Opposition — American Honda Motor Co. v. City of Farmers Branch

Supreme Court, U. 8. |

| FILED

AUG 27 1976

MICHAEL RODAK, JR.,CLERK

In the

Supreme Court of the United States

OCTOBER TERM, 1976

~ «6-92 4

No. .

AMERICAN HonpA Motor Company, INc.

Petitioner,

v.

Crry or FARMERS BrANCH, TEXAS AND THE TAX ASSESSOR-

CoLLector OF THE City oF FARMERS BRANCH, TEXAS,

Respondents.

RESPONDENT’S BRIEF IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

RonaLtp M. MANKOFF,

RonaLp G. WILLIAMS,

3900 First National Bank Bldg.,

Dallas, Texas 75202

Attorneys for Respondents.

Page

TE SN eA ne Rp oe Adv SNP er eee RR ii

| SR RE ee ee eS OO A ne PRU ME er ii

i aI TG et OOO 2

SATEEN os

The Writ of Certiorari Should Not Be Issued .................... 3

I. This Court Does Not Have Jurisdiction To

Review The Judgment Of The Supreme

Court Of Texas Concerning The Retroactive

Application Of The Michelin Decision ............... 3

II. This Is Not A Proper Case For Review Of

BR a ARR RL On AS A 5

A. This Case Cannot Be Distinguished

a 5

B. The Texas Supreme Court Correctly Ap-

plied The Standards Outlined In Chevron... 7

1. The Decision Must Reverse “Clear

Past Precedent” On Which The Liti-

gants May Have Relied ............................... 7

2. The Prior History Of The Rule, Its

Purpose And Effect Must Indicate

That Retrospective Effect Would

IE I ii ap sevcasensseen 8

3. Applying the New Rule Retroac-

tively Must Produce Substantial In-

— Or Hardship In The Case At

gees Bare iakees oabiets-eesclet iis alee ee 9

ER See de annie me 11

EEE, TAFE ESS eT 12

ii Citations

Page

Bradley v. School Board of Richmond,

4 & = = Rear eRe .

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) 20.0... 2

Great Northern R.R. Co. v. Sunburst Oil & Re-

fining Co., 287 U.S. 368 (1982) ................ccccceecsesseeeeeees 4

Lemon v. Kurtzman, 411 U.S. 192 (1973) ......0000000........ 7, 8

Low v. Austin, 80 U.S. (13 Wall.) 29 (1972) ........... 3, 5, 9

Michelin Tire Corporation v. Wages,

423 U.S. 376 (1976) 96 S. Ct. 184 (1976) ....................... 2

Simpson v. Union Oil Co., 396 U.S. 13 (1969) 00000000... 6

Youngstown Sheet & Tube Co. v. —

Oe Ce Ge Ge ia ri thn 7

Statutes

Oe Te MOTI oon ceecetsececet cect etantaiasaon 3, 4, 5

In the

Supreme Court of the United States

OCTOBER TERM, 1976

perks

AMERICAN Honpa Motor Company, INc.

Petitioner,

v.

Crry OF FARMERS BRANCH, TEXAS AND THE TAX ASSESSOR-

CoLLector OF THE Crry oF FARMERS BraANCH, TEXAS,

Respondents.

RESPONDENT’S BRIEF IN OPPOSITION TO PETITION

FOR WRIT OF CERTIORARI

Respondents, the Crry or Farmers BraNcu and T. E.

WaALopriP, its Tax Assessor-Collector (hereinafter sometimes

jointly referred to as “the respondent”), respectively pray

that a writ of certiorari not be issued to review the judg-

ment of the Texas Supreme Court entered in this proceeding

on May 5, 1976.

2

RESPONDENT’S POSITION

1. This Court does not have jurisdiction under 28 U.S.C.

§ 1257(3) to decide the issue of the prospective or retro-

active application of Michelin Tire Corporation v. Wages,

423 U.S. 376 (1976) 96 S. Ct. 184 (1976) in this case.

2. This is not a proper case for review of that question:

(a) The facts and circumstances of this case are

identical to those in Michelin so that identical treat-

ment should be accorded in each case.

(b) Whether or not the standards for prospective

limitation stated in Chevron Oil Co. v. Huson, 404

U.S. 97 (1971) are mandatory upon state courts, those

standards would not require such limited treatment in

this case.

STATEMENT OF THE CASE

The petitioner has omitted several facts from its State-

ment of the Case which we believe to be ~ vant.

The respondent had always denied the exemption

claimed by the petitioner from ad valorem tax levied on its

imported items stored in its Farmers Branch warehouse.

January 1, 1972 was the first assessment date that the peti-

tioner was subject to municipal taxation by the respondent.

This is not a case where the respondent is attempting to

assess back taxes based upon this Court’s decision in

Michelin, as intimated in the petitioner’s brief. (Pet., p. 9.)

There was no change in the respondent’s position or policy

concerning the taxability of these imported items.

The exemption claimed by Honda for each subsequent year

has been disallowed and Farmers Branch has included the

imported items on its tax rolls for each year. The petitioner

and the respondent entered into an agreement to delay the

collection of the taxes, pending the outcome in this case,

if Honda kept adequate security on hand for the payment

of those taxes.

Farmers Branch, from the inception of this litigation,

has always raised as one of its specifically stated arguments

3

that Low v. Austin, 80 U.S. (13 Wall.) 29 (1972) (ex-

pressly overruled by Michelin) was wrongly decided.’

The taxing authority in Michelin, Gwinnett County,

Georgia, had not argued or briefed the basis of that ultimate

decision. This Court, nevertheless, held that a non-dis-

criminatory ad valorem tax upon imports no longer in

the process of importation was not an “import” or “duty”

within the meaning of the Import-Export Clause.

This Court was presented with an opportunity to decide

the exact issue raised by the petitioner in its petition for

writ of certiorari. Michelin, in its motion for rehearing, argued

that the decision should be given only prospective effect.

This Court denied that motion for rehearing.

The petitioner in the case at bar has subsequently

moved outside the municipal boundaries of Farmers Branch.

Therefore, since this Court decided Michelin after January 1,

1976, the normal assessment date, if that decision is given

only prospective effect, Farmers Branch will be unable to

collect any taxes from the petitioner or from any other

similar taxpayer which chooses to shift its location during

1976.

THE WRIT OF CERTIORARI SHOULD

NOT BE ISSUED

The respondent respectively prays that a writ of cer-

tiorari not issue on any or all of the following grounds:

I. THIS COURT DOES NOT HAVE JURISDICTION

TO REVIEW THE JUDGMENT OF THE SUPREME

COURT OF TEXAS CONCERNING THE RETROACTIVE

APPLICATION OF THE MICHELIN DECISION.

The petitioner attempts to invoke the jurisdiction of

this Court under 28 U.S.C. § 1257(3), which delimits the

1 As stated by the Supreme Court of Texas, Honda “was

informed and put on notice by the City of Farmers Branch that the

city considered that the goods were taxable, and thet Low v. Austin

and similar cases were wrongly decided. There is no basis for a con-

tention that [Honda] relied on porte ee « eee

io dity Uncemm the Gly euntaned {Honda] property for taxes

at its first opportunity.” (Pet., p. A-9). !

4

Court’s certiorari jurisdiction over the judgments of state

courts. Since there is no question in the present case con-

cerning the validity of any statute, petitioner predicates

jurisdiction on the clause granting certiorari jurisdiction

“where any title, right, privilege or immunity is specifically

set up or claimed under the Constitution, treaties or statutes

of * * * the United States.’* Petitioner cites the Import-

Export Clause of the United States Constitution, Article 1,

Section 10, Clause 2, under the heading “CoNnstrruTIONAL

PROVISION INVOLVED.” Its apparent position is that jurisdic-

tion is predicated on the existence of a constitutional ques-

tion. The present case, however, does not involve a con-

stitutional issue. The question presented by the petitioner

deals solely with the concept of prospective versus retro-

active application of an interpretation of the Import-Export

Clause. Though that interpretation is of constitutional origin,

the interpretation itself and thus any constitutional ques-

tion is no longer at issue.

In the benchmark case of Great Northern R.R. Co. v.

Sunburst Oil & Refining Co., 287 U.S. 358 (1932), the Court

held that a state court could refuse to give retroactive effect

to a decision overruling a previous decision. Justice Cardozo

opened the decision by stating, “we think the federal con-

stitution has no voice upon the subject”, 287 U.S. 358 at

364, and “we are not at liberty, by anything in the Constitu-

tion of the United States, to thrust upon those [state]

courts a different conception either of the binding force of

precedent or of the meaning of the judicial process.” 287

U.S. 358 at 366.

This Court should follow the Sunburst reasoning in

denying certiorari for a lack of a constitutional question.

2 The opt B PES. § 1257 (3) should be compared to the

language of 28 U.S.C. § 1254 which grants power to this Court to

review, by writ of certiorari, the decision of a federal court of

appeals. Cases in the court of appeals “may be reviewed by the

Supreme Court by the following methods: (1) by writ of certiorari

granted upon the petition of party to any civil or criminal case,

Gee co cle aan af ae

added) The Court may review any case and is not limited to cases

involving a right, 7? or immunity predicated on the Constitu-

tion or a federal sta

5

Whether the courts of the different states allow a municipal

or state tax to be assessed retroactively or only prospec-

tively is a matter that is peculiarly within the jurisdiction

of those courts. This is the type of issue that Section 1257 (3)

was meant to restrict from the purview of this Court.

Il. THIS IS NOT A PROPER CASE FOR REVIEW

OF THESE ISSUES.

Notwithstanding petitioner’s arousing argument that

“this Court should pursue its supervisory function” to pre-

vent differences from arising in various states (Pet. p. 6),

we submit thet it would be unfair and erroneous to initiate

that pursuit in this case. Respondent has properly initiated

and moved forward its legitimate legal claims for taxes duly

assessed. Its position is identical to that of Gwinnett County,

Georgia, and, therefore, should be treated by the courts of

law in exactly the same way.

In any event, even if the issue were tested here, the

standards of Chevron would under no circumstances require

that the respondent be treated differently than Gwinnett

County, Georgia was treated.

A. THIS CASE CANNOT BE DISTINGUISHED

FROM MICHELIN. :

The facts of the case at bar are identical to those

presented in Michelin. In both cases, resvondents assessed

taxes on imported goods for 1972 and 1973. The importers

sought declaratory and injunctive relief in their respective

state courts. The sole difference is that Georgia, unlike Texas,

has no intermediate appellate court. Consequently, the

instant case was still in the state appellate courts when this

Court decided Michelin and overruled Low v. Austin.

The decision in Michelin described the purposes which

motivated the framers to add the Import-Export Clause to

the Constitution. The framers wanted: (1) consistent regu-

lation of commercial relations with foreign nations; (2) a

6

source of revenue for the federal government; and (3) pro-

motion of harmony among the states. This Court decided

in Michelin that a non-discriminatory ad valorem tax levied

upon imports which have come to rest, would not contra-

vene these specific goals.

Mr. Justice Brennan, speaking for the unanimous court,

held that an importer should bear a share of the cost of police

and fire protection, along with competitors handling only

domestic goods. (96 S. Ct. 535, at 541.) It is undisputed

that Honda has received the benefit of municipal services

provided by Farmers Branch. It is also undisputed that

Honda’s competitors have paid their proportionate share of

these costs. Michelin is liable for these taxes. Petitioner

should also be liable for the taxes due and owing for the

years in which it received these services.

The Michelin decision terminated the erroneous prefer-

ential treatment given to imports since the decision in

Low v. Austin. Petitioner is asking this Court to extend

this erroneous preferential treatment for an additional five

years. Indeed, in this case, such a conclusion would entirely

defeat the decision of the Texas Courts, since petitioner’s

warehouse is no longer located within the municipal boun-

daries of Farmers Branch. Therefore, its imports would

never be subject to respondent’s taxing authority.

The ultimate decision in Michelin was that the taxes

imposed by Gwinnett County for 1972 and 1973 were fully

collectable. This Court did not specifically reserve the ques-

tion of the retroactive-prospective effect of Michelin, as it

did in several cases cited by petitioner as authority for

granting a writ of certiorari to consider the prospectivity of

an earlier announced rule. See e.g. Simpson v. Union Oil Co.,

396 U.S. 13 /1969).

It was therefore quite necessary for the petitioner to

ask this Court to “go beyond the four corners of this case”

(Pet., p. 9), since the issues presented here were fully

presented by the litigants in Michelin.

7

B. THE TEXAS SUPREME COURT CORRECTLY

APPLIED THE STANDARDS OUTLINED IN CHEVRON.

The Chevron guidelines have never been considered

mandatory, as argued by the petitioner,’ but only as consid-

erations applicable in those cases where retroactive appli-

cation of a changed law or decision would work harsh and

inequitable results.

But certainly this is not the case in which to test that

issue, since the Supreme Court of Texas referred to these

principles, and decided that Michelin should be applied

without limitation.

Even if we liberally apply the Chevron general factors

to our facts, it is evident that the equitable goals of that

decision would not be served in this case. ‘Those factors

would support petitioner’s obligation to pay its taxes for

1972 and 1973.

1. The decision must reverse “clear past precedent”

on which the litigants may have relied.

Michelin overruled Low v. Austin, but that decision had

already been tainted by this Court’s decision in Youngstown

Sheet & Tube Co. v. Bowers, 358 U.S. 534 (1959). This is

the exact position that the respondent has taken since the

inception of this suit.

Also, there is no indication that petitioner relied on prior

precedent other than counsel’s assertions that pricing was

affected. We would assert that competition, and not costs,

dictated pricing practices. If petitioner assumed that its

profits would not be reduced by these taxes, it was simply

mistaken.

~ *The Court itself in Chevron merely said that these principles

to weigh the ities.

404 US. oP 107, Ay, +4 my S's. 192 (1973)

(where this Court stated that the Chevron guidelines are hel but

are discretionary with each court). Moreover, the Court in hevron

8

No amount of petitioner’s optimism as to the outcome

of its suit against respondent can be deemed to constitute

“reliance.” For each and every year, the petitioner has been

aware. of the precise amount of tax which would be due if it

failed in its injunction suit against the respondent. This is

not a case where the petitioner has relied upor inconsistent

past actions of the respondent. This is not a case where both

litigants relied on an erroneous decision.

The case at bar is clearly distinguishable from the deci-

sion in Lemon v. Kurtzman, 411 U.S. 192 (1973), which is

cited by the petitioner for the proposition that reliance is

justified even though “Farmers Branch had levied an ad

valorem tax before Low was reversed.” (Pet., p. 7.) Kurtz-

man presented the question of whether repayments should

be made to the state for funds expended under a state law

for the benefit of non-public schools, prior to the date that

such law was declared unconstitutional. This Court held that

the decision declaring the state law unconstitutional should

be applied only prospectively, since the parties who claimed

that the statute was unconstitutional had either abandoned

or not sought repayments prior to the Supreme Court’s deci-

sion. In the case at bar, there is not a “reaching back” to

secure relief, since the tax was assessed in the very first year

in which Honda became subject to the municipal tax.

This Court held in Bradley v. School Board of Richmond,

416 U.S. 696 (1974) that the existence of various theories on

which a party may have lost vitiates his claim of “manifest

injustice” when one of those theories is sustained by virtue

of new law.

2. The prior history of the rule, its purpose and

effect must indicate that a effect would retard

its operation.

The history of the Import-Export Clause indicates three

reasons why it was added to the Constitution. Applying the

decision in Michelin without limitation to the case at bar will

certainly not retard the (1) consistent regulation of com-

mercial relations with foreign nations, (2) sources of reve-

nue for the federal government, or (3) harmony among the

states.

The primary purpose of the Michelin decision was not

to allow “local government agencies to impose ad valorem

taxes and to thereby require ultimate consumers to pay for

the benefits and services accorded the goods.” (Pet., p. 8.)

The primary purpose of the decision was to force the import-

er to bear its share of the costs of municipal services and to

terminate the preferential treatment afforded importers since

Low v. Austin. (96 S. Ct. 535, at 541.) The Court in Michelin

stated in a footnote that “depending on the relevant competi-

tion from domestic goods, an importer may be forced to

absorb some of these ad valorem property assessments rather

than passing them on to consumers.” (96 S. Ct. 535, at 542,

f/n 8.)

Petitioner argues that a retroactive application of

Michelin would “reap a windfall in added revenues to taxing

authorities without a corresponding increase, as Michelin

intended, in the expense of local services for past years nor a

proper allocation of such burdens to the ultimate consumers.”

(Pet., p. 8.) The petitioner’s position seems to be that any

taxes imposed upon importers should be paid by the con-

sumers or not at all. This contention is neither reasonable nor

logical. Perhaps, the petitioner is saying that it would have

raised its prices, without regard to the competitive pricing of

domestic wholesalers, if it had to pay taxes as did those

domestic wholesalers. If that is the case, petitioner’s ultimate

complaint is that its domestic tax burden will result in a

reduction of its profits. If this is, in fact, the ultimate basis of

the petitioner’s argument, it should be rejected.

3. Applying the new rule retroactively must pro-

duce substantial injustice or hardship in the case at bar.

Honda claims that a retroactive application of Michelin

could cause it to “absorb all assessments of back taxes...

10

within the applicable periods of limitation.” (Pet., p. 8.)

The petitioner simply overlooks that its claimed tax exemp-

tion for each year was denied, and solely because of the agree-

ment entered into between the litigants was collection de-

layed. Honda knew each year its potential liability and could

have relied upon this potential liability “in ordering its busi-

ness affairs with respect to locating warehouses, pricing

goods, maintaining inventory levels, etc.” (Pet., p. 7.) Farm-

ers Branch should not be penalized if the petitioner did not

make these business decisions.

Actually, inequity will result to Farmers Branch if the

Michelin decision is limited by this Court. Farmers Branch

has been in litigation for just as long as the taxing authority

in Michelin. Farmers Branch has incurred substantial ex-

penses in attempting to assert its constitutional right to levy

a non-discriminatory ad valorem tax on imports. Farmers

Branch has placed these imports on its tax rolls and budgeted

its municipal activities and services relying on the collection

of these amounts. Finally, Honda has moved its warehouse

outside the municipal boundaries of Farmers Branch and is

now not subject to municipal taxation by the respondent.

Therefore, should this Court limit its decision in Michelin,

Farmers Branch would be unable to collect any taxes for the

municipal services rendered by it to the petitioner over the

past five years.

In its final section, the petitioner attempts to persuade

this Court to adopt a totally new judicial concept. It argues

that all decisions which affect business relationships and

transactions in any way, should be applied prospectively.

This argument has repeatedly been rejected as an attempt to

engraft upon a judicial decision the limitation placed upon

legislation. It is well settled that legislation should have pro-

spective effect, but that judicial decisions, except in extreme-

ly rare and unusual cases, should be applied without

restriction.

11

CONCLUSION

For any and all of these reasons, a writ of certiorari

should not issue to review the judgment and opinion of the

Texas Supreme Court.

Respectfully submitted,

DuRANT, MANKOFF,

Davis & WOLENS

3900 First National Bank Big.,

Dallas, Texas 75202

214/748-0074

RONALD M. MANKOFF

NALD G. WILLIAMS

Attorneys for Respondents.

12

CERTIFICATE OF SERVICE

I, Ronald M. Mankoff, do hereby certify that a true and

correct copy of the foregoing Respondent’s Brief In Opposi-

tion To Petition For Writ of Certorari was served on the

Johnson & Blumenthal, 3000 One Main Place, Dallas, Texas,

this 27th day of August, 1976.