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Berne Corp. v. Government of the Virgin Islands

June 16, 2009

BERNE CORP.; B&B CORP.; TWENTY-ONE QUEENS QUARTER, INC.; MILLER PROPERTIES, INC.; EQUIVEST ST. THOMAS, INC.; ROBERT SCHMIDT; KIM HOLSWORTH; ROBERT SCHMIDT DEVELOPMENT CORP.; DORI P. DERR; CYRIL V. FRANCOIS ASSOCIATES, LLC; SHELL SEEKERS, INC.; CHARLES W. CONSOLO; 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 GOVERNMENT OF THE VIRGIN ISLANDS; ROY MARTIN; VIRGIN ISLANDS TAX REVIEW BOARD, APPELLANTS



On Appeal from the District Court of the Virgin Islands Division of St. Thomas and St. John D.C. Civil Action Nos. 3-00-cv-00141, 3-00-cv-00167, 3-01-cv-00151, 3-01-cv-00155, 3-01-cv-00181, 3-01-cv-00196, 3-01-cv-00197, 3-01-cv-00228, 3-02-cv-00057 (Honorable Curtis V. Gomez).

The opinion of the court was delivered by: Scirica, Chief Judge.

PRECEDENTIAL

Argued January 29, 2009

Before: SCIRICA, Chief Judge, AMBRO and SMITH, Circuit Judges.

OPINION OF THE COURT

This appeal, the most recent chapter in a nearly decade-long legal battle over the assessment of commercial real property taxes in the United States Virgin Islands, requires us to reassess the jurisdictional foundations of our previous decisions in light of intervening congressional action.*fn1

The Government of the Virgin Islands appeals two orders, both entered on September 11, 2008, by the Chief Judge of the District Court of the Virgin Islands. In the first order, the District Court partially vacated its May 12, 2003 Decree. In the second order, the District Court found the Government of the Virgin Islands had violated the non-vacated parts of the May 12, 2003 Decree and held it in contempt. The Government of the Virgin Islands challenges both the jurisdiction of the District Court and its contempt order. We will affirm.

I.

The initial suit in this litigation, brought under 42 U.S.C. § 1983, was filed inJuly 2000 by owners of commercial real estate subject to commercial real property taxes levied by the Government of the Virgin Islands.*fn2 Plaintiff taxpayers alleged violations of the 1936 Act, 48 U.S.C. § 1401 (repealed 2007), which required real estate tax assessments for the territories be made at "actual value."*fn3 They also alleged violations of the Revised Organic Act of 1954, 48 U.S.C. § 1541,*fn4 as well as infringements of their procedural and substantive due process rights under the Fourteenth Amendment of the United States Constitution. Berne Corp. v. Gov't of the V.I., 120 F. Supp. 2d 528, 535 n.15 (D.V.I. 2000). Plaintiffs sought to enjoin the Government of the Virgin Islands from assessing real property taxes except in accordance with the 1936 Act, which required assessment by fair market value. The District Court granted a preliminary injunction against the Government of the Virgin Islands, finding continuing violations of the 1936 Act and a tax system that was neither credible nor reliable enough to provide taxpayers their constitutionally mandated due process rights. From this earlier litigation emerged the Berne settlement agreement which was approved by the District Court in December 2000.

Under the settlement agreement, the Government of the Virgin Islands agreed to reform its real property tax assessment system. The District Court appointed a Special Master to monitor the Government's procedures and to report on the level of achievement. The court granted the Government two years to bring its assessment system into compliance with constitutional requirements and the 1936 Act. Berne Corp. v. Gov't of the V.I. (Berne II), 262 F. Supp. 2d 540, 549 (D.V.I. 2003), aff'd, 105 F. App'x. 324 (3d Cir. 2004).

In the intervening years, old and new parties to the litigation filed motions to compel the Government of the Virgin Islands to comply with the settlement agreement. On May 12, 2003, the District Court entered a decree ("the May 2003 Decree") to enforce the Berne settlement agreement. Berne II, 262 F. Supp.2d at 544. The May 2003 Decree permanently enjoined the Government of the Virgin Islands from assessing all real property in the Virgin Islands until the District Court found (1) the government had established the property tax system mandated by the 1936 Act, and (2) the Board of Tax Review was consistently holding hearings and making determinations within a reasonable amount of time after an appeal. Id. at 572. The District Court extended this injunction to all similarly situated taxpayers in the Virgin Islands*fn5 but allowed the Government of the Virgin Islands to issue tax bills to non-party taxpayers based on assessment values for 1998 so long as it provided a mechanism to retroactively apply those assessment values. In response, the Virgin Islands legislature enacted Act 6586 to provide a mechanism to collect taxes from non-party taxpayers based on a 1998 assessment until the injunction was dissolved. Accordingly, in August 2003, the District Court modified the May 2003 Decree to allow the Government to collect these property taxes. In re Tax Litig., 276 F. Supp. 2d 435 (D.V.I. 2003).

On June 29, 2007, Congress repealed the 1936 Act and made the repeal retroactive to the enactment of the Revised Organic Act of 1954. Pub. L. No. 110-40, 121 Stat. 232 (2007). The Senate Committee Report stated "[t]he assessment and collection of real property taxes is fundamentally a local government issue with no Federal impact." S. Rep. No. 110-19, at 1 (2007). In response to the repeal, in December 2007, the Government of the Virgin Islands moved to vacate the May 2003 Decree under Fed. R. Civ. P. 60(b), contending it was based upon no longer valid law.*fn6

Before the District Court's decision on the status of the May 2003 injunction, the Virgin Islands legislature convened a special session on March 10, 2008, and passed Act 6991, 2008 V.I. Sess. Laws 6991, which permitted the Governor, John deJongh, to issue real estate tax bills for 2006 during the 2008 fiscal year, in contravention of the May 2003 Decree.*fn7 Act 6991 was silent with respect to the proper functioning of the Board of Tax Review, aside from appropriating a sum of money to the Board to hire administrative assistants and hearing officers and to pay for stenography services. Id.

While the District Court's review of the status of the May 2003 injunction, in light of the repealed 1936 Act, was pending, the District Court held an evidentiary hearing on July 2, 2008, to determine how the Board of Tax Review was functioning. Without waiting for the District Court's determination on the status of the injunction, the Government of the Virgin Islands apprised the court on August 19, 2008, via an Informative Notice, of its intention to issue the 2006 tax bills. Immediately thereafter, Berne moved for an order to show cause why the Government of the Virgin Islands should not be held in contempt. The Government of the Virgin Islands, nevertheless, sent out its tax bills, even as it filed an opposition to the motion to show cause for contempt. After a hearing on the motion, the District Court, on September 11, 2008, found the Government of the Virgin Islands in contempt of the May 2003 Decree. The court ordered it to rescind all 2006 tax bills and to establish a special fund to satisfy any possible payment obligation imposed by the District ...


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