcing impermissible under art. VII, § 25(A)(1)), affirmed dismissal of plaintiffs who failed to pay under protest, denied the City’s motion to strike, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of outsourcing/authorization of outside collectors to collect delinquent ad valorem taxes | Ordinance authorizes private collection/collection fees that violate art. VII, § 25(A)(1) | Ordinance only assists tax-sale process; cooperative endeavors clause permits contracting with private entities | Ordinance unconstitutional to the extent it authorizes outside collectors or any method beyond the exclusive tax‑sale procedure in art. VII, § 25(A)(1). |
| 9.5% "collection fee" characterization (cost vs. penalty) | Fee is effectively a penalty designed to recoup collection costs and is unconstitutional | Fee captures legitimate, recoverable costs of conducting tax sales (including Mennonite notice burdens) | Fee is substantively the same as the prior unconstitutional collection penalty; across‑the‑board fee untethered to actual case‑by‑case costs is unconstitutional. |
| Requirement to pay under protest before suing (per City Code §150‑49 and La. R.S. 47:2134) | Payment‑under‑protest should not bar challenge to an unconstitutional fee; McKesson requires return of unconstitutionally collected taxes | Procedural payment‑under‑protest and short timetables are permissible if meaningful post‑deprivation relief exists | Plaintiffs who did not timely pay under protest (Jackson and Hardin; KSD only for certain years) lacked a cause of action; requirement upheld because statute affords meaningful post‑deprivation relief. |
| Admissibility of plaintiffs’ exhibits (motion to strike) | Exhibits were part of the record and supported arguments; should be considered | City contended exhibits were not formally introduced at trial and should be stricken | Motion to strike denied as irrelevant to summary judgment holdings; exhibits (many duplicated in the record) did not affect outcome. |
Key Cases Cited
- Fransen v. City of New Orleans, 988 So.2d 225 (La. 2008) (ordinance authorizing collection methods other than tax sale and penalties for ad valorem arrears found unconstitutional under La. Const. art. VII, § 25(A)(1))
- Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (U.S. 1983) (constitutional notice requirements for tax sales)
- McKesson Corp. v. Division of Alcoholic Beverages & Tobacco, 496 U.S. 18 (U.S. 1990) (post‑deprivation refund procedures and limits on procedural requirements for challenging tax assessments)
- Builder’s Lumber & Supply Co. v. Jordan Lands, Inc., 228 So.2d 359 (La. App. 3d Cir. 1969) (costs recoverable in tax‑sale context are limited to sale notice/advertising and related actual expenses)