Pending a Pennsylvania state court’s determination of claims under state law, a federal court has put on hold a federal challenge to the Pennsylvania Department of Revenue’s expansive reading of Pennsylvania’s new tax on vapor products. The suit began in the Commonwealth Court of Pennsylvania and challenges the Department’s reading as a matter of statutory interpretation, the Pennsylvania Constitution and the U.S. Constitution.
By order dated July 18, 2017, the U.S. District Court for the Middle District of Pennsylvania abstained from further ruling and remanded outstanding issues of state law to the Commonwealth Court. The federal court retained jurisdiction over the pending federal issues (also denying Defendants’ Motion to Dismiss for lack of subject-matter jurisdiction) and stayed further federal proceedings pending the final decision of Pennsylvania’s courts. The crux of the Court’s procedural ruling was based on Pullman abstention, under which a federal court will abstain so that state courts will have an opportunity to settle an underlying state-law question whose resolution may moot a federal constitutional question.
The Plaintiffs had filed in state court and resisted the Department of Revenue’s removal to federal court. It will be interesting to see how this strategy pays off. Although litigants often wish to proceed against state parties in federal court, it should not be overlooked that federal courts are particularly wary of being put to the task of answering novel questions of state law.
The Pennsylvania case is Kingdom Vapor, et al. v. Pa. Dep’t of Revenue, No. 697 MD 2016 (Pa. Commw. Ct.). The federal case is Kingdom Vapor, et al. v. Pa. Dep’t of Revenue, et al., No. 1:17-cv-00439 (M.D. Pa.).