Appeal from the United States District Court for the District of New Jersey (D.C. Criminal Action No. 2-08-cv-03033) District Judge: Honorable Jose L. Linares
The opinion of the court was delivered by: Ambro, Circuit Judge
Before: AMBRO, CHAGARES, and GREENAWAY, JR., Circuit Judges
The Township of Lyndhurst, New Jersey, brought this putative class
action "in its capacity as a taxing authority" on behalf of itself and
all other similarly situated New Jersey municipalities, townships, and
counties.*fn1 It alleges that defendants-all companies who operate hotel booking sites online-owe
the putative class unpaid hotel occupancy taxes.*fn2
The District Court granted defendants' motion to dismiss on
prudential standing grounds, concluding that Lyndhurst did not have
the right to sue for the alleged taxes owed under the relevant
statutory scheme. Instead, that enforcement right was given to the
State of New Jersey's Director of Taxation (the "Director"), aided by
the State's Attorney General (the "Attorney General").*fn3
For the reasons that follow, we affirm.
Lyndhurst is a political subdivision of the State of New Jersey. "As a general principle, it is established beyond question that [such] municipalities, being created by the State, a tax on charges of rent for every occupancy of a room or rooms in a hotel."have no powers save those delegated to them by the Legislature and the State Constitution." Dome Realty, Inc. v. Paterson, 416 A.2d 334, 341 (N.J. 1980).*fn4 This case involves two distinct powers under N.J. Stat. Ann. §§ 40:48F-1 to -5 (the "Enabling Act"): 1) the power to enact a local hotel occupancy tax; and 2) the subsequent power to enforce it. The text of the Enabling Act speaks to each of these powers, as well as to the substantive reach of any ordinance enacted under this statutory scheme.
A. The Enactment Power and the Hotel Occupancy Tax's Substantive Reach
The Enabling Act's grant of power to enact local hotel occupancy taxes varies based on the "class" of the political subdivision at issue. For general classification purposes, cities of the "first class" have populations of greater than 150,000, while cities of the "second class" have populations between 12,000 and 150,000. See N.J. Stat. Ann. §§ 40A:6-4(a), (b).*fn5 It is undisputed that Lyndhurst is a city of the "second class" and that its enactment power is governed by N.J. Stat. Ann. § 40:48F-1, which permits it to "adopt an ordinance imposing a tax . . . on charges of rent for every occupancy . . . of a room or rooms in a hotel." (Emphasis added).*fn6 Lyndhurst exercised this authority by adopting (that is, enacting) such a tax, as did each member of the putative plaintiff class.*fn7 Even as the New Jersey legislature provided Lyndhurst with the power to enact such a tax ordinance, it (the legislature) also placed limits on the ordinance's substantive reach. In short, the Enabling Act only permitted Lyndhurst to impose a local hotel occupancy tax on transactions that were already subject to the Sales and Use Tax Act, which levied a statewide tax on "[t]he rent for every occupancy of a room or rooms in a hotel in [New Jersey]." N.J. Stat. Ann. § 54:32B-3(d). The tax was to be collected by "the person collecting rent from the hotel customer," id. § 40:48F-3(a), which included "every operator of a hotel," id. § 54:32B-2(w). Given this scheme, although the substantive reach of Lyndhurst's hotel occupancy tax remains a matter of dispute, its power to enact such a tax is not.
Once Lyndhurst passed its hotel occupancy tax, the Enabling Act also provided for a specific enforcement regime. By the terms of the statute, only the Director-a State of New Jersey official-is given the explicit right to enforce Lyndhurst's hotel occupancy tax: "The Director of the Division of Taxation shall collect and administer any tax imposed pursuant to the provisions of [§ 40:48F-1]." Id. § 40:48F-5 (emphasis added). Interestingly, the Enabling Act provides a distinct enforcement regime for cities of the "first class" and those of the "second class" with an international airport-as these municipalities may enforce directly their local hotel occupancy taxes. See id. § 40:48E-3 (outlining the enforcement regime for cities of the "first class" and cities of the "second class" with international airports). The same enforcement power is not given to other "second class" cities like Lyndhurst. As noted, this power resides with the Director.
"In carry[ing] out" his authority to enforce Lyndhurst's hotel occupancy tax, the Director is given "all the powers granted in" the Sales and Use Tax Act. Id. § 40:48F-5. This includes the power to "determine" the amount of tax owed by a taxpayer. Id. § 54:32B-19 (emphasis added). Indeed, the Act provides that, "[i]f a return required . . . is not filed, or if a return when filed is incorrect or insufficient, the amount of tax due shall be determined by the [D]irector from such information as may be available." Id. (emphasis added).
"[S]uch determinations shall finally and irrevocably fix the tax unless the person against whom it is assessed . . . shall apply to the [D]irector for a hearing, or unless the [D]irector of his own motion shall redetermine the same." Id. The Act also includes a specific mechanism for dealing with delinquent taxpayers: "Whenever any person required to collect tax shall fail to collect or pay over any tax[,] . . . the Attorney General shall, upon the request of the [D]irector, bring or cause to be brought an action to enforce the payment of same on behalf of the State of New Jersey . . . ." Id. at § 54:32B-22(a). In the end, the question remains whether this explicit grant of enforcement power to the Director (aided by the Attorney General) precludes Lyndhurst from bringing its own enforcement action against private parties in federal court.
II. FACTS AND PROCEDURAL HISTORY
This case involves the propriety of the so-called "Merchant Model" employed by defendants, whereby they (1) acquire inventories of hotel rooms at negotiated rates; and then (2) ...