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Jensen v. State Board of Tax Commissioners of

May 21, 1985


Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. H 74-230--Michael S. Kanne, Judge.

Coffey and Flaum, Circuit Judges, and Jameson, Senior District Judge.*fn*

Author: Flaum

FLAUM, Circuit Judge.

The State Board of Tax Commissioners of the State of Indiana ("State Tax Board") and its three individual members appeal from a district court order requiring them to approve Lake County, Indiana's request for authorization to levy an increased tax on County property for the purpose of funding certain improvements in the Lake County Jail. The court issued the order after concluding that the State Tax Board's prior denial of the request hindered the County's efforts to comply with a consent decree mandating the elimination of unconstitutional conditions in the jail. For the reasons set forth below, we reverse.


The roots of the present controversy extend back over ten years to a suit filed in the Northern District of Indiana on September 13, 1974, by plaintiffs Randy Jensen and Othello Upshaw individually and as representatives of a class of inmates in the Lake County Jail. The suit -- which named as defendants Lake County, the Lake County Council, and a number of County officials (collectively referred to as "the County defendants"), but not the state of Indiana or any of its officials -- alleged that conditions in the jail, such as the lack of proper medical care, violated the Eighth and Fourteenth Amendments to the Constitution. After six years of litigation, the parties finally entered into a consent decree which was approved by Judge Sharp on October 21, 1980. The three-page decree required the County defendants to take several generally defined steps to improve conditions in the jail, such as complying with the procedures set forth in the Lake County Jail Manual, and to pay each named plaintiff $500 in damages.

On May 29, 1981, the plaintiffs filed a motion charging the County defendants with failing to comply with and hence being in civil contempt of the consent decree. A hearing on the motion was held a little over a year later before Judge Kanne, who had since assumed responsibility for the case from Judge Sharp. Before Judge Kanne ruled on the motion, the parties reached another settlement that was entered by the court as a "Judgment Order" on June 28, 1982. In this sixteen-page order, Lake County expressly admitted that it was in contempt of the 1980 consent decree, and the County defendants as a whole agreed to implement a long and very specific list of reforms to improve the Lake County Jail. In the portion of the order most pertinent to the instant case, the County defendants agreed to provide a separate area of the jail, along with numerous additional services, for mentally ill inmates. On March 7, 1983, the court imposed a $500,000 fine against Lake County for civil contempt, which was suspended on the condition that the County defendants comply with the court's order.

In order to comply with provisions of the order concerning mentally ill inmates, the Lake County Council decided to contract with South Lake Center for Mental Health, Inc. ("South Lake"), a private, non-for-profit corporation, to develop and then operate a mental health facility on the fourth floor of the jail. The plan called for the Council to lease the fourth floor to South Lake, which in turn would contract with others to perform the necessary construction work. South Lake also would incur debt of approximately $4,000,000 for the project, which the County would repay in annual installments until the debt was retired. In meetings held during the fall of 1983, the Council voted to appropriate $757,400 in its 1984 budget for the first of such payments. Further, the Council voted to fund this appropriation by means of an "excessive tax levy" on Lake County property amounting to an additional four cents per $100 of assessed value. It was the County's decision to seek this levy that led to the present dispute with the State Tax Board.

Property tax levies for counties in Indiana are frozen at a particular level by law. See Ind. Code § 6-1.1-18.5 et seq. (1983 Supp.). A county that wishes to increase its levy above the statutory level generally must file a request for an excessive tax levy with the State Tax Board, which then refers the request for an initial consideration and recommendation by the local government tax control board. Ind. Code § 6-1.1-18.5-12 (1983 Supp.). Ultimately, the State Tax Board reviews this recommendation and enters a final decision on the request. Ind. Code § 6-1.1-18.5-15 (1983 Supp.). Lake County followed these procedures in requesting the excessive property tax levy at issue in this case, and the local government tax control board recommended that it be approved. Nevertheless, in January 1984 the State Tax Board denied the County's request.*fn1

On February 6, 1984, the County defendants filed with the district court a motion to add as parties the State Tax Board and its members (collectively referred to as "the State Tax Board defendants"), along with a "Petition for Authority for Funds to Comply with Judgments of the U.S. District Court" and a short "Claim for Relief." These pleadings described the events summarized above and averred that the County defendants could not obtain the funds necessary to comply with the court's orders absent the State Tax Board's approval of the excessive tax levy request. On February 8, the court found that joinder of the State Tax Board defendants was "necessary pursuant to rule 19(a)" of the Federal Rules of Civil Procedure,*fn2 and thus granted the County defendant's motion to add the State Tax Board defendants as parties "solely for the purpose of resolving issues relating to the corrections and improvements in conditions and practices at the Lake County, Indiana, Jail."

In response to the County defendants' petition, the State Tax Board defendants filed a memorandum arguing that the court lacked subject matter jurisdiction on several grounds, including the immunity granted to states under the Eleventh Amendment. The court heard argument on the petition at a hearing held on May 2, 1984. Treating the State Tax Board defendants' jurisdictional objections as a motion to dismiss the petition, the court denied it, concluding that the basis for the suit was a violation of federal constitutional rights, that the State Tax Board defendants had created an apparent impediment to the court's order aimed at eliminating these violations, and that the relief requested by the County defendants would not require expenditures by the state of Indiana. The court therefore proceeded to hear testimony on the merits of the petition. The key witnesses for each side included Dennis Aloia, Financial Director for the Lake County Council, who explained why the Council viewed an increased property tax levy as the only appropriate method of financing the jail improvements required by the court, and Gordon McIntyre, a member of the State Tax Board, who testified as to the Board's belief that other sources of funding were both available and preferable to the excessive tax levy requested by the County.

On May 10, 1984, the court entered its final order mandating that the State Tax Board defendants permit the County to increase its property tax levy as requested and to appropriate "$757,400 each year after 1984 for the use of South Lake until such time as work is completed and monies no longer required to pay for the construction of these facilities and costs incidental thereto as required by the Judgment Order . . . . provided, however, that any excessive tax levy imposed by this order shall be removed the year following completion." The court supported the order with findings to the effect that the funds necessary to finance the mental health facility pursuant to the court's previous orders could not appropriately be obtained by any means other than the excessive property tax levy.

On appeal, the State Tax Board defendants basically reassert their contention that the district court lacked subject matter ...

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