Amicus Curiae Brief — McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of Business Regulation

Surreme Gout. US.

- FJi,! D

i AUG i1 1989

No. 88-192

JOSEPH F. SPANIOL, JR.

Serer

In The

Supreme Court of the United States

October Term, 1989

=

McKESSON CORPORATION,

Petitioner,

VS.

DIVISION OF ALCOHOLIC BEVERAGES AND

TOBACCO, DEPARTMENT OF BUSINESS REGULATION,

AND OFFICE OF THE COMPTROLLER,

STATE OF FLORIDA,

Respondents.

.

On Writ of Certiorari to the

Supreme Court of Florida

°

BRIEF OF AMICUS CURIAE

U.S. OIL & REFINING CO.

IN SUPPORT OF PETITIONER

+

FRANKLIN G. Dincers*

Preter R. Jarvis

Srort Rives Boury Jones & Gerry

3600 One Union Square

Seattle, Washington 98101-3197

(206) 624-0900

Counsel for Amicus Curiae

U.S. Oil & Refining Co.

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO. (80D) 225.4944

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

1. When a taxpayer pays under protest a state tax

found to violate clearly established law under the Com-

merce Clause must the State provide some form of retro-

spective relief, such as a tax refund or an offsetting tax on

past beneficiaries of the tax preference, or may the State

elect to provide only prospective relief?

2. May a State, consistent with the Due Process

Clause of the 14th Amendment, remedy the effects of a

tax found to discriminate against an interstate business in

violation of the Dormant Commerce Clause by retroac-

tively raising the taxes of those who benefited from the

discrimination?

TABLE OF CONTENTS

Page

STATEMENT OF INTEREST OF AMICUS CURIAE... 1

SUMMARY OF ARGUBGENT. .....sccesccnccseueen 2

ABISUBRENGE . .. .00000000600006000805 8 een 3

|. THE TAKING OF PROPERTY WITHOUT JUST

COMPENSATION IS UNCONSTITUTIONAL... 3

a. A TAX MAY GB A TARR .<sccusccscsuaeens 5

Ill. THIS COURT HAS PREVIOUSLY FOUND STATE

DENIALS OF TAX REFUNDS UNCONSTITU-

TURARUALL. oo cccccuccccccceséubuw enn 6

IV. JUST COMPENSATION IS THE CONSTITU-

TIONALLY DICTATED REMEDY FOR A TAK-

_. rrrrrerrrerrrTr re 7

ili

TABLE OF AUTHORITIES

Page

Cases

Armstrong v. United States, 364 U.S. 40 (1960)...... 4,7

Brushaber v. Union Pacific Railroad, 240 U.S. 1

ea sess c ccc ccc cccsccsccccese ey

Carpenter v. Shaw, 280 U.S. 363 (1930).............. 6, 7

Chicago, Burlington & Quincy Railroad v. City of

Se ee Gl, 20 (0O97).....................5.. 3

County of Mobile v. Kimball, 102 U.S. 691 (1880)....... 7

First English Evangelical Lutheran Church v. County

of Los Angeles, 482 U.S. 304 (1987) ............ 3, 4, 8

Fitzpatrick v. Bitzer, 427 U.S. 445 (1976)............... 3

Forbes Pioneer Boat Line v. Board of Commissioners,

Ne occ e ec ceccc ccs cece: 9

Loretto v. Teleprompter Manhattan CATV Corp., 458

EE EE 4

Myles Salt Co. v. Board of Commissioners, 239 U.S.

SSS 5

National Can Corp. v. Department of Revenue, 109

Wash. 2d 878, 749 P.2d 1286 (1988) ................ 2

Owen v. City of Independence, 445 U.S. 622 (1980) ..... 8

Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984)...... 6

Seaboard Air Line Railway v. United States, 261 U.S.

EE I 4

Steward Machine Co. v. Davis, 301 U.S. 548 (1937)..... 5

Tyler Pipe Industries v. Washington State Department

of Revenue, 483 U.S. 232 (1987).............. 2, 4, 6,7

iv

TABLE OF AUTHORITIES - Continued

Page

United States v. Heinszen, 206 U.S. 379 (1907)......... y

United States v. Pewee Coal Co., 341 U.S. 114 (1951)..... 4

Village of Norwood v. Baker, 172 U.S. 269 (1898)....... 5

Ward v. Love County, 253 U.S. 18 (1920) ............ 6, 7

Williamson County Regional Planning Commission v.

Hamilton Bank, 473 U.S. 172 (1985).............-045- 6

CONSTITUTIONAL PROVISIONS

U.S. Const. Amendment V...............0550555 y a

U.S. Const. Amendment XIV..............55555- 2, 3, 6

No. 88-192

a

vr

In The

Supreme Court of the United States

October Term, 1989

>

McKESSON CORPORATION,

Petitioner,

VS.

DIVISION OF ALCOHOLIC BEVERAGES AND

TOBACCO, DEPARTMENT OF BUSINESS REGULATION,

AND OFFICE OF THE COMPTROLLER,

STATE OF FLORIDA,

Respondents.

+

On Writ of Certiorari to the

Supreme Court of Florida

+

BRIEF OF AMICUS CURIAE

U.S. OIL & REFINING CO.

IN SUPPORT OF PETITIONER

—

STATEMENT OF INTEREST OF AMICUS CURIAE

U.S. Oil & Refining Co. (“U.S. Oil”) is a Delaware

corporation in good standing that does business in the

states of Washington, Oregon, California and elsewhere.

Under statutory threat of penalties, interest and business

closure, U.S. Oil has paid the State of Washington certain

amounts in accordance with Washington State business

and occupation tax statutes that this Court declared

“unconstitutional in Tyler Pipe Industries v. Washington

State Department of Revenue, 483 U.S. 232 (1987). The State

of Washington has refused to refund those amounts. See

National Can Corp. v. Department of Revenue, 109 Wash. 2d

878, 749 P.2d 1286 (1988), appeal dismissed and cert. denied,

108 S. Ct. 2030 (1988). U.S. Oil was a party in Tyler Pipe

and National Can, and certain amounts paid by U.S. Oil

between January 1, 1980 and June 15, 1985 were involved

in those cases. Other amounts paid by U.S. Oil to Wash-

ington State between June 16, 1985 and July 23, 1987,

were not directly at issue in those cases but were required

to be paid under color of the same unconstitutional Wash-

ington statutes.

The resolution of the questions the parties were

directed to brief by this Court’s Order dated July 3, 1989,

will affect the likelihood of U.S. Oil recovering any of the

amounts it was unconstitutionally required to pay.

+

SUMMARY OF ARGUMENT

The Fifth and Fourteenth Amendments to the United

States Constitution forbid the taking of private property

without just compensation. Although the imposition of a

lawful tax does not constitute a taking, prior opinions of

this Court establish that a taking occurs whenever a state

unlawfully acquires private property. States requiring

payment of unconstitutional taxes acquire private prop-

erty unlawfully. Thus, states requiring payment of uncon-

stitutional taxes must pay just compensation. States may

not be relieved of their constitutional obligation to pay

just compensation for the taking of private property by

choosing to call the taking a tax. Indeed, this Court has

had occasion to hold a denial of a recovery of unlawful

taxes paid under compulsion unconstitutional. Similarly,

states may not evade their constitutional obligation to

pay just compensation by prospectively applying the

decision that finds the tax illegal or by claiming Eleventh

Amendment protections. The constitutionally mandated

just compensation remedy for a taking is self-executing

and without exception.

+

ARGUMENT

I. THE TAKING OF PROPERTY WITHOUT JUST

COMPENSATION IS UNCONSTITUTIONAL.

The Fifth Amendment to the United States Constitu-

tion, which applies to the states through the Fourteenth

Amendment,' provides in pertinent part that:

No person shall . . . be deprived of life, liberty,

or property, without due process of law; nor

shall private property be taken for public use,

without just compensation.

' First English Evangelical Lutheran Church v. County of Los

Angeles, 482 U.S. 304, 310 n.4 (1987). This Court has long been

of the view that the taking of private property by a state

without just compensation is a denial of Fourteenth Amend-

ment due process. Chicago, Burlington & Quincy Railroad v.

Chicago, 166 U.S. 226 (1897). Thus, the Eleventh Amendment is

no defense to a just compensation claim. See generally

Fitzpatrick v. Bitzer, 427 U.S. 445, 456 (1976) (“[T]he Eleventh

Amendment, and the principle of state sovereignty which it

embodies, are necessarily limited by the enforcement provi-

sions of § 5 of the Fourteenth Amendment.”) (citation omitted).

The right to just compensation for a taking springs directly

from the Constitution and is not dependent on the availabil-

ity or unavailability of other remedies. First English Evangeli-

cal Lutheran Church v. County of Los Angeles, supra, 482 US. at

316 n.9. Moreover, whenever a government unlawfully

acquires property a taking occurs.? There are also no excep-

tions to the just compensation requirement.? Id. at 318-21;

Armstrong v. United States, 364 U.S. 40, 48-49 (1960). Thus, just

compensation is required regardless of the size of the taking*

or the extent of the governmental need.®

Here, as in Tyler Pipe, money was unlawfully required to

be paid to a state. Money is property. Thus, the state must

pay just compensation for the money taken.®

2 See Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S.

419, 441 (1982) (“We affirm the traditional rule that a perma-

nent physical occupation of property is a taking.”).

3 Not even the absence of actual damages removes the

government's obligation to pay just compensation. United

States v. Pewee Coal Co., 341 U.S. 114, 118 (1951) (“[I]t is imma-

terial that governmental operation [of the coal mine] resulted

in a smaller loss . . . [than] would have [been] sustained if there

had been no seizure of the mines . . . [t]he crucial fact is that

the government chose to intervene. . . .”).

4 Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S.

419 (1982) (seizure of '/s of a cubic foot of space on the roof of a

Manhattan apartment building, though minor, is

compensable).

5 United States v. Pewee Coal Co., 341 U.S. 114 (1951) (sei-

zure of coal mines during war held compensable).

* Compensation for the time value of the money is also

required. See Seaboard Air Line Ry. v. United States, 261 U.S. 299

(1923) (holding that where payment of just compensation is

delayed, interest at a reasonable rate must be included).

Il. A TAX MAY BE A TAKING.

In both Myles Salt Co. v. Board of Commissioners, 239

U.S. 478 (1916), and Village of Norwood v. Baker, 172 U.S.

269 (1898), this Court held that an assessment for a local

improvement that placed an exceptionally disproportio-

nate burden upon certain parcels of property could be

sufficiently extreme to constitute a taking. In Norweod the

Court stated:

[T]he power of the legislature in these matters is

not unlimited. There is a point beyond which

the legislative department, even when exerting

the power of taxation, may not go consistently

with the citizens’ right of property.

172 U.S. at 278.

Similarly, in Brushaber v. Union Pacific Railroad, 240

U.S. 1 (1915), this Court obseived that it must be con-

ceded that the Fifth Amendment would apply:

where, although there was a seeming exercise of

the taxing power, the act complained of was so

arbitrary as to constrain to the conclusion that it

was not the exertion of taxation but a confisca-

tion of property; that is, a taking of the same in

violation of the Fifth Amendment; or, what is

equivalent thereto, was so wanting in basis for

classification as to produce such a gross and

patent inequality as to inevitably lead to the

same conclusion.

240 U.S. at 24-25; see also Steward Machine Co. v. Davis, 301

U.S. 548, 585 (1937) (“[W]e assume that discrimination, if

gross enough, is equivalent to confiscation and subject

under the Fifth Amendment to challenge and

annulment.”).

Ill. THIS COURT HAS PREVIOUSLY FOUND STATE

DENIALS OF TAX REFUNDS UNCON-

STITUTIONAL.

Here, as in Tyler Pipe, the discrimination was gross

enough for the tax to be unconstitutional. Therefore, by

unlawfully expropriating private property, Florida took

property in the constitutional sense. If the tax is not

refunded, the Fourteenth Amendment will be violated

unless just compensation is paid.” “[A] denial by a state

court of a recovery of taxes exacted in violation of the

laws or constitution of the United States by compulsion is

itself in contravention of the Fourteenth Amendment.”

Carpenter v. Shaw, 280 U.S. 363, 369 (1930). In Carpenter,

the State of Oklahoma argued that no refund was

required because taxpayers paid the taxes untimely and

taxpayers were only statutorily entitled to a refund of

amounts paid timely. The Court in rejecting Oklahoma’s

argument relied in part on Ward v. Love County, 253 U.S.

18 (1920)," where the Court wrote:

? The Constitution does not prohibit the taking of prop-

erty, only the taking of property without just compensation.

Williamson County Regional Planning Commission v. Hamilton

Bank, 473 U.S. 172 (1985). “If the Government has provided an

adequate process for obtaining compensation, and if resort to

that process ‘yield[s] just compensation,’ then the property

owner ‘has no claim against the Government’ for a taking.” /d.

at 194 (quoting Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1013

(1984)).

5’ Respondent acknowledges Ward and Carpenter, see Br.

Resp. at 17 n.17, but cannot adequately explain why Okla-

homa’s illegal acquisition of property in Ward and Carpenter

was tantamount to a taking requiring just compensation in the

form of a refund, while Florida’s illegal acquisition of property

may be remedied purely prospectively.

7

To say that the county could collect these unlaw-

ful taxes by coercive means, and not incur any

obligation to pay them back, is nothing short of

saying it could take or appropriate the property

of these Indians arbitrarily and without due pro-

cess of law. Of course, this would be in contra-

vention of the Fourteenth Amendment.

253 U.S. at 24.9

1V. JUST COMPENSATION IS THE CONSTITU-

TIONALLY DICTATED REMEDY FOR A TAKING.

The refund issues here, as in Tyler Pipe, “are essen-

tially issues of remedy for the imposition of a tax that

unconstitutionally discriminated against interstate com-

merce.”'® No matter what the attraction of a purely pro-

spective remedy, the imposition of an unconstitutional

tax has already occurred.'' That imposition being a

* County of Mobile v. Kimball, 102 U.S. 691 (1880), is distin-

guishable because it presented the question whether the impo-

sition of a valid tax is a taking. Here, we are presented with

invalid taxes. Moreover, the Court’s observations in Brushaber

and its holdings in Ward and Carpenter were issued some 35-50

years after County of Mobile.

10 Tyler Pipe Indus. v. Dep't of Rev., 483 U.S. 232, 252 (1987)

(quoting Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 at 276-77

(1984)).

'! We question whether prospective application of a deci-

sion invalidating state taxes can be attractive in light of the

policy enunciated in Armstrong v. United States, supra, 364 U.S.

at 49 (the just compensation requirement “was designed to bar

Government from forcing some people alone to bear public

burdens which, in all fairness and justice, should be borne by

(Continued on following page)

taking, the constitution dictates the retroactive remedy of

just compensation. '?

Application of the constitutional remedy does not

affect the state’s right to prospectively apply its taxes

even-handedly by eliminating the benefit. Neither does

the requirement of just compensation affect a state’s right

to retroactively impose new taxes or, what is the equiva-

lent, retroactively cure a previously imposed defective

tax. However, such legislative action would ultimately

result in courts (i) speculating whether retroactively col-

lecting previously unimposed taxes is practically possible

(Continued from previous page)

the public as a whole.”) and Owen v. City of Independence, 445

U.S. 622, 654-55 (1980) (“It has been argued, however, that

revenue raised for public use should not be diverted to the

benefit of a single or discrete group of taxpayers, particularly

where the municipality has at all times acted in good faith. On

the contrary, the accepted view is that stated in Thayer v. Boston

- ‘that the city, in its corporate capacity, should be liable to

make good the damage sustained by an [unlucky] individual,

in consequence of the acts thus done. .. . After all, it is the

public at large which enjoys the benefits of the government's

activities, and it is the public at large which is ultimately

responsible for its administration. Thus, even where some con-

Stitutional development could not have been foreseen by

municipal officials, it is fairer to allocate any resulting financial

loss to the inevitable costs of government borne by all tax-

payers, than to allow its impact to be felt solely by those whose

rights, albeit newly recognized, have been violated.’ ”) (cita-

tion omitted, brackets in original).

"2 “Though arising in various factual and jurisdictional

settings, these cases make clear that it is the Constitution that

dictates the remedy for interference with property rights

amounting to a taking.” First English Evangelical Lutheran

Church v. County of Los Angeles, supra, 482 U.S. at 316 n.9.

(many taxpayers will have gone out of business, left the

State's jurisdiction or otherwise have become judgment

proof); (ii) determining whether such collection violates

state statutes of limitation or notice provisions; and (iii)

deciding whether such retroactive application violates the

new taxpayers’ due process rights. Forbes Pioneer Boat

Line v. Board of Commissioners, 258 U.S. 338 (1922), and

United States v. Heinszen, 206 U.S. 370 (1907), illustrate

some of the constitutional difficulties in retroactively

imposing or curing tax statutes.

+

CONCLUSION

For the foregoing reasons, this Court should reverse

the Florida Supreme Court's final decree with respect to

its remedy and remand for a calculation of just

compensation.

Respectfully submitted,

FRANKLIN G. Dinces*

Peter R. Jarvis

Stor Rives Bortey Jones & Grey

3600 One Union Square

Seattle, Washington 98101-3197

(206) 624-0900

Counsel for Amicus Curiae

U.S. Oil & Refining Co.

*Counsel of Record