Opposition — Salorio v. Glaser

NO. 83-353 1 Office-Supreme Overt, 4S,

Ix THE | OCE Eb 1983

Supreme Court of the United States. EyAS,

—

Ocrozer Ters, 1983 SO ate es

JOHN SALORIO, ROBERT COF 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.

On Petition for a Writ of Certiorari to the Supreme Court

of New Jersey

BRIEF IN OPPOSITION TO PETITION FOR A WRIT

OF CERTIORAR! TO THE SUPREME COURT OF

NEW JERSEY

Attorney General of New Jersey,

Attorney for Respondent, Sidney Glaser,

Director of the Division of Taxation,

Department of the Treasury af the

State of New Jersey,

Richard J. Hughes Justice Complex

CN 112,

Trenton, New Jersey 08623.

(609) 292-4925

MicHaret R. Corse,

Assistant Attorney General,

Of Counsel.

Mary R. Hamm,

AnpreA M. Si_kow!Tz

Deputy Attorneys General,

On the Brief.

——————————

Adams Press Corp., 50 Park Place, Newark, New Jersey 07102—(201) 623-8611

TABLE OF CONTENTS

PAGE

TABLE OF AUTHORITIES li

COUNTERSTATEMENT OF THE CASE : 1

ARGUMENT—In denying retrospective effect to its

ruling invalidating the Emergency Transportation

Tax, the Supreme Court of New Jersey properly

exercised its discretion as empowered by the

Court’s ruling in Lemon v. Kurtzman, 411 US.

BR Na calc A Anite, a , 15

CoNCLUSION a 3 30

ii TABLE OF AUTHORITIES

PAGR

Table of Authorities

Cases Cited

Allen v. Bd. Elections, 393 U.S. 544 (1969) ww. 17

Austin v. New Hampshire, 420 U.S. 656 (1975) ....2, 3, 7, 8,

11, 15, 24-27, 29

Bethlehem Steel Corp. v. Bd. of Ed., 402 N.Y.S.2d

655 (Sup. Ct. App. Div. 1978) aff'd and mod. 406

N.VS.9d 733 (Ct. Ape. 1976) ccc

Borough of Neptune City v. Borough of Avon by

the Sea, 61 N.J. 296, 294 A.2d 47 (1972) ..................

Buckley v. Valeo, 424 U.S. 1 (1976) 220... .sesssseee

Calif. v. Grace Brethern Church, —— U.S. —

RID. acisccatsdsyeatinccetstonciejencdntendshinsoscapvatebaaanacemtiiaieaiates)

Central Buffalo Project v. City of Buffalo, 428

N.Y.S.2d 102 (Sup. Ct. App. Div. 1980) aff’d o.b.

423 N.Y.S.2d 79 (Ct. App. 1981) ca-eaasveccsscscosereon

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) ......0...

Chicot Co. Drainage Dist. v. Baxter State Bank, 30S

DS. Stl (0) vic ene

Cipriano v. Houma, 395 U.S. TOL (1969) ........eeeeseee

Darrow v. Hanover Tp., 58 N.J. 410, 278 A.2d 200

CRITI) * cccnscainnsscsnsedhstisinstidinnsgesenedeinsianncssaniaeneeieaaaaits

} +) ) eRe eR senna ee MM REAR O EE Me isav Ts REC 7 NT

Deseret & Ranches of Fla. v. St. Johns River Water

Management District, 406 So.2d 1132 (Dist. Ct.

Beye, BOG, TBE) sisisss sain scciinereninainenscninnaiclndiienantinnaig

TABLE OF AUTHORITIES lii

PAGE

Dist. Col. Court of Appeals v. Feldman, —— U.S.

vo endl 2S Lge tN INCA SIERO Mn Re es eae Oe MA 29

District of Columbia v. Keyes, 362 A.2d 729 (D.C.

Fe NR Rt 20

Fair Assessment in Real Estate Assoc., Inc. v. Me-

Mary, 456 U.S. 100 (1961) 23

Florida Dept. of Revenue v. Ford, 417 So.2d 1109

(2. Ct. App. Fis. 1962) saline caida 21

Freeman v. Hewitt, 329 U.S. 249 (1946) .occcccccccccccccccssee 30

Goldberg v. Traver, 52 N.J. 344, 245 A2Qd 334

ae, Lea AE ERC SRE CN cE MT aE RCE ee ORR 22

Gulesian v. Dade County School Bd., 281 So.2d

gE ER 6 ARE aes AEA BR det es ied RD 22

Hellerstein v. Assessor, 37 N.Y.2d 1, 332 N.E.2d

279 (Ct. App. 1975) mod. 39 N.Y.2d 920, 352 N.E.

ee fs ON, A ec 20, 21

Hicklin v. Orbeck, 437 U.S. 518 (1978) coecceccceccecccsssons 11, 27

Hurd v. City of Buffalo, 343 N.Y.S.2d 950 (Sup.

Ct. App. Div. 1973) aff'd 355 N.Y.S.2d 369, 311

N.E.2d 504 (Ct. App. 1974) ...... 20

Interlachen Lakes Estates, Ine. v. Snyder, 304 So.2d

433 (S.Ct. Fla. 1973) 00... i :

Jenkins v. Delaware, 395 U.S. 213 (1969) occ. 22

Lemon v. Kurtzman, 403 U.S. 602 (1971) (Lemon

Ili scdiiidadecsmnadieencndnasbdiensosciceinciatcemmasaasiscles 18

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

ee 1, 2, 15, 17, 18, 20, 23, 27, 28

Los Angeles Dept. of Water and Power v. Manhart,

435 U.S. 702 (1978) “fi. 28, 29

iv TABLE OF AUTHORITIES

PAGE

Middlesex County Ethics Committee v. Garden State

Bar Assn., Uae mee (TDBE) cet Be 29

Northern Pipeline Co. vy. Marathon Pipeline, ——

U.S. —— (1982) and —— TS. CRORE) Sects 29

Norton v. Shelton County, 118 U.S. 425 (1886) 0.000... 16, 17

Pellnat v. City of Buffalo, 399 N.Y.S.2d 788 (Sup.

CO Ape. FRO. TTT) cients nee 20

Phoenix v. Kolodziejski, 399 U.S. 204 (1970) wu... 17

Ramirez v. Amsted Industries, Inc, 86 N.J. 332,

491 A.36 811 (1961) WS 28

Rosewall v. LaSalle National Bank, 450 U.S. 503

CTGIGE ) ~.seranssinsicsnirsvonbichacuatedlagstiasiaggaeesdiel eaten ne 23

State v. Vigliano, 50 N.J. 51, 232 A.2d 129 (1967) .... 22

Switz v. Middletown Tp., 23 N.J. 580, 130 A.2d 15

CII) saicsiesincidsacaiesainceennisbewiagitazaceve eae ae a 22

Toomer v. Witsell, 334 U.S. 385 (1948) ......-.-.cceccoceses 11

Travelers’ Insurance Co. v. Connecticut, 185 U.S.

ELC |: ) eNO SS eR EN 25

United States v. Jefferson Electric Co., 291 U.S, 386

CEI) vnihnesncticcnshsoini in csacsmisiseobicenee enna ae 23

Willis v. Dept. of Cons. & Ec. Dev., 55 N.J. 534, 264

AO Th O8TO) sc eee 28

Wilson v. School District of Philadelphia, 328 Pa.

dam, 155 A. © (S.Ct. 1907)... 22

United States Constitution Cited

TABLE OF AUTHORITIES Vv

PAGE

Statutes Cited

McKinney, New York Tax Law:

EES STE EE OO 6

IMIR, WE OES seccisccaccenscccccsccecesssosscccseccecosseoenees 2,4

Neen nica. sos sececenssescesenessnsscssenee 5

ITD | 5s sccsnccaseessesesesorcsnscssssocssecosesesoes 6

Nee en assess ccsscssnennecenasesecesesecesonscess 5

EMEC DET) oncscccscsocosacosccsescescescsceevescesosesececes 5

PEIN CE) osccccoccscccsocccessrocscccseneserocececossceoses 5

ssc ccenecnasanesconencccessatooseccceccceces 5

Nees. scnsssonssennespessosansbanees 5

IT RIE oa cnesensnsenensctansesnecnqnensnestone 5

I ss acssasndncensscscenserccnsnnsomnees 5

Rule Cited

N.J. Ct. R.:

ES ES Sc 9

Other Authority Cited

I OR a, sss cnssessccnsesescucseceocccsososeoes 15

NO. 83-353

IN THE

Supreme Court of the United States

Ocrosper Term, 1983

ai

>

JOHN SALORIO, ROBERT COE and

JOHN D. McGARR, JR.,

Petitioners,

v.

SIDNEY GLASER, DIRECTOR OF THE DIVISION OF

TAXATION, DEPARTMENT OF THE TREASURY

OF THE STATE OF NEW JERSEY,

Respondent.

On Petition for a Writ of Certiorari to the Supreme Court

of New Jersey

”™

>

BRIEF IN OPPOSITION TO PETITION FOR A WRIT

OF CERTIORARI TO THE SUPREME COURT OF

NEW JERSEY

Counterstatement of the Case

The petitioners would have this Court review through

certiorari a decision of the Supreme Court of New Jersey

holding simply upon the balancing of the numerous factors

outlined by this Court in Lemon v. Kurtzman, 411 U.S, 192

to

(1973), that its declaration of invalidity of the New Jersey

Emergency Transportation Tax (hereinafter ETT), N.J.

S.A. 54:SA-1 et seg., under the Privileges and Immunities

Clause of the United States Constitution would not war-

rant refunds of ETT to the three named petitioners.* In

seeking such further and extraordinary review of this dis-

cretionary fashioning of an equitable remedy and the con-

comitant determination to postpone the effective date of

the ruling until January 1, 1984, to allow for the adoption

of an alternative method for raising in excess of $30 mil-

lion generated annually by the tax, petitioners continue to

assert in dogged and unrelenting fashion the baseless con-

tention that New Jersey's enforcement and defense of the

ETT in the wake of the Austin v. New Hampshire, 420 U.S.

656 (1975), ruling was unjustified and therefore warrants

retrospective application of the declaration of invalidity.

Yet, as the courts of New Jersey and this Court by its dis-

missal of petitioners’ earlier appeal (449 U.S. S04) have

recognized, the Austin ruling compels not a simplistic com-

parison of structural components of the ETT and the New

Hampshire tax invalidated therein, but a painstaking analy-

sis of the circumstances under which the allegedly dis-

eriminatory tax has been imposed and a calculation of

whether the tax bears a “substantial relationship” to the

evils which the tax has been enacted to correct. As demon-

strated below and as articulated in the State’s cross-peti-

tion for certiorari in this same action the ETT, contrary

to the ruling of the New Jersey Supreme Court, should be

held to survive this constitutional scrutiny. Accordingly,

the State justifiably defended and relied on the validity of

the tax throughout these proceedings and as a matter of

* The total amount in issue as to these three petitioners is

approximately $25,000 ( Supplemental Brief for Defendant, Su-

preme Court of New Jersey at p. 6).

equitable discretion, the court below properly declined to

give retrospective effect to its ruling. Yet, even, if as the

Supreme Court of New Jersey has concluded, the tax as

presently constituted is invalid under the Privileges and

Immunities Clause, denial of the requests for refunds and

postponement of the date of invalidity are warranted un-

der the unique facts presented.

The critical elements of dissimiliarity between the emer-

gency transportation tax in dispute in this litigation and

the tax invalidated by the Court in Austin v. New Hamp-

shire, can only be comprehended by a review of the complex

factual record compiled before the trial court in both the

initial and remand proceedings, the 1962 Agreement be-

tween New York and New Jersey respecting the taxation

of interstate commuters and an appreciation of the unique-

ness of the New York-New Jersey metropolitan area.

Every weekday (and primarily during the peak hours of 7

to 10 a.m. and 4 to 6 p.m.) over seven million commuters

traverse the Hudson River separating New Jersey from

New York, 2,250,000 of these in northern New Jersey (App.

B at 32a) (Pa 273) (T31-13 to 16).° The burden imposed

upon transportation facilities in the northern New Jersey-

New York City region by these vast numbers of commuters

is exacerbated by the extraordinarily high population densi-

ties of the points of origin and destination for these com-

muting trips (Da**2 to Dal0; Pal4-1) and the limited

number of river crossings between the States, Although

* This notation refers to the appendix to the brief filed by peti-

tioners with the Supreme Court of New Jersey. The transcript

reference is to the undated transcript of the remand proceedings

in the Superior Court of New Jersey, Chancery Division.

** This notation refers to the appendix to the brief filed by

respondent with the Supreme Court of New Jersey.

the number of New York commuters utilizing these trans-

portation facilities is substantially smaller than the cor-

responding New Jersey interstate travelers, transporta-

tion experts have determined that these New Yorkers sig-

nificantly exacerbate New Jersey's peak hour transporta-

tion problems and cause thereby the need for substantial

expenditures for transportation facilities and transit sub-

sidies (App. B at 34a to 41a; Db18 to Db20; Db46 to Db47;

Db73 to DbS1).

Since not all of the interstate routes and crossings nor

all of the public transportation facilities are self-sustain-

ing, New Jersey has been compelled to use general reve-

nues to construct, maintain, and in the case of public

transit, subsidize the transportation facilities in the north-

ern part of the State. Yet because the New Jersey tax

structure relies very heavily upon real property taxes,

which are ordinarily paid only by residents, nonresidents

who commute to New Jersey traditionally have not con-

tributed substantially to State revenues despite deriving

significant benefits from the New Jersey transportation

system.

In 1961 and 1962, the New Jersey Legislature took cog-

nizance of these tax inequities and of the pressing inter-

state transportation problem in the New York-northern

New Jersey transportation area. The legislative means de-

vised to generate the additional revenue needed to main-

tain and improve transportation facilities between New

Jersey and New York was the Emergency Transportation

Tax Act (N.J.S.A. 54:SA-1 et seq.) which is essentially a

tax on individuals who use interstate transportation facili-

ties.

Several aspects of the tax are worthy of note. Thus, the

imposition of the tax was expressly made contingent upon

the annual certification by the New Jersey Commissioner

of Transportation to the State Treasurer of the existence

of a “critical transportation problem” in connection with

transportation between this State and another state bor-

dering thereon. N.J.S.A. 54:8A-5(c). And significantly, the

Legislature mandated that all ETT revenues be paid into

a special transportation fund. N.J.S.A. 54:8A-20. Other

than the costs of administering the tax and of refunds to

taxpayers, monies in the ETT fund are to be used exclu-

sively to finance projects and programs designed to allevi-

ate transportation problems between New Jersey and New

York. (See N.J.S.A, 54:8A-20(a)(2)). The statute fur-

ther provides that the ETT receipts may not be charged

for expenditures except upon a presentation to the Attor-

ney General itemizing the purposes for which the funds

will be used, and the transmittal of such itemization to the

State Treasurer “with a certification by the Attorney Gen-

eral endorsed thereon that the purposes for which funds

are therein proposed to be used are within the terms

and intent of the act...” N.J.S.A. 54:8A-20(b) (2). If any

of the moneys in the transportation fund are not used for

one of the purposes specified in the Act, a taxpayer has

the right to a refund or credit equal to his pro rata share

of the fund. N.J.SA. 54:8A-22.°

As explained by the Supreme Court of New Jersey in its

initial opinion,** the tax as originally enacted applied only

* An express exception to the above is provided in N.J.S.A.

54:8A-120, which directs that payments of ETT equivalent to

amounts which New \v:iers would otherwise pay under New

Jersey’s Gross Income Tax Act (N.J.S.A. 54A:1-1 et seg.) be re-

moved from the Transportation Fund, and pursuant to N.J.S.A.

54A:9-25 deposited in the Property Tax Relief Fund to which

the gross income tax is dedicated. These funds are not in dispute

in this action.

** A copy of this opinion is included in Appendix A to re-

spondent’s cross petition for a writ of certiorari seeking review

of the Supreme Court of New Jersey’s rulings as to the invalidity

of the ETT under the Privileges and Immunities and Compact

Clauses of the United States Constitution.

6

to New Jersey residents commuting to New York. The inci-

dence of the tax was shifted to New Yorkers commuting to

New Jersey when the State of New York repealed the non-

resient credit in its personal income tax (theretofore

available to New Jersey residents) which triggered the

elimination of the reciprocal nonresident credit in the ETT.

Under the subsequently enacted (and present) statutory

scheme sanctioned by the 1962 Agreement entered into be-

tween the States of New York and New Jersey,* New

Jerseyans’ emergency transportation tax liability is offset

by their payment of the New York personal income tax

(N.J.S.A. 54:8A-16(b)) while New Yorkers receive a full

eredit against their New York personal income tax for pay-

ment of the emergency transportation tax. New York Tax

Law §620(a) (MecKinney).** The State of New Jersey

from 1961 through the fiscal year ending June 30, 1980, in

reliance on the Accord and the validity of the tax which

generated $380,634,000 by that date (Db21) expended ap-

proximately $5.3 billion in the northern ten counties of

New Jersey for its highway network and for railroad and

*A more detailed discussion of the May 6, 1962 Accord

concluded by Governors Rockefeller and Hughes appears in re-

spondent’s cross petition for writ of certiorari in this same action.

The Accord appears at Appendix C to the cross petition.

** In all but a few instances (e.g. where New York real estate

loses would effectively eliminate any New York tax on income

earned in New Jersey) the credit reduces a New York resident's

New York tax liability by the exact amount of emergency trans-

portation tax paid. Accordingly, in the absence of an emergency

transportation tax, the credit would have been eliminated, and a

New Yorker’s combined New Jersey and New York tax liability

would have been precisely the same. The only difference, of course,

is that the amount of the emergency transportation tax would

have been payable to New York rather than New Jersey. Peti-

tioners have admitted as much in this case (Da20).

bus subsidies (Db17).* Of this amount the State's expert

Simpson & Curtin estimated (Db20) and the Supreme

Court concluded (App. A at 14a) that approximately

$182.0 million in State expenditures were allocable to

New York commuters.

The present declaratory action ostensibly brought by

three New York residents but actually pursued on behalf

of officials of the State of New York (Dal) was not com-

menced until June 8, 1977, more than fifteen years after the

enactment of the ETT and New York's express concur-

rence in the imposition of the tax (Pal to Pa4). Of course,

then and now there was little financial incentive for indi-

vidual taxpayers to bring such a challenge since no New

Yorker paving the emergency transportation tax save in

the rare circumstances (which do not pertain to any of

petitioners herein) detailed supra suffered any economic

harm by reason thereof.

The case proceeded, notwithstanding petitioners’ sugges-

tion to the contrary, in an expeditious fashion. Thus in

response to petitioners’ filing of a motion for summary

judgment declaring the ETT unconstitutional under the

Court’s ruling in Austin v, New Hampshire, respondent

alternatively moved to dismiss the complaint and for

summary judgment.** At the return date of the cross mo-

*This notation refers to the brief filed by respondents with

the Supreme Court of New Jersey.

** The suggestion set forth in the petition for writ of certiorari

that the aforementioned motions and an earlier motion to dis-

miss (on exhaustion grounds) filed in September 1977 were frivo-

lous and filed as dilatory measures is unjustified and offensive.

Each one of these motions had a substantial basis in State law

(see respondent’s brief filed with the Supreme Court of New

Jersey in the initial proceeding at pp. 1-2, 38, 44-46 and respond-

ent’s brief filed with the Supreme Court of New Jersey after

remand at p. 47) and was filed by the respondent based upon his

belief that his position on the merits would be furthered if the

motion was granted,

tions in December 1977 petitioners insisted upon the right

to take the depositions of the persons whose affidavits had

been submitted in support of the motion for summary judg-

ment (Transcript of December 15, 1977 hearing, at T4-6 to

T5-3). This resulted in the taking of more than 550 pages

of depositions as well as the introduction of hundreds of

pages of exhibits in connection with those depositions

(Ppa50 to Ppal00, Ppal20 to Ppalsl).* The matter was

then brought back before the trial court, first in February

and then in March 1978, at which time there was further

controversy concerning the parameters of the record

(Ppal45 to Ppal49, Dda45 to Ddadd).*

On October 24, 1978 the trial court issued a comprehen-

sive opinion upholding the constitutionality of the ETT,

wholly rejecting petitioners’ contention that Austin v. New

Hampshire compelled a contrary result. Thus, the trial

court noted:

Nothing in Austin indicates any reason for the enact-

ment of the New Hampshire statute other than to

raise general revenue, The statute before this Court

dedicates the use of the revenues collected under the

Act to the Transportation Fund. There is no indi-

cation of dedication in Austin. The purpose of the

New Jersey Act is the alleviation of the commuter

problem. Thus, a ‘lirect benefit is intended to New

York commuters such as Salorio (Cr. Pet. App. B at

53a].°*

* These notations refer to the appendix to the briefs filed by

petitioners and respondents in the initial proceedings before the

Supreme Court of New Jersey which was stipulated as part of

the record in the remand proceedings (App. B at 25).

** This notation refers to the Appendix to the State's cross

petition for a writ of certiorari in this same action.

9

The trial court further found that, assuming the tax “is

administered in accordance with the express purposes” de-

clared therein, New York commuters “will receive a direct

benefit from the expenditure of the funds” (Cr. Pet. App.

B at 5la). It further concluded that

... the transportation problem is substantial and

the ultimate impact of the tax upon residents and

non-residents bears a close relation to the challenge

of correcting the traffic and commuting problems

[Cr. Pet. App. B at 54a).

Based upon these factual findings, the trial judge con-

cluded that the petitioners had failed to demonstrate that

the ETT violates the United States Constitution [Cr. Pet.

App. B at 56a).

The trial court also determined that the ETT and its

companion legislation in New York had been enacted and

remained in effect pursuant to a reciprocal agreement en-

tered into between the States, consistent with the prin-

ciples of interstate comity embodied in the Privileges and

Immunities Clause of Article 1V (Cr, Pet. App. B at 55a).

Finally, the trial court upheld the tax under the Equal Pro-

tection Clause of the Fourteenth Amendment, reasoning

that the State was not required to demonstrate a compell-

ing state interest and that the tax bore a “reasonable re-

lation to a proper governmental purpose” (Cr. Pet. App.

B at 54a).

Upon direct certification to review the judgment of the

trial court,® the Supreme Court of New Jersey affirmed

the trial court’s equal protection ruling (Cr. Pet. App. A

* Pursuant to N.J. Ct. R. 2:12-2 the Supreme Court of New

Jersey may directly certify an appeal pending unheard in the

Superior Court of New Jersey, Appellate Division,

10

at 36a). The court further concurred with the State’s

arguments and the trial court ruling that as a matter of

law the costs concurred in alleviating transportation prob-

lems created by New Yorkers commuting to New Jersey

would serve as a “valid independent justification” for the

ETT (Cr. Pet. App. A at 21a). However, it concluded

that the trial court had erred in its determination that the

1962 agreement between New York and New Jersey was

an enforceable reciprocal agreement sufficient to support

the constitutionality of the ETT under the Compact and

Privileges and Immunities Clauses of the United States

Constitution (Cr. Pet. App. A at 30a). The court further

held that the trial court had acted improvidently in decid.

ing the Privileges and Immunities issue on cross-motions

for summary judgment (i.e. identifying the extent to which

the New Jersey commuter constituted “a peculiar source”

of the New Jersey transportation crisis and concluding that

the tax levied on the New York commuter bore a “substan-

tial relationship” to costs expended by New Jersey in al-

leviating the crisis) (Cr. Pet. App. A at 36a). Finding the

record inadequate to decide these factual questions, the

court ordered a remand

... to permit a full exploration of the benefits and

burdens to non-residential commuters occasioned by

State transportation programs and imposition of the

ETT [Cr. Pet. App. A at 26a).

In providing guidelines for further trial proceedings, the

Supreme Court of New Jersey directed:

On remand, evidence should be introduced to enable

the trial court to compare the transportation bene-

fits New York residents receive and the tax contri-

butions they are required to make. The data must,

therefore, include statistics on annual state and local

expenditures—identified by source—for commuter

ll

rail and bus service and for construction and main-

tenance of highways used by interstate commuters.

Figures on the amount and application of ETT

monies must also be introduced for the years dur-

ing which non-residents paid emergency transpor-

tation taxes [Cr. Pet. App. A at 26a to 27a].

Although the opinion of the Supreme Court of New Jer-

sey was squarely based on the principles set forth in Iick-

lin vy. Orbeck, 437 U.S. 518 (1978) and Toomer v. Witsell,

334 U.S. 385 (1948), petitioners chose to press their claim

that the Austin v. New Hampshire ruling compelled a sum-

mary invalidation of the ETT and filed a Notice of Appeal

with this Court on June 19, 1980 from those portions of the

Supreme Court of New Jersey's opinion affirming the con-

stitutionality of the emergency transportation tax and re-

manding the case for further proceedings. On July 24,

1980, the State filed a motion to dismiss on the grounds of

lack of finality of the Supreme Court of New Jersey’s re-

mand opinion and on the same date filed a cross-petition

for a writ of certiorari as to that portion of the Supreme

Court of New Jersey’s decision declaring the 1962 Agree-

ment between New York and New Jersey unenforceable and

thus an insufficient basis for upholding the ETT against

the Privileges and Immunities challenge. On October 6,

1980 this Court dismissed petitioners’ appeal and denied

the State’scross-petition.

In the remand hearing conducted in May 1981 respond-

ent with the assistance of experts in the transportation

field adduced extensive evidence on the exact nature of

the transportation problem, the extent to which New York

commuters contribute to it, the benefits they derive from

New Jersey’s expenditures for transportation facilities, and

net ETT collections over the twenty-year history of the tax

12

(App. B at 34a to 53a). Petitioners countered with ex-

pert opinion purporting to refute the State’s evidence

(App. B at 28a, 40a, 43a to 49a). Upon the conclusion of

the five day hearing the trial court in an opinion issued on

October 9, 1981, upheld the constitutionality of the ETT

under the Privileges and Immunities Clause (App. B at

53a to 54a). In so doing, the trial court accepted as per-

suasive virtually all the State’s evidence and based its find-

ings almost exclusively on the reports and testimony of

the State’s experts. Thus the court agreed with the State’s

expert Simpson & Curtin that commuter demand is the pri-

mary cause of New Jersey's transportation problem, both

as to highway and transit facilities (App. B at 30a to 33a).

The court further accepted the commutation figures pre-

sented in the Simpson & Curtin report pointing out, as re-

quired by the Supreme Court, the relative numbers of New

York to New Jersey and New Jersey to New York com-

muters during the period under review. With the excep-

tion of the allocation of highway maintenance expendi-

tures to the commuting population, (see App. B at dla to

52a), the trial court also adopted the allocation of costs to

New York highway, bus and rail commuters developed by

Simpson & Curtin and in so doing rejected petitioners’ pro-

posed incremental analysis of allowable transportation ex-

penditures (App. B at 47a). On this basis, the trial court

concluded that $182.9 million of State transportation ex-

penditures were properly allocable to the New York com-

muters who had paid a total of $380 million over the twenty-

year history of the ETT (App. B at 36a).

While these allocable costs alone would not justify more

than approximately 50% of the total amount of tax im-

posed upon New York commuters, the trial court did find

that the benefits calculated by the State’s experts to have

been derived by New York commuters from these expendi-

13

tures* were commensurate with the ETT imposed upon

them (App. B at 53a to 54a). The trial court thus con-

cluded that the State had established that the ETT was not

violative of the Privileges and Immunities Clause because

New York commuters are a peculiar source of the critical

transportation problem in the New York-New Jersey

metropolitan area (App. B at 54a) and the burden of the

ETT on New York commuters is substantially commensu-

rate with the benefits they derive from New J ersey’s trans-

portation facilities (App. B at 53a to 54a).

Judgment in favor of the State was entered on October

26, 1981 (Pa47 to Pa48, Pa46) and on November 6, 1981,

petitioners filed a Notice of Appeal with the Superior

Court of New Jersey, Appellate Division (Pa49 to

Pa5l). Petitioners, following the filing of all parties’

briefs, moved for direct certification of the appeal pending

unheard in the Appellate Division which motion was

granted by the Supreme Court of New Jersey on April 27,

1982. 91 N. J. 182, A.2d —— (1982). In a decision

issued on June 8, 1983, the Supreme Court of New Jersey,

reversing the trial court, concluded that the ETT (as pres-

ently constituted) could not survive petitioners’ challenge

under the Privileges and Immunities Clause in that the

State had failed to establish that the costs incurred by New

Jersey as a result of New York commuters’ exacerbation

of New Jersey’s peak hour transportation problems ($182,-

973,042) bore a “substantial relationship” to the tax im-

posed on these commuters ($381 million) (App. A at 13a

* These benefits consist of savings in time and user costs at-

tributable primarily to new highway construction and widening,

highway resurfacing, operational improvements, safety improve-

ments, maintenance and drainage, and, in the transit area, savings

in time and costs (Db20 to Db29; App. B at 44a to 54a).

14

to 14a).° Nevertheless, in view of the State’s “justifiable

reliance” upon the ETT as a source of revenue, and the

reciprocal tax crediting arrangement made with New York

in 1962, the absence of any application by petitioners or

other taxpayers for interim injunctive relief during the

pendency of the action as well as the fiscal chaos which

would result should it be required to refund the ETT as

compared to the absence of any financial harm suffered by

petitioners by reason of the collection of the ETT, the

court concluded, as a matter of its discretion, that no re-

funds would be ordered (App. A at 16a to 20a). For these

reasons, and because the State had established the validity

of approximately 50% of the annual taxes collected from

New York commuters, the court postponed the effective

date of its decision for six months hence (until January 1,

1984) to provide an opportunity for the New Jersey Legis-

lature and executive branch to devise an alternative source

of revenue to meet the costs incurred in alleviating the

transportation burdens imposed 'y New York commuters

(App. A at 20a to 22a),

*In so ruling the Court rejected the trial court’s acceptance of

the Stat<'s experts’ calculation of benefits derived from these costs,

finding that a misunderstanding had resulted from the repeated

references in the Supreme Court of New Jersey's initial opinion

to such benefits (App. A. at lla). Rather than directing an ad-

measurement of “benefits” on remand, the Court stated it had

intended that a record be created on the ‘‘costs of those benefits”

(Ibid. n.9).

15

ARGUMENT

In denying retrospective effect to its ruling invali-

dating the Emergency Transportation Tax, the Supreme

Court of New Jersey properly exercised its discretion

as empowered by the Court's ruling in Lemon vy. Kurtz-

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

By this petition the named New York commuters seek to

overturn the decision of the Supreme Court of New Jer-

sey, denying their right to recapture from New Jersey any

taxes paid by them under the Emergency Transportation

Tax Act.* In asserting this claim for relief petitioners pro-

ceed upon the theory that once Austin v. New Hampshire

was decided, the invalidity of the ETT was incontroverti-

ble and New Jersey could not in good faith have collected

or defended the validity of the tax. They therefore con-

clude that the Supreme Court of New Jersey erred in find-

ing the State’s reliance upon the constitutionality of the

* The claims of the petitioners in total are in excess of $25,000.

Identical claims for relief for all ETT monies collected by the

State have also been sought in a pending and as yet uncertified

class action suit filed on April 14, 1978 in the Superior Court

of New Jersey, Chancery Division, (Yowell v. Glaser) (Docket

No. C-2190-77), which has been stayed pending a final determi-

nation in this action (App. A at 16a). Additionally, there are

pending within the New Jersey Division of Taxation an un-

determined number of claims for refunds of ETT and in the

Tax Court of New Jersey ten suits appealing the denial of ETT

refund claims. The potential recovery under all these claims

amounts to approximately $500 million—a significant percentage

of the State’s $6.1 billion budget (see P.L. 1982 ¢. 49 at 482).

If limited to the amounts collected from the date of the Austin

vy. New Hampshire ruling, the refund sought would be in excess

of $260 million, the loss of which have would a devastating effect

on the State’s fisc (see Supplemental Brief of Respondents, Su-

preme Court of New Jersey at pp. 6-7).

16

tax justifiable and a factor thus warranting prospective

invalidation of the tax alone. Such a theory of mandatory

retrospective invalidity is predicated upon a fundamental

misconception of the applicable law and ignores as well the

compelling equitable factors which justify the denial of any

monetary recovery from New Jersey.

While this Court initially espoused the common law doc-

trine that an invalidated statute must be deemed a nullity

from the moment of its adoption (“. .. in legal contempla-

tion as inoperative as though it had never been passed”

Norton v, Shelton County, 118 U.S. 425, 442 (1886)), the

rigidity of the rule and the impractical and harsh results

which it compelled in invalidating all past transactions

made in reliance upon a purportedly legitimate statute led

the Court in Chicot Co. Drainage Dist. v. Baxter State Bank,

308 U.S. 371, 374 (1940), to reason that the “broad state-

ments” of absolute retrospective invalidity espoused in

Norton were unjustified:

The actual existence of a statute, prior to such a de-

termination, is an operative fact and may have con-

sequences which cannot justly be ignored. The past

cannot always be erased by a new judicial declara-

tion.... Questions of rights claimed to have become

vested, of status, of prior determinations deemed to

have finality and acted upon accordingly, of public

policy in the light of the nature both of the statute

and of its previous application, demand examina-

tion.

17

The deathknell of the Norton doctrine was sounded in

Lemon vy. Kurtzman, 411 U.S. 192, 199 (1973) (Lemon II).*

There Chief Justice Burger, in the plurality opinion of the

Court, concluded that the Court’s abandonment of the doe-

trine was compelled by the “recognition that statutory or

even judge-made rules of law are hard facts on which peo-

ple must rely in making decisions and in shaping their con-

duct.” Where the government’s evaluation of the constitu-

tionality of a legislative enactment is made in good faith

and is reaffirmed upon initial judicial review, Lemon II in-

structs that the expenditure of public monies pursuant to

the later invalidated statute should not be overturned, Jd.

at 207-209.

In so ruling the Court rejected the position of the plain-

tiffs that the Court's 1971 invalidation of a Pennsylvania

statutory program to reimburse nonpublic sectarian schools

*The implicit rejection of the Norton doctrine and concomitant

adoption of an equitable analysis in determining questions as to

the appropriateness of retroactive invalidation of challenged statutes

was evident in several decisions issued prior to Lemon. See

Allen v. Bd. Elections, 393 U.S. 544 (1969) (State’s failure to

obtain federal approval of composition of election districts pur-

suant to section 5 of the Voting Rights Act did not require in-

validation of prior elections); Cipriano v. Houma, 395 U.S. 701

(1969) (invalidation of Louisiana law permitting property owners

alone to vote in election to approve the issuance of municipal

utility revenue bonds did not compel invalidation of previous ap-

proval of $10 million in bonds in view of the “significant hard-

ships” which would befall the cities, bondholders and other per-

sons connected with the utilities if the bonds were invalidated) ;

Phoenix v. Kolodziejski, 399 U.S. 204 (1970) (invalidation of

$60,450,000 in genera! obligation bonds approved pursuant to an

unconstitutional election process not required since bonds were

issued on the “good faith assumption that restriction of the

franchise in the bond election was not constitutionally prohibited

fand because] it would be unjustifiably disruptive” to give the

decision full retroactive effect. )

1$

for certain secular educational services (Lemon vy. Kurtz-

man, 403 U.S. 602 (1971) (Lemon I)) precluded the sub-

sequent District Court order on remand permitting the

State to reimburse nonpublic sectarian schools approxi-

mately $24 million owed for services provided during the

1970-1971 school year before issuance of the Lemon I deci-

sion.* Recognizing that where as in the present case an

equitable solution was required, the Court determined that

“reliance interests must weigh heavily in the shaping” of

the appropriate equitable decree. In Lemon II the Court

concluded that the plaintiffs’ “tactical choice not to press

for interim injunctive suspension of payments or contracts

during the pendency of the Lemon I litigation may well

have encouraged the appellee schools to incur detriments

{in entering into new contracts] in reliance upon reim-

bursement by the State...” 7d. at 204. Nor was such reli-

ance undercut by the fact that the statute’s validity had

never been authoritatively determined. In soundly reject-

ing this proposition, the Chief Justice stated:

Appellants ask, in effect, that we hold those charged

with executing state legislative directives to the peril

of having their arrangements unraveled if they act

before there has been an authoritative judicial de-

termination that the governing legislation is cousti-

* The challenged law was enacted on June 19, 1968 and contracts

with nonpublic schools were entered into in January 1969. Within

one month of adoption of the legislation plaintiffs publicly an-

nounced their intention to file a lawsuit challenging its constitu-

tionality. Simultaneously with the filing of their complaint on

June 3, 1969 plaintiffs sought a preliminary injunction to restrain

responsible state officials from paying or processing for payment

any funds appropriated pursuant to the challenged legislation. This

motion however was subsequently withdrawn by plaintiffs. Follow-

ing the District Court’s dismissal of the complaint and the Court’s

acceptance of their appeal, plaintiffs did not move for interlocutory

relief pending appeal.

19

tutional. Appellants would have state officials stay

their hands until newly enacted state programs are

“ratified” by the federal courts, or risk draconian,

retrospective decrees should the legislation fall. In

our view, appellants’ position could seriously under-

mine the initiative of state legislators and executive

officials alike, Until judges say otherwise, state of-

ficers—the officers of Pennsylvania—have the power

to carry forward the directives of the state legis-

lature. Those officials may, in some circumstances,

elect to defer acting until an authoritative judicial

pronouncement has been secured; but parti rly

when there are no fixed and clear conan rm

cedents, the choice is essentially one of political dis-

cretion and one this Court has never conceived as ev,

an incident of judicial review. We do not engage

lightly in post hoe evaluation of such political judg-

ment, founded as it is on “one of the first principles

of constitutional adjudication—the basic presump-

tion of the constitutional validity of a duly enacted

state or federal law.” San Antonio School District

v. Rodriguez, 411 U.S. at 60 (Stewart, J., concur-

ring).

In short, the propriety of the relief afforded appel-

lants by the District Court, applying familiar equit-

able principles, must be measured against the total-

ity of circumstances and in light of the general prin-

ciple that, absent contrary direction, state officials

and those with whom they deal are entitled to rely

on a presumptively valid state statute, enacted in

good faith and by no means plainly unlawful [Jd. at

207-209].

O

20

In considering claims for recovery of taxes paid prior

to invalidation of governing tax statutes, reviewing courts

have followed or anticipated the Lemon II analysis in bar-

ring restitution of tax monies collected by governmental

officials in good faith reliance upon the presumed validity

of the tax enactments. Thus in District of Columbia v.

Keyes, 362 A.2d 729 (D.C. Ct. App. 1976), the court denied

a request that the District be required to refund all excess

taxes for the 1973 fiscal year (variously estimated to be

$1.1-1.75 million) collected pursuant to a statute declared

unconstitutional in October, 1973. Given the significant

monies involved (as compared to the District’s annual $1

billion budget), the fact that the funds had already been

expended for governmental purposes and that new taxes

or decreased public services would be effected if the re-

covery was allowed, the Court concluded that equity had

been done in the prior proceeding with the issuance of a

mandatory injunction prohibiting the District’s use of the

invalidated assessment procedure for the 1974 fiscal year.

Similarly in Hurd vy. City of Buffalo, 343 N.Y.S.2d 950

(Sup.Ct. App. Div. 1973) aff’d 355 N.Y.S.2d 369, 311 N.E.

2d at 504 (Ct. App. 1974), the New York courts refused to

apply their decision as to the unconstitutionality of a tax

statute retrospectively to allow for recovery of excess taxes.

Finding the equitable considerations of reliance cited in

Lemon II to be dispositive, the courts concluded that the

City’s reliance on its ability to collect the taxes pursuant

to the statute in preparing its budget and its expenditure

of these monies was a sound basis upon which to deny re-

covery of the “illegally collected” taxes.* See also Heller-

*In Pellnat v. City of Buffalo, 399 N.Y.S.2d 788, 790 (Sup. Ct.

App. Div. 1977) the Court extended the Hurd decision to preclude

recovery of taxes paid under protest after the Hurd trial court’s

(Footnote continued on following page)

21

stein v. Assessor, 37 N.Y.2d 1, 14, 332 N.E.2d 279, 287 (Ct.

App. 1975) mod, 39 N.Y.2d 920, 352 N.E.2d 593 (Ct. App.

1976) (decision invalidating illegal assessment practices of

Town of Islip held to be prospective only with the effec-

tive date of the order deferred until July 1, 1978 in order

to provide for reasonable time for reassessments; in dic-

tum, the court opined that taxes levied and paid should not

be recoverable). See also Deltona Corp. v. Bailey, 336 So,

2d 1163, 1166 (S.Ct. Fla. 1976) and Jnterlachen Lakes

Estates, Inc. v. Snyder, 304 So.2d 433, 826-327 (S.Ct. Fla.

(Footnote continued from preceding page)

decision upholding the challenged statute had been reversed by the

Appellate Division decision but before affirmance of the Appellate

Division decision by the Court of Appeals, concluding that the City

of Buffalo had the right to rely on the basic presumption of the

constitutional validity of the law despite the Appellate Division

determination since “there was no certainty as to the ultimate

determination of the question... [and] practicality demanded that

the governmental process go on.” In the wake of subsequent

efforts by the New York Legislature to re-enact statutes “indis-

tinguishable from the Legislation struck down as unconstitutional

in Hurd supra,” the Court of Appeals however did allow for

restitution of any taxes paid in protest by the taxpayers who ini-

tiated lawsuits to invalidate these enactm: its on the basis that its

opinion in Hurd put local subdivisions on notice that “patent cir-

cumvention of constitutional limitations on their taxing powers

would not be tolerated.” Bethlehem Steel Corp. v. Bd. of Ed.,

402 N.Y.S.2d 655 (Sup. Ct. App. Div. 1978) aff'd and mod. 406

N.Y.S.2d 752, 755 (Ct. App. 1978). See also Central Buffalo

Project v. City of Buffalo, 428 N.Y.S.2d 102 (Sup. Ct. App.

Div. 1980) aff'd o.b. 438 N.Y.S.2d 79 (Ct. App. 1981), A

similar state court ruling authorizing recovery of past taxes paid

pursuant to the unconstitutional applications of the taxing laws was

also predicated upon the implicit finding of unjustified or bad

faith assessment. See Florida Dept. of Revenue v. Ford, 417

So.2d 1109 (D. Ct. App. Fla. 1982) (failure of State Depart-

ment of Revenue to even attempt to undertake its statutory duty

to supervise the assessment of valuation of property).

1973) (invalidation of statute establishing unconstitutional

tax assessment valuation scheme prospective only from

date opinion on rehearing issued) ; Gulesian v, Dade County

School Bd., 281 So.2d 325, 326-327 (S.Ct. Fla. 1973) (re-

fund of $7.3 million in taxes illegally collected without elec-

tor approval denied); Deseret & Ranches of Fla, v. St.

Johns River Water Management District, 406 So.2d 1132

(Dist. Ct. App. Fla. 1951) (refund of ad valorem taxes

collected by an unconstitutionally created water manage-

ment district denied), See also Wilson v. School District

of Philadelphia, 328 Pa. 225, 195 A. 90, 100-101 (S.Ct.

1937) (taxes levied by Philadelphia school district pursu-

ant to unconstitutional statutory provision not recoverabie;

as well, delinquent taxpayers could be assessed for taxes

unpaid during the period prior to invalidation of the stat-

ute where school district had incurred expenses in reliance

on such future payments).

In the wake of these rulings as well as its own earlier

pronouncements, see e.g. Borough of Neptune City vy. Bor-

ough of Avon by the Sea, 61 N.J. 296, 294 A.2d 47 (1972),

Darrow vy. Hanover Tp., 58 N.J, 410, 412, 278 A.2d 200

(1971), Goldberg v. Traver, 52 N.J, 344, 245 A.2d 334 (1968)

and Switz v. Middletown Tp., 23 N.J. 580, 180 A.2d 15

(1957), it is evident that the Supreme Court of New Jersey,

in framing the relief to be granted to petitioners herein,

was not compelled by either the State or Federal Consti-

tutions to invalidate retrospectively the State’s collection

of taxes during the 22 years in which the ETT legislation

has been in effect. Rather, that court possessed “a large

measure of . .. discretion... in deciding both the issues

of prospective application or retrospective application and

the time for which the new principle is to be deemed con-

trolling.” State v. Vigliano, 50 N.J. 51, 65-66, 282 A.2d 129

(1967) cited with approval in Jenkins v. Delaware, 395

U.S. 213, 218 (1969).

23

As recognized in Lemon I, supra at 200, 201

. . » in constitutional adjudication as elsewhere,

equitable remedies are a special blend of what is

necessary, what is fair and what is workable, ... In

equity, as nowhere else, courts [must] eschew rigid

absolutes and look to the practical realities and ne-

cessities inescapably involved in reconciling compet-

ing interests, notwithstanding that these interests

have constitutional roots.

Accordingly (and petitioners herein do not dispute this), in

the exercise of its equitable discretion the Supreme Court

of New Jersey properly considered and gave great weight

in determining the appropriate form of relief to be afforded

petitioners to such pragmatic and compelling factors as:

the absence of any attempt by petitioners or other com-

muters to obtain interim injunctive relief during the pend-

ency of this action “presumably because their right to re-

lief was not clear... .” (App. A at 18a to 19a); the fact

that petitioners have suffered no financial harm by opera-

tion of the ETT in that they have received full credit for

the amounts paid to New Jersey against their New York

income tax (App. A at 19a); and the fiscal chaos which

would result if full refunds were compelled*® (App. A at

*The individual taxpayers accordingly have no entitlement in

equity to obtain the monies sought and would reap only a wind-

fall if the requested relief were granted. See United States v.

Jefferson Electric Co., 291 U.S, 386, 402-03 (1934).

** This Court, of course, in various contexts has recognized the

substantial degree to which States rely on tax revenues and the

“ominous . . . potential for havoc” that the enjoining of the State

collection process and even temporary loss of tax revenues will

effect. See Fair Assessment in Real Estate Assoc., Inc. v. McNary,

454 U.S, 100, 103 (1981); Rosewall v. LaSalle National Bank, 450

U.S. 503, 527, 528 (1981).

2+

1Sa). Indeed, petitioners’ sole basis for challenge is their

claim that the court below erred in declining to rule that

the ETT is indistinguishable from the tax invalidated in

Austin v. New Hampshire and thus that New Jersey could

not reasonably have concluded that the tax would ulti-

mately be validated. The fallaciousness of this assertion is

evident.

Of obvious and critical distinction are the trial court and

the Supreme Court of New Jersey's findings of the unique

demographic and commuter transportation problems ex-

perienced in the metropolitan New York-New Jersey area

and the contributing factor the New York commuters play

in increasing the need for substantial expenditures by the

State of New Jersey for maintenance and subsidy of in-

terstate transportation facilities. In response to these prob-

lems and in recognition of the absence of any contribution

by New Yorkers to the inordinate costs incurred by New

Jersey, the State of New Jersey, with the concurrence of

the State of New York, as evidenced by the 1962 Accord

concluded by Governors Rockefeller and Hughes, under-

took to tax New York commuters alone under the ETT

with the understanding that these New Yorkers would be

afforded a credit for payment of these taxes against the

New York tax, and with the further agreement that a re-

ciprocal taxing arrangement would be established for the

New Jersey traveler, In short, the ETT and the tax credit

mechanisms of the two States became the mechanisms for

achieving what both States perceived as an equitable ap-

portionment of taxes levied on the total class (citizens of

New Jersey and New York) of interstate commuters in-

volved, In reliance on the terms of the Accord, and speci-

fically, the agreement “that neither State would contest nor

participate in contesting the right of the other to levy and

collect the taxes imposed by the two laws on residents of

the other...” (Cr. Pet. App. C at 67a), New Jersey

25

reasonably believed that a reciprocal arrangement to fairly

allocate the financial burdens of government between the

States had been achieved consistent with the limitations

imposed by the Privileges and Immunities Clause.

The issuance of the Austin v. New Hampshire ruling did

not and should not have dispelled the State’s firm belief in

the legitimacy of the ETT. Thus, rather than altering the

principles governing challenges to State tax legislation un-

der the Privileges and Immunities Clause of Article IV

of the United States Constitution, the Court re-emphasized

the fact that this Clause “... implicates not only the indi-

vidual’s right to nondiscriminatory treatment but also, per-

haps more so, the structural balance essential to the con-

cept of federalism.” Id. at 662. The Court also quoted with

approval the statement in Travelers’ Insurance Co, v. Con-

necticut, 185 U.S. 364 (1901) that to satisfy the require-

ments of the Clause it is “enough that the State has se-

cured a reasonably fair distribution of burdens and that no

intentional discrimination has been made against nonresi-

dents.” 420 U.S. at 664. However, the record in Austin

was barren of any indication that the tax “secured a rea-

sonably fair distribution of burdens.” Moreover, there

was no suggestion in the record that nonresidents imposed

any special fiscal burden on the State nor that the pro-

ceeds from the taxes imposed on nonresidents were de-

voted to meeting that burden, as was the case in New

Jersey. Most significantly, there was no indication that

the invalidated tax had resulted from bilateral actions

between sister states as with the New York-New Jersey

accord. In fact, the Court specifically noted that:

Neither Travis nor the present case should be

taken in any way to denigrate the value of re-

ciprocity in such matters. The evil at which they

are aimed is the unilateral imposition of a dis-

advantage upon nonresidents, not reciprocally fa-

vorable treatment of nonresidents by states that

coordinate their tax laws [Jd. at 667, n. 12).°

The State’s good faith belief that the ETT would sur-

vive any constitutional challenge was confirmed by the

initial trial court ruling that New York and New Jersey

had entered into a reciprocal agreement, consistent with

the principles of interstate comity embodied in the Privi-

leges and Immunities Clause of Article IV, pursuant to

which the States had sanctioned their respective Legis-

lature’s formulas for the taxation of residents and non-

residents. Although this ruling was ultimately vacated

by the Supreme Court of New Jersey in its 1980 ruling,

the State was successful in its contentions that the mere

superficial similarity between the New Hampshire tax in-

*In this regard petitioners blatantly misrepresent the legal argu-

ments of the State of New Jersey in the amicus curiae brief filed

in Austin v. New Hampshire. A review of the entire paragraph

in the amicus brief from its beginning (not from the middle as in

petitioners’ brief), reveals the State’s true position, i.e., only the

collection of the two taxes from non-residents is similar—in all

other respects the taxes differ:

The transportation taxes imposed by New Jersey thus differ

from the New Hampshire income tax involved in the pres-

ent matter since the revenues from the New Jersey taxes

are used solely to alleviate transportation problems en-

countered by the interstate commuters while the New Hamp-

shire tax revenues a:’ not so dedicated. Also, each of the

New Jersey taxes has a uniform tax rate. Nevertheless,

the New Jersey and New Hampshire taxes are similar in-

sofar as the tax revenues are derived solely from non-

residents because each of the taxing statutes permit resi-

dents a credit for income taxes paid to the State wherein

such persons work [Amicus Curiae brief of the Attorney

General of New Jersey in Austin v. New Hampshire, page

3; emphasis added].

validated in Austin and the ETT would not justify auto-

matic invalidation of the ETT without further inquiry

as required by Hicklin v. Orbeck and Toomer v. Witsell

as to the peculiar burden which New York commuters

imposed on the New Jersey transportation network, the

expenditures required by the New York commuters’ use

of the State’s transportation system and the use of the

proceeds from the ETT to meet those burdens. As well,

the State prevailed in its arguments that the ETT legis-

lation did not place an impermissible burden on New

Yorkers’ right to travel or otherwise violate the pro-

hibitions of the Equal Protection Clause. These rulings,

of course, were not placed in doubt when this Court on

October 6, 1980, dismissed petitioners’ appeal. That New

Jersey reasonably persisted in its belief in the legitimacy

of the ETT and in its entitlement to collect and utilize

these monies was reaffirmed with the issuance of the trial

court opinion on remand that the ETT did not violate

the Privileges and Immunities Clause.°

Each of these affirmative preliminary rulings by the

reviewing courts as well as the substantial arguments

the State continues to press in its cross-petition for a writ

of certiorari in this action obviously justified a conclusion

* The State’s reliance upon the availability of ETT funds and its

right to expend same for necessary transportation costs has equally

been enforced by the absence of any challenge made to its consti-

tutionality from 1962-1976, and thereafter by the Salorio and

Yowell plaintiffs’ tactical decisions not to seek interim injunc-

tive suspension of the tax or creation of a fund in court in

which the tax monies could be deposited during the pendency of

these proceedings. As the Lemon II Court repeatedly emphasized,

id. at 204-205, such a tactical choice may reasonably “encourage”

the governmental or private body “to incur detriments in reliance

upon” the availability of these monies.

25

by the court below which should be affirmed by this Court

that the State has proceeded in good faith in its belief

that the ETT is not “plainly unlawful.” Lemon IJ, supra

at 209.

Balanced against the substantia! equitable factors mili-

tating in favor of prospective application of an adverse

ruling—the devastating monetary exposure faced by the

State, the State’s good faith judgment as to the consti-

tutionality of the ETT legislation and its reliance on and

expenditure of the taxes collected—is the uncontroverted

absence of any cognizable harm to the petitioners in this

proceeding or to New York commuters generally. More-

over, because it is undisputed that this case is being total-

ly financed by New York State and from the limited

discovery permitted the State it appears that the liti-

gation may also have been completely controlled by the

State, there is no warrant for concern that denial of

retrospective relief would deny to these petitioners a

reward for their initiative in pursuing the litigation.®

Compare e.g. Ramirez vy. Amsted Industries, Inc., 86 NJ.

332, 357, 481 A.2d 811 (1981); Willis v. Dept. of Cons.

é@ Ec. Dev., 55 N.J. 534, 541, 264 A.2d 34 (1970). Ac-

cordingly, under the clear guidelines articulated by the

Court in Lemon II, the Supreme Court of New Jer-

sey’s denial of the requested refund of ETT was an

eminently proper exercise of the broad discretionary

powers afforded the State courts in fashioning equitable

remedies. Cf. also Los Angeles Dept. of Water and

* As noted in the cross petition these actions by New York are in

violation of certain provisions of the Accord between the two

States. New York, however, is not a named party to this litiga-

gation and no issue consequently is presented herein as to the

enforceability of this part of the Accord or remedies available

for its breach. Except as to its pledge not to “contest” the ETT,

New York has otherwise abided by the terms of the Accord.

29

Power v. Manhart, 435 U.S. 702, 719-723 (1978). For

these same reasons and in proper recognition of the bur-

densome task imposed upon the New Jersey Legislature

to establish an alternative scheme of taxation to replace

the millions of dollars of tax revenue to be lost with the

invalidation of the ETT and the evidence establishing the

validity of approximately 50% of the ETT rate, the Su-

preme Court of New Jersey properly postponed the ef-

fective date of its decision until January 1, 1984. See

Northern Pipeline Co. v. Marathon Pipeline, —— U.S.

—- (1982) and —— U.S. —— (1982); Buckley v. Valeo,

424 U.S. 1, 143 (1976).

The determinations of the Supreme Court of New Jersey

challenged herein therefore reaffirm this Court’s and Con-

gress’ confidence in the competency of the State judiciary

to adjudicate and safeguard federal constitutional rights.

Dist. Col. Court of Appeals vy. Feldman, —— U.S, —,

n. 16 (1983); Calif. v. Grace Brethren Church, — U.S.

—— (1983); Middlesex County Ethics Committee v. Gar-

den State Bar Assn., U.S, —— (1982). In strict ad-

herence to the Court's rulings on factors to be weighed in

determining the retrospectivity of constitutional adjudica-

tions affecting the public fise, the court below balanced the

relative harm to the State, innocent third parties and the

individual claimants and evaluated the reasonableness of

the State’s conviction that invalidation of the ETT was not

“clearly foreshadowed” by the Austin ruling. See Chevron

Oil Co. vy. Huson, 404 U.S. 97, 106 (1971). Petitioners’

protestations to the contrary as to this latter point ignores

the critical distinctions between the two taxes established

by the evidence adduced below, but of equal importance

fails to take cognizance of the Court’s admonitions that in

litigation involving issues respecting the constitutionality

of state taxes “opinions must be read in the setting of the

particular cases and as the product of preoccupation with

30

their special facts.” Freeman vy. Hewit, 329 U.S. 249, 252

(1946),

The petition for writ of certiorari plainly does not pre-

sent any question of constitutional dimension nor any

other basis which would warrant the granting of such ex-

traordinary relief. The petition should therefore be denied.

CONCLUSION

For the above-stated reasons, it is respectfully sub-

mitted that the petition for a writ of certiorari should

be denied.

Dated: October 6, 1983

Respectfully submitted,

Inwin I, KimMmecmay,

Attorney General of New Jersey,

Attorney for Respondent, Sidney Glaser,

Director of the Division of Taxation,

Department of the Treasury of the

State of New Jersey,

By: Micuaet R. Core,

Assistant Attorney General.

Micwaet R, Co sz,

Assistant Attorney General,

Of Counsel.

Mary R. Hamm,

Anprea M. Srtxowrrz

— Attorneys General,

the Brief.