Avon Group, Inc. v. STATE OF NY INS. DEPT., 741 F. Supp. 82 (S.D.N.Y. 1990)

Jerrold E. Hyams, New York City (Andrew R. Colmant, of counsel), for plaintiffs.

Robert Abrams, Atty. Gen., New York City (David S. Cook, of counsel), for defendants.

SPRIZZO, District Judge:

Plaintiff, the Avon Group, Inc. ("Avon"), brings this admiralty action against the Department of Insurance of the State of New York and the acting Superintendent of the Department (collectively the "State"), seeking an order enjoining the State from assessing against Avon a tax discussed more fully herein. Currently before the Court is the State's motion to dismiss the complaint for lack of subject matter jurisdiction pursuant to Fed.R. Civ.P. 12(b) (1).^[1] For the reasons stated herein, the State's motion is granted.

The facts relevant to the determination of the motion are set forth in plaintiff's amended complaint. Avon is a licensed excess lines insurance broker^[2] which, inter alia, places a type of insurance called "Ocean Marine Cargo Transit Insurance" in the London Market. See Amended Complaint at ¶ 5 & p. 4. This insurance covers both ocean carrier and inland carrier risks. See id.

Pursuant to New York law, all excess lines brokers are required to pay a percentage of gross premiums charged for excess lines insurance placed by the broker. See N.Y.Ins.Law § 2118(d) (McKinney Supp. 1990). However, while the tax is applicable to inland marine policies, the statute expressly *83 exempts ocean marine policies from the tax. See id.; N.Y.Ins.Law §§ 2105(a), 2117(b) (3) (B) (McKinney 1985); see also id. § 1113(a) (20) (D). According to this statutory scheme, the State assessed Avon $192,673.48 for unpaid taxes on the "Ocean Marine Cargo Transit Insurance" policies for the tax years 1984-87 and threatened to revoke Avon's license if it failed to pay the assessment. See Amended Complaint at 5-6. Soon thereafter plaintiff brought this action.

Plaintiff, invoking the Court's admiralty jurisdiction, claims that the "Ocean Marine Cargo Transit Insurance" policies are exempt from the tax pursuant to both state and federal law^[3] because the policies are maritime contracts. However, the Tax Injunction Act ("Act")^[4] bars the district courts from adjudicating challenges to a state tax assessment if the state provides a procedurally adequate remedy in which plaintiff may raise its objections to the tax. See Long Island Lighting Co. v. Town of Brookhaven, 889 F.2d 428, 431 (2d Cir. 1989) ("Lilco"); see also Wells v. Malloy, 510 F.2d 74, 77 (2d Cir. 1975); cf. Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 300-01, 63 S. Ct. 1070, 1074, 87 L. Ed. 1407 (1943). Moreover, the Act's broad language precludes even a claim that the tax itself is unconstitutional. See FDIC v. New York, 718 F. Supp. 191, 194 n. 13 (S.D.N.Y.1989) (quoting Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463, 470, 96 S. Ct. 1634, 1639-40, 48 L. Ed. 2d 96 (1976)).

Since Avon is clearly seeking to enjoin the assessment of the State's tax, its action is barred so long as Avon can raise its claims in the New York courts.^[5]See Franchise Tax Board v. Alcan Aluminium Ltd., ___ U.S. ___, 110 S. Ct. 661, 107 L. Ed. 2d 696 (1990).

Plaintiff has not even contended that New York law does not provide a procedurally adequate remedy to contest the assessment of the tax, and indeed could not do so, since New York does in fact provide several "plain speedy and efficient" remedies.^[6] For example, Avon can obtain judicial review of the Insurance Department's assessment methodology and any revocation of Avon's license in an Article 78 proceeding which would stay any license revocation for thirty days. See N.Y. Ins.Law § 2124 (McKinney 1985). Furthermore, plaintiff's constitutional challenge would be cognizable in a declaratory judgment action pursuant to New York CPLR § 3001. See Lilco, supra, 889 F.2d at 431-32; see also Tully v. Griffin, Inc., 429 U.S. 68, 75-77, 97 S. Ct. 219, 223-24, 50 L. Ed. 2d 227 (1976). Moreover, any rulings by the state court would ultimately be subject to review by the Supreme Court of the United States.

Accordingly, plaintiff's amended complaint is dismissed without prejudice to plaintiff's commencement of an action in the appropriate court of the State of New York.

IT IS SO ORDERED.

[1] The State raises several grounds for dismissing the complaint, i.e., the Eleventh Amendment of the United States Constitution, abstention, the Tax Injunction Act and lack of an admiralty question. Since the Court concludes that jurisdiction is barred by the Tax Injunction Act, the other grounds relied on by the State need not be addressed.

[2] An excess lines broker is authorized to procure certain types of insurance from insurers which are not authorized to transact business in New York. See N.Y.Ins.Law § 2105(a) (McKinney 1985).

[3] Plaintiff asserts that the tax on maritime insurance policies violates the Commerce Clause of the United States Constitution. See U.S. Const. art. 1, § 8.

[4] The Tax Injunction Act provides that "[t]he 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." 28 U.S.C. § 1341 (1988). The Act has been interpreted as a bar to declaratory relief as well. See California v. Grace Brethren Church, 457 U.S. 393, 408, 102 S. Ct. 2498, 2507-08, 73 L. Ed. 2d 93 (1982).

[5] This case, therefore, is unlike Wells v. Malloy, 510 F.2d 74 (2d Cir.1975) in which the taxpayer contended that the sanction imposed for nonpayment of taxes was unconstitutional but did not contest the constitutionality of the tax or the state's assessment thereof.

[6] To satisfy this requirement, the State must provide a mechanism for a "full hearing and judicial determination" of Avon's claims. See Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503, 514, 101 S. Ct. 1221, 1230, 67 L. Ed. 2d 464 (1981).