Swanson v. State

Justice MITCHELL

dissenting.

I am convinced that the rule announced by the Supreme Court of the United States in Davis v. Michigan Dept. of Treasury, 489 *587 U.S. 803 , 103 L. Ed. 2d 891 (1989) must be applied retroactively, and that the majority errs in holding to the contrary. In Davis , the Supreme Court held that a scheme of taxation, exempting the pensions of retired state employees from state taxation while not exempting pensions of retired federal employees similarly situated, violates 4 U.S.C. § 111 and the constitutional doctrine of intergovernmental tax immunity. I believe that decision is fully retroactive and is the controlling precedent which must be applied in this case.

Assuming arguendo that the Chevron test is still valid, three factors must be considered in determining whether a constitutional ruling by the Supreme Court of the United States in a civil case will be applied retroactively. Chevron Oil Co. v. Huson, 404 U.S. 97, 106-107 , 30 L. Ed. 2d 296, 306 (1971). In the present case, all of those factors weigh in favor of retroactive application of Davis .

The first factor to be considered under Chevron is whether the decision to be applied has established “a new principle of law, either by overruling clear past precedent on which litigants may have relied ... or by deciding an issue of first impression whose resolution was not clearly foreshadowed. . . .” Id. at 106, 30 L. Ed. 2d at 306 . Clearly, the Supreme Court’s decision in Davis did not overrule any past precedent. Further, the majority in Davis seems to have felt that its holding there — that imposing state taxes upon the pensions of federal retirees but not upon the pensions of similarly situated state retirees was unconstitutional — had been clearly foreshadowed under the constitutional doctrine of intergovernmental tax immunity. See Davis, 489 U.S. 803 , 103 L. Ed. 2d 891 .

The second factor under Chevron requires a consideration of the prior history of the rule announced by the Supreme Court, its purpose and effect, and whether retroactive application will further or retard the operation of the rule. Chevron, 404 U.S. 106 -107, 30 L. Ed. 2d 306 . Unlike my colleagues, I believe that retroactive application of the rule announced in Davis will further the operation of that rule. Surely, requiring the State to return money it has collected from one class of taxpayers in a discriminatory and unconstitutional manner will further the operation of the rule announced in Davis declaring that the very conduct engaged in by the State violates the Constitution of the United States.

The third and final factor to be considered under Chevron is whether retroactive application of the Supreme Court decision in question will produce “inequitable results.” Id. at 107, 30 *588 L. Ed. 2d at 306 . As to this factor, my colleagues take judicial notice of the fact that the State of North Carolina is currently experiencing hard financial times. For that reason, they conclude that it would be “inequitable” to require the State to refund the taxes it has unconstitutionally taken from the plaintiffs under color of state law.

I am unable to see the “inequity” involved in requiring the State to return any money it has unconstitutionally taken from the plaintiffs. In my view, the fact that the State is experiencing financial difficulties has little to do with whether it would be inequitable to require the State to refund the plaintiffs’ money. Nothing in the record before us indicates that the plaintiffs, federal pensioners and military personnel, are experiencing any less financial difficulties than the State of North Carolina. Further, unlike the State, the plaintiffs do not have the power of taxation at their disposal when attempting to deal with their financial difficulties. There simply is nothing “inequitable” or wrong about ordering that the State not pick a taxpayer’s pocket or in requiring it to return the money when it is caught doing so. I believe it is entirely equitable and just to apply the rule announced in Davis retroactively so as to require that the State return any taxes it has unconstitutionally collected from the plaintiffs.

For the foregoing reasons, I believe that all three factors to be considered under the Chevron test weigh heavily in favor of the plaintiffs and against the defendants. Therefore, if the Chevron test is still valid, Davis must be applied retroactively.

I note, however, that the continuing viability of the Chevron test has been brought into question by the decision of the Supreme Court of the United States in James B. Beam Co. v. Georgia, — U.S. —, — L. Ed. 2d — (1991). Nevertheless, I am convinced that, even if the Chevron test has been abandoned, the rule announced in Davis must be given fully retroactive application for whichever of the several reasons set forth by the various Justices in Beam ultimately prevails in the Supreme Court of the United States. See generally, Beam, id.

The plaintiffs here must receive the full benefit of the rule set forth in Davis , just as the plaintiffs in that case did. Therefore, I believe that the plaintiff taxpayers are entitled to have the Constitution of the United States, as interpreted by the Supreme Court *589 of the United States in Davis , applied to this case. I respectfully dissent from the decision of the majority to the contrary.

Chief Justice EXUM and Justice FRYE join in this dissenting opinion.