Petition — Salorio v. Glaser

UMCe= SIpreme Court, U.S.

FILED

8 3 = 353 SEP 2 i993

ACEXE Wise L, STEVAS,

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

—<j—<_

JOHN SALORIO, ROBERT COE and

JOHN D. MCGARR, JR.,

Petitioners,

—Y—

SIDNEY GLASER, Director of the Division of Taxation,

Department of the Treasury of the State of New Jersey,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE SUPREME COURT OF NEW JERSEY

Max Gitter,

345 Park Avenue

New York, New York 10154

(212) 644-8000

Of Counsel: ce I —

Richard A. Rosen Newark, New Jersey 07102

PAUL, WEISS, RIFKIND, (201) 643-2060

WHARTON & GARRISON,

A partnership including

professional corporations

New York, New York

Kevin J. Coakley,

CONNELL FOLEY & GEISER,

Newark, New Jersey

September 1, 1983

Counsel for Petitioners

Question Presented

Whether affording only prospective effect to a judgment

invalidating a taxing statute identical in purpose, structure,

operation and effect to a statute previously declared unconsti-

tutional by this Court undermines the principle of stare decisis,

and signals to the states that even facially unconstitutional

legislation can be used to raise revenue without any serious risk

that funds so collected will ever have to be refunded.

TABLE OF CONTENTS

CUR cee e db esaccedeeccescsccecs

SEEDED sce scncccccccccsccccccccccce

EC UEME s Ga cans beccccscrsccerccrccccccsecs

Statutory and Constitutional Provisions Involved......

Neen ee cece bce censeeeees

A.

B.

c.

EE I con ccccccssccccescesecs

New Jersey’s Commuter Income Tax...........

New Jersey's Evasion of this Court’s Decree in

DCCC PEAS Ce hake eeoseecececrcorccesece

REASONS FOR GRANTING THE WRIT

THIS COURT SHOULD GRANT THE WRIT

TO RESTRAIN THE INVOCATION OF THE

PROSPECTIVITY DOCTRINE AS A DEVICE

FOR AVOIDING STARE DECISIS, AND TO

ENSURE THAT STATES DO NOT CONTINUE

TO ENFORCE UNCONSTITUTIONAL REVE-

NUE STATUTES BECAUSE OF A BELIEF

THAT RETROSPECTIVE RELIEF WILL

RARELY, IF EVER, BE AWARDED...........

RUPEE csc ccc cccccscccccccccccesscccccccs

14

ee ate cress scsecreceses Bound separately

TABLE OF AUTHORITIES

Cases: PAGE

Austin v. New Hampshire, 420 U.S. 656 (1975)....... passim

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971). ....... 10, 13

Hicklin v. Orbeck, 437 U.S. 518 (1978) ...........05. 8

Lemon v. Kurtzman, 411 U.S. 192 (1973) ............ 12

New York v. Cathedral Academy, 434 U.S. 125 (1977)... 14

New York v. New Jersey, 429 U.S. 810 (1976)......... 7

Salorio v. Glaser, 82 N.J. 482, 414 A.2d 943 (1980)...1, 7, 12

Toomer v. Witsell, 334 U.S. 385 (1948) ...........00. 8

United States v. Johnson, 457 U.S. $37 (1982) ........ 13-14

United States Trust Co. v. New Jersey, 431 U.S. 1 (1977) 12

Books and Articles:

Day, Taxing Interstate Commuters: A New Jersey Ex-

periment Under The United States Constitution, 18

Sena 5... Ws ET a 3.6 654be Vaso eanacenkwes 5

O. Field, The Effect of an Unconstitutiona! Statute

(DOGG tid isin ad nebo iden es eencend cee ae eens 1]

Mishkin, The Supreme Court, 1964 Term-Foreword:

The High Court, The Great Writ, and Due Process of

Time and Law, 79 Harv. L. Rev. 56 (1965)......... ll

Constitutional Provisions, Statutes and Regulations:

as Somat, Mt, TE 6:2, Gh be eee vevcencasvuns 2, 9, 12-13

ae OBES STR ve oda vvissucccosesasacvessuheas 2

Ae BG, ET vac tevdevecsecstvetesteabacniters 12

$4.N.J. Stat. Ann. §§ 8A-1-8A-57 (West Supp. 1983) . .passim

vi

PAGE

54.N.J. Stat. Ann. § 8A-2 (West Supp. 1983)..........

54.N.J. Stat. An. § 8A-5 (West Supp. 1983)...........

54.N.J. Stat. Ann. § 8A-16 (West Supp. 1983).........

54.N.J. Stat. Ann. § 8A-19(b) (West Supp. 1983)......

54. N.J. Stat. Ann. §§ 8A-20-23 (West Supp. 1983).....

54.N.J. Stat. Ann. § 8A-121 (West Supp. 1983)........

Pere Whole NN CANO, TR. FEDS oo ceive vel née cadedaces

1 N.J. Tax Reporter (CCH) §§ 18-301, 305 ............

59 New York Tax Law § 602 (McKinney 1982) ........

Se Oy ee RAO COS MC eens c st Rbaveceenev bec.

a oe So ee ee Se Oe: SS” SO

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

No.

>

JOHN SALORIO, ROBERT COE and

JOHN D. MCGARR, JR.,

Petitioners,

—_—\ —

SIDNEY GLASER, Director of the Division of Taxation,

Department of the Treasury of the State of New Jersey,

Respondent.

>

PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF NEW JERSEY

Petitioners John Salorio, Robert Coe and John D. McGarr,

Jr. respectfully pray that a writ of certiorari issue to review the

judgment of the Supreme Court of the State of New Jersey

entered on June 8, 1983.

OPINIONS BELOW

The opinion of the New Jersey Supreme Court, which is not

yet officially reported, appears in Appendix A hereto at Al.

The opinion of the court of first instance (New Jersey Superior

Court, Chanc.ry Division) appears in Appendix B hereto at

A23. A prior opinion of the New Jersey Supreme Court,

remanding the case to the Superior Court, Chancery Division,

for findings of fact, is officially reported at 82 N.J. 482, 414

A.2d 943 (1980).

JURISDICTION

The judgment of the New Jersey Supreme Court was entered

on June 8, 1983. This petition was filed within 90 days

thereafter. This Court's jurisdiction is invoked under 28

U.S.C. § 12$7(3).

Statutory and Constitutional Provisions Involved

New Jersey Emergency Transportation Tax Act (Commuter

Income Tax), $54 N.J. Stat. Ann. §§ 8A-1-8A-57 (West Supp.

1983).

Reprinted in Appendix D to this Petition for Certiorari.

U.S. Const., Art. IV. § 2, el. 1

“The Citizens of each State shall be entitled to all

Privileges and Immunities of Citizens in the several

States.”

Statement of the Case

A. Preliminary Statement

Petitioners are citizens and residents of the State of New

York who work or who have worked in the State of New

Jersey, and who have therefore been subject to New Jersey’s

Commuter Income Tax, which falls exclusively on New

Yorkers. Although the Commuter Income Tax is indistinguish-

able from the discriminatory commuter tax struck down under

the Privileges and Immunities Clause in Austin v. New

Hampshire, 420 U.S. 656 (1975), petitioners were required to

expend more than six years in the New Jersey State courts

relitigating precisely the issue decided in Austin. Until the New

Jersey Supreme Court finally held, in June 1983, that the

Commuter Income Tax violates the Privileges and Immunities

Clause, the State of New Jersey continued to collect the

unconstitutional tax.

The New Jersey Supreme Court nevertheless applied its

ruling prospectively only, and refused to award petitioners any

refunds of taxes paid after the date of the Austin decision. By

postponing the effective date of its decision to January 1, 1984,

the Court permitted the State to reap a substantial windfall,

and sanctioned its defiance of this Court’s decree. If permitted

to stand, this aspect of the judgment of the Court below will be

a clear signal to state and local governments that the risks

entailed by ignoring this Court’s decisions are minimal. The

states will conclude that even plainly unconstitutional statutes

may be counted on to raise revenue until the judicial process

ends and the legislation is invalidated.

This Court should therefore grant certiorari to protect the

integrity of stare decisis in constitutional litigation.

B. New Jersey's Commuter Income Tax

Pursuant to the Commuter Income Tax, first enacted in

1961, New Jersey has taxed New York residents who derive

income in or from the State of New Jersey at rates that range

from 2% to 15% of taxable income. New Jersey residents,

however, paid no income tax whatsoever on their income

derived from New Jersey until 1976, and since that time have

paid income taxes of 2% to 3%, under a separate tax called the

New Jersey Gross Income Tax.!

While New Jersey residents are theoretically subject to the

Commuter Income Tax,’ only New York residents pay the tax

| New Yorkers working in New Jersey are subject to the Gross Income

Tax as well as the Commuter Income Tax, and are required to pay

whichever tax results in the higher levy,

2 By its terms, the Commuter Income Tax is imposed (a) upon

residents of New Jersey on their income earned in another “critical

area state” and (b) upon a// income—including rents, capital gains,

and so forth—derived from New Jersey by persons who are not

residents of New Jersey but who reside in a “critical area state.” 54

N.J. Stat. Ann, § 8A-2 (West Supp. 1983). A “critical area state” is one

bordering on New Jersey as to which the State Highway Commissioner

4

in practice. The statute provides New Jersey residents working

in New York with a credit against the Commuter Income Tax

for income taxes which they pay to New York. 54 N.J. Stat.

Ann. § 8A-16 (West Supp. 1983). Since New York's income tax

is identical in rate with the Commuter Income Tax, New Jersey

residents who work in New York pay income taxes to New

York which necessarily equal the Commuter Income Tax; they

therefore eceive a full credit and pay no Commuter Income

Tax to New Jersey. Thus, no New Jersey resident has ever paid

a penny under this tax. Indeed, New Jersey residents have been

exempted from filing returns for the Commuter Income Tax.

54.N.J. Stat. Ann. § 8A-19(b) (West Supp. 1983); [1980] 1 N.J.

Tax Reporter (CCH) §§ 18-301, 305.

The New Jersey Commuter Income Tax on New York resi-

dents is, and has been since its inception, identical in all

Significant respects with the New York State income tax. For

example, the rate table for the Commuter Income Tax is a

carbon copy of the rate table for New York’s income tax as set

out in the New York statute books.’ Not only are the ta. sates

and structures of the two taxes identical, but each time New

York has amended its income tax statute in any significant

respect, New Jersey has shortly thereafter enacted an identical

change.

Significant to the analysis required by Austin v. New

Hampshire, 420 U.S. 656 (1975), New Jersey does not impose

any tax which is payable by New Jersey citizens alone—all of

New Jersey’s other taxes are imposed upon residents and

nonresidents alike.

has certified that there exists a “critical transportation problem”

relating to the commutation between New Jersey and the bordering

state. 54. N.J. Stat. Ann. § 8A-S (West Supp. 1983).

The only “critical area” which has ever been certified is the New

York-New Jersey border. Therefore, residents of New York who work

in New Jersey and New Jersey residents who work in New York are

theoretically subject to the Commuter Income Tax.

3 Compare 1978 N.J. Sess. Laws, Ch. 131, with $9 New York Tax Law

§ 602 (McKinney 1982) and 1978 N.Y. Sess. Laws, Ch. 70.

The purported justification for the Commuter Income Tax is

the burden that nonresident commuters allegedly place upon

New Jersey’s transportation facilities. But the tax has never

been adjusted during its entire twenty year history to reflect

any transportation needs or burdens; its rates are set solely to

conform with New York’s statute. Indeed, Governor Meyner,

in his original message to the New Jersey legislature, candidly

stated that the intent of the statute was to take advantage of

tax credits granted by New York State’s income tax scheme and

divert tax revenues from New York. See, Day, Taxing Interstate

Commuters: A New Jersey Experimeni Under The United

States Constitution, 18 Rutgers L. Rev. 1, 2 (1963).*

Moreover, imposition of the tax is not limited to New

Yorkers who actually commute to New Jersey; rather, the tax is

levied on ail income derived by New Yorkers from New Jersey,

including rents and capital gains, whether or not the New York

resident ever sets foot in New Jersey. Yet neither Connecticut

nor New Jersey residents who use the very same transportation

facilities are taxed.

The New Jersey tax is identical in all significant respects to

the discriminatory commuter tax invalidated by this Court in

Austin v. New Hampshire, 420 U.S. 656 (1975).

—Each commuter income tax is a duplicate of the income

tax imposed by the bordering state;

—Each was designed to, and has the effect of, taking

advantage of tax credits granted by the bordering state in order

to divert income tax revenues from that bordering state;

—Each is nominally imposed on residents and nonresidents,

but, by means of credits or exemptions, in fact is imposed only

on nonresidents;

4 While the proceeds of the tax assertedly are kept in a special fund

for transportation projects, 54 N.J. Stat. Ann. §§ 8A-20-23 (West

Supp. 1983), transfers from that fund may be and have been made

regularly to the State’s General Fund and to the Property Tax Relief

Fund. See $4 N.J. Stat. Ann. § 8A-121 (West Supp. 1983).

6

—Each taxing state requires employers to withhold portions

of the nonresidents’ income for payment of the commuter

income tax;

—Each commuter income tax “falls exclusively on the in-

come of nonresidents; and it is not offset even approximately

by other taxes imposed upon residents alone.” Austin v. New

Hampshire, 429 U.S. at 665.°

This Court concluded that the New Hampshire tax could be

upheld only if, looking to “the practical effect and operation”

of the taxing scheme, “the nonresident was not treated more

onerously than the resident in any particular, and in fact was

called upon to make no more than his ratable contribution to

the support of the state government.” 420 U.S. at 664 (empha-

sis added).

Although New Hampshire attempted to argue that the tax

did not discriminate at all between Maine and New Hampshire

citizens, this Court ruled flatly that the New Hampshire tax

could not be sustained under the principle of “substantial

equality of treatment,” because the “tax falls exclusively on the

income of nonresidents; and it is not offset even approximately

by other taxes imposed upon residents alone.” 420 U.S. at 665.

The discriminatory effect of the New Jersey Commuter

Income Tax is identical with that of the invalid New

Hampshire tax. The New Jersey Commuter Income Tax falls

only on nonresidents—in this case, only New Yorkers—and the

tax on New York residents’ income (up to 15% of taxable

income) is not even approximately offset by taxes that New

Jersey has imposed only upon its own residents.

5 In this and other respects, the New Jersey Commuter Income Tax is

worse than the New Hampshire tax invalidated in Austin. New

Hampshire residents did pay some taxes to which nonresidents were

not subjected. See Austin v. New Hampshire, 420 U.S. at 659 n. 3.

Moreover, the maximum rate paid by Maine residents in Austin was

4%, whereas the Commuter Income Tax imposed on New Yorkers has

ranged as high as 15%.

The State of New Jersey recognized that the constitutional

fate of its statute was inextricably tied to that of the New

Hampshire tax. Thus, New Jersey submitted an amicus brief to

this Court in Austin (on behalf of New Hampshire) which

conceded that the two states’ commuter income tax schemes

were “similar.” See Amicus Curiae Brief of the Attorney

General of the State of New Jersey at 3, Austin v. New

Hampshire, 420 U.S. 656 (1975). The New Jersey Supreme

Court has also stated that “[t]he mechanics of the [Commuter

Income Tax] are strikingly similar to the invalidated New

Hampshire tax.” Salorio v. Glaser, 82 N.J. 482, 504 n.17, 414

A.2d 943, 953 n.17 (1980). And in evident recognition of the

constitutional infir.nities of its tax in the wake of Austin, the

proceeds of the tax were held separate for a period of at least

two years pending the outcome of this challenge to the tax, and

were disbursed only at the end of each fiscal year.

C. New Jersey’s Evasion of this Court’s Decree in Austin

Austin therefore clearly foreshadowed—indeed, com-

pelled—a ruling that the Commuter Income Tax contravenes

the Privileges and Immunities Clause. Yet New Jersey managed

to stave off compliance with the teaching of this Court for

more than six years, meanwhile collecting as much as $40

million each year from citizens of New York.

After substantial dilatory and frivolous motion practice,°

which helped to delay the case for over a year before the merits

could even be addressed, the State attempted to distinguish

6 Thus, for example, the State (1) moved to dismiss the case for failure

to exhaust administrative remedies—in the face of uniform authority

holding that no exhaustion is necessary in a constitutional challenge to

a statute; (2) moved to dismiss for failure to join New York State as a

“real party in interest,” even though New Jersey previously had

argued—and this Court had held—that only individual citizens, and

not the State of New York, had standing, New York v. New Jersey, 429

U.S. 810 (1976); and (3) moved to dismiss on the ground that plaintiffs

lacked standing—on precisely the same argument raised and squarely

rejected in Austin v. New Hampshire, 420 U.S. at 659-60 n. 4.

Austin on the ground that the tax is justified by the costs New

Yorkers impose on New Jersey’s transportation facilities. Yet

such a justification must be meaningless as a matter of law. By

definition, a nonresident who works in a neighboring state and

thereby earns income can do so only by transporting himself

there. This interstate commutation necessarily will impose

some cost or “burden” upon the transportation facilities of the

taxing state. Austin necessarily presented precisely the same

problem, and therefore must be read to hold that the “trans-

portation problem” created by the mere movement of residents

of one state to work in a neighboring state cannot serve as a

legitimate justification for a discriminatory tax. Otherwise,

Austin would be a nullity.

And this “cost” justification was frivolous as a matter of

fact as well. For not only had the tax been enacted and

modified solely to capture income from New York, and in

disregard of any transportation cost issues (see pp. 3-5, supra),

but the State was unable to advance any evidence at the five

day hearing on this matter that New Yorkers constituted the

“peculiar source” of the alleged transportation problem,

Toomer v. Witsell, 334 U.S. 385, 398 (1948); Hicklin v.

Orbeck, 437 U.S. 518, 526-27 (1978), or that there was a

“substantial relationship” between the burdens New Yorkers

imposed on the transportation system and the discrimination

practiced against them. See Toomer v. Witsell, 334 U.S. at

398-99. Indeed, how could it have done so? As the New Jersey

Supreme Court noted, “New Jersey to New York commuters

substantially outnumber those travelling from New York to

New Jersey,” and New Yorkers constitute a tiny fraction—

2.9% in 1970 and 4.0% in 1980—of the total number of

interstate and intrastate commuters using New Jersey’s facili-

ties. See Appendix A at Al2.’ New Yorkers thus travel against

7 Between 1962-1980, the tax generated $381 million from New

Yorkers. Yet, even according to the State’s own testimony, there was a

gross disparity between the sums collected and the costs attributable to

New York commuters. The New Jersey Supreme Court assumed

witout deciding that the State was correct that New Yorkers paid

9

the peak flow of traffic, which consists of New Jerseyans

commuting to New York.

Recognizing that the tax could not be justified under Austin

by reference to the additional costs New Yorkers impose on

New Jersey’s transportation facilities, the State essentially

abandoned its attempt to defend the tax on this ground, and

instead concocted a novel—and incoherent— “benefits” theory,

which was ultimately, and properly, rejected by the New Jersey

Supreme Court (Appendix A at All). On this theory, New

York commuters (like any other user of New Jersey transporta-

tion facilities) receive some theoretical total amount of “bene-

fits” from travelling on New Jersey roads (such as reduced

travel time and savings on tire wear); the dollar amount of

such benefits is necessarily a multiple of the costs imposed by

New Yorkers; and New York commuters may be taxed in an

amount equivalent to these theoretical “benefits”. But New

Jersey taxes its own residents on the basis of costs it incurs,

and not on benefits New Jerseyans enjoy; the State does not

make a profit off its citizens. On the State’s theory, however,

since the dollar amount of benefits exceeds the dollar amount

of transportation costs, New Jersey can make a profit, but

only off New York commuters.”

twice as much in taxes as the costs attributable to them, because the

Court concluded that the Privileges and Immunities Clause was vio-

lated by a disparity of this magnitude. The record below demonstrates

clearly, however, that the proceeds of the tax were actually between

nine and thirty times higher than maximum state and local government

transportation expenditures that could conceivably be s*tributed to

New Yorkers. Indeed, New Yorkers’ payments under ™.w Jersey's

gasoline tax alone more than covered their share of any state transpor-

tation costs.

8 In any event, the “benefits” test is purely tautological—a New

Yorker's share of benefits is precisely the same as his share of costs; the

State measured both on the basis of percentage of use of transporta-

tion facilities. New York commuters represent only about 1% of total

usage of transport facilities, and yet their tax payments are many times

more than 1% of total payments for transportation in New Jersey. As

the trial court recognized, on the State’s theory, New Yorkers must pay

10

In short, as was clear from the outset of this litigation, and

as the New Jersey Supreme Court ultimately held, New Jer-

sey’s “transportation” justification for its discriminatory tax

was a makeweight which could not withstand serious analysis.

But by ruling that its decision voiding the Commuter Income

Tax would be afforded prospective effect only, and that peti-

tioners would not be awarded refunds of taxes paid to the State

since Austin, the New Jersey Supreme Court rewarded the

State for gambling that it would not be penalized for failing to

comply with a controlling precedent of this Court.

REASONS FOR GRANTING THE WRIT

THIS COURT SHOULD GRANT THE WRIT TO RE-

STRAIN THE INVOCATION OF THE PROSPECTIVITY

DOCTRINE AS A DEVICE FOR AVOIDING STARE DECI-

SIS, AND TO ENSURE THAT STATES DO NOT CON.-

TINUE TO ENFORCE UNCONSTITUTIONAL REVENUE

STATUTES BECAUSE OF A BELIEF THAT RETROSPEC-

TIVE RELIEF WILL RARELY, IF EVER, BE AWARDED.

Before a rule of law can be afforded prospective effect only,

it is well-settled that

“(t]he decision to be applied nonretroactively must estab-

lish 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.”

Chevron Oil Co. v. Huson, 404 U.S. 97, 106 (1971) (citations

omitted). The justification for limiting prospectivity to cases

that announce a new legal standard is that any other rule

would vitiate the rule of stare decisis and undermine the role of

this Court as the ultimate arbiter of questions of constitutional

a dollar for each dollar of benefit, while New Jersey residents pay no

more than 12-16 cents for the same dollar of benefit. (See Appendix B

at A30.)

dimensions. Retrospective application of established legal prin-

ciples through damage awards is what gives this Court some

assurance that, by and large, its decisions will actually govern

the behavior of persons in similar circumstances.’ Such assur-

ance is of particular significance because of the practical

inability of the courts—and of this Court in particular—to

provide review of every statute of dubious constitutional valid-

ity.

Vigilant monitoring by this Court is especially necessary

when the doctrine of prospectivity, designed as a shield against

unexpectedly harsh or unjust results when a new legal principle

is announced, is instead invoked to avoid the impact of

controlling precedent. Prospectivity then becomes a sword. It

cuts off relief to which persons injured by a clearly unconstitu-

tional statute are entitled, destroys incentives to challenge

unconstitutional enactments, and removes the deterrent effect

of damage awards on unconstitutional conduct. That, we

submit, is what has happened in this case.

Once this Court had decided Austin v. New Hampshire in

1975, there was no reasonable basis for believing that the New

Jersey Commuter Income Tax could pass constitutional muster.

The tax should have been declared unconstitutional on its face

in a summary proceeding. Rather than acknowledge that tre

Austin decision controlled, however, New Jersey continued to

enforce its facially invalid statute while the litigation lan-

guished in the state court system for nearly six years.’ And by

9 As Professor Mishkin pointed out almost twenty years ago, retro-

active application of holdings that can be “reasonably anticipated”

helps insure that those who may be affected by such holdings will seek

to conform, in advance, to expected standards. Mishkin, The Supreme

Court, 1964 Term-Foreword: The High Court, The Great Writ, and

Due Process of Time and Law, 79 Harv. L. Rev. $6, 72 (1965).

10 It should be pointed out that New Jersey is not the first state that

has sought to retain the benefits of invalid tax legislation. Historians

have documented numerous instances in which governments have

collected taxes under clearly unlawful statutes. See O. Field, The

Effect of an Unconstitutional Statute 318-320 (1935).

12

1980, when the New Jersey Supreme Court ruled that the State

had the burden of proof, New Jersey could not possibly argue

that it was relying on the presume! constitutionality of a

legislative act. Salorio v. Glaser, 82 N.J. 482, 503-504, 414

A.2d 943, 953-54 (1980). Yet, New Jersey reaped as much as

$40 million per year exclusively from New Yorkers, who had

no voice in the legislative affairs of New Jersey and whose

interests were entirely unrepresented there.''

By permitting New Jersey to retain the tax revenues it

obtained from New Yorkers and postponing the effectiveness

of its decision to strike down the statute until 1984, the New

Jersey Supreme Court’s judgment tells the states that it is to

their advantage to enact revenue statutes without regard to

their constitutionality. Legislatures can be secure in the knowl-

edge that, even if their unconstitutional laws are ultimately

11 Granting the writ is particularly appropriate in this case because

Salorio concerns a state tax that contravenes the Privileges and

Immunities Clause. Non-residents of a state who are subject to a

discriminatory tax can generally challenge its constitutionality only in

state court. See Tax Injunction Act, 28 U.S.C. § 1341 (1976). State

court judges, however, are understandably reluctant to void a tax that

constitutes a substantial source of revenue for the state. The original

New Jersey trial judge in this case, for instance, candidly stated on a

number of occasions that he was struggling for a way to uphold the

tax, despite Austin. He said, for example: “[I]f I could find a way to

end it or to avoid Austin, | surely would sustain this tax... .”

Transcript of Proceedings, Salovio v. Glaser, No. C-3628-76 (N.J.

Super. Ct. Ch. Div. Feb. 23, 1978) at 16.

The reluctance to void an unconstitutional iax may extend to a

reluctance to apply any such decision retroactively. As this Court

recognized in Lemon v. Kurtzman, 411 U.S. 192, 200 n. 2 (1973),

however, constitutional interests cannot be ignored in deciding whether

to attach retrospective effect to a constitutional decision. This Court

should take this oprortunity to reemphasize the importance of the

values embodied in the Privileges and Immunities Clause and the

appropriateness of securing these values by awarding damages for a

clear violation of the principles of Austin. Where a state's financal

self-interest is implicated, this Court has been particularly vigilant in

protecting constitutional principles. See United States Trust Co. v.

New Jersey, 431 U.S. 1, 25-26 (1977).

13

invalidated, the states will be able to retain any revenues they

received in the interim.

Such a misconception will affect more than economic in-

terests. It will impede the operation of the Privileges and

Immunities Clause itself. See, Chevron Oil Co. v. Huson, 404

U.S. at 106-107 (“we must . . . weigh the merits and demerits

in each case by looking to the prior history of the rule in

question, its purpose and effect, and whether retrospective

Operation will further or retard its operation”). Even the

temporary enforcement of comparable legislation will have a

substantially harmful impact on the ability of thousands of

persons like petitioners to travel and pursue their occupations

in neighboring states free from discriminatory treatment. It

will also disrupt the structural integrity of our federal system

by encouraging the passage of retaliatory legislation by the

home states of commuters. See Austin v. New Hampshire, 420

U.S. at 662. Retrospective application of the Salorio decision

to require refunds of taxes paid since 1975, when Austin was

decided, or since 1980, when the New Jersey Supreme Court

placed on the State the burden of proof to justify the tax, will

substantially advance the underlying purposes of the Privileges

and Immurities Clause.

The New Jersey Supreme Court’s justification for declining

to give its ruling retrospective effect was that it was announc-

ing “a new rule of law” and that the State had reasonably

relied on the revenues derived from the tax until such time as it

was declared invalid (Appendix A at Al7-A18). To be sure,

this Court has, on several occasions, held that prospective

application of a decision was appropriate when an issue of first

impression had been decided. See, e.g., Lemon v. Kurtzman,

411 U.S. 192, 206 (1973).

But this is not such a case. Austin v. New Hampshire not

only foreshadowed, but compelled, the invalidation of the

Commuter Income Tax. As this Court noted recently in United

States v. Johnson, 457 U.S. 537, 549 (1982):

“when a decision of this Court merely has applied settled

precedents to new and different factual situations, no real

14

question has arisen as to wivether the later decision should

apply retrospectively. In such cases, it has been a foregone

conclusion that the rule of the later case applies in earlier

cases, because the later decision has not in fact altered

that rule in any material way.”

Under such circumstances, this Court simply will not hear it

argued that reliance has been placed on the unconstitutional

statute; such a “rule would mean that every such unconstitu-

tional statute, like every dog, gets one bite, if anyone has relied

on the statute to his detriment.” New York v. Cathedral

Academy, 434 U.S. 125, 130 (1977).

To permit the prospective aspect of the judgment below to

stand would, in a very direct way, undermine the importance of

stare decisis in constitutional litigation, and remove a signifi-

cant constraint on the states’ willingness to enact revenue

legislation that impinges on clearly articulated and entrenched

constitutional! values. If the State of New Jersey is permitted to

retain the tax revenues it collected in defiance of this Court’s

decision in Austin, the carefully delimited doctrine of prospec-

tivity will have engulfed the general principle that settled rules

of law should be afforded retrospective effect.

CONCLUSION

For the reasons set forth above, a writ of certiorari should

issue to review the prospective aspect of the judgment of the

Supreme Court of New Jersey.

September 2, 1983

Respectfully submitted,

Max Gitter

Adrian M. Foley, Jr.

Of Counsel: Counsel for Petitioners

Richard A. Rosen

Kevin J. Coakley