Before Cummings and Bauer, Circuit Judges, and Solomon, Senior District Judge.*fn**
This appeal and cross appeal arise from an action brought pursuant to 42 U.S.C. § 1983 by Huber Pontiac, Inc. (Huber) against the Director of the Illinois Department of Revenue (Department). In its complaint Huber alleges that certain aspects of the hearing procedure for assessing an Illinois use tax deficiency violate its due process rights as guaranteed by the Fifth and Fourteenth Amendments. Specifically, Huber faults the Department's Hearing Rule 2-4 (which provides that the hearing officer shall both preside at the hearing and present the Department's case) and the Director's failure personally to set forth the basis for the deficiency decision.
In the district court the Department filed a motion to dismiss on the ground that the Tax Injunction Act, 28 U.S.C. § 1341, was a total bar to the action. This motion was denied by the district court. In its later final decision the district court declared Hearing Rule 2-4 unconstitutional and granted a mandatory injunction compelling the Director to grant Huber a new hearing. The Department has appealed that portion of the final decision granting the above-mentioned relief; Huber has appealed the denial of its request for attorney's fees and that portion of the order in which the district court declined to rule on the Director's failure to set forth his own reasons for finalizing the deficiency assessment.
The threshold inquiry for this Court must be whether it has jurisdiction to adjudicate this matter. One of the statutory authorities directly related to this issue is 28 U.S.C. § 1341 which provides:
"The 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 State."
This statute codifies the well-established policy of non-intervention by federal courts in state taxation matters. Tully v. Griffin, 429 U.S. 68, 73, 97 S. Ct. 219, 50 L. Ed. 2d 227; Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 298-299, 63 S. Ct. 1070, 87 L. Ed. 1407; 28 East Jackson Enterprises, Inc. v. Cullerton, 523 F.2d 439, 441 (7th Cir. 1975). The other relevant jurisdictional statute is 28 U.S.C. § 1343(3):
"The district courts shall have original jurisdiction of any civil action authorized by law to be commenced by any person:
(3) To redress the deprivation, under color of any State law, statute, ordinance, regulation, custom or usage, of any right, privilege or immunity secured by the Constitution of the United States or by any Act of Congress providing for equal rights of citizens or of all persons within the jurisdiction of the United States."
Recognizing the clear jurisdictional bar presented by the language of Section 1341, Huber characterizes this action as one to enforce its procedural due process rights and not as a state tax case. As such, it asserts that jurisdiction under Section 1343(3) is proper and further that Section 1341 cannot be used to limit a federal court's jurisdiction under the former provision.
When this same argument was presented below, the district court found support for it in dicta in a Seventh Circuit case, Gray v. Morgan, 371 F.2d 172 (7th Cir. 1966), certiorari denied, 386 U.S. 1033, 87 S. Ct. 1484, 18 L. Ed. 2d 596, and denied the Department's motion to dismiss. In doing so, the district court quoted the following language from Gray (at 175):
"In the instant case, we have no claim of the denial of procedural due process. Plaintiffs do not complain of the method of assessing or collecting the tax. They complain of the tax itself."
Apparently the district court accepted this language as an indication that the Tax Injunction Act was not a complete bar to a Section 1983 action if personal rights and not property rights were at issue. The Department argues, however, that this ruling by the district court misconceives the scope and legislative intent of Section 1341 as expressed in both its plain language and in a number of judicial pronouncements since this Court's comments in Gray.
Huber's argument based on the alleged dichotomy between personal and property rights in a civil rights action was addressed and laid to rest in Lynch v. Household Finance Corp., 405 U.S. 538, 92 S. Ct. 1113, 31 L. Ed. 2d 424, decided six years after Gray. In Lynch the Supreme Court rejected the distinction between personal liberties and proprietary rights for the purpose of invoking Section 1343 jurisdiction. The Court specifically noted that its opinion in no way ...