City of Austin, Texas, et al. v. Reagan National Advertising of Austin, Inc., dba Reagan National Advertising

A billboard company sued the City of Austin twice – first in federal court, then in state court – for refund of billboard registration fees paid under protest. Both times, the company claimed that the registration fee is an invalid tax under the Texas Constitution. In the first-filed suit, the federal district court dismissed the company’s claim without prejudice for lack of jurisdiction, because it found the fee to be a tax under the Tax Injunction Act, 28 U.S.C. § 1341. In the second-filed suit, in reversing a trial court finding that the fee is not a tax, the state appeals court held that the prior federal dismissal under the Tax Injunction Act preclusively determined that the billboard fee is a tax under Texas law and, hence, invalid under the Texas Constitution. The question presented is: Whether a federal court’s dismissal of a state tax law claim for lack of jurisdiction under the federal Tax Injunction Act may be interposed as a matter of federal law to preclusively determine the same state tax law claim in a subsequent state case.