author: CLAY, Circuit Judge. KETHLEDGE, Circuit Judge,

text:
    WAYSIDE CHURCH, an Illinois Not-For-Profit (Ecclesiastical) Corporation; Myron W. Stahl; Henderson Hodgens, individually and on behalf of a class of all others similarly situated, Plaintiffs-Appellants/Cross-Appellees, v. VAN BUREN COUNTY, in its individual Michigan municipal capacity and on behalf of a class of all other Michigan counties similarly situated; Karen Makay, in her individual official capacity as Treasurer of Van Buren County and on behalf of a class of all other Treasurers of Michigan counties similarly situated, Defendants-Appellees/Cross-Appellants.
    Nos. 15-2463/2525
    United States Court of Appeals, Sixth Circuit.
    Argued: October 20, 2016
    Decided and Filed: February 10, 2017
    Rehearing En Banc Denied March 15, 2017

      ARGUED: Owen Dennis Ramey, LEWIS, REED & ALLEN PC, Kalamazoo, Michigan, for Appellants/Cross-Appellees. Thomas G. King, KREIS, ENDERLE, HUDGINS & BORSOS, P.C., Kalamazoo, Michigan, for Appellees/Cross-Appellants. ON BRIEF: Owen Dennis Ramey, Ronald W. Ryan, LEWIS, REED & ALLEN PC, Kalamazoo, Michigan, James Shek, Alle-gan, Michigan, for Appellants/Cross-Appel-lees. Thomas G. King, KREIS, EN-DERLE, HUDGINS & BORSOS, P.C., Kalamazoo, Michigan, for Appellees/Cross-Appellants. Christina M. Martin, PACIFIC LEGAL FOUNDATION, Palm Beach Gardens, Florida, Steven C. Liedel, Ted Seitz, DYKEMA GOSSETT PLLC, Lansing, Michigan, William H. Horton, GIAR-MARCO MULLINS & HORTON P.C., Troy; Michigan, Daniel B. Kohrman, AARP FOUNDATION LITIGATION, Washington, D.C., for Amici Curiae.
    Before: CLAY, KETHLEDGE, and DONALD, Circuit Judges.

       Judge White recused herself from participation in this ruling. Judge Kethledge would grant rehearing for the reasons stated in his dissent.

   CLAY, J., delivered the opinion of the court in which DONALD, J., joined. KETHLEDGE, J. (pp. 823-25), delivered a separate dissenting opinion.

OPINION

CLAY, Circuit Judge.

Plaintiffs Wayside Church, Myron Stahl, and Henderson Hodgens (collectively “Plaintiffs”) appeal the district court’s order granting Defendants’ motion to dismiss the complaint, which asserted that Defendant Van Burén County and its Treasurer, Defendant Karen Makay (collectively “Defendants”), violated Plaintiffs’ Fifth Amendment rights by taking their property without just compensation. Defendants filed a cross-appeal arguing that the district court erred in determining that it could exercise jurisdiction over this case. For the reasons set forth below, we VACATE the judgment of the district court and REMAND with instructions to DISMISS the case for lack of subject matter jurisdiction.

BACKGROUND

Plaintiffs each owned real property in Van Burén County, Michigan in 2011 but failed to pay property taxes for that year. On March 1, 2012, pursuant to the General Property Tax Act (the “GPTA”), Mich. Comp. Laws § 211.1 et seq., these properties became subject to forfeiture and foreclosure. On April 24, 2014, the Van Burén County Circuit Court issued a foreclosure judgment,, and title to these properties passed in fee simple absolute to the Defendant County. A few months later, Defendant Makay, the treasurer for the Defendant County, sold these properties at an auction, pursuant to Michigan Compiled Laws § 211.78m. The minimum bid for each of the properties was calculated by totaling “[a]ll delinquent taxes, interest, penalties, and fees due on the property” plus the “expenses of administering the sale, including all preparations for the sale.” Mich. Comp. Laws § 211.78m(16)(a). Plaintiff Wayside Church’s former property had a minimum bid of $16,750, but at the public auction held on August 5, 2014, the property was sold for $206,000, meaning Defendant Van Burén County received surplus proceeds of $189,250. The minimum bid for the property formerly owned by Plaintiff Stahl was $25,000, but the property was sold at the same auction for $68,750, resulting in a surplus of $43,750. Finally, the property that had once been owned by Plaintiff Hodgens required a minimum bid of $5,900, but was sold for $47,750 at the same auction, meaning the Defendant County received $41,850 in surplus proceeds. .

In this suit, Plaintiffs seek return of the surplus funds because they allegedly possessed a cognizable property interest in each of their foreclosed properties and in the surplus proceeds generated by the sales, in connection with which Defendants were required to pay just compensation pursuant to the Fifth Amendment. Plaintiffs did not seek to challenge the process by which these asserted interests were taken; instead, Plaintiffs sought a declaratory judgment from the district court that, by not returning the surplus funds to the former owner-Plaintiffs, Defendants effectuated a taking without just compensation in violation of the Fifth Amendment.

On December 11, 2014, Plaintiffs initiated this suit in federal court by filing a complaint against Defendants asserting the following claims: Count I asserted that Defendants violated Plaintiffs’ rights under the Fifth Amendment by taking their property without just compensation; Count II asserted that Plaintiffs were entitled to monetary damages, pursuant to 42 U.S.C. § 1983, for the violation of their Takings Clause rights alleged in Count I; and Count III sought a declaratory judgment that the Michigan Circuit Court failed to enter judgment in accordance with a state statute and, thus, that the redemption period should have been tolled. In addition to asserting these claims against Defendants on their own behalf, Plaintiffs also sought to represent a class of former Michigan property owners who had lost title to their property for non-payment of taxes but whose former properties were sold for significantly more than the taxes owed.

On January 7, 2016, Defendants filed a motion to dismiss the complaint for lack of jurisdiction and for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), respectively. On November 9, 2015, the district court issued an opinion denying the motion to dismiss for lack of subject matter jurisdiction but granting the motion for failure to state a claim.

Plaintiffs filed a timely appeal on November 30, 2015, arguing that the district court erred in dismissing its claims pursuant to Rule 12(b)(6). This appeal was docketed as No. 15-2463. On December 9, 2015, Defendants filed a cross-appeal, docketed as No. 15-2525, challenging the district court’s order denying its motion to dismiss for lack of jurisdiction.

DISCUSSION

We are “bound to consider the 12(b)(1) motion first, since the Rule 12(b)(6) challenge becomes moot if this court lacks subject matter jurisdiction.” Moir v. Greater Cleveland Reg’l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990).

A. Standard of Review

“Article III of the Constitution confines the federal courts to adjudicating actual ‘cases’ and ‘controversies.’” Nat’l Rifle Ass’n of Am. v. Magaw, 132 F.3d 272, 279 (6th Cir. 1997) (citing U.S. Const, art. Ill, § 2). This command requires us to dismiss cases that are not ripe for review. “Ripeness is more than a mere procedural question; it is determinative of jurisdiction. If a claim is unripe, federal courts lack subject matter jurisdiction and the complaint must be dismissed.” Arnett v. Myers, 281 F.3d 552, 562 (6th Cir. 2002) (quoting Bigelow v. Mich. Dep’t of Nat. Res., 970 F.2d 154, 157 (6th Cir. 1992)).

“Challenges to subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) ‘come in two varieties: a facial attack or a factual attack.’ ” Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012) (quoting Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007)). “A facial attack on the subject-matter jurisdiction” — like the one Defendants make here — “questions merely the sufficiency of the pleading.” Gentek Bldg. Prods., Inc., 491 F.3d at 330 (citing Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990)). “When reviewing a facial attack, a district court takes the allegations in the complaint as true,” just as in a Rule 12(b)(6) motion. Id. (citing Ohio Nat’l Life Ins. Co., 922 F.2d at 325). This Court reviews facial challenges to subject matter jurisdiction de novo. DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004) (citing Cob Clearinghouse Corp. v. Aetna U.S. Healthcare, Inc., 362 F.3d 877, 880 (6th Cir. 2004)).

A factual attack, on the other hand, raises a factual controversy requiring the district court to “weigh the conflicting evidence to arrive at the factual predicate that subject-matter does or does not exist.” Gentek Bldg. Prods., Inc., 491 F.3d at 330 (citing Ohio Nat'l Life Ins. Co., 922 F.2d at 325). “Where a trial court’s ruling on jurisdiction is based in part on the resolution of factual disputes, a reviewing court must accept the district court’s factual findings unless they are clearly erroneous.” RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1135 (6th Cir. 1996) (citing Ohio Nat’l Life Ins. Co., 922 F.2d at 326) (additional citations omitted). “However, review of the district court’s application of the law to the facts is de novo.” Id. (citing Ynclan v. Dep’t of Air Force, 943 F.2d 1388, 1390 (5th Cir. 1991); Holt v. United States, 46 F.3d 1000, 1003 (10th Cir. 1995)).

Because the district court treated the challenge as a facial attack and made no factual findings in reaching its decision, the appeal is treated the same way. See DLX, Inc., 381 F.3d at 516. This Court thus reviews the judgment of the district court de novo. Moreover “where subject matter jurisdiction is challenged under Rule 12(b)(1), as it was here, the plaintiff has the burden of proving jurisdiction in order to survive the motion.” Rogers v. Stratton Indus., Inc., 798 F.2d 913, 915 (6th Cir. 1986).

B. Analysis

Defendants argue that we lack jurisdiction for two reasons: (1) Plaintiffs’ claims are not ripe for review; and (2) the Tax Injunction Act and principles of comity prevent jurisdiction from being exercised in federal court. We address these arguments in turn below.

1. Ripeness of Takings Clause Claims

“Applicable to the States through the Fourteenth Amendment, the Takings Clause of the Fifth Amendment ‘provides that private property shall not be taken for public use, without just compensation.’ ” Wilkins v. Daniels, 744 F.3d 409, 416 (6th Cir. 2014) (quoting Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005)). “As its text makes plain, the Takings Clause ‘does not prohibit the taking of private property, but instead places a condition on the exercise of that power.’” Lingle, 544 U.S. at 536, 125 S.Ct. 2074 (quoting First English Evangelical Lutheran Church of Glendale v. Cty. of Los Angeles, 482 U.S. 304, 314, 107 S.Ct. 2378, 96 L.Ed.2d 250 (1987)). The Takings Clause’s purpose is “not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking.” Id. at 537, 125 S.Ct. 2074 (quoting First English Evangelical Lutheran Church of Glendale, 482 U.S. at 315, 107 S.Ct. 2378). Consequently, “a State does not violate the Takings Clause ‘until it refuses to compensate the owner.’” Wilkins, 744 F.3d at 417 (quoting Hensley v. City of Columbus, 557 F.3d 693, 695-96 (6th Cir. 2009)). Such compensation is not required to be “paid in advance of, or contemporaneously with, the taking.” Williamson Cty. Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 194, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). Therefore, a takings claim is not ripe “unless or until the State fails to provide an adequate postdepriv'ation remedy for the property loss.” Id. at 195, 105 S.Ct. 3108 (quoting Hudson v. Palmer, 468 U.S. 517, 532 n.12, 104 S.Ct. 3194, 82 L.Ed.2d 393 (1984)).

In Williamson County, the Supreme Court established a two part test to determine when a takings claim is ripe. “A federal court may hear a takings claim only after: (1) the plaintiff has received a ‘final decision’ from the relevant government actor; and (2) the plaintiff has sought ‘compensation through the procedures the State has provided for doing so.’ ” Wilkins, 744 F.3d at 417 (quoting Williamson Cty., 473 U.S. at 186, 194-95, 105 S.Ct. 3108). For plaintiffs to be obligated to seek redress in the state courts before litigating in federal court, the state procedures must be “reasonable, certain, and adequate ... at the time of the. taking.” Williamson Cty., 473 U.S. at 194, 105 S.Ct. 3108 (quotation omitted).

This Court has previously acknowledged that the Williamson County test is not strictly jurisdictional but only “prudential,” and need not be followed “when its application ‘would not accord with sound process.’ ” Miles Christi Religious Order v. Twp. of Northville, 629 F.3d 533, 541 (6th Cir. 2010) (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1012, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992)). However, the requirement that aggrieved parties first seek compensation for the alleged taking in state court before bringing suit in federal court “will often serve important federalism interests.” Wilkins, 744 F.3d at 418. These interests are especially strong where, as here, the case “turn[s] on whether the plaintiff has a property interest as defined by state law.” Id. Therefore, we engage in the Williamson County analysis to determine whether jurisdiction is proper. See Miles Christi Religious Order, 629 F.3d at 541 (continuing to follow Williamson County test after acknowledging that it is not jurisdictional because the Court “fail[ed] to see why this prudential requirement should be ignored here”).

Defendants do not contest here that the first part of the test is satisfied and, instead, only appeal the district court’s determination that no adequate state procedures existed in which Plaintiffs could challenge the alleged taking. Defendants claim, as they did before the district court, that Plaintiffs could have challenged the tax law on constitutional grounds in state court or brought an inverse condemnation action. The district court, however, found that such avenues of relief were foreclosed by the text of the GPTA.

Specifically at issue is the provision in the GPTA that addresses actions seeking monetary damages after foreclosure, codified as Michigan Compiled Laws § 211.78L This section provides as follows:

If a judgment for foreclosure is entered under section 78k and all existing recorded and unrecorded interests in a parcel of property are extinguished as provided in section 78k, the owner of any extinguished recorded or unrecorded interest in that property who claims that he or she did not receive any notice required under this act shall not bring an action for possession of the property against any subsequent owner, but may only bring an action to recover monetary damages as provided in this section.

Mich. Comp. Laws § 211.78i(l). These actions must be brought in a special court, called the Court of Claims, as “[t]he court of claims has original and exclusive jurisdiction in any action to recover monetary damages under this section.” Id. § 211.78i(2). That court, however, cannot hear actions brought against the state of Michigan or any arm thereof if the elaim-ant “has an adequate remedy upon his claim in the federal courts.” Id. § 600.6440. Therefore, according to Plaintiffs, there is no adequate state forum for their claims, as they are required to seek redress in the Court of Claims; but that court cannot hear cases where a federal remedy exists. Consequently, Plaintiffs contend that federal court is the only forum where they can seek relief.

The district court agreed with Plaintiffs and found that “the only cause of action permitted by the GPTA is one for lack of notice (due process); specifically, the law allows a cause of action against a county treasurer for monetary damages only when a property owner ‘claims that he or she did not receive any notice required under this act.’ ” (R. 38, PagelD #409 (quoting Mich. Comp. Laws § 211.78Í).) The court went on to note that the Court of Claims was the only court that could hear any challenges to the GPTA, but that federal claims were barred in that forúm. The district court concluded that because the “Michigan Court of Claims has exclusive and original jurisdiction over claims under the GPTA against the County Treasurer,” and because “Michigan absolutely divests jurisdiction from the Michigan Court of Claims where a plaintiff ‘has an adequate remedy upon his claim in the federal courts,’ ” the state had failed to provide an adequate remedy. (Id. at 410 (quoting Mich. Comp. Laws § 600.6440).) Based on this analysis, the court concluded that the claim was ripe for review under the Williamson County test.

This analysis, however, suffers from two fatal flaws. First, and most importantly, in reading the above quoted section, the district court read subsection (1) to bar all actions challenging the GPTA except those challenging the notice procedures. However, the plain language of the text does not require such a restrictive reading. Instead, the statute limits a plaintiff to monetary damages when two conditions are present: (1) the former owner’s rights have been extinguished by foreclosure proceedings for failure to pay property taxes; and (2) the former owner is challenging whether he received the notice required by other provisions in the GPTA. While the first condition is undoubtedly present in the case at bar, Plaintiffs here have stated explicitly that they are not challenging the notice provided to them, either on statutory or constitutional grounds. Because Plaintiffs’ Takings Clause claim does not meet both criteria, the restrictions on relief do not apply to this action.

Second, the district court erred in determining that the Court of Claims has exclusive jurisdiction over all claims challenging the GPTA. In arriving at that conclusion, the court conflated the terms “section” and “act.” It is clear from the text that the Michigan legislature used the term “act” to refer to the entire GPTA and the term “section” to refer to the more specific provisions in the act. For example, in providing definitions for the GPTA, the text states that “[a]s used in this section and sections 78a through 155 ... (a) ‘Foreclosing governmental unit’ means ... [t]he treasurer of a county.” Mich. Comp. Laws § 211.78(8). This language makes clear that “section” refers to individual parts of the general statute, and not the entire GPTA. See also id. § 211.78Í (“If a judgment for foreclosure is entered under section 78k,.... ”). By contrast, when referring to the entire statutory scheme, the legislature clearly indicated so, as seen in the provision regarding the purpose of the GPTA, which states, “Therefore, the powers granted in this act relating to the return of property for delinquent taxes constitute the performance by this state or a political subdivision of this state of essential public purposes and functions.” Id. § 211.78(1).

By the plain reading of the language at issue in this case, then, it is apparent that the word “section” in the phrase limiting jurisdiction to the Court of Claims — “The court of claims has original and exclusive jurisdiction in any action ... under this section” — the legislature was limiting jurisdiction for claims brought pursuant to § 211.78Í, not claims brought pursuant to the entire GPTA. As established above, § 211.781 only discusses claims by former owners challenging the notice provisions, which is not the case here. Therefore, Plaintiffs were not required to bring their actions in the Court of Claims and therefore were not subject to the bar that “[n]o claimant may be permitted to file claim in [the Court of Claims] against the state nor any department, ... arm or agency thereof who has an adequate remedy upon his claim in the federal courts.” Id. § 600.6440. Consequently, the district court erred in concluding that the GPTA provided no remedy for Plaintiffs’ constitutional claims.

Moreover, reading the statute in the way directed by the district court would mean the statute would be unconstitutional, which would violate the constitutional avoidance statutory construction rule. See Carey v. South Dakota, 250 U.S. 118, 122, 39 S.Ct. 403, 63 L.Ed. 886 (1919) (“Where a statute is reasonably susceptible of two interpretations, by one of which it would be clearly constitutional and by the other of which its constitutionality would be doubtful, the former construction should be adopted.” (citations omitted)); see also In re Treasurer of Wayne Cty. for Foreclosure, 478 Mich. 1, 732 N.W.2d 458, 462 (2007) (requiring courts to “presume a statute is constitutional and construe it as such, unless the only proper construction renders the statute unconstitutional” (citation omitted)). If the district court were right in its interpretation, the Michigan legislature would have created a statutory scheme by which plaintiffs were barred from asserting all but one federal right— due process notice — in state court. Such a scheme could not stand, as “[a] jurisdictional rule cannot be used as a device to undermine federal law, no matter how evenhanded it may appear.” Haywood v. Drown, 556 U.S. 729, 739, 129 S.Ct. 2108, 173 L.Ed.2d 920 (2009); see also Felder v. Casey, 487 U.S. 131, 138, 108 S.Ct. 2302, 101 L.Ed.2d 123 (1988) (“Under the Supremacy Clause of the Federal Constitution, ‘[t]he relative importance to the State of its own law is not material when there is a conflict with a valid federal law,’ for ‘any state law, however clearly within a State’s acknowledged power, which interferes with or is contrary to federal law, must yield.’ ” (quoting Free v. Bland, 369 U.S. 663, 666, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962))). The Michigan Supreme Court also recognized the same limitation when discussing § 211.78Í of the GPTA, and held that, in the context of a due process claim to the statute, “[b]ecause the Legislature cannot create a statutory regime that allows for constitutional violations with no recourse, that portion of the statute ... is unconstitutional and unenforceable.” In re Treasurer of Wayne Cty., 732 N.W.2d at 463. We therefore conclude that § 211.78Z of the GPTA does not bar Plaintiffs from filing their Takings Clause claims in state court.

Pursuant to Williamson County, we still must determine whether Plaintiffs are generally allowed to bring their Takings Clause and § 1983 claims in Michigan state court, independent of § 211.781 of the GPTA, or whether there were no “reasonable, certain, and adequate” procedures for challenging a taking, thereby allowing Plaintiffs to seek redress in federal court first. The Michigan Court of Appeals has previously held that “[t]he Court of Claims is the proper forum in which to seek redress where a plaintiff alleges an already accomplished inverse condemnation by the State of Michigan.” Lim v. Mich. Dep’t of Transp., 167 Mich.App. 751, 423 N.W.2d 343, 345 (1988) (citing Hill v. State Highway Comm’n, 382 Mich. 398, 170 N.W.2d 18 (1969)) (additional citations omitted). Jurisdiction would normally lie in that court as it has exclusive jurisdiction over all claims “statutory or constitutional, liquidated or unliquidated, ex contractu or ex delicto, or any demand for monetary, equitable, or declaratory relief ... against the state or any of its departments or officers notwithstanding another law that confers jurisdiction of the case in the circuit court.” Mich. Comp. Laws § 600.6419(l)(a).

Plaintiffs’ action, however, is not an action against the State of Michigan. Instead, Plaintiffs have sued Van Burén County and the county treasurer, as the county treasurer is the one responsible for effectuating the alleged taking of Plaintiffs’ properties. See Mich. Comp. Laws §§ 211.78(8)(a), 211.78k(5). (See also R.16-2, Judgment & Order of Judicial Forfeiture, PagelD #181-82.) Counties, however, “are never within the jurisdiction of the Court of Claims.” Doan v. Kellogg Cmty. Coll., 80 Mich.App. 316, 263 N.W.2d 357, 359 (1977); see also Cameron v. Monroe Cty. Probate Court, 457 Mich. 423, 579 N.W.2d 859, 862 (1998) (determining that the circuit court had jurisdiction over a complaint against a county court because “[t]he state was not made a party to the complaint, nor did the court attempt to order the state to pay the complaint”). Thus, Lim is inapplicable to Plaintiffs’ case and does not require them to file in the Court of Claims. See Lim, 423 N.W.2d at 345.

Furthermore, the argument that the Michigan jurisdictional scheme essentially requires that all claims against political subdivisions of the state be litigated in federal court when there is an adequate federal remedy ignores the Michigan state courts’ interpretation of its own jurisdictional statutes. In Gordon v. Sadasivan, 144 Mich.App. 113, 373 N.W.2d 258 (1985) (per curiam), the Court of Appeals of Michigan addressed the situation where a circuit court dismissed a suit brought pursuant to § 1983 for lack of jurisdiction, as it thought the case belonged in the Court of Claims. Id. at 259-60. The Gordon court first recognized that “state courts exercise concurrent jurisdiction over § 1983 claims.” Id. at 261. After determining that there was an adequate remedy that the plaintiff could have pursued in federal court, as his claim was not barred by the Eleventh Amendment, the Michigan Court of Appeals determined that the Court of Claims lacked subject matter jurisdiction over the claim pursuant to Michigan Compiled Laws § 600.6440. Id. However, the court further determined that the circuit court did, in fact, have jurisdiction over the plaintiffs § 1983 claims. Id. Put another way, the Gordon court noted that, while § 600.6440 may divest the Court of Claims of jurisdiction when there is a remedy available in federal court, the result is not that no remedy can be sought in state court; instead, the proper forum to litigate such claims is the circuit court. Id. Based on this interpretation of the relevant jurisdictional statutes, we find that Plaintiffs were not barred from bringing their actions in the state circuit court and thus were not deprived of a state forum for vindicating their federal constitutional rights.

Because the clearer reading of the relevant statutes allows Plaintiffs to bring their cases, including their federal claims, in state court, and because this Court is required to read statutes to be constitutional if possible, we conclude that Plaintiffs have failed to establish that jurisdiction in federal court is proper because the state provided no “reasonable, certain and adequate [procedures] at the time of the taking.” Williamson Cty., 473 U.S. at 194, 105 S.Ct. 3108 (quotation omitted). The district court thus erred in finding that it had jurisdiction to entertain this action.

2. Tax Injunction Act and Comity

The district court also determined that the Tax Injunction Act does not bar jurisdiction here. That Act declares that “[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S.C. § 1341. This statute is jurisdictional, Hedgepeth v. Tennessee, 215 F.3d 608, 611-12 & n.4 (6th Cir. 2000), and prevents federal courts from awarding declaratory or injunctive relief to plaintiffs who challenge state tax laws. Nat’l Private Truck Council, Inc. v. Okla. Tax Comm’n, 515 U.S. 582, 586-87, 115 S.Ct. 2351, 132 L.Ed.2d 509 (1995).

Another similar but distinct limitation on federal court jurisdiction over challenges to state tax laws is the principle of comity. This principle “prohibits ‘taxpayers ... from asserting § 1983 actions against the validity of state tax systems in [the lower] federal courts.’ ” Chippewa Trading Co. v. Cox, 365 F.3d 538, 541 (6th Cir. 2004) (alterations in original) (quoting Fair Assessment in Real Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 116, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981)). “While this comity principle reflects some of the same concerns that led Congress to enact the Tax Injunction Act, 28 U.S.C. § 1341, it stands on its own bottom, and extends to cases seeking monetary damages as well as injunctive or other equitable relief.” Id. (footnote omitted) (citing Fair Assessment, 454 U.S. at 110, 102 S.Ct. 177). Only when the states do not provide a “plain, adequate, and complete” remedy in their courts should the federal courts be able to exercise jurisdiction despite the principle of comity. Id. (quoting Fair Assessment, 454 U.S. at 116, 102 S.Ct. 177).

Plaintiffs here brought an action for both a declaratory judgment and monetary damages, and, thus, both the Tax Injunction Act and comity are at play. Because the two doctrines only allow federal courts to exercise jurisdiction when states courts cannot provide “plain, adequate, and complete” remedies, only one analysis is required. Fair Assessment, 454 U.S. at 116 n.8, 102 S.Ct. 177 (“We discern no significant difference, for purposes of the principles recognized in this case, between remedies which are ‘plain, adequate, and complete,’ as that phrase has been used in articulating the doctrine of equitable restraint, and those which are ‘plain, speedy and efficient,’ within the meaning of § 1341.” (citations omitted)). “[S]tate remedies are plain, adequate, and complete if they provide the taxpayer with a full hearing and judicial determination at which the taxpayer may raise any federal constitutional objections to the tax.” In re Gillis, 836 F.2d 1001, 1010 (6th Cir. 1988) (footnote omitted). As has already been discussed above in the ripeness context, the district court and Plaintiffs erred in concluding that Plaintiffs could not challenge the GPTA on constitutional grounds in state court. In fact, such a plain, adequate, and complete avenue for redressing their claims was available. We therefore conclude that the district court erred in finding that the claims were not barred by the Tax Injunction Act and the doctrine of comity, and as a result, mistakenly determined that it could exercise subject matter jurisdiction over Plaintiffs’ claims. Consequently, the district court lacked jurisdiction to entertain this action.

CONCLUSION

For the foregoing reasons, we VACATE the judgment of the district court and REMAND with instructions to DISMISS the action for lack of subject matter jurisdiction.

DISSENT

KETHLEDGE, Circuit Judge,

dissenting.

In this case the defendant Van Burén County took property worth $206,000 to satisfy a $16,750 debt, and then refused to refund any of the difference. In some legal precincts that sort of behavior is called theft. But under the Michigan General Property Tax Act, apparently, that behavior is called tax collection. The question here is — or at least in my view should be— whether the County’s action is a taking under the federal Constitution.

Our court declines to answer that question because it holds — under the Supreme Court’s decision in Williamson County Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108 (1985) — that the plaintiffs here must seek a remedy in state court rather than federal. I respectfully disagree with that conclusion. To begin with first principles: the federal courts indisputably have jurisdiction over this case, see 28 U.S.C. § 1331, and the federal courts “have a strict duty to exercise the jurisdiction that is conferred upon them by Congress.” Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). But Williamson County singles out takings claims for disfavored treatment so far as the availability of a federal forum is concerned. Specifically, if a plaintiff alleges that a State has violated the federal Takings Clause, and state law provides a “reasonable, certain, and adequate” remedy for the violation, then the plaintiff must pursue that remedy in state court. Williamson County, 473 U.S. at 194, 105 S.Ct. 3108. As the majority points out, however, this doctrine is merely “prudential,” which is to say discretionary and judge-created. See Suitum v. Tahoe Reg’l Planning Agency, 520 U.S. 725, 733-34, 117 S.Ct. 1659, 137 L.Ed.2d 980 (1997). Thus we may dispense with it “when its application ‘would not accord with sound process.’ ” Miles Christi Religious Order v. Twp. of Northville, 629 F.3d 533, 541 (6th Cir. 2010) (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1012, 112 S.Ct. 2886 (1992)).

We have neither certainty nor sound process here. Whether Michigan substantive law provides a remedy for the type of taking alleged here is hardly certain. True, Michigan law provides a cause of action for so-called “inverse condemnations,” in which the government takes a property interest without a formal exercise of eminent domain. See Merkur Steel Supply, Inc. v. Detroit, 261 Mich.App. 116, 680 N.W.2d 485, 495 (2004). And in adjudicating those claims the Michigan courts have recognized what they call “de facto” takings, for which “no exact formula” exists. Id. But the Michigan courts have not yet determined, as a matter of state law, whether a local government’s appropriation of property pursuant to the taxing power generally, or to the General Property Tax Act in particular, is a taking to the extent the government takes property worth more than the amount of taxes owed. Perhaps the Michigan courts will recognize this kind of inverse-condemnation claim as viable, not least because of the gross injustice — both equitably, and from the standpoint of the interests protected by takings law — caused by the kind of governmental action on display here. (In the County’s defense, the Michigan Act appears actually to require the County to short the taxpayer the difference between the value of the property forfeited and the amount of taxes and penalties owed. See M.C.L. § 211.78m(8).) But it overstates matters to say the Michigan courts’ recognition of this type of inverse-condemnation claim is “certain.”

Equally problematic is the jurisdictional uncertainty that awaits the plaintiffs in state court. When they file their inverse-condemnation claim there, they must choose between two courts: the state circuit court, which is a trial court of general jurisdiction, or the state court of claims, which (like its federal counterpart) has jurisdiction over monetary claims “against the state or any of its departments[.]” See M.C.L. §§ 600.605 (circuit court), 600.6419 (court of claims). But no matter which court the plaintiffs choose, they will face, a strong argument that they chose wrongly. The majority suggests the plaintiffs should file in circuit court, which is remarkable given the statute’s plain statement that the court of claims’s jurisdiction over monetary claims against the state or its departments “is exclusive[,]” M.C.L. § 600.6419(1), and given the Michigan Court of Appeals’s plain holding that “[t]he Court of Claims is the proper forum in which to seek redress where a plaintiff alleges an already accomplished inverse eondemnation[.]” Lim v. Mich. Dep’t of Transp., 167 Mich.App. 751, 423 N.W.2d 343, 345 (1988). Perhaps, as the majority suggests, the Michigan courts will distinguish Lim on the ground that the plaintiffs here are suing a subdivision of the State rather than the State itself. But perhaps not, since counties are instrumentalities of the State. See, e.g., Wayne Cty. Bd. of Comm’rs v. Wayne Cty. Airport Auth., 253 Mich.App. 144, 658 N.W.2d 804, 828 (2002); Pomann, Callanan & Sofen, P.C. v. Wayne Cty. Dep’t of Soc. Servs., 166 Mich. App. 342, 419 N.W.2d 787, 789 (1988). And the Michigan Court of Appeals has held that a monetary claim against a county agency belongs in the court of claims, whose exclusive jurisdiction “encompasses all claims against the state and its instru-mentalities for money damages.” Pomann, Callanan & Sofen, 419 N.W.2d at 789.

That said, the jurisdiction of the court of claims over this case is likewise uncertain: under another statutory provision, no claimant “who has an adequate remedy upon his claim in the federal courts” may . bring suit against the state or its departments in the court of claims. M.C.L. § 600.6440. Given that the plaintiffs assert a federal constitutional claim and that the federal courts exist in part to provide a remedy for such claims, § 600.6440 seems to direct these plaintiffs to litigate their claims in federal court rather than state.

Thus, as read by the majority, Williamson County sends these plaintiffs to state court, while state law directs them back to federal. The majority resolves this dilemma by declaring the state jurisdictional regime unconstitutional to the extent it would require a federal constitutional claimant to bring suit in federal court. Maj. Op. at 819-22. And thus, contrary to what the Michigan statutes actually say, the majority opines that the plaintiffs may bring suit in the state circuit court.

At this point one senses we have lost our constitutional bearings. The plaintiffs have asked us to adjudicate a claim arising under the federal Constitution, which is the most important type of claim that we can adjudicate. The claim itself is substantial: that, when a state takes fee simple to property in satisfaction of a tax obligation, the state effects a taking to the extent the property is worth more than the taxes and penalties owed. Complaint ¶ 4. Congress has granted us jurisdiction over that claim. We have a strict duty to exercise that jurisdiction. Meanwhile, the state jurisdictional statute, specifically § 600.6440, expresses an affirmative preference that we adjudicate the claim. And yet — in the interest of “federalism,” no less — we reject the State’s preference, declare the state jurisdictional regime (as set forth by the statute’s plain terms) unconstitutional as applied here, disregard our strict duty to exercise the jurisdiction assigned to us by Congress, and send the plaintiffs back to state court, where they face procedures that as a practical matter are “confusing and uneertain[.]” Kruse v. Village of Chagrin Falls, 74 F.3d 694, 698 (6th Cir. 1996). The result is not “sound process” but a welter of contradictions.

One further irony remains. The majority cites Haywood v. Drown, 556 U.S. 729, 129 S.Ct. 2108 (2009), as support for its conclusion that Michigan’s jurisdictional regime cannot, consistent with the federal Constitution, mean what its relevant jurisdictional provisions say. In Haywood, the Supreme Court held that state jurisdictional statutes that are designed to discriminate against “disfavored federal claim[s]” or that serve “as a device to undermine federal law” violate the Supremacy Clause. 556 U.S. at 738-89, 741, 129 S.Ct. 2108. But here, in clear contrast to Haywood (which involved suits brought by inmates against corrections officers), there is no reason at all to think that, in directing federal takings claims to federal court, the State sought ' to undermine or discriminate against those claims in any way. Quite the contrary: if anyone has undermined the adjudication of federal takings claims against states and local governments, it is the federal courts — by the application of Williamson County.

I respectfully dissent.

      . The GPTA provides that, after a hearing and a determination that foreclosure is warranted, the county’s circuit court shall issue a foreclosure order specifying, inter alia, "[t]hat fee simple title to property foreclosed by the judgment will vest absolutely in the foreclosing governmental unit,” with only limited exceptions. Mich. Comp. Laws § 211.78k(5)(b); see also id. § 211.78k(5)(d) (explaining that “the foreclosing governmental unit has good and marketable fee simple title to the property”).

      . The district court reached the opposite conclusion on the jurisdictional question as the district court in Rafaeli, LLC v. Wayne County, No. 14-13958, 2015 WL 3522546 (E.D. Mich. June 4, 2015), which found that the Tax Injunction Act and the comity doctrine bar plaintiffs from challenging the GPTA in federal court.

      . The dissent makes much of the fact that the test set forth in Williamson County is only prudential. Dissent Op. at 823-24. However, the Tax Injunction Act, discussed infra at 821-23, utilizes substantially the same test and is jurisdictional, rather than prudential.

      . Indeed, the circuit courts of Michigan routinely decide cases involving causes of action for which a remedy in federal court exists. See, e.g., Mudge v. Macomb Cty., 458 Mich. 87, 580 N.W.2d 845 (1998); Dampier v. Wayne Cty., 233 Mich.App. 714, 592 N.W.2d 809 (1999); Morden v. Grand Traverse Cty., 275 Mich.App. 325, 738 N.W.2d 278 (2007) (per curiam).


source: Caselaw Access Project

author: HAMILTON, Circuit Judge.

license: Public Domain

text:
    LEGATO VAPORS, LLC, et al., Plaintiffs-Appellants, and Right to be Smoke-Free Coalition, Inc., Intervenor-Appellant, v. David COOK, et al., Defendants-Appellees.
    No. 16-3071
    United States Court of Appeals, Seventh Circuit.
    Argued December 8, 2016
    Decided January 30, 2017

      Robert David Epstein, James A. Tan-ford (argued), Attorneys, EPSTEIN COHEN SEIF & PORTER, LLP, Indianapolis, IN, J. Gregory Troutman, Attorney, TROUTMAN LAW OFFICE, PLLC, Louisville, KY, for Plaintiffs-Appellants.
    Joshua R. Lowry (argued), Attorney, OFFICE OF THE ATTORNEY GENERAL, Indianapolis, IN, for Defendants-Ap-pellees.
    Robert David Epstein, James A. Tan-ford, Attorneys, EPSTEIN COHEN SEIF & PORTER, LLP, Indianapolis, IN, Eric P. Gotting, Attorney, KELLER & HECK-MAN, Washington, DC, for Intervenor-Appellant.
    Before MANION, KANNE, and HAMILTON, Circuit Judges.
   HAMILTON, Circuit Judge.

In 2015 the State of Indiana enacted the Vapor Pens and E-Liquid Act to regulate the manufacture and distribution of vapor pens and the liquids used in so-called e-cigarettes. 2015 Ind. Acts 1870, Ind. Code §§ 7.1-7-1-1 et seq. The Act is written so as to have extraterritorial reach that is unprecedented, imposing detailed requirements of Indiana law on out-of-state manufacturing operations. The Act regulates the design and operation of out-of-state production facilities, including requirements for sinks, cleaning products, and even the details of contracts with outside security firms and the qualifications of those firms’ personnel. Imposing these Indiana laws on out-of-state manufacturers violates the dormant Commerce Clause of the United States Constitution.

The federal Constitution leaves Indiana ample authority to regulate in-state commerce in vapor pens, e-liquids, and e-cigarettes to protect the health and safety of its residents. For example, the Act’s prohibitions on sales to minors, its requirements for child-proof packaging, ingredient labeling, and purity, and requirements for instate production facilities pose no inherent constitutional problems. Indiana may not, however, try to achieve those health and safety goals by directly regulating out-of-state factories and commercial transactions. As applied to out-of-state manufacturers, the challenged provisions of the Act violate the dormant Commerce Clause prohibition against extraterritorial legislation.

We reverse the judgment of the district court dismissing this case and remand with instructions to enjoin enforcement of the challenged provisions against the plaintiffs and to declare the challenged provisions unenforceable against out-of-state manufacturers. To explain our reasons, we first review the statutory provisions and procedural history of the case. Then we apply the Commerce Clause analysis to three categories of challenged provisions: security terms, clean room specifications, and audit requirements.

I. Factual and Procedural Background

In 2015, the Indiana legislature passed the Vapor Pens and E-Liquid Act, regulating the production and sale of e-liquid solutions. E-liquid solutions — generally consisting of a mixture of propylene glycol, vegetable glycerin, flavorings, water, and a range of nicotine concentrations — are ingested by the consumer using an e-vapor device. E-vapor devices are often shaped like cigarettes. They use a battery and atomizer to turn an e-liquid solution into an aerosol that can be inhaled through a mouthpiece, simulating the act of smoking a cigarette. The popularity of “vaping” has increased dramatically since its introduction to the United States market in 2007. Currently, there are an estimated 138 brick-and-mortar “vape” shops in Indiana, and products are also available online to Indiana consumers. Total annual sales of vape devices and e-liquids in the state are more than $77 million.

In some ways, the Act is unremarkable and uncontroversial. It regulates in-state sales of e-liquids with requirements for tamper-evident and child-proof packaging, as well as labels designating active ingredients, nicotine content, and expiration dates. Ind. Code § 7.1-7-4-6(b)(l)-(7). The Act prohibits sales to minors. § 7.1-7-6-2(a)(1). The Act itself explains that its purpose is to protect public health and safety in the use of these products “in the absence of federal regulations,” § 7.1-7-1-2, since the federal government has not adopted comparable regulations for safety and purity of e-cigarette products.

What is remarkable, however, is the Act’s extensive regulation beyond the manufacture and sale of e-liquid solutions in Indiana. The statute requires not just that in-state and out-of-state manufacturers meet stringent security standards, but it also goes so far as to require the manufacturer to contract with an independent security firm rather than provide the security services in-house. It requires the manufacturer to enter a service agreement with a security firm that is valid for five years after the date of permit application. Ind. Code §§ 7.1-7-4-l(d)(2)(B), (d)(3). The security firm must meet stringent certification standards and provide 24-hour video monitoring and high-security key systems. § 7.1-7-4-6(b)(12)-(13). The Act also dictates details for the construction, design, and operation of the manufacturing facility, including requiring a “clean room” for mixing and bottling that adheres to requirements of the Indiana Commercial Kitchen Code. §§ 7.1-7-4-l(d)(l), 7.1-7-2-4(3).

The Act imposes each of these substantive requirements governing manufacturing processes and facilities as a condition of obtaining and keeping a permit. If a manufacturer’s products are sold in Indiana, the manufacturer must obtain a permit from the Indiana Alcohol and Tobacco Commission. § 7.1-7-4-l(a). To obtain a permit, the substantial requirements for security and clean room facilities must be met, and audit provisions apply to ensure compliance after the permit is granted. See, e.g., § 7.1-7-4-6(b)(17). A permitted manufacturer “must submit to random audits,” § 7.1-7-4-6(b)(16), defined as procedures “performed by the commission, including inspection of manufacturing facilities and preparation areas, review of required records, compliance checks, and auditing of samples of e-liquid,” § 7.1-7-2-3. The Act defines a “manufacturer” as “a person or cooperative, located inside or outside Indiana, that is engaged in manufacturing e-liquid.” § 7.1-7-2-15 (emphasis added).

The plaintiffs are three out-of-state manufacturers of regulated products: Legato Vapors, Rocky Mountain E Cigs, and Derb E Cigs. They filed suit in the district court for injunctive and declaratory relief against members of the Indiana Alcohol and Tobacco Commission on several state and federal grounds. The parties filed cross-motions for summary judgment on stipulated facts. The district court granted summary judgment for the defendants. Legato Vapors LLC v. Cook, 193 F.Supp.3d 952, 977, 2016 WL 3548658 at *18 (S.D.Ind. June 30, 2016).

Where the district court has decided cross-motions for summary judgment on stipulated facts, our review on appeal is de novo, without deference to the legal analysis of the district court. On appeal, plaintiffs have narrowed both their theory and the scope of their challenge. They have narrowed their legal theory to the argument that the Act, as applied to out-of-state manufacturers, violates the dormant Commerce Clause prohibition on extraterritorial state regulation of commerce. Plaintiffs have narrowed their challenges to the Act’s direct regulations applicable to manufacturing facilities, including those regulating the physical manufacturing facility, security and cleaning arrangements, and facility audits.

II. The Dormant Commerce Clause

The Commerce Clause gives Congress the power to regulate commerce “among the several States.” U.S. Const. art. I, § 8, cl. 3; see Gibbons v. Ogden, 22 U.S. 1, 9 Wheat. 1, 6 L.Ed. 23 (1824); Willson v. Black Bird Creek Marsh Co., 27 U.S. 245, 2 Pet. 245, 7 L.Ed. 412 (1829). While the clause expressly grants power to Congress, since before the Civil War it has been settled that it also has an implicit or “dormant” dimension: “Although the Clause thus speaks in terms of powers bestowed upon Congress, the Court long has recognized that it also limits the power of the States to erect barriers against interstate trade.” Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 35, 100 S.Ct. 2009, 64 L.Ed.2d 702 (1980); see also, e.g., CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 87, 107 S.Ct. 1637, 95 L.Ed.2d 67 (1987), citing Cooley v. Board of Wardens, 53 U.S. 299, 12 How. 299, 13 L.Ed. 996 (1851).

For many years, dormant Commerce Clause jurisprudence drew a distinction between States’ direct and indirect regulation of interstate commerce. Direct interference with interstate commerce was invalid as a violation of the dormant Commerce Clause, but legislation having indirect effects remained permissible. See, e.g., Di Santo v. Pennsylvania, 273 U.S. 34, 36-37, 47 S.Ct. 267, 71 L.Ed. 524 (1927) (state law seeking to prevent fraud by requiring state license to sell steamship tickets was invalid as direct regulation of foreign and interstate commerce).

The distinction between direct and indirect regulation proved to be less a bright line and more a matter of degree. The Supreme Court then began to rely more on a balancing test that weighs the regulating state’s interests against the burdens on interstate commerce (at least when the state does not actually discriminate against interstate commerce). See Southern Pacific Co. v. Arizona, 325 U.S. 761, 770-71, 783-84, 65 S.Ct. 1515, 89 L.Ed. 1915 (1945) (applying balancing test to hold that state law restricting length of interstate trains was invalid burden on interstate commerce); California v. Thompson, 313 U.S. 109, 116, 61 S.Ct. 930, 85 L.Ed. 1219 (1941) (overruling Di Santo); South Carolina State Highway Dep’t v. Barnwell Bros., 303 U.S. 177, 196, 58 S.Ct. 510, 82 L.Ed. 734 (1938) (upholding state limits on size and weight of trucks on state highways).

Despite the fading reliance on the direct-indirect distinction and the further development of balancing tests for. nondiscriminatory state laws, the Supreme Court has never held that a state may impose truly direct and burdensome state regulation of commerce beyond the state’s boundaries. See, e.g., Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 584, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986) (invalidating state’s price-affirmation law that directly regulated “interstate commerce”); Edgar v. MITE Corp., 457 U.S. 624, 642, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982) (plurality opinion) (“[A] state statute which by its necessary operation directly interferes with or burdens [interstate] commerce is a prohibited regulation and invalid, regardless of the purpose with which it was enacted.”), quoting Shafer v. Farmers’ Grain Co., 268 U.S. 189, 199, 45 S.Ct. 481, 69 L.Ed. 909 (1925). The dormant Commerce Clause continues to prohibit “the application of a state statute to commerce that takes places wholly outside of the State’s borders, whether or not the commerce has effects within the State.” Healy v. Beer Institute, Inc., 491 U.S. 324, 336, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989), quoting Edgar, 457 U.S. at 642-43, 102 S.Ct. 2629. When a state directly regulates interstate commerce, it “exceeds the inherent limits of the enacting State’s authority and is invalid regardless of whether the statute’s extraterritorial reach was intended by the legislature.” Id.

Generally, courts will strike down a statute that “directly regulates or discriminates against interstate commerce, or when its effect is to favor instate economic interests over out-of-state interests,” without engaging in the more permissive balancing tests applied to nondiscriminatory legislation. Brown-Forman Distillers, 476 U.S. at 578-79, 106 S.Ct. 2080; Edgar, 457 U.S. at 640, 643, 102 S.Ct. 2629. See, e.g., Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970). Laws that discriminate directly against interstate commerce are subject to what amounts to strict scrutiny. Maine v. Taylor, 477 U.S. 131, 138, 106 S.Ct. 2440, 91 L.Ed.2d 110 (1986). “[0]nce a state law is shown to discriminate against interstate commerce either on its face or in practical effect, the burden falls on the State to demonstrate both that the statute serves a legitimate local purpose, and that this purpose •could not be served as well by available nondiscriminatory means.” Id. (internal quotation marks and citations omitted).

In this ease, plaintiffs do not contend that the Indiana Act discriminates against interstate commerce. They argue that the law violates the Commerce Clause by directly regulating commercial activity outside Indiana. Where the issue is the extraterritorial effect of a law, the focus is on its “practical effect.” Healy, 491 U.S. at 336, 109 S.Ct. 2491. The practical effect is assessed by considering both the consequences of the law itself and how the law may interact with the legitimate regulatory regimes of other states — potential inconsistent legislation. Id.

Here, plaintiffs argue that the Indiana Act violates the Commerce Clause as extraterritorial regulation because it dictates how out-of-state manufacturers must build and secure their facilities, operate assembly lines, clean their equipment, and contract with security providers, if any of their products are sold in Indiana. Plaintiffs also argue that the Act puts out-of-state manufacturers at risk of inconsistent regulations imposed by other states. The defendant state officials argue that the transactions regulated by the Act are not wholly outside Indiana and that the Act is facially neutral, without discriminating against interstate commerce. The Act applies equally to in-state and out-of-state manufacturers.

We assess only whether particular provisions of the Indiana Act, as applied to out-of-state manufacturers, are invalid as direct extraterritorial regulation. To figure out which provisions plaintiffs challenge, we note their general claim that “the security, clean room, and audit requirements” violate the Commerce Clause, their list of twenty-two challenged provisions in the first amended complaint, and the imprecise disclaimer that plaintiffs are not challenging, or at least are no longer challenging, “local sales rules” in Ind. Code § 7.1-7-4-6. The result, as we see it, is that plaintiffs continue to challenge the following sixteen provisions: Ind. Code §§ 7.1-7-4-l(d)(l)~ (3), (6), (8) — (10); 7.1-7-4-6(b)(8), (10)-(16), and (19). See Legato Vapors, 193 F.Supp.3d at 957 n.1, 2016 WL 3548658, at *1 n.1 (district court’s observation that exact provisions plaintiffs challenged were not clear in the filings).

With almost two hundred years of precedents to consider, our review of prior dormant Commerce Clause decisions has not revealed a single appellate case permitting any direct regulation of out-of-state manufacturing processes and facilities comparable to the Indiana Act. The Supreme Court has issued a number of decisions in closer cases, such as challenges to price-affirmation laws and laws regulating in-state segments of interstate transportation. At first glance, both types of laws seem to regulate only in-state commerce. Those lines of cases reveal two facets of the basic rule prohibiting extraterritorial legislation. Price-affirmation laws can violate the Commerce Clause because they have ripple effects in other states, effectively setting the price for a commodity in transactions outside the regulating state. See, e.g., Healy, 491 U.S. 324, 109 S.Ct. 2491; Brown-Forman Distillers, 476 U.S. 573, 106 S.Ct. 2080. State regulation of in-state segments of interstate railroad and highway traffic can violate the Commerce Clause because national uniformity is “practically indispensable to the operation of an efficient and economical national railway system,” Southern Pacific, 325 U.S. at 771, 65 S.Ct. 1515, and the effect of one state’s regulation can place a “substantial burden on the interstate movement of goods,” Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 445, 98 S.Ct. 787, 54 L.Ed.2d 664 (1978). Implicit in both lines of cases is the more general principle that a state may not impose its laws on commerce in and between other states.

This court has struck down as extraterritorial state laws much less intrusive than the Indiana Act. For example, we invalidated a state law that attempted to regulate loan transactions entered into entirely out-of-state. In Midwest Title Loans, Inc. v. Mills, the plaintiff challenged an Indiana law that deemed a loan transaction to take place in Indiana and thus subject to Indiana law if the out-of-state lender advertised in Indiana, even if an Indiana resident entered into the transaction entirely in Illinois. 593 F.3d 660, at 661-62, 669 (7th Cir. 2010). Indiana’s attempt to regulate loan transactions occurring wholly outside the state constituted impermissible extraterritorial regulation. Id. at 669. Similarly, in Dean Foods Co. v. Brancel, a Wisconsin law prohibited payment of volume premiums for bulk purchases of milk produced in Wisconsin. 187 F.3d 609 (7th Cir. 1999). We held that Wisconsin could not apply its law to regulate the price of sales of milk produced in Wisconsin but where the sales took place outside the state, after the producers had transported the milk beyond the state boundary. Id. at 620.

In National Solid Wastes Management Association v. Meyer, a Wisconsin statute prohibited both in-state and out-of-state generators of solid waste from dumping certain materials in Wisconsin landfills unless they resided in a community that had adopted an “effective recycling program.” 63 F.3d 652, 653-54 (7th Cir. 1995). We held that the law violated the Commerce Clause as extraterritorial regulation. Id. at 661-62. The law controlled the conduct of those engaging in commerce occurring wholly outside the state when it conditioned the “use of Wisconsin landfills by non-Wisconsin waste generators on their home communities’ adoption and enforcement of Wisconsin recycling standards,” such that all persons in those communities outside Wisconsin had to “adhere to the Wisconsin standards whether or not they dump[ed] their waste in Wisconsin.” Id. at 658. That Wisconsin law also directly regulated out-of-state commerce and was invalid. Id. at 661.

It is useful to compare these cases on extraterritorial legislation to decisions dealing with state laws imposing product labeling requirements for in-state sales, even when the product is produced out-of-state. The Second Circuit upheld a Vermont law requiring special labels for light bulbs containing mercury in National Electrical Manufacturers Association v. Sorrell, 272 F.3d 104 (2d Cir. 2001). The court found that the law was not extraterritorial in scope. Although the law may have required out-of-state manufacturers to “modify their production and distribution systems to differentiate” between light bulbs bound for Vermont and those bound elsewhere, the law was not invalid. Id. at 110. Nor did it matter that the law might compel manufacturers to withdraw from the Vermont market, or alternatively, to sell light bulbs with labeling conforming to Vermont’s requirements in other states. Id. at 110-11. The Second Circuit found that no conflict with other state regulatory schemes had been shown, so that the labeling law did not pose a risk of inconsistent regulation. Id. at 112.

The Sixth Circuit took a similar approach to uphold a state-specific labeling requirement in International Dairy Foods Association v. Boggs, 622 F.3d 628, 647-49 (6th Cir. 2010). An Ohio law said that labels on milk sold in the state could not carry certain claims about the absence of artificial hormones and had to include a disclaimer for claims about the absence of artificial hormones in production processes. Id. at 632-34. The Sixth Circuit held that the law was not invalid as extraterritorial despite out-of-state producers’ claims that it would burden interstate commerce. Id. at 649-50. The Sixth Circuit reasoned that the law had only indirect effects on out-of-state manufacturers, who may have needed to adjust their labels, and did not impede the flow of milk across state lines. Id. at 647-48.

The contrast between the labeling laws and the extraterritorial laws we have struck down helps to mark the extent of the dormant Commerce Clause prohibition. When we compare the challenged provisions of the Indiana Act here, it becomes clear that they cannot be applied to out-of-state manufacturers of vaping products.

A. Security Provisions

We first consider the requirements for security contracts, beginning with Indiana Code § 7.1-7-4-l(d), which governs initial applications for e-liquid manufacturing permits. Paragraph 7.1.-7-4-l(d)(l) requires the permit application to include plans “for the construction and operation of the manufacturing facility that demonstrate that the facility design is ... capable of meeting ... the security requirements.” Paragraphs (d)(2) and (d)(3) make explicit the requirements referenced in (d)(1): the applicant-manufacturer must have entered into a service agreement that is valid for five years after the date of application, renewable for the entire duration the applicant holds a permit, and with a security firm that can certify that it meets the requirements of § 7.1-7-4-6(b)(10)-(15).

The provisions of § 7.1-7-4-6(b)(10)-(15) in turn require the manufacturer to “take reasonable steps to ensure that all ingredients used in the production of e-liquid are stored in a secure area accessible only by authorized personnel,” and “that only authorized personnel have access to secured areas;” to have “a remotely monitored security system” and “an exclusive high security key system;” to record 24-hour video surveillance; and to maintain samples from each production batch for not less than three years m areas with “recorded -video surveillance.”

In remarkably specific provisions, § 7.1-Y — 4—1(d)(3) requires an applicant for a manufacturing permit to provide “verified documents” demonstrating that the “security firm has continuously employed” for not less than one year at least one employee certified by the Door and Hardware Institute and at least one employee certified as a Rolling Steel Fire Door Technician. The security firm must also have at least one year of commercial experience with “video surveillance system design and installation with remote viewing capability from a secure facility,” owning and operating a security monitoring system with redundant offsite backup, and operating “a facility that modifies commercial hollow metal doors, frames, and borrowed lights with authorization to apply the Underwriters Laboratories label.” § 7.1 — Y—4—1(d)(8).

From the perspective of the dormant Commerce Clause, these are extraordinary provisions, at least as applied to out-of-state manufacturers. At the most basic level, one might wonder why Indiana cares whether an out-of-state manufacturer provides for security at its facilities through a contract with an independent company rather than through its own employees. The specific provisions for the forms of security, including the types of systems and the use of on-site or off-site monitoring, raise more questions. The astoundingly specific provisions for the qualifications of the security firm that the manufacturer must commit to hire for at least five years raise still more questions that go well beyond the Commerce Clause.

Another district court decision in Indiana recently found that only one company in the entire United States, located not so coincidentally in Indiana, satisfied the criteria of the Indiana Act and has the approval of the Indiana Alcohol and Tobacco Commission. GoodCat, LLC v. Cook, 202 F.Supp.3d 896, 904-05, (S.D.Ind. 2016). In fact, prior to an amendment to the bill that became the Act, not even that favored company would have met the Act’s requirements. Id. That lone company was neither required nor had the capacity to accept all contract applications. The result has been that the one security company serves six companies who sought security contracts with it. Id. at 905-06. Only those six companies may lawfully sell their vap-ing products in Indiana. Before the Act went into effect, ninety percent of e-liquid revenue in Indiana came from e-liquids manufactured out-of-state. Now, only six manufacturers — compared to the more than one hundred selling in Indiana before the Act — supply e-liquids to Indiana retailers. Four of those six are in-s'tate companies. Id. at 915-16.

These circumstances raise obvious concerns about protectionist purposes and what looks very much like a legislative grant of a monopoly to one favored instate company in the security business. We can decide this case without pursuing all of those questions, however. As applied to out-of-state manufacturers, the security provisions of the Indiana Act violate the Commerce Clause for a more basic reason. They operate as extraterritorial legislation, governing the services and commercial relationships between out-of-state manufacturers and their employees and contractors. With two hundred years of Commerce Clause precedents to draw from, the defendant state officials have offered no authority supporting such extraterritorial legislation.

We understand the State’s arguments that good security for manufacturing facilities is vital to protect vaping products from contamination. The Commerce Clause does not prohibit Indiana from imposing reasonable and even-handed purity requirements on vaping products sold in Indiana. It may not try to achieve that goal by direct extraterritorial regulation of the manufacturing processes and facilities of out-of-state manufacturers.

Consideration of potential inconsistent regulation only reinforces our conclusion that, as applied to out-of-state manufacturers, the challenged provisions violate the Commerce Clause. Plaintiffs argue that now, ten years after the launch of the e-liquid market, states have had the opportunity to adopt their own distinct regulatory regimes for e-liquids. Plaintiffs point us to less stringent e-liquid laws in Arkansas and Utah, for example, but the threat of inconsistent regulation, not inconsistent regulation in fact, is enough to show why Indiana cannot impose these security requirements on out-of-state manufacturers. See Dean Foods, 187 F.3d at 615.

The potential for conflicts in the remarkably specific security requirements is obvious. Suppose another state chose to enact a similarly specific security provision tailored to one of its own in-state security firms. Or suppose another state simply required manufacturers to provide adequate security through their own employees, without trying to contract out the service. Indiana responds that the e-liquid market is new and states are just beginning to regulate it, making the possibility of inconsistent regulation slight. We reject this argument. The very youth of the market and of state health and safety regulations cuts the other way. In the absence of preemptive federal laws, we can expect more states to enact their own laws (and to treat existing laws in other states, like Indiana, as models). In any event, the obvious risk of inconsistent regulation is enough here. See Healy, 491 U.S. at 336, 109 S.Ct. 2491.

Taken together and individually, the security provisions amount to direct and unconstitutional extraterritorial regulation of out-of-state e-liquid manufacturers’ production facilities and their purchases of services in their home states. These requirements are not like the labeling cases, where an out-of-state producer may comply by making minor adjustments to its production processes so that labeling will conform to the governing state’s requirements. The direct regulation of out-of-state facilities and services has effects that are not comparable to mere incidental effects of a facially neutral law regulating labels, such as those on light bulbs or milk. Compare National Electrical Manufacturers Ass’n, 272 F.3d 104, and International Dairy Foods Ass’n, 622 F.3d 628, with Ind. Code § 7.1 — 7—4—6(b). More than just posing a significant threat of inconsistent regulation, the Indiana Act directly regulates specific elements of any security contract made by out-of-state manufacturers. These provisions control conduct “beyond the boundaries of the state” and tell out-of-state companies how to operate their businesses. See Edgar, 457 U.S. at 643, 102 S.Ct. 2629 (citation omitted).

The defendant state officials have not tried to show that they can satisfy the “strictest scrutiny” that would be needed to uphold a discriminatory or extraterritorial law. See Taylor, 477 U.S. at 144, 106 S.Ct. 2440 (citation omitted). The defendants simply assert without support that “for a product such as e-liquids there is no practical way to regulate the quality of it without regulating the manufacturing process.” The asserted purpose of the statute — protecting the health and safety of Hoosiers who consume e-liquids — is of course legitimate. But the defendants have failed to offer any evidence that less intrusive alternatives to these unprecedented extraterritorial provisions are incapable of serving that purpose. See Taylor, 477 U.S. at 138, 106 S.Ct. 2440. Such direct extraterritorial legislation is invalid as applied to the plaintiffs and other out-of-state manufacturers. See Healy, 491 U.S. at 336, 109 S.Ct. 2491.

B. Clean Room Requirements

The clean room provisions challenged by the plaintiffs require that the permit application include plans “for the construction and operation of the manufacturing facility that ... include a clean room space where all mixing and bottling activities will occur.” Ind. Code § 7.1.-7-4-l(d)(l). “The manufacturing facility must conduct all mixing and bottling activities in a clean room.” § 7.1-7-4-6(b)(8). The cleaning and sanitizing of equipment must be consistent with the Indiana standards for commercial kitchens in Indiana, and the equipment used in the production process must be “easily cleanable.” § 7.1 — 7—25—4; 410 Ind. Admin. Code § 7-24-1 et seq.; § 7-24-27(a). The commercial kitchen standards referenced in the Act impose detailed requirements for everything from physical facilities such as the type of sinks and required cleaning equipment, 410 Ind. Admin. Code § 7-24-270), to production materials such as types of cleansers and utensils used, 410 Ind. Admin. Code §§ 7— 24-294, -303).

Like the security provisions, the clean room provisions directly regulate the physical plants of out-of-state manufacturers. The clean room provisions also directly regulate the production processes of out-of-state manufacturers. Akin to telling out-of-state communities how to run their recycling programs, Indiana has gone so far as to order out-of-state e-liquid manufacturers to wash their equipment with specific cleansers in specific sinks. Compare National Solid Wastes Management Ass’n, 63 F.3d 652, with 410 Ind. Admin. Code §§ 7-24-270, -294, -303. And again, the potential for inconsistent regulation is obvious. Of the many requirements, from sink size to cleanser type, there are countless possible variations. That one state might demand double-basin steel sinks and another demand single-básin porcelain sinks is just one example. The clean room provisions directly regulate interstate commerce and, as applied to out-of-state manufacturers, are invalid as extraterritorial laws.

C. Audits and Additional Provisions

The remaining provisions of the Indiana Act challenged by the plaintiffs fall into the loose category of “audits.” Indiana Code § 7.1-7-4-l(d)(10) requires the applicant-manufacturers to give their consent to the Indiana Alcohol and Tobacco Commission “to enter during normal business hours ... to conduct physical inspections, sample the product ... and perform an audit.” See also § 7.1 — 7—4—6(b)(l6). Paragraph 7.1-7-4-l(d)(9) requires the manufacturers to consent to state or national criminal background checks on anyone listed in the permit application, and § 7.1-7-4-6(b)(19) prohibits the manufacturer or any other person listed on the permit application from having been “convicted of a felony or an offense involving a controlled substance.” Another challenged provision is § 7.1 — 7—4—1(d)(6), which requires a permit application to include the “projected output in liters per year of e-liquid of the manufacturing facility,” perhaps as the .basis for a future audit.

The record and parties’ arguments with respect to the audit provisions are not well developed. The record is sufficient for us to conclude, however, that audits and on-site inspections of out-of-state manufacturers are invalid direct regulations of interstate commerce insofar as they relate to enforcement of Indiana’s requirements for facility design and production operations. We leave room for future challenges, based on better developed records and arguments, to audit provisions such as taking product samples or other inspections not relating as directly to manufacturing facilities and production processes.

D. Commercial Transactions Outside the State

Our conclusion that the Act is an impermissible “attempt to regulate activities in other states,” see Midwest Title, 593 F.3d at 665, is supported by further analysis of commercial transactions taking place wholly outside the governing state. The plaintiffs argue that not only are the regulations direct extraterritorial regulations, as explained above, but also that three categories of commercial sales are impermissi-bly regulated by the Act because they take place wholly outside the state. See Healy, 491 U.S. at 336, 109 S.Ct. 2491. The parties have agreed that the Act regulates: (1) sales by an out-of-state manufacturer to an out-of-state distributor if the distributor resells the e-liquids to Indiana retailers; (2) sales by an out-of-state manufacturer to an out-of-state online retailer if the online retailer sells the e-liquid to Indiana consumers; and (3) direct online sales by out-of-state manufacturers to Indiana consumers. Although not explicitly regulated, these transactions fall within the scope of the statute because in each case, the Indiana Alcohol and Tobacco Commission could enforce the provisions against a manufacturer whose product, either intentionally or unintentionally, reaches Indiana vape shops for sale. To avoid violating the Act, an out-of-state manufacturer who wishes to avoid regulation by Indiana and has not obtained an Indiana permit would need to include in its contracts with distributors and online retailers an effective, perhaps even foolproof, guarantee ensuring the e-liquid would not be resold to anyone in Indiana.

The first two categories of transactions are like the loan transactions in Midwest Title or milk sales in Dean Foods. They occur entirely outside the regulating state. Indiana’s governance of these transactions is impermissible extraterritorial regulation. See Midwest Title, 593 F.3d 660; Dean Foods, 187 F.3d 609. Whether the third category — the producer-as-online-retailer selling directly to an Indiana consumer — occurs wholly outside the state may be a more complex question. See generally Ind. Code § 26-1-2-401(2) (under UCC sales provision, title to goods passes at time and place of shipment unless otherwise specified); Quill Corp. v. North Dakota, 504 U.S. 298, 311-13, 112 S.Ct. 1904, 119 L.Ed.2d 91 (1992) (dormant Commerce Clause requires out-of-state seller to have substantial nexus with taxing/purchaser state in order for taxing state to collect taxes from out-of-state seller). In any event, the other extraterritorial aspects of the challenged provisions are sufficient to hold that they may not be applied to out-of-state manufacturers, so the answer to the online sales question would not change our ultimate conclusion.

The regulations of clean rooms and security systems for e-liquid manufacturers are akin to an attempt by Ohio to regulate not just milk labeling but also the heating, cooling, ventilation, plumbing, and locks for out-of-state barns where the cows are milked. The Indiana Act directly regulates the production facilities and processes of out-of-state manufacturers and thus wholly out-of-state commercial transactions. It poses the clear risk of multiple and inconsistent regulations that would unduly burden interstate commerce. As applied to out-of-state manufacturers, the challenged extraterritorial laws violate the Commerce Clause.

For these reasons, we REVERSE the district court’s grant of summary judgment to the defendant state officials and REMAND to the district court to declare the challenged provisions unenforceable against out-of-state manufacturers and to enjoin their enforcement against the plaintiffs. These instructions apply to the following provisions: Indiana Code §§ 7.1-7-4 — 1 (d)(1) — (3), (6), (8) — (10); 7.1-7-4-6(b)(8), (10) — (16), and (19).

      . The Supreme Court has said that extraterritorial laws, like laws that discriminate against interstate commerce, are "virtually per se invalid” under the Commerce Claüse. Brown-Forman Distillers, 476 U.S. at 579, 106 S.Ct. 2080; see also International Dairy Foods, 622 F.3d at 644-45. We understand the qualifier "virtually” to refer to unusual circumstances where the state law serves an important purpose and the state can show that no less restrictive or intrusive measures could serve that purpose, so that the law survives strict scrutiny, as in Taylor, 477 U.S. at 138, 106 S.Ct. 2440 (upholding discriminatory state law under strict scrutiny). Indiana has not tried to satisfy that standard here.

      . The statute defines "clean room” as any part of the facility where "the mixing and bottling activities are conducted in secure and sanitary conditions in a space that is kept in repair sufficient to prevent e-liquid from becoming contaminated.” Ind. Code § 7.1-7-2-4.