ALEXANDER BOLT, FOR PUBLICATION
October 12, 1999
Plaintiff, 9:00 a.m.
v No.192944
Declaratory Action
CITY OF LANSING,
Defendant. ON REMAND
Before: Saad, P.J., and Hood and Markman, JJ.
SAAD, P.J.
We decide this case on remand from our Supreme Court.
Previously, we held that a storm water service charge the City of
Lansing imposed on certain property owners was not a tax subject
to the requirements of the Headlee Amendment,1 but rather a user
fee. Bolt v City of Lansing, 221 Mich App 79; 561 NW2d 423
(1997). Our Supreme Court reversed and held that the service
charge was, in fact, a tax, and that Lansing Ordinance 925 was
therefore unconstitutional under the Headlee Amendment. 459 Mich
152; 587 NW2d 264 (1998). We now consider further issues as
required by the Supreme Court’s remand.
I. NATURE OF THE CASE
When plaintiff filed this Headlee suit on March 4, 1996, he
did not seek monetary relief or ask this Court to order a refund
of all taxes already paid by other taxpayers. Nor did plaintiff
ask to represent other parties. After plaintiff lost his suit in
this Court, and while appealing his case to the Michigan Supreme
Court, he did not seek to amend his Complaint to request damages
or to represent others. Only after plaintiff prevailed in the
Supreme Court, on December 28, 1998, did he first ask for damages
on behalf of other taxpayers. Accordingly, we must respond to
his belated request for refunds for others.
If plaintiff desired his lawsuit to achieve not only
declarative relief invalidating the Lansing storm water service
charge, but also monetary relief for those taxpayers who, unlike
plaintiff, had already paid the tax, he could have easily
structured his lawsuit to attain these ends. Plaintiff could
have requested the court, under our joinder rules, to add as
party plaintiff a taxpayer who had paid the charge. MCR 2.206.
This taxpayer could have sought to act as a class representative
to seek refunds or damages for the class of taxpayers who had
paid the charge. MCR 3.501. Plaintiff failed to take any of
these fundamental measures, though they are nothing more than
standard procedures for obtaining relief for a large class of
allegedly injured parties. Plaintiff claims and the dissent
agrees that requiring plaintiff to follow normal rules of court
which everyone else must follow in every other type of action
would be onerous and would undermine Headlee.2 We not only
disagree with the dissent, we believe adopting this view would
set dangerous precedent.
Instead of utilizing available procedures for obtaining
relief for a class of persons, plaintiff waited more than two and
a half years, after two appellate courts acted on this
litigation, to assert for the first time that he wishes to
represent others and seek damages, not merely injunctive relief.
Were we to accept plaintiff’s argument, any litigant who sought
neither damages nor representative status could wait until after
he prevailed in his action to ask for additional relief for
additional parties. This is not how our system works. If a
plaintiff wants to represent others, he must ask the court
permission to do so; if plaintiff wants a certain type of relief,
he must say so in his pleadings.
Having failed to pursue this action as he should have,
plaintiff now says, and the dissent agrees, that if we refuse his
post-victory request for damages for others then we gut Headlee.
This argument is akin to a complaint that a court is
“unsympathetic” if it rejects an action brought after the
expiration of the statute of limitations. It is plaintiff’s
failure to prosecute his case effectively that leads to the
result here, nothing more. It is not our decision here that
precludes damages for others, but plaintiff’s failure to follow
Michigan Court Rules to ask for damages and to sue on behalf of
others.
II. FACTS AND PROCEEDINGS
The Supreme Court’s decision sets forth the facts of this
case in detail. Id., 155-158. Briefly stated, a portion of the
City of Lansing’s wastewater disposal system consists of combined
sanitary and storm sewers. During periods of heavy rainfall the
system often overflows and discharges storm water and untreated
or partially treated sewage into the Grand River and the Red
Cedar River. Federal law requires that the overflow be
controlled. The City estimated that the cost of separating the
combined sewers would be $176 million over approximately thirty
years. In 1995 the Lansing City Council adopted Ordinance 925,
which provided for the creation of a storm water enterprise fund
to defray the costs of improvements to the system. The ordinance
provided that the improvement program would be financed by the
imposition of an annual storm water service charge on each parcel
of real property in the City. The storm water service charge,
popularly known as the “rain tax,” was to be calculated pursuant
to a formula that attempted to estimate the rain runoff from each
parcel of property.
The City began billing property owners in 1995, and
established March 15, 1996 as the due date for payment of the
fee. Plaintiff was billed $59.83 for his parcel of property. On
March 4, 1996, plaintiff filed an original action in this Court
pursuant to Const 1963, art 9, §32, which provides in pertinent
part that “[a]ny taxpayer of the state shall have standing to
bring suit in the Michigan State Court of Appeals to enforce the
provisions of Sections 25 through 31, inclusive, of this Article
. . ..” Plaintiff sought a declaratory judgment that the storm
water service charge was a tax subject to the limitations of the
Headlee Amendment, in particular the requirements for voter
approval of a new tax set forth in Const 1963, art 9, §§ 25 and
31. Significantly for purposes of our analysis, plaintiff sought
neither class action certification on behalf of all affected
taxpayers, nor monetary relief in the form of tax refunds.
Indeed, plaintiff did not seek to represent anyone other than
himself, nor did he ask for any relief other than declaratory or
injunctive relief.
In a 2-1 decision, we held that the storm water service
charge did not violate the Headlee Amendment because it
constituted a fee rather than a tax. 221 Mich App 79. Our
Supreme Court reversed in a 4-3 decision, holding that the storm
water service charge was a tax, and not a user fee, because it
lacked the necessary characteristics of a user fee. 459 Mich 161-
169.
Our Supreme Court remanded the matter “for further
proceedings consistent with this opinion.” Id., 170. On remand,
we directed the parties to brief the following issues:
(a) the retroactivity, if any, of the application
of the Supreme Court’s opinion and order of December
28, 1998;
(b) the scope of available relief, including the
entitlement of any persons, whether or not party to
this suit, to the refund of previously paid “rain
taxes”;
(c) the amount of attorney’s fees to be awarded
plaintiff in connection with this litigation pursuant
to MCL 600.308a; MSA 27A.308a [sic—MSA 27A.308(1)].
Plaintiff and defendant filed briefs, and oral argument was
heard. Amici curiae briefs were invited; no such briefs were
filed.
III. ANALYSIS
A. Retroactivity of Supreme Court’s Opinion and Order
Plaintiff contends that the Supreme Court’s decision should
be given retroactive effect. We disagree.
Generally, a judicial decision is to be given complete
retroactive effect. Syntex Laboratories v Dep’t of Treasury, 233
Mich App 286, 292; 590 NW2d 612 (1998). However, as our Supreme
Court recognized in Lindsey v Harper Hosp, 455 Mich 56, 68; 564
NW2d 861 (1997), particular circumstances may warrant only
prospective application:
where injustice might result from full retroactivity,
this Court has adopted a more flexible approach, giving
holdings limited retroactive or prospective effect.
This flexibility is intended to accomplish the “maximum
of justice” under varied circumstances. Tebo v Havlik,
418 Mich 350, 360; 343 NW2d 181 (1984), citing Williams
v Detroit, 364 Mich 231, 265-266; 111 NW2d 1 (1961).
A key consideration under Lindsey in deciding if a decision
should be given prospective or retrospective application is: did
the judicial decision announce a new and unexpected rule of law,
or did it merely clarify, extend, or interpret existing law? A
decision should be applied prospectively if the decision
overrules settled precedent or decides an issue of first
impression “’whose resolution was not clearly foreshadowed.’”
Id., citing Chevron Oil Co v Huson, 404 US 97, 106; 92 S Ct 349;
30 L Ed 2d 296 (1971). Of course, a decision on an issue of
first impression does not necessarily require prospective
application. If the decision merely provides a clarified legal
interpretation without announcing a new rule of law or a change
in existing law, the decision should be retroactively applied.
Id., 68-69, citing Jahner v Dep’t of Corrections, 197 Mich App
111, 114; 495 NW2d 168 (1992).
Here, the Supreme Court’s decision announced a new and
unanticipated rule of law on a significant public issue of first
impression, i.e., whether a charge assessed to property owners to
fund a federally mandated project is a user fee, or a tax subject
to the Headlee Amendment requirements.3 The Supreme Court’s
resolution of this issue differs from case law addressing the
user fee/tax inquiry in other contexts. Prior to our Supreme
Court’s decision in Bolt, Michigan case law consistently
distinguished taxes from fees on the basis that the former
involved general collection of money whereas the latter paid for
the community’s exercise of the police power in protecting the
community’s health, safety and welfare, with each payer receiving
a benefit proportionate to the amount paid. Merrelli v St Clair
Shores, 355 Mich 575; 96 NW2d 144 (1959). Under this test, where
the amount charged proportionately correlated to the payer’s use
of the service or to the benefit the payer received from the
service, and where the funds collected were appropriated for the
sole purpose of paying for that service, the charge was deemed a
fee, and laws governing the assessment of taxes did not apply.
For example, in Ripperger v Grand Rapids, 338 Mich 682; 62 NW2d
585 (1954), the city’s utility charge for water and sewage
service was deemed a user fee because the charge proportionately
related to residents’ use of these services. Accordingly, the
city did not have to comply with tax assessment procedures when
residents did not pay the charge; the city could simply cut off
water and sewage services until the fee was paid. In contrast,
in Merrelli, supra, the Court held that the city’s building
license fees were really an improper tax because they were
disproportionate to their related administrative costs.
Additionally, under previous case law, the storm water
service charge would have been considered proportionate to
plaintiff’s use. In Detroit Water & Sewage Dep’t v Michigan,
803 F2d 1411 (CA 6, 1986), the Sixth Circuit Court of Appeals
utilized this proportionality test in a case bearing pertinent
similarities to the facts here. The City of Detroit, in order to
comply with the Federal Water Pollution Control Act, 33 USC 1251
et seq., implemented a user charge system to pay for the
treatment of runoff storm water pursuant to a settlement with the
Environmental Protection Agency. Id., 1412-1414. The State
Department of Transportation, like plaintiff here, maintained
that it received no benefit from the treatment of storm water
that ran off its road because it had no control over this runoff.
Id., 1417. The Court rejected this argument, stating that the
treatment of the runoff water was, in reality, a “service
rendered”. Id., 1418. The Court concluded that the charge was
not a tax, but a fee that the city charged for a service rendered
based upon the reasonable cost and value of the service conferred
on the individual taxpayer. Id., 1421. See also Cincinnati v
United States, 153 F3d 1375 (Fed, 1998) (although the issue was
not before the court, the court indicated that a city’s storm
drainage service charge imposed on a federal building might not
be an impermissible state tax on the federal government, but a
permissible service fee).
Michigan’s approach to this issue was not unique in American
jurisprudence. There was no foretoken that Michigan law on this
issue would be deemed anachronistic or out of synch with the
prevailing law in other jurisdictions. On the contrary, Michigan
law was consistent with the laws of other jurisdictions. See
Sarasota County v Sarasota Church of Christ, Inc, 667 So 2d 180,
185-186 (Fla, 1995); Long Run Baptist Association, Inc v
Louisville Metropolitan Sewer District, 775 SW2d 520, 522 (Ky, Ct
App, 1989); Teter v Clark County, 104 Wash 2d 227; 704 P2d 1171,
1176-1177 (1985); Zellinger v Denver, 724 P2d 1356 (Colo, 1986).
Given the Ripperger/Merelli test and this pattern of case
law, Michigan municipalities could have reasonably concluded that
charges such as the storm water service charge were user fees,
and not subject to Headlee Amendment requirements. However, when
the Supreme Court decided plaintiff’s case, the Court replaced
the Ripperger/Merelli test with a three-part test and concluded
that the charge was not a user fee primarily because (1) a
portion of the charge covered capital infrastructure expenditures
which would outlast the thirty-year payment program; (2) one goal
of the program was to address environmental concerns which
benefited everyone, not only the property owners. 459 Mich 165-
167.
Clearly, the Supreme Court’s decision here established a
different analytical framework for distinguishing user fees from
a tax which perhaps could not have been reasonably anticipated by
taxpayers or municipalities.4 The resolution of the dispute was
not clearly foreshadowed; therefore, prospective application is
appropriate in this case. Lindsey, supra, 68.
Additionally, our Supreme Court recognized in Michigan
Educational Employees Mutual Ins Co v Morris Auto-Owners Ins Co,
460 Mich 180; 596 NW2d 142 (1999), two additional considerations
when deciding the retroactive or prospective application of a
judicial decision in civil cases:
Second, it has been stressed that “we must . . . weigh
the merits and demerits in each case by looking to the
prior history of the rule in question, its purpose and
effect, and whether retrospective operation will
further or retard its operation.” . . . Finally, we
have weighed the inequity imposed by retroactive
application, for “[w]here a decision of this Court
could produce substantial inequitable results if
applied retroactively, there is ample basis in our
cases for avoiding the ‘injustice or hardship’ by a
holding of non-retroactivity.” [Michigan Educational
Employees, 189 (quoting Chevron Oil, supra 106-107,
citations omitted).]
Here, these considerations warrant prospective application.
Prospective application of the Supreme Court’s decision will
serve the purpose of the Headlee Amendment by providing a new
means for distinguishing between user fees and taxes. We are
unpersuaded by plaintiff’s arguments that prospective application
of the Supreme Court’s ruling will thwart the goals of the
Headlee Amendment. Plaintiff protests that prospective
application here will forever enable municipalities to willfully
assess and collect taxes in violation of Headlee throughout the
pendency of a Headlee lawsuit, without any obligation to refund
the wrongfully collected tax once the Courts rule with finality
that the tax was illegal. This argument is completely lacking in
merit. The Supreme Court’s ruling in Bolt became the law of this
state effective December 28, 1998. On that date, all
municipalities were put on notice that charges such as the storm
water service charge are taxes, subject to the requirements of
the Headlee Amendment. Hence, all future court decisions on this
issue will therefore be given retroactive effect back to December
28, 1998.5 Furthermore, with respect to concerns expressed by
the dissent, we do not hold nor imply that relief in Headlee
cases should or will always be prospective only. Since December
28, 1998, all Michigan governments have been on notice of the
Supreme Court’s decision which established a new test for
distinguishing taxes from fees. Accordingly governments, since
December 28, 1998, are on notice of the legal difference between
a tax and fee and the consequences that follow. Therefore, any
tax collected on or after December 28, 1998 that is adjudicated
to be a wrongful tax under Headlee will have to be refunded,
provided, of course, that persons seeking relief have acted
within the statute of limitations.
Furthermore, we agree with defendant that retroactive
application would burden defendant more than it would benefit
plaintiff. Plaintiff’s point of view has been vindicated: the
storm water service charge has been nullified; his past refusal
to pay the tax has been sanctioned, and any future obligation to
pay it has been extinguished. Defendant’s thirty-year revenue
program has been abolished only two years into its
implementation. Further, defendant avers that it has refunded
payments collected for 1998, and plaintiff does not dispute this.
Accordingly, prospective application of our Supreme Court’s
decision does not, in any way, impair plaintiff’s interest and
equally important, retroactive application would not, in any way,
improve his position. On the other hand, it would be unfair and
unreasonable to force defendant to pay refunds to taxpayers who
have never sought a refund when the money collected has already
been committed in good faith to the project.6 Washtenaw County v
State Tax Comm, 422 Mich 346, 378-379; 373 NW2d 697 (1985).
Indeed, if the City of Lansing were required to refund the storm
water service charge collected in 1996 and 1997, in one way or
another, the refund payments would ultimately have to be covered
by the taxpayers. Accordingly, retroactive application of the
Supreme Court’s decision would achieve nothing more than a
symbolic benefit to plaintiff or any other Lansing taxpayer.
B. Scope of Available Relief
Because the Supreme Court’s decision has only prospective
effect, defendant cannot be held liable for any storm water
service charges collected before December 28, 1998. Accordingly,
no taxpayer is entitled to a refund of any storm water service
charge paid before that date. In LCI Int’l Telecommunications
Corp v Dep’t of Commerce, 227 Mich App 196, 207; 574 NW2d 710
(1997), this Court held that the Michigan Public Service
Commission improperly assessed regulatory costs from
telecommunications carriers based on interstate operations when
the assessments should have been based only on intrastate
operations. Id., 205-206. However, the Court held that the
carriers were not entitled to refunds of assessments already paid
because the decision had only prospective effect:
Although the statute prescribes the remedy [i.e., a
refund], retroactive application of a decision and the
appropriate remedy are separate issues. . . .
Prospective application is preferred when overruling an
established precedent or when deciding an issue of
first impression whose resolution was not clearly
foreshadowed. . . . [O]rdering defendants to refund
past assessments paid under protest would undercut the
primary legislative intent underlying Act 299, i.e., to
require utilities to pay for the costs of regulating
them, unless defendants were able to reassess all
utilities for the periods in question. Even if doing
so would be legally permissible, the difficulties of
administration and the upsetting of settled
expectations of other utilities would make this
inequitable. [It., 207-208.]
See also Fonger v Treasury Dep’t, 193 Mich App 71, 75-76; 483
NW2d 920 (1992). (“If [a Supreme Court decision invalidating a
state income tax on federal pension benefits] is to be given
purely prospective application, then the question of remedy need
never be reached.”) Accordingly, the prospective application of
this decision precludes any refund of back taxes.
Furthermore, were this decision to be applied retroactively,
plaintiff has no right in this suit to seek refunds for other
taxpayers. Plaintiff, an owner of real property within the City
of Lansing, filed an original action in this Court pursuant to
Const 1963, art 9, § 32, seeking a declaration that Ordinance 925
was unconstitutional. Plaintiff filed suit as an individual, and
never sought class certification. Furthermore, plaintiff’s
lawsuit sought only declaratory and injunctive relief. Plaintiff
did not seek a monetary refund for himself or any other taxpayer,
presumably because he has never made any storm water service
charge payments. If plaintiff wanted his lawsuit to result in
refunds for all those who did pay the storm water service charge,
the proper route would have been to file a class action lawsuit
pursuant to MCR 3.501.7 Having failed to follow this route,
plaintiff cannot ex post facto convert his individual lawsuit to
a class action.
Were we to accept plaintiff’s position, we would deem that
every individual Headlee action automatically becomes a
constitutional class action, notwithstanding lack of
certification, lack of notice to potential/actual class members,
and lack of request for relief for all taxpayers adversely
affected by an allegedly unconstitutional tax. MCR 3.501.
Neither the language of the Headlee Amendment, nor that of the
enabling legislation, MCL 600.308a; MSA 27A.308(1), contemplates
the creation of a new breed of constitutional class action suit.
Reviewing the language of the Amendment and implementing
statutes, we find nothing that enables a plaintiff to ex post
facto or retroactively make his individual lawsuit a class action
seeking monetary relief for nonparties. There is simply no
provision, in either the constitution, or the statutes, or the
court rules, that allows plaintiff to obtain monetary relief for
persons not named as plaintiffs in his lawsuit. There also is no
provision that allows a Headlee plaintiff to circumvent the court
rules, particularly MCR 3.501, in order to obtain monetary relief
for nonparties. Although individuals have “standing to enforce”
Headlee by bringing lawsuits on behalf of the public to challenge
the legality of an assessment, it does not logically follow that
they may seek refunds or any other form of monetary damages for
nonparties without following proper procedures. Indeed,
plaintiff’s argument amounts to a request to dispense with all
the applicable litigation rules that apply to all other
litigants. This we cannot do. In sum, we find no statutory or
constitutional authorization for plaintiff to seek damages on
behalf of nonparty Lansing taxpayers.
Plaintiff offers numerous arguments regarding his right to
bring a Headlee action, the remedies available under Headlee, and
the advantages taxpayers would enjoy if plaintiff could obtain
refunds for them. The thrust of these arguments is that
plaintiff should not be limited to the relief sought in his
complaint because this would result in the non-enforcement of the
Headlee rights for the other nonparty taxpayers. Nonetheless, in
Headlee actions, as in all other legal actions, a person’s
ability to obtain relief is often conditioned on his compliance
with relevant procedures and court rules. For example, in
Taxpayers Allied for Constitutional Taxation v Wayne County, 450
Mich 119; 537 NW2d 596 (1995), the plaintiff in a Headlee action
argued that the one-year statute of limitations for seeking
refunds was unconstitutional because it purportedly “destroyed”
taxpayers rights under the Headlee Amendment. Id., 125. The
Michigan Supreme Court disagreed:
Far from destroying the right, it merely restricts the
remedies available. Taxpayers may sue for a refund
within one year of the date the tax was assessed. Even
if taxpayers cannot obtain refunds for past tax
payments exceeding the constitutional limit because
they did not dispute them within one year of the date
the taxes were assessed, the constitutional right does
not disappear because they retain the right to prevent
future violations of their rights. [Id., 125.]
By analogy, requiring Headlee plaintiffs to comply with ordinary
litigation procedures, including MCR 2.111(B)(2) (plaintiff must
include demand for the relief sought), or the class action rule,
does not restrict a plaintiff’s rights under the Headlee
Amendment.
Plaintiff’s emphasis on Durant v Michigan, 456 Mich 175; 566
NW2d 272 (1997) is misplaced. This case held that enforcement of
the Headlee Amendment entailed refunds to taxpayers in certain
circumstances. Id., 212. It did not, however, mandate refunds
to all affected taxpayers every time a plaintiff successfully
seeks injunctive relief from a Headlee violation.
Furthermore, compelling policy reasons strongly militate
against allowing plaintiff to bring a “quasi-class action”.
Class action procedures are designed for precisely this kind of
case. MCR 3.501 was promulgated to address the special problems
peculiar to class actions. If we were to entertain plaintiff’s
argument, and allow every individual Headlee action to become a
de facto class action without resort to certification procedures,
courts would be forced to deal with these special problems
without the benefit of MCR 3.501 procedures. For example, the
court rule provides that the representative party “fairly and
adequately assert and protect the interests of the class.” MCR
3.501(A)(1)(d). Here, though plaintiff may not have qualified as
a representative party who could adequately assert and protect
the interests of the other taxpayers, because he never actually
paid the storm water service charge, had plaintiff desired
refunds as a remedy, he could have easily enlisted a taxpayer who
paid the fee to join as a party plaintiff to represent that class
of litigants and sought class certification. Additionally, the
court rule sets forth procedures for class members to opt out or
intervene as they see fit. MCR 3.501(A)(3) and (4). If we
accepted plaintiff’s position, affected taxpayers would lose the
opportunity to protect their interests by invoking these
procedures. Indeed, were we to accept plaintiff’s argument, it
is doubtful that all the affected taxpayers would even learn of
the pending lawsuit and their potential rights because the
plaintiff would not be obligated to provide notice to class
members as required by MCR 3.501(C).
Mindful of these considerations, at least two federal courts
have decided against allowing an individual plaintiff to seek
monetary damages for nonparties absent specific statutory
authorization or class action certification. In Northside Realty
Associates, Inc v United States, 605 F2d 1348 (CA 5, 1979), the
United States Attorney General was the plaintiff in a housing
discrimination action. In the course of the protracted
litigation, the Attorney General obtained a civil contempt award
after the defendants violated a court injunction prohibiting
discriminatory housing practices. Id., 1350. However, the
Attorney General appealed the civil contempt award, maintaining
that the district court should have also awarded compensatory
damages to nonparty victims of the defendants’ discriminatory
practices. Id., 1355-1356. After concluding that such a remedy
was beyond the scope of a contempt proceeding, the Court
discussed the policy reasons against the proposed remedy:
Even were we confident that third party
compensatory relief might be a proper remedy in some
civil contempt cases, a number of considerations makes
us ill-disposed to allow such relief in this case.
Without elaboration, we mention several difficult legal
questions that come to mind. By allowing the relief
requested by the Government, we would in effect
transform the civil contempt proceeding into a
representative class action, with the Government as the
representative party. This would take the action far
beyond the scope of an ordinary contempt proceeding and
would raise all the “class action problems”—such as
certification, notice and fair representation—that such
a proceeding entails. Id., 1357.
Similarly, in United States v Beneficial Corp, 492 F Supp
682 (D NJ, 1980), aff’d 673 F2d 1302 (1981) (case table format),
the court did not allow the Attorney General to seek damages for
nonparties under the Equal Credit Opportunity Act.8 The court
found no express statutory authorization for the Attorney
General’s damage claim, and declined to find implied
authorization:
In determining whether or not the Government’s right to
pursue such claims should be implied, the Court
considered the following self-imposed leading
questions: If the Justice Department had intended that
the Attorney General seek legal damages for a mass of
persons not party to the suit, why did it not draft a
more specific provision which would have provided for
the foreseeable problems?
* * *
. . . The Government cannot and should not run the
gauntlet for every deprivation or interference with
individual rights. There are many instances where the
protection and pursuit of such rights are better left
in the hands of those who hold such rights. Whether
the Government carries the banner of enforcement is a
policy decision for Congress and not the courts to
render. [Id., 688 (footnotes and citations omitted).]
We agree with both Northside Realty and Beneficial Corp that
compelling policy considerations preclude a plaintiff from
asserting alleged monetary damage claims for non-participants.
Indeed, these considerations are more compelling here, where the
plaintiff is not a publicly accountable government agency charged
with enforcement of the law, but a private citizen.
Finally, contrary to plaintiff’s contention, in declining at
this late stage of this litigation to recognize plaintiff as a
representative suing on behalf of all Lansing taxpayers, we do
not violate the Equal Protection clause by favoring taxpayers who
refused to pay the charge over taxpayers who complied. Armco
Steel Corp v Dep’t of Treasury, 419 Mich 582, 595-596; 358 NW2d
839 (1984). To the extent that there is any differential
treatment of Lansing taxpayers, this difference is based on those
who sought relief and those who did not.
While we find the arguments of the dissent to be thoughtful,
they do not alter our conclusion. The dissent here objects to
our plain language reading of the amendments as contrary to the
“common understanding” rule of constitutional interpretation.
Relying on the common understanding rule, the dissent maintains
we should read “standing to enforce” as “standing to enforce
effectively”, and that we should “understand” that to “enforce
effectively”, a Headlee plaintiff must be free from the ordinary
obligations of the Michigan Court Rules. We do not read the
common understanding rule to permit this degree of extrapolation.
We regard this interpretation as an unwarranted departure from
basic litigation procedures—unwarranted by any language in the
Headlee Amendment, or related legislation, or the court rules.
The dissent would excuse plaintiff from complying with the most
essential procedural rules, including the requirement of naming
plaintiffs or obtaining class certification, on the ground that
compliance with these rules would present an obstacle to Headlee
enforcement. We do not see these procedures as “obstacles”, but
rather as safeguards assuring the rights of all litigants,
regardless of the nature of the cause of action. Moreover, we do
not see why Headlee plaintiffs as a class should be excused from
the rules that apply to every other category of civil action. We
can find no authority for the sort of “Headlee exceptionalism”
advocated by the dissent.
Furthermore, we cannot agree that the class action rule, MCR
3.501, is inapplicable to this
Court. Clearly, Rule 3.501, along with all other court rules,
applies in the Court of Appeals pursuant to MCR 1.103. The
dissent cites no authority for an exception to these rules, but
argues instead that this Court is ill-equipped to handle a class
action. However, though a class action in the Court of Appeals
would be unusual, the wide range of obtainable relief under MCR
7.216 would enable this Court to make appropriate arrangements.
That is, this Court could remand to the trial court for a simple
class certification proceeding, retain jurisdiction and then
review the trial court’s class certification ruling and then rule
on the merits. Indeed, this type of case is clearly the kind of
litigation that should be pursued as a class action. This would
not be burdensome. To the contrary, the principal legal issue in
this case is especially suited for class treatment.
Plaintiff filed this suit as an individual taxpayer seeking
injunctive relief only on behalf of the public. He is not
entitled to ex post facto recognition as a class representative
suing for monetary relief on behalf of other taxpayers.
Accordingly, we hold that defendant is not obligated to pay
refunds to those other taxpayers. This result is dictated not by
Headlee, but rather by plaintiff’s failure to abide by simple
rules mandated by the Michigan Court Rules.
Attorney Fees
Const 1963, art 9, § 32 provides that a taxpayer whose suit
to enforce the Headlee Amendment is “sustained” shall receive the
“costs incurred in maintaining such suit.” See also MCL
600.308a(6); MSA 27A.308(1)(6). The costs allowed by Const 1963,
art 9, § 32 include reasonable attorney fees. Macomb Cty
Taxpayers Ass’n v L’Anse Creuse Public Schools, 455 Mich 1, 8;
564 NW2d 457 (1997).
Factors to be considered when assessing the reasonableness
of a requested attorney fee include: (1) the skill, time, and
labor involved; (2) the likelihood, if apparent to the client,
that the acceptance of the employment will preclude other
employment by the attorney; (3) the fee customarily charged in
that locality for similar services; (4) the amount in question
and the results obtained; (5) the time limitations imposed by the
client or by the circumstances; (6) the nature and length of the
professional relationship with the client; (7) the professional
standing and experience of the attorney; and (8) whether the fee
is fixed or contingent. In re Condemnation of Private Property
for Highway Purposes, 209 Mich App 336, 341-342; 530 NW2d 183
(1995); MRPC 1.5(a)(1)-(8). The party claiming compensation
bears the burden of proof with respect to reasonableness. In re
Krueger Estate, 176 Mich App 241, 249; 438 NW2d 898 (1989). The
court has discretion to determine the reasonableness of the
attorney fee awarded. Jordan v Transnational Motors, Inc, 212
Mich App 94, 97; 537 NW2d 471 (1995).
This case presented a significant public issue of first
impression, and required extensive and expeditious preparation
and presentation. Each of plaintiff’s attorneys charged an
hourly fee commensurate with his expertise and experience in
appellate practice, and within the range of fees charged by
attorneys who practice in the City of Lansing. Counsel worked
without guarantee of any payment. Under Const 1963, art 9, § 32,
had plaintiff’s suit not been “sustained,” no attorney fee would
have been payable. Defendant’s assertion that the hourly fee of
$280 charged by plaintiff’s more highly-paid attorney be reduced
by more than $100 per hour, to $174, the average fee charged by
attorneys in the City of Lansing, is without merit. No authority
holds that the average fee charged by attorneys in a particular
location must be deemed the only reasonable fee. Ultimately,
plaintiff obtained a favorable decision. We conclude that
plaintiff’s request for a total of $174,841.64 in costs and fees,
while substantial, is reasonable and warranted under the
particular circumstances of this case.
We decline plaintiff’s invitation to apply a discretionary
multiplier to enhance the award of attorney fees. Application of
such a multiplier is appropriate when the evidence shows that
obtaining counsel would have been extremely difficult without the
possibility of enhancement of the attorney fee. Schellenberg v
Rochester, Michigan, Lodge No. 2225 of the Benevolent and
Protective Order of Elks, 228 Mich App 20, 52-56; 577 NW2d 163
(1998). Plaintiff has made no showing that his ability to obtain
competent counsel was contingent on the possibility of fee
enhancement.
/s/ Henry William Saad
/s/ Harold Hood
_______________________________
1 The Headlee Amendment, Const 1963, art 9, §§ 25-31, requires
that property taxes cannot be increased above the amendment’s
specified limitations without direct voter approval.
2 We disagree with the dissent’s intimation that a class action
is not suitable here. This is exactly the type of dispute that
the class action procedure was designed to handle: a large
number of allegedly aggrieved individuals with a common legal
complaint, each seeking a modest amount of damages. MCR 3.501.
3 As we recognized in our initial decision, 221 Mich App at 86,
and as our Supreme Court also acknowledged, 459 Mich at 160,
resolution of the issue was inordinately difficult because the
Headlee Amendment does not define either the term “fee” or the
term “tax.”
4 While not dispositive of the retroactive application issue, the
sharp splits in the Supreme Court and this Court evince the
novelty of the final outcome of this controversy.
5 In a somewhat convoluted argument that we find difficult to
follow, plaintiff opines that given the Headlee Amendment’s one-
year statute of limitations MCL 600.308a(3); MSA 27A.308(1)(3),
prospective application of the Supreme Court’s decision will
preclude anyone from ever receiving a refund of taxes paid
pursuant to an unconstitutional assessment. This argument fails
for this reason: any taxpayer who believes he has paid an
unconstitutional tax need only file a claim seeking a refund
within one year of payment to protect his rights under the
Headlee Amendment. The one-year statute of limitations will bar
relief only to taxpayers who fail to seek relief within the year,
or to taxpayers who seek only injunctive relief in their Headlee
complaints, and wait too long to seek monetary relief as well.
6 Plaintiff insinuates that there was a malevolent motive behind
defendant’s collection of the tax throughout the pendency of
plaintiff’s litigation and appeal to the Supreme Court. This
spurious accusation is groundless. Defendant had the right to
continue collecting the tax until a court ordered it to desist.
This did not occur until the Supreme Court acted in December,
1998. For obvious reasons, we cannot countenance plaintiff’s
suggestion that a municipality must impose a retraining order
upon itself whenever a taxpayer files a Headlee action.
7 Plaintiff incorrectly argues that class actions are not
maintainable in this Court. MCR 1.103 provides that the
“Michigan Court Rules govern practice and procedure in all courts
established by the constitution and laws of the State of
Michigan”, therefore, MCR 3.501 applies in this Court.
8 15 USC 1691 et seq.
STATE OF MICHIGAN
COURT OF APPEALS
ALEXANDER BOLT,
Plaintiff,
FOR PUBLICATION
October 12, 1999
v No. 192944
Declaratory Action
CITY OF LANSING,
Defendant.
ON REMAND
Before: Saad, P.J., and Hood and Markman, JJ.
MARKMAN, J. (dissenting).
Because I disagree with the majority’s conclusions as to
both the “retroactivity” of the Supreme Court’s decision and the
scope of available relief in this case, I respectfully dissent.8
The majority would dispose of the “rain tax” issue by declaring
Bolt v City of Lansing, 459 Mich 152; 587 NW2d 264 (1998) such an
extraordinary case that the Supreme Court’s holding in such case
should only be applied prospectively; that is, the only relief
any taxpayer can receive with regard to the unconstitutional
“rain tax” is future declaratory relief. I find no reason to
invoke the exceptional rule of prospectivity in this case.
Rather, the Supreme Court’s decision, in my judgment, should be
given complete retroactive application. Further, although it is
unfortunate that the Headlee Amendment, Const 1963, art 9, §§ 25-
32, was not more explicit concerning the precise scope of
available relief, I believe that the Headlee Amendment mandates
that City of Lansing taxpayers receive full refunds of their
“rain taxes” in this case in order to effectively “enforce” the
Amendment. The majority’s finding that a general refund is not
allowed, although it is dictum, is a prescription for eroding the
Headlee Amendment by precluding its effective enforcement. Thus,
I write separately in order to discuss these issues and to
express my deep reservations regarding the implications of the
majority’s opinion. Ultimately, I would grant the relief of a
general “rain tax” refund to Lansing taxpayers in addition to the
declaratory relief already granted by the Supreme Court. I join
the majority’s opinion only with regard to the attorney fees
issue.8
To begin with, I do not agree with the majority’s analysis
and holding that the Supreme Court’s opinion in Bolt should have
prospective effect only. I agree with the majority’s general
statement of the law of retroactivity, but respectfully disagree
with its conclusions on this issue. By holding that the Supreme
Court’s opinion has prospective effect only, the majority
essentially finds that the Supreme Court’s determination that the
“rain tax” is unconstitutional has sharply limited practical
effect. Although the City of Lansing would not be able to
continue to collect the “rain tax” in the future, there could be
absolutely no remedy for any past collection. This is an
extraordinary outcome and effectively creates an incentive for
municipalities to attempt to circumvent the Headlee Amendment,
knowing that they will have free and clear use of the money that
they collect through any unconstitutional tax, whatever may
subsequently happen in the courts. In my judgment, this
extraordinary outcome is not necessary in this case.
The clear general rule is that judicial decisions are to be
given complete retroactive effect. Syntex Laboratories v Dep’t
of Treasury, 233 Mich App 286, 292; 590 NW2d 612 (1988). This
rule is so often invoked that there is generally no discussion of
whether a particular holding will be applied retroactively.
James B. Beam Distilling Co v Georgia, 501 US 529, 534; 111 S Ct
2439; 115 L Ed 2d 481 (1991). Even where there is some question
about the complete retroactive application of a holding, limited
retroactive application is available. Lincoln v General Motors
Corp, 231 Mich App 262, 311; 586 NW2d 241 (1998) (Whitbeck, J.,
concurring). Exclusively prospective application is reserved for
truly extraordinary cases that indisputably overrule clear and
uncontradicted case law, Hyde v Univ of Michigan Bd of Regents,
426 Mich 223, 240; 393 NW2d 847 (1986), i.e., for cases in which
an outcome is truly “‘unexpected’ and ‘indefensible’ in light of
the law existing at the time of the underlying facts,” Lincoln,
supra at 311 (Whitbeck, J., concurring), quoting People v Doyle,
451 Mich 93, 104; 545 NW2d 627 (1996). In Michigan Educational
Employees Mutual Ins Co (MEEMIC) v Morris Auto-Owners Ins Co, 460
Mich 180, 189; 596 NW2d 142 (1999), the Michigan Supreme Court
recognized the United States Supreme Court’s restatement of the
criteria for determining retroactivity in Chevron Oil Co v Huson,
404 US 97, 106-07; 92 S Ct 349; 30 L Ed 2d 296 (1971):
First, the decision to be applied non-
retroactively must establish a new principle of law,
either by overruling clear past precedent on which
litigants may have relied . . . or by deciding an issue
of first impression whose resolution was not clearly
foreshadowed . . . Second, it has been stressed that
“we must . . . weigh the merits and demerits in each
case by looking to the prior history of the rule in
question, its purpose and effect, and whether
retrospective operation will further or retard its
operation.”. . . Finally, we have weighed the inequity
imposed by retroactive application, for “[w]here a
decision of this Court could produce substantial
inequitable results if applied retroactively, there is
ample basis in our cases for avoiding the ‘injustice or
hardship’ by a holding of non-retroactivity.”
[Chevron, supra at 106-07 (citations omitted).]
Application of the full three-part test is necessary, however,
only if the threshold question of whether the decision in
question clearly establishes a new principle of law is answered
in the affirmative. Lincoln, supra at 312-13 (Whitbeck, J.,
concurring). “If the decision does not announce a new principle
of law, then full retroactivity is favored.” MEEMIC, supra.
Further, the Supreme Court has observed:
The fact that a decision may involve an issue of
first impression does not in and of itself justify
giving it prospective application where the decision
does not announce a new rule of law or change existing
law but merely gives an interpretation that has not
previously been the subject of an appellate court
decision. [Lindsey v Harper Hosp, 455 Mich 56, 68; 564
NW2d 861 (1997), quoting Jahner v Dep’t of Corrections,
197 Mich App 111, 114; 495 NW2d 168 (1992).]
In order to give the Supreme Court’s Bolt holding complete
prospective application, the decision must have overruled clear
and uncontradicted case law. Hyde, supra at 240. What such law
was overruled here? It appears that the majority views the
fee/tax issue addressed by the Supreme Court in Bolt as one that
depends solely on the substantive nature of the project involved
rather than on the totality of factors assessed on a case-by-case
basis according to the Court’s standards. The majority
explicitly states that, prior to Bolt, “Michigan municipalities
could have reasonably concluded that charges such as the storm
water service charge were user fees.”8 Yet the majority also
appears to look to a single factor-- whether the charge is
proportionate to and pays only for the use of the service-- to
determine whether the charge is a tax or a fee. It is not
completely clear how this single factor and the nature of the
project interact, according to the majority, but it appears that
the majority believes that virtually any charge to fund a
water/sewage treatment program would be proportionate-- the
majority specifically contends that “under previous case law, the
storm water service charge would have been considered
proportionate to plaintiff’s use.”8 However, this is not the
correct way to characterize this issue. The Supreme Court
specifically stated that “[t]here is no bright-line test for
distinguishing between a valid user fee and a tax.” Bolt, supra
at 160. Instead, distinguishing between the two “involves
consideration of several factors.” Id. at 161.
In making such a statement, the Supreme Court did not devise
a wholly new test to distinguish between a fee and a tax, as the
majority argues, but rather the Court merely clarified and
interpreted existing law on the subject. The Supreme Court’s
decision in Bolt did not overrule established precedent and the
distinctions between a tax and a fee relied upon by the Court
were not matters of first impression. Instead, they were matters
of long-standing Michigan law. See Bolt, supra at 161-69. In
reaching its conclusion that the storm water service charge
constituted a tax rather than a fee, the Bolt Court examined
established case law to address the traditional criteria to be
considered when distinguishing between the two, then applied
those criteria to the facts of this case. Id. It is true that
past cases distinguishing between fees and taxes did not
explicitly set out a three-factor test, as in Bolt, or make
reference to each of the factors discussed in Bolt. The Supreme
Court acknowledged that “[t]he distinction between a fee and a
tax is one that is not always observed with nicety in judicial
decisions.” Bolt, supra at 166, quoting 71 Am Jur 2d, State and
Local Taxation, § 15, at 352. Previous opinions tended to
mention only the specific factors that were most relevant to the
case at hand. For example, in Ripperger v Grand Rapids, 338 Mich
682, 686; 62 NW2d 585 (1954), which the previous Court of Appeals
majority relied on to find that the “rain tax” was a fee, 221
Mich App at 87; 561 NW2d 423, the Court noted that “no one can be
compelled to take water unless he chooses” and that the amount
paid reflected the price of the service received. Although not
set out explicitly as two factors of a fee/tax test, these
statements nevertheless clearly articulate the second and third
factors of the Bolt test. In Merrelli v St. Clair Shores, 355
Mich 575, 583; 96 NW2d 144 (1959), the Court quoted Vernor v Sec
of State, 179 Mich 157; 146 NW 338 (1914), that a fee must be for
regulation, not as a means primarily of producing revenue, and
that it must not be disproportionate to the cost of the service.
These are the first two factors of the Bolt test. Simply reading
the Supreme Court’s articulation of the three main factors of the
fee/tax distinction indicates that the Court did not invent new
law in Bolt: The Court explicitly stated that “this Court has
articulated three primary criteria to be considered when
distinguishing between a fee and a tax.” Bolt, supra at 161
(emphasis added). The Court then proceeded to list these
criteria, citing to the past Michigan Supreme Court cases in
which the criteria were used to distinguish between a fee and a
tax. Id. at 161-62, citing Bray v Dep’t of State, 418 Mich 149;
341 NW2d 92 (1983); Merrelli, supra; Ripperger, supra; Vernor,
supra. The Supreme Court in Bolt merely collected these relevant
factors together and set them forth in a more organized and
coherent manner. Clarifying a standard is not the equivalent of
establishing a new standard, much less one that is truly
“unexpected.” Even less is such clarification the equivalent of
replacing a clear previous standard. Chevron, supra at 106-07.8
The Supreme Court Bolt decision, therefore, was not a
decision of first impression that might support prospective
rather than retroactive application. While the word “tax,” which
the Court was charged with defining and distinguishing from
“fee,” was from the Headlee Amendment language, neither term was
defined by the Amendment. The Court merely had to discern the
common understanding of these terms. Bolt, supra at 160. Thus,
the Court did not concoct a new definition or interpretation of
either the Headlee Amendment or the terms “tax” or “fee”; the
Court did not declare the Amendment ambiguous and invest it with
a meaning that could not have been foreseen; and the Court did
not formulate new or technical definitions for the words at
issue. Instead, as discussed above, the Court merely looked to
the common usage of these words and applied them to the language
of the Amendment. As with Profit v Citizens Ins Co of America,
444 Mich 281; 506 NW2d 514 (1993), as discussed in MEEMIC, supra
at 192, the Supreme Court “simply reaffirmed the existing law,
which was misinterpreted by the Court of Appeals.” The Supreme
Court in this case made this point very clear, stating, “rather
than standing for the proposition that sewage charges are always
user fees, as the Court of Appeals majority contended, 221 Mich
App at 86-87, Ripperger actually articulated relevant criteria
for determining whether a charge is a fee or a tax.” Bolt, supra
at 163, n 12. Although the majority here is apparently convinced
that the Supreme Court in fact announced a new rule of law in
Bolt, this interpretation is directly at odds with the express
language of the Supreme Court’s decision itself. For purposes of
deciding this issue, we must accept the Supreme Court’s own
determination that it was merely collecting and organizing the
existing law of previous Supreme Court decisions regarding fees
and taxes-- a determination that, in my judgment, is altogether
accurate.
Thus, the Bolt decision neither announced a new rule of law
nor altered any clear existing law. It neither employed
unforeshadowed interpretative tools nor reached any unforeseeable
conclusion. The Supreme Court merely applied already identified
factors to the new circumstances of the case. The fact that the
defendant could make a reasonable argument in response to
plaintiff’s prevailing argument does not make the ultimate
holding surprising or unanticipated. Although the majority
states that Headlee cases will not always be applied
prospectively, following the majority’s basic reasoning here
another Headlee suit on a different subject would have to be
given prospective effect also, since there is often a reasonable
argument to be made on both sides. However, this is not the test
for prospectivity. Quite simply, there is no basis here for
departing from the normal presumption of retroactivity.8
In particular, to allow such a departure in the context of
the Headlee Amendment tax/fee dispute would be to considerably
dilute the Amendment since, in virtually all such disputes, the
application of a ‘totality of factors’ test will inevitably
entail some uncertainty in terms of the ultimate result, while
also affording both sides some measure of reasonable argument.
Such circumstances, however, are not “extraordinary” and should
not be viewed as sufficient to alter the normal rule of
retroactivity.
Accordingly, having determined that the Supreme Court’s
holding in this case must actually be applied to this case, I
turn to the main issue: the proper scope of relief. The majority
addresses this issue, although given the majority’s decision to
apply the Supreme Court’s holding only prospectively, it is
merely dictum. Under the majority’s holding, plaintiff here can
receive no more than a declaratory judgment that the “rain tax”
is unconstitutional and that he personally does not have to pay
the tax in the future, regardless of the scope of relief he
requested in his complaint or the scope of relief provided for in
the Headlee Amendment. The majority concludes that accepting
plaintiff’s substantive position regarding his proposed remedy
would effectively result in an “ex post facto” “constitutional
class action” that is unnecessary since a plaintiff could have
brought a traditional class action in this type of case. I
respectfully but strongly disagree.
We review de novo constitutional issues and constructions.
Kuhn v Secretary of State, 228 Mich App 319, 324; 579 NW2d 101
(1998). A primary rule in interpreting a constitutional
provision is the rule of “common understanding”:
A constitution is made for the people and by the
people. The interpretation that should be given it is
that which reasonable minds, the great mass of the
people themselves, would give it. “For as the
Constitution does not derive its force from the
convention which framed, but from the people who
ratified it, the intent to be arrived at is that of the
people, and it is not to be supposed that they have
looked for any dark or abstruse meaning in the words
employed, but rather that they have accepted them in
the sense most obvious to the common understanding, and
ratified that instrument in the belief that that was
the sense designed to be conveyed.” [Traverse School
Dist v Attorney General, 384 Mich 390, 405; 185 NW2d 9
(1971), quoting Cooley’s Const Lim 81.]
A second rule is that courts may also consider the circumstances
leading to the adoption of the constitutional provision and the
purpose behind the provision in order to clarify the meaning of
an amendment’s language. Macomb County Taxpayers Ass’n v L’anse
Creuse Public Schools, 455 Mich 1, 7; 564 NW2d 457 (1997). This
Court has stated, in the context of determining whether money
damages were recoverable in a suit brought pursuant to § 29 of
the Headlee Amendment, that the words of the Amendment “are to be
applied to the subject matter and to the general scope of the
provision, and they are to be considered in light of the general
purpose sought to be accomplished or the evil sought to be
remedied by the constitution.” Wayne Co Chief Executive v
Governor, 230 Mich App 258, 264; 583 NW2d 512 (1998) (citations
omitted). The voters for the Headlee Amendment “were . . .
concerned with ensuring control of local funding and taxation by
the people most affected, the local taxpayers. The Headlee
Amendment is the voters’ effort to link funding, taxes, and
control.” Id. “The ultimate purpose [of the Headlee Amendment]
was to place public spending under direct popular control.”
Waterford School Dist v State Bd of Ed, 98 Mich App 658, 663; 296
NW2d 328 (1980). The Amendment “grew out of the spirit of ‘tax
revolt’ and was designed to place specific limitations on state
and local revenues.” Id.
Any discussion of the remedy for a violation of the Headlee
Amendment must, of course, begin by looking to the language of
such amendment. Durant v State Bd of Ed, 424 Mich 364, 378; 381
NW2d 662 (1985). Although the Supreme Court held that the “rain
tax” violated Const 1963, art 9, § 31, which “prohibits units of
local government from levying any new tax or increasing any
existing tax above authorized rates without the approval of the
unit’s electorate,” Durant v State of Michigan, 456 Mich 175, 182-
83; 566 NW2d 272 (1997), it is § 32 specifically that gives any
taxpayer standing to enforce §§ 25 through 31. Section 32
states:
Any taxpayer of the state shall have standing to
bring suit in the Michigan State Court of Appeals to
enforce the provisions of Sections 25 through 31,
inclusive, of this Article and, if the suit is
sustained, shall receive from the applicable unit of
government his costs incurred in maintaining such suit.
[Const 1963, art 9, § 32.]
Several factors must be analyzed to determined the specific
nature of the remedy that will effectively “enforce” the Headlee
Amendment in this case. First, I address what the “great mass of
the people” intended in directing the Court of Appeals “to
enforce” the Amendment. Durant, supra, 456 Mich at 204. There
is no explicit statement in the Amendment regarding the type of
enforcement intended in any particular situation. However,
traditionally, a private citizen had no standing to enforce a
public right where he was not injured in any manner differently
than the general public, and thus a taxpayer had no standing to
challenge expenditures of public funds where the threatened
injury to him was no different than that to taxpayers generally.
Waterford, supra at 662. This Court held that the plain language
of § 32 altered the status quo in that it indicates an intent to
provide broad standing to taxpayers to enforce the substantive
provisions of the Amendment.8 This section facilitates control
by the public by allowing a single taxpayer to bring suit to
enforce the constitution directly in the Court of Appeals. Id.
Although § 32 does not explicitly address the scope of the
remedy that can be pursued by an individual taxpayer, it does do
so by implication, in my judgment. A person looking at the
Headlee Amendment’s broad grant of standing to any single
taxpayer “to enforce” the Amendment would presume that such
taxpayer had the power to effectively enforce the amendment.
Certainly if a single taxpayer’s lawsuit was able to result in
the declaration of a law enacted by a governmental body as
unconstitutional and therefore void in the future as to all
taxpayers (as in the instant case), then the persons comprising
the “great mass of the people” would reasonably believe that any
additional remedy derived by the suing taxpayer in “enforcement”
of the Amendment would also apply to all taxpayers, not merely to
the individual suing party. I do not believe that they would
understand that plaintiff Bolt’s “enforcement” of the Amendment,
although generally applicable to everyone in terms of its future
relief, i.e., the unconstitutionality of the tax, was only
specifically applicable to Bolt in terms of its past relief,
i.e., restoration of the status quo and the refund of wrongly
collected taxes. This broad scope of relief is not normally
available to a party-- generally a person must be a party to a
lawsuit in order to obtain a remedy from it. Yet just as the
Headlee Amendment altered the status quo regarding standing, the
citizenry who voted for the Headlee Amendment would reasonably
understand it also to have changed the status quo regarding the
scope of relief allowed by the Amendment.8 The common
understanding would be that the Headlee Amendment allows whatever
relief is necessary to effectively “enforce” the Amendment. “The
voters have left it to this Court to delineate the proper
remedy,” depending on the specific violation and facts of each
case. Durant, supra, 456 Mich at 214, n 45.
Second, I address the scope of relief required for
“enforcement” in this case. The Supreme Court has held that the
Headlee Amendment’s grant of enforcement powers “was intended as
a general directive, giving this Court the duty and authority to
enforce [the Headlee Amendment, §§ 25 through 31] in the way that
would most effectuate the balances struck by the people in the
Headlee Amendment.” Id. at 205. Therefore, any remedy must be
broad enough to actually enforce the Amendment and its purpose.
Such obligation to actually enforce the Amendment is the
equivalent of the concept of the ‘effective’ enforcement of the
Amendment that seems implicit, as noted above, in the common
understanding of its language. To “enforce” a measure means to
sufficiently correct the violation of a measure such that
obedience is compelled and the law is made strong. See Durant,
supra, 456 Mich at 208; Random House Webster’s College Dictionary
(1992). “Simply put, if declaratory relief is not sufficient to
compel obedience to the constitutional mandate . . . then the
electorate has authorized that additional relief be granted.”
Id.8
In this case, the Supreme Court determined that the “rain
tax” violated § 31 of the Headlee Amendment, by establishing a
tax upon the citizens of the City of Lansing without their prior
approval by vote. It is the entire Lansing Ordinance 925, which
imposed the “rain tax,” that is unconstitutional and therefore
null and void here. Thus, the city must not just discontinue the
collection of this illegal tax, but we must also address the fact
that it has already illegally collected this tax for several
years. The tax did not become unconstitutional as of the time of
the Supreme Court’s decision; rather it was unconstitutional ab
initio and therefore illegal for the city to collect. Thus,
declaratory relief alone is insufficient to remedy the violation
here because it does not address this issue in plenary fashion.
The majority states that plaintiff did not seek a monetary
refund, instead seeking only declaratory and injunctive relief,
arguing that he cannot receive any type of refund because he did
not include this in his demands for relief. However, the
declaratory judgment rule, MCR 2.605(F), states that “[f]urther
necessary or proper relief based on a declaratory judgment may be
granted after reasonable notice and hearing, against a party
whose rights have been determined by the declaratory judgment.”
Thus, it was only necessary that plaintiff here request
declaratory action, and any additional remedies could then be
determined by the Court. Since declaratory relief is not
“sufficient to compel obedience to the constitutional mandate” in
the present case, the “electorate has authorized that additional
relief be granted.” Durant, supra, 456 Mich at 208. In this
case, the additional relief required is a general refund that
would restore the status quo. Indeed, the Supreme Court itself
has commented upon the “obvious merit” of the refund remedy for a
violation of § 31:
§ 32 does not mention a refund for taxes
unconstitutionally collected under § 31. Yet the
remedy of a refund is so obvious that the ordinary
person would say that, without such a remedy, the court
would not be enforcing § 31. We continue to be of the
belief that the command of § 32 is general and
empowering and contemplates a money judgment where
necessary. [Durant, supra, 456 Mich at 216.]
Although this case requires a broader refund than that in
Taxpayers Allied for Constitutional Taxation (TACT) v Wayne
County, 450 Mich 119; 537 NW2d 596 (1995), which the Durant Court
was discussing above, the general refund here is also “obvious”
and “necessary” to enforce § 31.8 The majority claims that any
reliance on Durant is misplaced because it did not “mandate
refunds to all affected taxpayers every time a plaintiff
successfully seeks injunctive relief from a Headlee violation.”
I agree that refunds are not mandated in every successful Headlee
Amendment suit, where, for example, there are unusual financial
or administrative burdens imposed upon either a governmental body
or this Court. The relief that would effectively remedy the
situation in each individual case would have to be determined on
a case-by-case basis. Thus, in contrast to the majority’s claim,
there is no “dangerous precedent” set here. However, a general
refund is certainly one possible remedy where a tax has been
unconstitutionally levied, in light both of the language and
purpose of the Headlee Amendment. Indeed, in the instant case, I
believe it to be an obvious remedy.
Third, I address the claim that effective “enforcement” of
the Headlee Amendment could be accomplished through methods
available in the existing law, such as individual suits by each
taxpayer to receive a refund; thus no “constitutional class
action” is necessary or allowed. I agree that if an array of
equally effective remedies is available, this Court should choose
those less onerous, in order to “most effectuate the balances
struck by the people in the Headlee Amendment.” Durant, supra,
456 Mich at 205, 225 (J. Brickley, dissenting). I also agree
that each taxpayer in the city could have individually filed a
lawsuit within one year of the collection of the “rain tax” in
order to receive full relief for the violation of the Headlee
Amendment. However, I cannot conceive of a procedure better
designed to undermine the purpose of the Headlee Amendment, and
to erode its functionality as an effective check upon government,
than to require that every taxpayer must file an individual
lawsuit. As the instant case adequately demonstrates, the great
majority of taxpayers will never file such a lawsuit because it
would impose far too much burden and financial risk upon them.
Instead, the principal role of the taxpayer in ensuring
compliance with the Headlee Amendment is to vote on proposed tax
increases, a relatively minor imposition on their personal
resources, as opposed to the much higher imposition of requiring
each taxpayer to file a lawsuit against his government to enforce
compliance even where the law in question has already been found
unconstitutional. Under this proposition, since most people are
unlikely ever to file suit, a governmental body apparently faces
few practical consequences of imposing an unconstitutional tax
upon its citizens. In my judgment, to remove this element of
enforcement from the Headlee Amendment, the deterrent element
inherent in a governmental body being made aware that it will not
be able to gain financial advantage from an unconstitutional tax,
would be to ineffectively “enforce” the Amendment. As stated in
Durant, supra, 456 Mich at 206, this “would authorize the
[government] to violate constitutional mandates with little or no
consequence.” Governmental bodies and their officials react to
incentives and disincentives in the same manner as private
actors; to introduce into the Headlee Amendment a substantially
weaker incentive for compliance on the part of governmental
bodies would be to sharply erode the ability of the individual
taxpayer to “enforce” the provisions of the Amendment.
Fourth, I address the contention that plaintiff should be
forced to abide by class action rules in order to obtain a remedy
that would benefit all taxpayers. In contrast to the majority, I
am not convinced that a class action is required under the
Headlee Amendment. The majority claims that plaintiff should
have complied with the class action rule, MCR 3.501, if he wanted
broader relief than an individual remedy. There are several
factors relevant to the class action issue: (a) Allowing or
requiring a class action suit to enforce Headlee would be to
graft additional requirements into the Amendment that are nowhere
mentioned (or probably even contemplated) in the text of the
Amendment itself. The plain language of § 32 logically
contemplate a class action. The Amendment simply and plainly
states that “[a]ny taxpayer . . . shall have standing . . . to
enforce the provisions of Sections 25 through 31.” The provision
clearly refers to more than standing because it directs taxpayers
to “enforce” the Amendment. Yet there is no mention of a class
action requirement in a place where this would be obviously
mentioned if it was contemplated. There is not even a mention of
a “group of taxpayers” enforcing the Amendment, but merely “any
taxpayer.” The most logical inference is that one individual can
obtain whatever remedy is necessary to “enforce” the Amendment.
(b) Class action lawsuits beget a host of complex issues
regarding certification, representation, notice, jurisdiction and
several other matters. Although the majority states that
plaintiff could have “easily” joined a representative taxpayer as
a party to represent a class, and refers to a class certification
proceeding as “simple,” these requirements are not mere
procedural hurdles. Rather, they are substantive burdens that
are designed to be difficult to satisfy. Martin, Dean & Webster,
Michigan Court Rules Practice (3d ed), MCR 3.501, p 18. Such
burdens are not reasonably contemplated in the Amendment, which
seems instead to attempt to designate a relatively
straightforward individual suit which will fully “enforce” the
entire Amendment. (c) The Headlee Amendment is strikingly
comprehensive and detailed, in contrast to the succinctness of
most other constitutional amendments, particularly those
concerned with the relationship between the individual and
government. Under such a constitutional scheme, it is logical to
infer that if the framers had intended to require class actions
in order for a taxpayer to effect a remedy for all, they would
have so clearly stated. (d) The Court of Appeals is not well
equipped to handle class actions. The same requirements that
make class actions extremely onerous for representative parties
also weigh heavily on the judiciary. Even if MCR 3.501 does
apply to the Court of Appeals,8 this Court was not designed to
effectively manage class actions. Unlike the trial courts, which
have traditionally had responsibility for managing class actions,
the Court of Appeals acts exclusively on the basis of three-
person panels, undoubtedly a far more cumbersome structure for
administering the decisions involved in certifying and managing a
class. Although the Court perhaps could take on the additional
responsibilities of fact-finding, had class actions been truly
intended by the Headlee Amendment I would have expected, given
its wealth of specificity in other regards, that the Amendment
would have specifically identified this highly uncustomary
responsibility.
Thus, the absence of any reference to class actions in the
Headlee Amendment in the face of the heavy burdens that such
actions inevitably impose, both upon parties and the courts,
strongly suggests that class actions are not intended as a
precondition for relief for all in a Headlee suit. A class
action requirement is not only rendered inapposite by an absence
of reference to such actions in the Amendment, but by the obvious
barriers that such a requirement would impose to the effective
“enforcement” of the Amendment.
Fifth, requiring abidance with class action requirements is
not required under the Headlee Amendment because the Headlee
Amendment clearly contemplates pre-class action enforcement of
the Amendment. TACT, supra at 124, n 7, stated:
In fact, the only type of Headlee Claim that would
accrue at the time the resolution is passed is a claim
brought merely on behalf of the public, as opposed to a
claim brought by a taxpayer who has been or is about to
be subject to the tax.
Thus, it is clear that the Supreme Court has recognized that the
Headlee Amendment allows an individual suit on behalf of the
public prior to the time that a class action suit is ripe. Yet
it would be illogical to allow the individual suit, then disallow
any general remedy. This serves little apparent purpose and
would essentially preclude the type of Headlee claim specifically
allowed by the Supreme Court in the quote above. The Supreme
Court’s interpretation in TACT supports plaintiff’s argument that
there are several different kinds of suits that can be filed
under Headlee. As in this case, there is the declaratory
judgment action brought by one taxpayer on behalf of the entire
public, which is in contrast with the more typical private suit
brought to recover individual damages. Where a constitutional
provision conflicts with a general court rule regarding class
actions, it is clear that the constitutional provision providing
for an alternative to the class action must prevail. Regardless,
therefore, whether a class action suit is or is not available to
a Headlee plaintiff, a plaintiff in Alexander Bolt’s position is
obliged only to follow the plain language of the Headlee
Amendment. Grafting the complex and intricate requirements of a
class action onto the Headlee Amendment is not something that
this Court should undertake without considerably more evidence
than presented here that this was intended by the framers and
voters of the Amendment.
In my judgment, it is clear that the Headlee Amendment
allows a single taxpayer to “enforce” the Amendment for the
general public by whatever remedy is reasonably necessary. Even
if a class action were available, plaintiff was not required to
wait until he could fulfill all the requirements of a class
action because there was no ambiguity about the type of action
taken by plaintiff here. Suit here was brought prior to the time
that a class action for refunds was ripe and it was brought to
“enforce” the Headlee Amendment on behalf of the general public
by preventing the imposition of a tax and obtaining a declaratory
ruling of its unconstitutionality. This is precisely the type of
pre-class action suit described in Tact, supra at 124, n 7.
Plaintiff’s suit here appears to be bona fide effort to enforce
Headlee on behalf of the general public in Lansing, rather than a
suit principally for personal gain.
In addition, for the benefit of all the parties involved, we
do not want to discourage future plaintiffs from bringing Headlee
actions as quickly as possible by forcing them to invoke complex
and intricate class action procedures before filing suit. To
require a class action as a precondition for broad relief is
virtually to ensure that future Headlee plaintiffs will act in a
considerably less expeditious manner in filing suit. Of course,
some unknown number of potential Headlee plaintiffs will be
discouraged altogether from filing suits as a result of the
burdens of these procedures, as well as because of the greater
difficulty in finding counsel prepared to provide the necessary
representation. Additionally, given the additional length of the
class action certification process, where a Headlee class action
ultimately prevails, the governmental body almost certainly will
have wrongfully obtained larger amounts of revenue than in the
case of an individual enforcement action. Whether such
additional revenues are ultimately refunded to the taxpayers, or
retained by the governmental bodies, more disruption will
inevitably arise in the fiscal process. It is extremely hard to
fathom how any of these circumstances are gauged to enhance the
effective “enforcement” of the Headlee Amendment.
Sixth, effective “enforcement” should not hinge on the
judicial system’s own inherent lack of expedition in deciding
cases. Had the judicial process been able to immediately resolve
this matter when it was filed-- prior to the “rain tax” actually
becoming due-- and afford plaintiff the relief for which he
asked, there would be no question or need of further remedy.
However, the judicial process is often slow-moving and while
waiting for a declaration of constitutionality, most taxpayers in
Lansing paid the tax for several years. That the ultimate court
decision issued after the tax had been paid by most taxpayers
does not affect the type of suit filed and the original purpose
of such suit, in my judgment. It does not affect the fact that,
when plaintiff filed his suit, the relief sought would have
ensured that no new taxes were imposed upon any taxpayer. At
this juncture, plaintiff still represents the public at large,
but the prolonged nature of this suit has now necessitated a
fuller remedy than that originally envisioned. Where a lawsuit
has been brought early, as here, and declaratory judgment for the
general public is the goal, a general remedy for all should be an
option for the court. We should not penalize the public for the
inherent deficiencies of the judicial branch.
Seventh, the majority’s holding would result in an
inequality among similarly situated taxpayers that would be
highly unfair, and thus would undermine the integrity of the
Amendment as an effective tool for these same taxpayers in
controlling spending and taxing. Should only those who refused
to pay taxes benefit from the Supreme Court’s decision in Bolt?
This creates an inequitable outcome of a sort similar to that in
Armco Steel Corp v Dep’t of Treasury, 419 Mich 582; 358 NW2d 839
(1984). In Armco, following unauthorized audits by the
Department, the Department of Treasury canceled deficiency
assessments for those who had refused to pay them, but refused to
grant refunds to taxpayers who had paid their assessments and
then later sought repayment. The Supreme Court found this to be
unfairly disparate treatment. Id. at 595. The Court stated:
When faced, as in this case, with a choice between
securing that which is due under the law and upholding
the constitutional requirements of uniformity and
equality, the latter is to be preferred “as the just
and ultimate purpose of the law.” [Id. at 594-95.]
In this case, the “choice” is even easier than in Armco because
here there is nothing rightfully due under the law-- the “rain
tax” was declared void as of the moment of its passage-- and
equality requires that all similarly situated taxpayers be
treated equally. See Horrigan v Klock, 27 Mich App 107; 183 NW2d
386 (1971). Thus, defendant should not be allowed to keep the
“rain taxes” paid by some Lansing residents while those who did
not pay benefit exclusively. This would leave those who have not
complied with the “rain tax” better off than those citizens who
did comply with the “rain tax.” I cannot think of a less prudent
public policy nor one better designed to undermine respect for
the law generally and for the constitutional language of the
Headlee Amendment specifically.8
Eighth, the upshot of this inequality among taxpayers
countenanced by the majority’s decision is the creation of
several perverse incentives inimical to the orderly processes of
the law. First, some number of taxpayers will be encouraged to
withhold their taxes if there is any question regarding their
validity under the Headlee Amendment. Where such withholding is
the only way to ensure that their payments are not forfeited even
where a tax is later declared invalid, some taxpayers will risk
the penalties for nonpayment. Withholding money is a much less
burdensome course of action than having to file a lawsuit seeking
to recover invalid taxes; inevitably, some taxpayers will prefer
the former “option.” Second, if a governmental body can keep all
of the money it collected from an invalid tax, there will be
concomitantly less interest among governmental bodies in
conscientiously ascertaining the validity of tax measures before
enacting them. Laws have consequences-- they impose incentives
and disincentives for undertaking various actions. In part,
enactment of the Headlee Amendment appears to reflect a judgment
by the citizenry that additional constraints needed to be placed
upon the taxing propensities of their elected representatives,
perhaps because the incentives acting upon such officials to
spend increasing amounts of public monies (and the resultant need
to raise revenues for such spending) outweighed the disincentives
in this regard. The purpose of the Amendment is clearly to
circumscribe the actions of public officials who are subject to
this aggregation of incentives and disincentives. I fear that
the majority’s opinion would effectively undermine this judgment
in unpredictable ways by eliminating a critical disincentive for
new taxes contained in the Amendment-- that there will be utterly
no benefit to a governmental body from enacting what is
ultimately determined to be an unconstitutional tax. By eroding
this disincentive and enabling governmental bodies to keep at
least some measure of their wrongfully obtained funds, the
following questions come to mind:
(1) Will governments be able to more easily
justify higher levels of future taxes to the people on
the grounds that wrongfully obtained funds will go to
waste unless additional funds are obtained by a tax
approved by the voters?
(2) Will governments be able to use the wrongfully
obtained funds for any public purpose as opposed only
to the purpose for which the funds were ostensibly
raised?
(3) Will governments use the wrongfully obtained
funds for existing programs and thereby justify higher
levels of future spending (and therefore taxes) on the
ground that new levels of current services need to be
maintained?
(4) Will governments use the wrongfully obtained
funds for new programs, in turn creating new spending
constituencies, and thereby more easily justify higher
levels of future spending (and therefore taxes) on the
ground that such new programs need to be maintained?
There is no basis in the language of the Headlee Amendment for
experimenting with the array of disincentives for new taxes
established by the Amendment. Ensuring that the Headlee
Amendment is effectively enforced is no less important than with
any other part of the Constitution. Headlee is no mere statute--
it is a part of the Constitution, entitled to no less regard than
any other part. Because it deals with a non-traditional matter
of constitutional focus makes it no less important-- the voters
of Michigan have decreed this fact, and we are obligated to
uphold this judgment.
Ninth, I question why the Supreme Court remanded this case
in the first place when plaintiff’s personal rights were fully
vindicated by its decision. Plaintiff did not pay the “rain tax”
and thus does not need a refund for himself. What then is the
reason for the remand? Although one could argue that perhaps the
Supreme Court remanded on the basis of the attorney fees issue,
this seems a rather trivial reason to send the entire case back
to this Court without explanation to that effect. In my
judgment, it would seem that the Supreme Court had some reason
rather more substantial in mind when it chose to remand, in
particular, the crafting of a remedy additional to that already
granted above.
Tenth, I question why the drafters of the Headlee Amendment
would have provided under § 32 for the public reimbursement of
plaintiff’s legal costs if he were merely vindicating a personal
right. In my judgment, the award of costs to a taxpayer is
intended to encourage exactly the type of suit brought by
plaintiff in this case-- a suit on behalf of the general public.
There would be no need of the rather extraordinary award of costs
where a taxpayer was merely vindicating his personal rights.
However, where he has served the public good, the award of costs
is easily understood. Further, I note that it is in the
governmental body’s own best financial interest to enable a
single lawsuit by a single taxpayer in order to determine the
constitutional validity of a fee or tax for the entire public
rather than a series of such suits in order to vindicate merely
personal rights. Undoubtedly, the same could be said with regard
to a class action suit. The attorney’s fees due plaintiff here
would, almost certainly, have been far higher had this been a
class action than a mere individual “enforcement” suit.
In my judgment, the majority’s holding, that a general
refund is unavailable under the Headlee Amendment, would result
in the difficulties laid out above and thus would undermine the
rules of enforcement in the Headlee Amendment that we are
attempting to uphold in Bolt. However, the majority states that
it does not hold or imply that “relief in Headlee cases should or
will always be prospective only,” and that the instant case
provides potential future governmental defendants clear notice of
the rules for fees and taxes under the Amendment. Therefore,
knowing the law as a result of Bolt, future taxing jurisdictions
apparently will apply the correct constitutional test and the
question of refunds will not arise. Respectfully, I do not
believe that the answer is quite this simple. Although the
Supreme Court in Bolt acted conscientiously in summarizing the
standards for determining whether charges are fees or taxes, the
standards set forth in Bolt are still not designed to lead to a
purely mechanical determination of constitutionality in future
cases. Contrary to the majority’s interpretation, Bolt did not
set forth a fee/tax distinction based solely on the substantive
nature of the project involved or on the answer to a single
inquiry, e.g. the proportionality of the fee or tax. We cannot
now assume that any charge for a water/sewer project will be
deemed a tax simply because the charge for the water/sewer
project in Bolt was determined to be a tax. Instead, there must
be a case-by-case application of the ‘totality of factors’ test,
which will inevitably entail some uncertainty in terms of the
ultimate result. It is almost certainly true that Bolt will
assist future taxing jurisdictions in understanding and applying
the Headlee Amendment in their own unique situations, such that
the number of charges found unconstitutional will likely be
reduced. That, of course, is one of the purposes of all sound
legal precedents-- the minimization of future legal uncertainties
and a resultant diminution in the need for litigation. However,
the fact that the number of future legal controversies may be
minimized by the Supreme Court’s decision in Bolt is no warrant
for failing to offer relief in the instant case that, in my
judgment, is required by the Michigan Constitution.
In conclusion, I believe that a broad remedy, according
relief to all taxpayers in the city, is not only allowed under
the Headlee Amendment, but is necessary in this case in order to
uphold the Amendment. While there may be instances in which such
relief may be limited because of administrative or financial
burdens, defendant here has not purported to make such a showing.
In any event, plaintiff here acted in as expeditious a manner as
possible in bringing his lawsuit, and defendant was apprised as
early as possible that its levy was subject to some
constitutional shadow.8 There has been no bad-faith or
‘gamesmanship’ on the part of plaintiff and, as a result, no
lengthier than necessary period for which the tax refunds should
be made. Further, it appears quite clear who should receive
refunds and in what amounts. Therefore, in view of the absence
of unusual circumstances that would complicate refunding of the
tax, and in recognition of the fact that unconstitutional
statutes are void ab initio, Horrigan, supra at 107, all
taxpayers who paid the “rain tax” in any years should receive a
full refund. 8
The scope of relief available here derives from the
constitutional grant of standing to individual taxpayers to
effectively “enforce” the Headlee Amendment. The relief required
to effectively “enforce” the Amendment will vary depending on the
section violated and the facts of each case, but the Amendment
contemplates broad relief. Here, such a broad remedy is
required. Mere declaratory relief will not sufficiently enforce
the Amendment, but rather will weaken its effectiveness.
Declaring that a governmental body acted contrary to the
Constitution in taxing the people, but then allowing such body to
retain much or all of the money that it wrongfully collected,
will only dilute the authority of the Constitution by eroding
incentives for compliance on the part of government. “The intent
of the people in enacting art 9, § 32 of the Michigan
Constitution was not to enact a constitutional provision that
could not be effectively enforced.” Durant, supra, 456 Mich at
206.
/s/ Stephen J. Markman
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