Amicus Curiae Brief — Healthcare Distribution Alliance, et al., Petitioners v. Letitia James, Attorney General of New York, et al.

No. 20-1611

IN THE

Supreme Court of the United States

HEALTHCARE DISTRIBUTION ALLIANCE, ASSOCIATION

FOR ACCESSIBLE MEDICINES, and SPECGX LLC,

Petitioners,

v.

LETITIA JAMES and HOWARD A. ZUCKER, in their

respective official capacities as Attorney General and

Commissioner of Health of the State of New York,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

BRIEF FOR AMICUS CURIAE CHAMBER OF

COMMERCE OF THE UNITED STATES OF

AMERICA IN SUPPORT OF PETITIONERS

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. CHAMBER

LITIGATION CENTER

1615 H St., N.W.

Washington, DC 20062

YAAKOV M. ROTH

Counsel of Record

MICHAEL A. CARVIN

BRINTON LUCAS

JONES DAY

51 Louisiana Ave., N.W.

Washington, DC 20001

(202) 879-3939

yroth@jonesday.com

Counsel for Amicus Curiae Chamber of Commerce

of the United States of America

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ............................................. ii

INTEREST OF AMICUS CURIAE ................................ 1

SUMMARY OF ARGUMENT .......................................... 1

ARGUMENT ........................................................................ 3

I.

II.

THE SECOND CIRCUIT’S OVERBROAD

READING OF THE TIA IS BADLY MISTAKEN ............ 4

A.

Injunctive Relief Against

Unconstitutional Actions by State

Officers Is Presumptively Available

in Federal Court ................................................. 4

B.

The TIA Prevents Interference with

State Tax Collection, Not Federal

Pre-Enforcement Review of Unlawful

State Penalties .................................................... 5

THE SECOND CIRCUIT’S OVERBROAD READING

OF THE TIA THREATENS FEDERAL JUDICIAL

REVIEW OF PUNITIVE STATE LAWS ........................ 11

A.

In the Chamber’s Experience, States

Regularly Seek to Use the TIA to

Shield Punitive Laws from Federal

Pre-Enforcement Review................................ 11

B.

This Court’s Review Is Necessary to

Ensure the Availability of a Federal

Forum to Address Constitutional

Violations ........................................................... 15

CONCLUSION .................................................................. 18

ii

TABLE OF AUTHORITIES

Page(s)

CASES

Armstrong v. Exceptional Child Ctr., Inc.,

575 U.S. 320 (2015) ...................................................... 4, 5

Blatchford v. Native Vill. of Noatak,

501 U.S. 775 (1991) ...........................................................5

Chamber of Commerce v. Edmonson,

594 F.3d 742 (10th Cir. 2010) ................................. 13, 14

Child Labor Tax Case,

259 U.S. 20 (1922) .............................................................7

CIC Servs., LLC v. IRS,

141 S. Ct. 1582 (2021) ............................................ 4, 5, 16

Comptroller of Treasury of Md. v. Wynne,

575 U.S. 542 (2015) .........................................................17

Department of Revenue of Mont. v.

Kurth Ranch,

511 U.S. 767 (1994) ...........................................................8

Direct Mktg. Ass’n v. Brohl,

575 U.S. 1 (2015) .................................................... passim

Dows v. City of Chicago,

78 U.S. (11 Wall.) 108 (1871)............................................4

Empress Casino Joliet Corp. v. Balmoral

Racing Club, Inc.,

651 F.3d 722 (7th Cir. 2011) (en banc) .........................17

Entergy Nuclear Vt. Yankee, LLC v. Shumlin,

737 F.3d 228 (2d Cir. 2013) ..............................................3

Ex parte Young,

209 U.S. 123 (1908) ...................................................... 4, 5

iii

TABLE OF AUTHORITIES

(continued)

Page(s)

Free Enter. Fund v. Pub. Co. Acct.

Oversight Bd.,

561 U.S. 477 (2010) ...........................................................5

GenOn Mid-Atlantic, LLC v.

Montgomery Cnty.,

650 F.3d 1021 (4th Cir. 2011) ............................. 3, 15, 16

Graham v. Dupont,

262 U.S. 234 (1923) ...................................................... 6, 7

Great Lakes Dredge & Dock Co. v. Huffman,

319 U.S. 293 (1943) ...........................................................8

Hibbs v. Winn,

542 U.S. 88 (2004) ...................................................... 6, 15

Hill v. Kemp,

478 F.3d 1236 (10th Cir. 2007) ........................................7

Hill v. Wallace,

259 U.S. 44 (1922) .............................................. 6, 7, 8, 10

Holland v. Florida,

560 U.S. 631 (2010) ...........................................................6

Lipke v. Lederer,

259 U.S. 557 (1922) ...................................................... 6, 7

MedImmune, Inc. v. Genentech, Inc.,

549 U.S. 118 (2007) ...........................................................5

NFIB v. Sebelius,

567 U.S. 519 (2012) .........................................................10

Ohio Tax Cases,

232 U.S. 576 (1914) ...........................................................8

iv

TABLE OF AUTHORITIES

(continued)

Page(s)

Parsons v. District of Columbia,

170 U.S. 45 (1898) .............................................................7

Regal Drug Corp. v. Wardell,

260 U.S. 386 (1922) ...........................................................6

Retail Indus. Leaders Ass’n v. Fielder,

475 F.3d 180 (4th Cir. 2007) ................................... 11, 12

Rosewell v. LaSalle Nat’l Bank,

450 U.S. 503 (1981) .................................................... 7, 17

Sisson v. Ruby,

497 U.S. 358 (1990) .........................................................18

United States v. Butler,

297 U.S. 1 (1936) ...............................................................9

Von Hoffman v. City of Quincy,

71 U.S. (4 Wall.) 535 (1866)..............................................4

STATUTES

7 U.S.C. § 518 et seq. ............................................................16

26 U.S.C. § 7421 ......................................................................6

28 U.S.C. § 1341 ....................................................... 1, 2, 6, 10

31 U.S.C. § 3302 ............................................................... 9, 16

Fair and Equitable Tobacco Reform Act

of 2004, Pub. L. No. 108-357, Tit. VI,

118 Stat. 1418 ..................................................................16

Md. Code, Tax-Gen. § 7.5-101 .............................................14

Md. Code, Tax-Gen. § 7.5-102 .............................................14

Md. Code, Tax-Gen. § 7.5-103 .............................................14

v

TABLE OF AUTHORITIES

(continued)

Page(s)

N.Y. Exec. Law § 63.6 ............................................................9

N.Y. Tax Law § 498 ..............................................................10

OTHER AUTHORITIES

1 Thomas M. Cooley, THE LAW OF TAXATION

(4th ed. 1924) .......................................................... 7, 9, 10

Senator Bill Ferguson, Post, FACEBOOK

(Feb. 12, 2021) .................................................................14

Paul Romer, Opinion, A Tax That Could Fix

Big Tech, N.Y. TIMES (May 6, 2019) ............................14

INTEREST OF AMICUS CURIAE 1

The Chamber of Commerce of the United States of

America (the Chamber) is the world’s largest business

federation. It represents approximately 300,000 direct

members and indirectly represents the interests of more

than three million companies and professional

organizations of every size, in every industry sector, and

from every region of the country.

An important function of the Chamber is to represent

the interests of its members in matters before Congress,

the Executive Branch, and the courts. To that end, the

Chamber regularly files amicus curiae briefs in cases, like

this one, that raise issues of concern to the nation’s

business community. This case presents a recurring issue

that the Chamber has litigated, and is currently litigating,

in courts across the country: Whether punitive exactions

qualify as “taxes” for purposes of the Tax Injunction Act,

28 U.S.C. § 1341 (TIA), merely because they raise revenue

for general public purposes. See infra Pt. II.A.

SUMMARY OF ARGUMENT

Consistent with a long equitable tradition stretching

back to England, this Court has made clear that federal

courts may review—and halt—unconstitutional state laws

before they are enforced. That mechanism of preenforcement review ensures that regulated parties are not

forced into a cruel dilemma of either complying with an

unlawful edict or throwing themselves on the mercy of the

1

All parties have consented to the filing of this brief and received

timely notice of amicus’ intent to file as required by Rule 37. No

counsel for any party authored this brief in whole or in part, and no

person or entity other than amicus, its members, or its counsel made

a monetary contribution intended to fund the preparation or

submission of this brief.

2

courts of the State whose law they just transgressed. One

narrow exception to this rule, the TIA, instructs that

federal district courts are not to “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.

Deepening a conflict in the courts of appeals, the

Second Circuit held that States can fit within this limited

exception—and thereby opt out of federal judicial scrutiny

before a law is enforced—merely by directing the

revenues raised by an unconstitutional penalty to

activities that benefit the general public. But all sorts of

financial penalties fit that description, as fines no less than

taxes can and do fund the States’ general treasuries.

Given that reality, those subject to regulation by New

York, Connecticut, and Vermont—including the many

companies doing business in those States—may soon find

themselves in a lose-lose situation. That bodes ill not just

for the nation’s businesses, but for the rule of law itself.

The Second Circuit thought unconstitutional exactions

that raise revenue for public purposes—in this case, to

address the opioid crisis—were immune from federal preenforcement review under the TIA. But one can agree

that the opioid epidemic is a public-health emergency that

requires serious responses, as the Chamber does, without

reading the TIA to produce such a startling result. The

mere fact that an exaction produces revenue for general

public purposes does not make it a “tax” under this statute.

28 U.S.C. § 1341. Rather, when Congress enacted the TIA

in 1937, it was understood that exactions were not “taxes”

when their primary purpose was to regulate or punish,

even if they also produced revenue for general public

purposes.

3

This Court should grant certiorari and reverse.

Petitioners have shown that the decision below furthers a

division in the circuits, and the Second Circuit’s approach

cannot be reconciled with the TIA or this Court’s

precedents. The question here is also an important and

recurring one, as the Chamber’s own litigating experience

confirms. States have tried to dress up punitive exactions

as revenue-producing taxes before, and they continue to

do so today. Those efforts are unsurprising given that

many of the courts of appeals, including the Second Circuit,

have employed open-ended multifactor tests to interpret a

jurisdictional statute whose boundaries should be clear.

Even a limited ruling from this Court would go a long way

toward taming the TIA inquiry in the lower courts and

providing clarity to both regulated parties and States alike.

ARGUMENT

As petitioners have demonstrated, the decision below

exacerbates a conflict within the circuits over how to

determine whether a state exaction constitutes a “tax”

immune from pre-enforcement constitutional challenges

in federal court. See Pet. 16-24. Indeed, respondents have

repeatedly acknowledged that decisions from the Second

Circuit and the Fourth Circuit are “at odds” in this area.

Resp. C.A. Br. 28 n.27 (contrasting GenOn Mid-Atlantic,

LLC v. Montgomery Cnty., 650 F.3d 1021 (4th Cir. 2011)

(Wilkinson, J.), with Entergy Nuclear Vt. Yankee, LLC v.

Shumlin, 737 F.3d 228 (2d Cir. 2013)); accord Resp. C.A.

Reply. Br. 12 n.3. That conflict alone merits this Court’s

review. The Chamber writes to explain why the Second

Circuit’s sweeping view of what qualifies as a “tax under

State law” for purposes of the TIA is not only deeply

flawed, but also threatening to the nation’s business

community.

4

I. THE SECOND CIRCUIT’S OVERBROAD READING OF THE

TIA IS BADLY MISTAKEN.

When it comes to challenging the constitutionality of

state exactions, the TIA’s “pay-now-sue-later procedure,”

CIC Servs., LLC v. IRS, 141 S. Ct. 1582, 1592 (2021), is

the exception, not the rule. That exception may make

sense when it comes to taxes, where delays in collection

could deprive States of “the means to carry on their

respective governments.” Dows v. City of Chicago, 78 U.S.

(11 Wall.) 108, 110 (1871). But it cannot become the rule

lest States become free to strong-arm parties into

“voluntarily” complying with unlawful commands on pain

of ruinous penalties. By adopting a sweeping definition of

“tax” as an exaction that “raises revenue to provide a clear

general public benefit,” Pet. App. 19a, the Second Circuit

lost sight of th3se fundamental principles.

A.

Injunctive Relief Against Unconstitutional

Actions by State Officers Is Presumptively

Available in Federal Court.

Had New York enacted a law imposing a “fine” of up to

$100 million for selling or distributing opioids within its

borders, no one would question petitioners’ ability to

challenge its constitutionality in federal court and seek an

injunction against its enforcement. See Ex parte Young,

209 U.S. 123, 147, 155-56 (1908). “The ability to sue to

enjoin unconstitutional actions by state and federal

officers is the creation of courts of equity, and reflects a

long history of judicial review of illegal executive action,

tracing back to England.” Armstrong v. Exceptional

Child Ctr., Inc., 575 U.S. 320, 327 (2015). In the absence

of this form of judicial review, constitutional protections

would be meaningless, for a “right without a remedy is as

if it were not.” Von Hoffman v. City of Quincy, 71 U.S.

(4 Wall.) 535, 554 (1866).

5

Moreover, petitioners could seek this relief before the

law was ever enforced, rather than violate the edict and

then raise its unconstitutionality as a defense to a state

enforcement proceeding. Courts “normally do not require

plaintiffs to bet the farm by taking the violative action

before testing the validity of the law.” Free Enter. Fund

v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477, 490 (2010)

(cleaned up). And for good reason: In the absence of preenforcement review, a regulated party would face the

classic “dilemma” of either “abandoning his rights or

risking prosecution.” MedImmune, Inc. v. Genentech, Inc.,

549 U.S. 118, 129 (2007). And because the latter is “not the

kind of thing an ordinary person risks, even to contest the

most burdensome regulation,” a “pre-enforcement” suit

must be available in these situations “if there is to be a suit

at all.” CIC Servs., 141 S. Ct. at 1592.

Finally, petitioners would have their day in the right

court—a federal one. Whether a state law comports with

“the Federal Constitution is a judicial question, and one

over which Federal courts have jurisdiction by reason of

its Federal nature.” Young, 209 U.S. at 144. Petitioners

therefore would not have to depend on the courts of the

State whose law they were challenging for vindication of

their federal constitutional rights.

B.

The TIA Prevents Interference with State Tax

Collection, Not Federal Pre-Enforcement

Review of Unlawful State Penalties.

Of course, Congress remains free to displace this

longstanding form of equitable relief, Armstrong, 575 U.S.

at 327-28, and it did so in the TIA with respect to “state

tax-injunction suits,” Blatchford v. Native Vill. of Noatak,

501 U.S. 775, 784 (1991). The question here is whether the

TIA permits New York to evade pre-enforcement review

in federal court merely by framing its penalty on the sale

6

or distribution of opioids as a way to raise revenue for

opioid-abuse programs. It does not. Nothing in the TIA

suggests that Congress decided to give state penalties a

pass from federal pre-enforcement challenges so long as

they raise revenue for providing a general public benefit—

a description that could apply to virtually any exercise of

the police power.

1. By its terms, the TIA deprives federal courts only

of the power to “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. Consistent

with a longstanding reluctance to “construe a statute to

displace courts’ traditional equitable authority absent the

clearest command,” Holland v. Florida, 560 U.S. 631, 646

(2010) (cleaned up), this Court has declined to give terms

in the TIA a “broad meaning” when “statutory context”

counsels otherwise. Direct Mktg. Ass’n v. Brohl, 575 U.S.

1, 13 (2015) (rejecting broad reading of “restrain”); see

Hibbs v. Winn, 542 U.S. 88, 100-102 (2004) (rejecting broad

reading of “assessment”).

The same approach should control the meaning of “tax”

within the TIA. 28 U.S.C. § 1341. Because the TIA “was

modeled on the Anti-Injunction Act (AIA),” this Court

“assume[s] that words used in both Acts are generally

used in the same way.” Direct Mktg., 575 U.S. at 8; see

26 U.S.C. § 7421(a). And by the time Congress enacted

the TIA in 1937, this Court had repeatedly held that the

term “tax” in the AIA did not cover “a penalty in the form

of a tax.” Graham v. Dupont, 262 U.S. 234, 258 (1923)

(discussing Hill v. Wallace, 259 U.S. 44 (1922); Lipke v.

Lederer, 259 U.S. 557 (1922); and Regal Drug Corp. v.

Wardell, 260 U.S. 386 (1922)).

7

Then, as now, “[t]he difference between a tax and a

penalty” (or other exercise of the police power)

occasionally proved “difficult to define,” as it was

understood that taxes could have both revenue-raising and

regulatory purposes. Child Labor Tax Case, 259 U.S. 20,

38 (1922). In his treatise on taxation, Judge Cooley

confronted the issue directly and took the position that the

distinction turned on whether “the primary purpose of the

legislative body in imposing the charge is to regulate.”

1 Thomas M. Cooley, THE LAW OF TAXATION 99 (4th ed.

1924); see id. at 94-102, 108-15. If so, “the charge is not a

tax even if it produces revenue for the public.” Id. at 99.2

This Court’s decisions from the period reflected a

similar test. The relevant question was whether a law

imposed “a tax with only that incidental restraint and

regulation which a tax must inevitably involve” or

“regulate[d] by the use of the so-called tax as a penalty.”

Child Labor Tax Case, 259 U.S. at 36. Accordingly, this

Court declined to apply the AIA to bar injunctions against

so-called taxes “primarily designed to define and suppress

crime,” Lipke, 259 U.S. at 561, or “imposed for the purpose

of regulating the future grain business.” Graham, 262 U.S.

at 257-58 (discussing Hill); see Cooley 115 (explaining that

Hill addressed a statute whose “purpose was to regulate

the business of grain boards of trade, with a heavy penalty,

called a tax, imposed on sales of grain for future delivery

2

This Court has repeatedly relied on Cooley’s treatise on

taxation—including when interpreting the TIA—and has referred to

him as a “text writer[] of high authority.” Parsons v. District of

Columbia, 170 U.S. 45, 55 (1898); see Rosewell v. LaSalle Nat’l Bank,

450 U.S. 503, 523-24 (1981) (consulting Cooley’s treatise in

interpreting the phrase “plain, speedy and efficient remedy” in the

TIA); see also Hill v. Kemp, 478 F.3d 1236, 1244-45 (10th Cir. 2007)

(Gorsuch, J.) (relying on Cooley’s treatise to interpret the term “tax”

in the TIA).

8

to coerce boards and their members into compliance with

the regulations”).

Reading “tax under State law” in this statute to exclude

exactions primarily meant to regulate “is also consistent

with” the fact that “the TIA ‘has its roots in equity

practice.’ ” Direct Mktg., 575 U.S. at 13. The TIA

“partially codifie[d]” a longstanding “comity doctrine,” id.,

under which “courts of equity” would “not ordinarily

restrain state officers from collecting state taxes where

state law affords an adequate remedy to the taxpayer.”

Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293,

297 (1943). But even while applying that doctrine, “those

courts did not refuse to hear every suit that would have a

negative impact on States’ revenues,” Direct Mktg., 575

U.S. at 14—including when the challenged tax legislation

included “penalties and coercive features.” Ohio Tax

Cases, 232 U.S. 576, 587 (1914); see Hill, 259 U.S. at 62

(holding that the AIA did not prevent an injunction against

a federal penal exaction and observing that “[w]ere this a

state act, [an] injunction would certainly issue”).

2. The decision below sharply broke from that

understanding. While the Second Circuit paid lip service

to the rule that an exaction qualifies as a “tax” under the

TIA only if its primary purpose is to raise revenue, see Pet.

App. 9a, its actual analysis employed a far more expansive

definition. In the court of appeals’ view, any exaction

whose “revenue’s ultimate use is to provide a general

benefit to the public” is presumptively a “tax” for TIA

purposes. Id. at 11a (cleaned up).

That sweeping definition threatens to make the TIA’s

exception to federal pre-enforcement review the rule.

While “taxes … generate government revenues,” so do

“fines” and “penalties.” Department of Revenue of Mont.

v. Kurth Ranch, 511 U.S. 767, 778 (1994). And in each

9

instance, those revenues can and often will be used to

benefit the general public. At the federal level, the

Miscellaneous Receipts Act requires that any funds

received by a federal official—including fines or

penalties—be deposited into the general treasury absent

a statutory exception. See 31 U.S.C. § 3302(b). New York

likewise requires its Attorney General to deposit

“penalties forfeited to the people of the state” in the

State’s treasury. See N.Y. Exec. Law § 63.6. Yet no one

thinks that this funding structure transforms these

punitive exactions into taxes.

Rather, it was understood at the time the TIA was

enacted that a “charge is not a tax even if it produces

revenue for the public”—and even when that revenue is

ultimately “paid into the state treasury”—so long as “the

primary purpose of the legislative body in imposing the

charge is to regulate.” Cooley 99-100; see, e.g., United

States v. Butler, 297 U.S. 1, 57, 61 (1936) (deeming a

regulatory “exaction not a true tax” even though its

“proceeds … go into the federal Treasury and thus

become available for appropriation for any purpose”). To

conclude otherwise would threaten to cause “the TIA to

bar every suit with” a “negative impact on States’

revenues,” despite the Act’s equitable roots to the

contrary. Direct Mktg., 575 U.S. at 14.

3. As the decision below illustrates, a test turning on

the ultimate use of revenue from an exaction will cause

courts to overlook evidence of its primary purpose. For

example, the Second Circuit brushed off the exaction’s

“method of assessment”—here, “a ‘fixed sum’ of $100

million per year”—as not “bear[ing] at all on the

jurisdictional inquiry.” Pet. App. 19a-20a. It likewise

dismissed the relevance of the fact that this annual $100

million surcharge is collected by New York’s “Department

10

of Health”—and not its “Department of Taxation and

Finance”—on the ground that the proceeds are

technically held in the custody of “the State Comptroller

and the Commissioner of Taxation and Finance.” Id. at

18a. But in determining whether a particular exaction

constitutes a tax or penalty, this Court has repeatedly

considered whether it is “collected … through the normal

means of taxation”—including by looking to the “agency

responsible for” securing the funds. NFIB v. Sebelius, 567

U.S. 519, 566 (2012); see id. at 569 (indicating that how

“[t]he amount due is adjusted” is evidence of whether an

exaction constitutes a tax). In other words, both who

collects the exaction and how it is collected matters, not

merely where its proceeds are stored.

The Second Circuit’s blinkered approach also led it to

dismiss evidence from the rest of New York’s Opioid

Stewardship Act, such as its refusal to call the $100-million

surcharge a “tax” and its prohibition on passing the costs

of that surcharge on to customers. See Pet. App. 19a, 21a.

But a State’s choice not to call an exaction a “tax” under

state law is decent evidence that it is in fact not a “tax

under State law.” 28 U.S.C. § 1341; cf. Hill, 259 U.S. at 66

(relying on the fact that “the title of the act recites that one

of its purposes is the regulation of Boards of Trade” to

conclude that a so-called “tax” was in fact a “penalty”).

And the observation that “taxation is unpopular these

days, so taxing authorities avoid the term,” Pet. App. 19a

(cleaned up), rings hollow here given that New York

proved quite willing to adopt an explicit excise “tax” on

opioid products in response to the district court’s decision.

N.Y. Tax Law § 498(a). Likewise, New York’s choice to

“no longer defend[]” the “pass-through prohibition” after

the district court held it invalid, Pet. App. 20a, in no way

bears on “the primary purpose of the legislative body in

imposing” the surcharge itself. Cooley 99.

11

II. THE SECOND CIRCUIT’S OVERBROAD READING OF THE

TIA THREATENS FEDERAL JUDICIAL REVIEW OF

PUNITIVE STATE LAWS.

The decision below not only conflicts with text, history,

and precedent, it also imperils the nation’s business

community. As the Chamber’s litigating experience

illustrates, states are not shy about trying to evade federal

pre-enforcement review by dressing up penal exactions as

“taxes” under the TIA. Given that background, the

Second Circuit’s sweeping understanding of what

constitutes a “tax” in this context is likely to be used in the

future to punish unpopular out-of-state businesses

unimpeded by the prompt scrutiny of federal courts.

A.

In the Chamber’s Experience, States Regularly

Seek to Use the TIA to Shield Punitive Laws

from Federal Pre-Enforcement Review.

As an institutional litigant, the Chamber has witnessed

States repeatedly disguise penalties as “taxes” in an

attempt to force regulated parties into state-court refund

suits. Thankfully, courts have largely seen through these

schemes, although the decision below marks a troubling

step in the wrong direction.

1.

For example, the Chamber participated as an

amicus curiae in Retail Industry Leaders Ass’n v. Fielder,

475 F.3d 180 (4th Cir. 2007), where the Fourth Circuit

confronted a so-called “tax” gerrymandered to compel a

single company to provide its employees with better

health insurance. Following “a nationwide campaign to

force Wal-Mart Stores, Inc., to increase health insurance

benefits for its 16,000 Maryland employees,” Maryland

passed “the Fair Share Health Care Fund Act,” which,

while framed in general terms, “was crafted to cover just

Wal-Mart.” Id. at 183; see id. at 185. The Act required

covered employers to devote at least eight percent of their

12

total payrolls to employee health insurance or pay the

shortfall to the State. Id. at 184. A district court enjoined

the exaction’s enforcement after concluding the Act was

preempted by ERISA. Id. at 186.

In affirming that injunction, the Fourth Circuit rejected

the State’s argument that the Act “imposes a tax on

employers” for purposes of the TIA. Fielder, 475 F.3d at

188. As it explained, “[t]he circumstances surrounding the

Act’s enactment” indicated that its “primary purpose

[wa]s to regulate employers’ healthcare spending, not to

raise revenue.” Id. at 189. And that was true, the Fourth

Circuit observed, even though the Act’s declared purpose

was “to establish the Fair Share Health Care Fund”

dedicated “to support[ing] the operations of the Maryland

Medical Assistance Program.’ ” Id. (cleaned up). As the

court correctly determined, the State’s “superficial

characterization … does not determine the Act’s actual

purpose and effect; its content and context do.” Id.

Thus, unlike the decision below, the Fourth Circuit did

not miss the primary purpose of an exaction by focusing

on the intended disposition of the funds. Similar to New

York’s Opioid Stewardship Act, Maryland’s law directed

that its revenues were to be “held by the Treasurer of the

State and accounted for by the State Comptroller like all

other state funds,” and to be used to “support the

Maryland Medical Assistance Program.” Fielder, 475

F.3d at 185. That scheme can be fairly described as

funding “broad public health initiatives that undoubtedly

provide a ‘general benefit’ to [state] residents ‘of a sort

often financed by a general tax,’ ” Pet. App. 12a, but that

did not blind the court to the fact that Maryland had

gerrymandered legislation to punish Wal-Mart for

allegedly “provid[ing] its employees with a substandard

level of healthcare benefits.” Fielder, 475 F.3d at 183.

13

2.

The Tenth Circuit took a similar approach in

Chamber of Commerce v. Edmonson, 594 F.3d 742 (2010).

In that case, Oklahoma had enacted legislation requiring

independent contractors to provide documentation to

contracting entities showing that they were eligible to

work in the United States under federal immigration law.

Id. at 754. If they failed to do so, the contracting entity

was to “withhold compensation” from the independent

contractor “in amount equal to ‘the top marginal income

tax rate’ allowed under Oklahoma law.” Id. at 755. And if

a contracting entity did not comply, it was “ ‘liable for the

taxes required to have been withheld.’ ” Id. at 754 n.9.

The Chamber successfully challenged this legislation as

preempted by federal immigration law and obtained an

injunction against in its enforcement. Edmonson, 594

F.3d at 750. In upholding that relief, the Tenth Circuit

rejected Oklahoma’s argument that the law merely

imposed “a tax” under the TIA. Id. at 761. As the court

explained, this exaction “constitutes a regulatory penalty,

not a tax, because its purpose is to regulate behavior”—

namely, the verification of the employment eligibility of

independent contractors—“rather than to raise revenue.”

Id. at 763. Even though contracting entities could comply

with the law by withholding the maximum amount of

compensation from independent contractors who failed to

document their eligibility to work—and thus raise funds

for Oklahoma—the Tenth Circuit held that revenue

generation was not its “primary purpose.” Id. at 764 n.23.

Unlike the Second Circuit here, the Tenth Circuit

treated “the ultimate use of funds” raised by an exaction

as “relevant” but “not dispositive” to the inquiry.

Edmonson, 594 F.3d at 761-62. Rather, the Tenth Circuit

explained, “[t]he mere fact that revenue received from a

violation of [the law] ends up in Oklahoma’s general fund

14

is of little significance when measured against the

incentive structure created and the avowed statutory

purpose.” Id. at 763.

3. The Chamber is currently seeking federal preenforcement review of a recent Maryland law that imposes

a “tax” on digital advertising by large technology

companies. See Am. Compl., Doc. 23-1, Chamber of

Commerce v. Franchot, No. 21-cv-410 (D. Md. Apr. 30,

2021). This digital-advertising “tax” seeks to penalize

politically unpopular companies from outside the State for

allegedly “erod[ing]” the “shared values and norms of

American society” by creating “a haven for dangerous

misinformation and hate speech.” Paul Romer, Opinion, A

Tax That Could Fix Big Tech, N.Y. TIMES (May 6, 2019),

https://bit.ly/3gq9gKU. One of the law’s proponents, the

President of Maryland’s Senate, was quite explicit that it

was a “targeted” measure aimed at “[c]ompanies like

Amazon, Facebook, and Google.” Senator Bill Ferguson,

Post, FACEBOOK (Feb. 12, 2021), https://bit.ly/3xjNyPF.

Consistent with this purpose, the law applies only to

those companies with $100 million in annual global gross

revenues and subjects them to an unusual and severe form

of exaction ranging from 2.5 to 10 percent of their “gross”

revenues. Md. Code, Tax-Gen. §§ 7.5-102, -103. Moreover,

the law expressly exempts the digital advertising of

Maryland’s preferred speakers—“broadcast” entities and

“news media” entities that do not “primarily” serve as “an

aggregator or republisher of third-party content.” Id.

§ 7.5-101(d), (e), and (g). This is yet another example of

the kind of exaction that may be styled as a revenueraising “tax,” but is nonetheless a punitive and

unconstitutional penalty warranting pre-enforcement

review in federal court.

15

B.

This Court’s Review Is Necessary to Ensure the

Availability of a Federal Forum to Address

Constitutional Violations.

The Chamber’s experience in litigation confirms this

need for further review here. In the absence of this

Court’s intervention, the decision below will provide

States—at least within the Second Circuit—with a

roadmap to insulate unconstitutional state laws from

federal pre-enforcement review. The upshot of the

decision below is that so long as a State carefully frames

its punitive exactions as a way of “rais[ing] revenue to

provide a clear general public benefit,” Pet. App. 19a, it

can rest comfortably in the knowledge that its targets will

be hamstrung from seeking pre-enforcement review in

federal court. Rather, the only recourse for those parties

disfavored by New York, Connecticut, or Vermont under

the TIA is “to pursue refund suits” or some other

challenge in the courts of the State whose law they are

challenging. Hibbs, 542 U.S. at 104.

Indeed, the decision below all but invites States to

target disfavored industries through gerrymandered

“taxes.” The Second Circuit dismissed the fact that “the

State Legislature here imposed” the $100 million

surcharge “to hold opioid manufacturers and distributors

responsible for the ‘unusual costs’ of the opioid epidemic”

as irrelevant on the theory that States are free to “require

an industry to pay a tax to support public programs

designed to address a widespread problem caused by the

industry.” Pet. App. 19a. And that was so, the court

emphasized, even if the exaction falls on “only a few

entities, or one entity alone.” Id. at 14a. That approach

threatens to “turn what are truly interstate issues over to

local authorities” and “encourage punitive financial strikes

against single entities with national connections.” GenOn,

16

650 F.3d at 1026. Because “[t]he implications of allowing

localities to impose financial exactions exclusively upon

single entities of national reach with no accountability in

federal court are profound,” id., this Court, and not the

Second Circuit, should have the last word on whether the

TIA compels this result.

Moreover, the Second Circuit’s sweeping interpretation

of “tax” in the TIA will presumptively guide how that term

is understood in the AIA, see CIC Servs., 141 S. Ct. at 1589

& n.1, and thereby threaten to insulate unlawful federal

statutes and regulations from pre-enforcement review.

Under the Miscellaneous Receipts Act, revenues from

federal enforcement proceedings are presumptively sent

to the general treasury, see 31 U.S.C. § 3302(b), and thus

would appear to serve “general revenue-raising purposes”

under the Second Circuit’s approach. Pet. App. 12a. And

as respondents contended below, at least one federal

statute—the Fair and Equitable Tobacco Reform Act of

2004, Pub. L. No. 108-357, Tit. VI, § 643, 118 Stat. 1418,

1536 (codified at 7 U.S.C. § 518 et seq.)—bears several

similarities to New York’s Opioid Stewardship Act,

including that “the proceeds of the assessment” can be

plausibly described as “used for [a] public purpose”—

namely, “stabilizing the tobacco market.” Resp. C.A.

Reply Br. 18; see id. at 17-18 & n.7.

Finally, this case provides an opportunity for this Court

to furnish some much-needed clarity in this area.

Applying the principle that “jurisdictional rules should be

clear,” this Court has rejected constructions of the TIA

that would produce “a vague and obscure boundary”

leading to “both needless litigation and uncalled-for

dismissal … in the name of a jurisdictional statute meant

to protect state resources.” Direct Mktg., 575 U.S. at 14

(cleaned up). Yet in deciding whether an exaction

17

constitutes a “tax” under the TIA, many courts of appeals

have employed “open-ended, multifactor tests” where the

“relative weights of the factors are left to judicial

discretion.” Empress Casino Joliet Corp. v. Balmoral

Racing Club, Inc., 651 F.3d 722, 727 (7th Cir. 2011) (en

banc). This case is no exception. By our count, the Second

Circuit applied at least seven different factors, see Pet.

App. 9a-19a, while ultimately concluding that the “most

significant” one is the “use of the revenues generated by

the assessment.” Id. at 10a; see, e.g., id. at 19a (concluding

that New York’s “refusal to call” the surcharge “a tax” is

“less significant” because the surcharge “raises revenue to

provide a clear general public benefit”).

The uncertainties and delays associated with these

sprawling inquiries only serve to deter regulated parties

from challenging unconstitutional state laws. The time

required for a state tax-refund suit alone is frequently

sufficient to coerce businesses into compliance: Few

companies will choose to spend years in state courts

contesting a law’s constitutionality while their competitors

alter their business practices to comply, especially when

this Court has held that nothing in the TIA requires a

state tax-refund scheme to “be the speediest.” Rosewell v.

LaSalle Nat’l Bank, 450 U.S. 503, 520 (1981) (holding that

“2-year wait” to receive tax refund without interest

sufficient); cf. Comptroller of Treasury of Md. v. Wynne,

575 U.S. 542, 545-46 (2015) (holding aspect of Maryland

taxing scheme unconstitutional in 2015 after taxpayers

challenged it in connection with their 2006 tax returns).

Accordingly, for many businesses, it is either preenforcement review in federal court or no review at all.

And those companies need to know whether the doors to

the federal courthouse will be open or shut, not devote

“ ‘an enormous amount of expensive legal ability’ ” and

years of litigation to navigating the vagaries associated

18

with multifactor tests. Sisson v. Ruby, 497 U.S. 358, 375

(1990) (Scalia, J., concurring in the judgment); cf. Direct

Mktg., 575 U.S. at 6 (ruling, in 2015, that a 2010 challenge

to notice and reporting requirements in federal court was

not barred by the TIA). Even a narrow decision from this

Court holding that the use of revenues should not be

dispositive under the TIA would mark a significant step

toward replacing this bestiary of considerations with a

framework oriented in text and history.

CONCLUSION

The Court should grant certiorari and reverse the

decision below.

June 18, 2021

Respectfully submitted,

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. CHAMBER

LITIGATION CENTER

1615 H St., N.W.

Washington, DC 20062

YAAKOV M. ROTH

Counsel of Record

MICHAEL A. CARVIN

BRINTON LUCAS

JONES DAY

51 Louisiana Ave., N.W.

Washington, DC 20001

(202) 879-3939

yroth@jonesday.com

Counsel for Amicus Curiae Chamber of Commerce

of the United States of America