Tag Archives: summary judgment

2011 – Death and Taxes … and Chickens

The sole issue in this case was at what point in the life of a chicken does the chicken lose its tax-exempt status as poultry?

When this lawsuit was filed in 2011, Pilgrim’s Pride was the second-largest chicken producer in the world.  A vertically-integrated company, Pilgrim’s Pride controlled every phase of the production of its poultry – from egg, to hatchling, to chicken, to drumstick, to chicken salad. As such, Pilgrim’s Pride owned and operated feed mills, hatcheries, processing plants and distribution centers in 14 U.S. states, Puerto Rico and Mexico.

Following the denial of a tax protest regarding the valuation of the contents of a cold storage warehouse located in Tarrant County, Texas, Pilgrim’s Pride filed suit in the 352nd District Court seeking a de novo review[1].  Housed inside the warehouse in question was boxed, frozen chicken meat (also described as “chicken flesh,” “dead chicken, without giblets” and “breaded, baked, par-fried chicken”) on which the Tarrant Appraisal District had levied an ad valorem tax.

Texas Tax Code Section 11.16, the enabling legislation for Article VIII, Section 16 of the Texas Constitution, exempts from ad valorem taxation “farm products, livestock and poultry” held by “producers” while the producer is “financially providing for the physical requirements of such livestock and poultry.”  Pilgrim’s Pride relied on these provisions to claim tax exempt status for the contents of the warehouse.

In summary judgment motions presented to Judge Bonnie Sudderth in which both sides agreed that there was no material fact in dispute, the parties – Pilgrim’s Pride and the Tarrant County Appraisal District - submitted the case for a legal determination by Judge Sudderth.  Pilgrim’s Pride argued that the contents of its cold storage facility warehouse constituted tax-exempt “poultry” the physical requirements of which Pilgrim’s Pride, the producer, was financially providing for. As the owner and producer of the poultry, Pilgrim’s Pride contended that it was financially responsible for all of their poultry’s physical requirements from egg to chicken part storage, and all points in between, until the chicken was sold to a third party.  For that reason, Pilgrim’s Pride sought a summary judgment ruling that its warehoused chicken would retain its tax-exempt status until it was sold in the market.

Tarrant Appraisal District filed a summary judgment motion as well, taking the position that once the chickens were no longer alive, Pilgrim’s Pride became a “processor” rather than a “producer” within the meaning of the Constitution and Statute.  The District also argued that frozen chickens would no longer have “physical requirements” requiring financial support, which the statute requires in order to support a tax exemption.  The Tarrant Appraisal District sought a summary judgment ruling by Judge Bonnie Sudderth that the chicken stored in Pilgrim’s Pride warehouse were properly subject to ad valorem taxation under state law.

Judge Bonnie Sudderth ruled that just as livestock, once slaughtered, would no longer enjoy tax exempt status as “livestock” under the constitutional and statutory provisions, poultry, once slaughtered, would not longer enjoy tax exempt status as “poultry” under these same provisions.

In explaining her ruling, Judge Sudderth pointed to the idiosyncrasy of the English language that changes the name of some farm animals once they are slaughtered.  In polite company, one would not purchase steaks or pork chops by asking the butcher for a pound of “livestock” or “pig,” whereas, “poultry” and “chicken” are permissible nouns to to describe chicken, whether located in the coop or behind the meat counter.  The statute clearly identifies “livestock” as tax exempt, but not “beef” or “pork,” so there is no confusion in the law with regard to bovines or swine.  Once the cow and the pig are slaughtered, their tax exempt status ends. Judge Sudderth reasoned that even though the English language calls for no name change upon the death of a chicken, it would make no sense for there to be a distinction between dead cows, pigs or poultry when it comes to ad valorem taxation.

Furthermore, Judge Sudderth reasoned, the purpose of the tax-exemption laws would not extend to cold-storage warehousing of meat products.  These laws were designed to provide tax exemptions to farmers and ranchers who were tending to the daily needs (such as food, water and veterinary care) of their flocks and herds, not for warehousemen who simply store the frozen meats.

Finally Judge Sudderth agreed with the Tarrant Appraisal District in her opinion that neither the livestock nor the chickens, once slaughtered, would have “physical requirements” necessitating financial support, as required under the tax exemption statute.

In denying Pilgrim’s Pride’s summary judgment motion, Judge Bonnie Sudderth held that Pilgrim’s Pride, who bore the legal burden of clearly establishing that its operations fell within the tax exemption, failed to meet its burden.  In granting Tarrant Appraisal District’s motion for summary judgment, Judge Sudderth upheld the Tarrant Appraisal District’s interpretation of the constitutional and statutory provisions as reasonable and not in conflict with the plain meaning of the statute.

Judge Bonnie Sudderth’s ruling was not appealed, leaving undisturbed those two certainties in life – even in the life of a chicken - Death and Taxes.


[1] For a discussion and explanation of the concept of de novo review, go to: http://bonniesudderth.wordpress.com/2011/08/28/when-can-i-get-a-trial-de-novo/

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2001 – Taxpayer Protest of Arlington Street Maintenance Fee

In 2000, the City Council of the City of Arlington, Texas adopted an ordinance that established a street maintenance fee which was assessed in city water bills.  This fee was later amended and then finally repealed in 2003. 

During that time, on May 15, 2001, an Arlington taxpayer filed a lawsuit in the 352nd District Court of Tarrant County, Texas against the City of Arlington, arguing that the fee constituted an illegal tax. Other Constitutional challenges were also raised, including allegations that the street maintenance fee violated equal protection and due process rights, was void for vagueness, and provided no mechanism for redress of unlawful collection of the tax. In addition, the taxpayer asserted that the City had violated the Texas Debt Collection Act, and he brought a civil rights action under 42 U.S.C. § 1983.

The City of Arlington claimed general authority to assess fees of this nature by ordinance, rather than charter amendment, but the taxpayer argued that it was a tax which was not permitted under the city charter without approval of the voters. Judge Bonnie Sudderth ultimately issued a summary judgment ruling that the City of Arlington exceeded its authority by taxing the citizens without their consent in violation of the city charter.

While the case was pending, the taxpayer also sought an injunction to prohibit the City from collecting the street maintenance fee and to require the City to refund the full amount of street maintenance fees collected. The lawsuit was brought by the taxpayer on his own behalf as an individual and resident of Arlingtonas well as on behalf of the proposed class of persons – all taxpayers from the City ofArlington- who had been billed for the street maintenance fee.

In response, the City asserted a plea to the jurisdiction, arguing that the trial court did not have jurisdiction due to the plaintiff’s lack of standing to sue because his claim did not meet the $500 amount-in-controversy requirement. The City also claimed immunity from suit.  Judge Bonnie Sudderth denied the City’s plea to the jurisdiction and granted a motion for partial summary judgment declaring the maintenance fee an unlawful tax imposed without consent required of the citizens, but denied the injunctive relief sought.

After so ruling, Judge Sudderth expressed concern to the parties that due to the unique nature of the case and the fact that because there was little guidance in the law on the correct application of the law to the facts of the case, the parties could potentially expend considerable costs of litigation which might be unnecessary if the appellate court disagreed with her interim rulings.  Because of this, Judge Sudderth suggested that the parties agree to request a written order for interlocutory appeal to the Second Court of Appeals.

This agreed interlocutory appeal mechanism was a new creature of statute (Texas Civil Practices & Remedies Code, Section 51.014[d]), having at that time recently been enacted by the Texas Legislature.  The new law provided that parties in litigation may agree to appeal an otherwise non-appealable interlocutory ruling if: (1) the ruling involves a controlling question of law as to which there is a substantial ground for difference of opinion, (2)  an immediate appeal from the order may materially advance the ultimate termination of the litigation;  and (3)  the parties agree to the order.

Without such agreement, the interlocutory summary judgment ruling would not have been appealable at that time, and the parties would have been required to wait until the entire case, including the class action certification issues, were concluded before testing Judge Sudderth’s ruling on appeal.  The parties agreed to go forward with an immediate agreed appeal, as suggested by Judge Sudderth, which the Second Court of Appeals accepted.  (This was the first agreed appeal that the Second Court of Appeals ever accepted under the new law.)

As a result of that agreed interlocutory appeal, Judge Sudderth’s ruling was reversed – not because her ruling was erroneous regarding the illegality of the tax – but on the ground that the taxpayer lacked “standing” to complain about it because the taxpayer failed to show a “particularized injury distinct from that suffered by the general public.” 

In the interim, the City of  Arlington held an election on the issue and the tax was ultimately approved by the voters.

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