Amicus Curiae Brief — American Trucking Assns., Inc. v. Smith

or. 14, ;

Nos. 88-192 and 88-325

‘

;

”

IN THE ‘|

Supreme Court of the Unite

OCTOBER TERM, 1988

MCKESSON CORPORATION,

y Petitioner,

DIVISION OF ALCOHOLIC BEVERAGES AND TOBACCO,

DEPARTMENT OF BUSINESS REGULATION, and

OFFICE OF THE COMPTROLLER, STATE OF FLORIDA,

Responden s.

On Writ of Certiorari to the Supreme Court of Florida

AMERICAN TRUCKING ASSOCIATIONS, INC., et al.,

Ino4ses _

y. Petitioners,

MAURICE SMITH, Director, ARKANSAS HIGHWAY

AND TRANSPORTATION DEPARTMENT, ef a/.,

Respondents.

On Writ of Certiorari to the Supreme Court of Arkansas

BRIEF OF THE NATIONAL CONFERENCE OF

STATE LEGISLATURES, NATIONAL LEAGUE OF

CITIES, NATIONAL GOVERNORS’ ASSOCIATION,

U.S. CONFERENCE OF MAYORS,

NATIONAL ASSOCIATION OF COUNTIES, AND

INTERNATIONAL CITY MANAGEMENT ASSOCIATION;

JOINED BY THE MULTISTATE TAX COMMISSION

AS AMICI CURIAE IN SUPPORT OF RESPONDENTS

BENNA RUTH SOLOMON *

Chief Counsel

CHARLES ROTHFELD

STATE AND LOCAL LEGAL CENTER

444 N. Capitol Street, N.W.

Suite 349

Washington, D.C. 20001

(202) 638-1445

* Counsel of Record for the

Amici Curiae

—

WiLeon - Eras Printing Co., Inc. - 789-0096 - Wasnineron, D.C. 20001

QUESTION PRESENTED

Amici will address the following question :

Whether Chevron Oil Co. v. Huson, 404 US. 97

(1971), states the appropriate test for determining the

availability of a tax refund as a remedy for a violation

of the Commerce Clause.

(i)

TABLE OF CONTENTS

Page

Nee cc ceceseseecesouccs i

a iv

INTEREST OF THE AMICI CURIAE ........................ 2

INTRODUCTION AND SUMMARY OF ARGU-

ELA 3

EES 6

THE CHEVRON TEST SHOULD NOT CONTROL

THE AVAILABILITY OF REFUNDS IN THESE

a 6

A. The Constitution Does Not Require The Pay-

ment Of Tax Refunds When A State Tax Stat-

ute Is Struck Down As Unconstitutional 6

B. State Courts Are Not Obligated To Use The

Chevron Test To Determine The Availability

CO 10

1. The Chevron test fails to take into account

the special nature of the government de-

EES 12

2. The availability of a refund is a question of

remedy that should be settled by state courts

asa matter oj state law... sett 16

CONCLUSION .............. = ees iaataaiiedaiindies 26

(iii)

iv

TABLE OF AUTHORITIES

CASES: Page

Allegheny Pittsburgh Coal Co. v. Commission,

No. 87-1303 (Jan. 18, 1989) -.............. 8

Allen v. Hardy, 478 U.S. 255 (1986) ....................... 11

Allen v. State Board of Elections, 393 U.S. 544

I ceceeneennissicaialatnctiaatmaiicahenhttaiaelaan idea ob ost inemaianeeadiataae 7,11

American Trucking Ass’ns, Inc. v. Conway, 508

A.2d 408 (Vt. 1986), cert. denied, 107 S.Ct. 3262

ee - 10

American Trucking Ass’ns, Inc. v. Scheiner, 107

SS fF fF _ se 9, 12, 15, 24

Arizona Governing Comm. v. Norris, 463 U.S.

ME 7, 11, 15, 19

Armco Inc. v. Hardesty, 467 U.S. 638 (1984) ........ 24

Ashland Oil, Inc. v. Rose, 350 S.E.2d 531 (W.Va.

1986), app. dismissed, 107 S.Ct. 1949 (1987).... 17, 21

Atascadero State Hospital v. Scanlon, 473 U.S.

RRR ee SUPT Pr TS ae 10

Atchison, T. & S.F.R.R. v. O'Connor, 223 U.S. 280

STITT sxsccchsiesspiainesiniamciemiesetaeteli hie mci hk acetal 7

Bacchus Imports, Ltd. v. Dias, 468 U.S. 263

ES ee eee a 9,17, 18

Best & Co. v. Maxwell, 311 U.S. 454 (1940)........ 7

Bibb v. Navajo Freight Lines, 359 U.S. 520

IID» sannaceeeecicaeceeetemsneentearicedanamedice ia a ee area las 22

Boston Stock Exchange v. State Tax Comm'n, 429

Rs, <A 24

Buckley v. Valeo, 424 U.S. 1 (1976) 6

Burlington Northern R.R. Co. v. Board of Super-

visors, 418 N.W.2d 72 (Iowa 1988) 000. 20

6

24

Caban v. Mohammed, 441 U.S. 380 (1979) .............

Califano v. Westcott, 443 U.S. 76 (1979) ..........

Carpenter v. Shaw, 280 U.S. 363 (1930) ............ 7, 8,

Chapman v. California, 386 U.S. 18 (1967) _........... 18-

Chapman v. Houston Welfare Rights Organiza-

eB! GF nee 23

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

Chicot County Drainage Dist. v. Baxter State

EO 11

Vv

TABLE OF AUTHORITIES—Continued

Page

Cipriano v. City of Houma, 395 U.S. 701 (1969).. 6, 11

City of Newport v. Fact Concerts, Inc., 453 U.S.

ected cc, (LOL

City of Phoenix v. Kolodziejski, 399 U.S. 204

See seal See Nena ee CoN 6

Clearfield Trust Co. v. United States, 318 U.S.

363 (1943)

Complete Auto Transit, Inc. v. Brady, 430 U.S.

ea ee an a Oe ee 24

Connor v. Rivers, 25 F. Supp. 937 (N.D. Ga.

1938), aff'd, 305 U.S. 576 (1939) ...... 23

Connor v. Williams, 404 U.S. 549 (1972) 6

Consolidated Freightways Corp. v. Kassel, 730

F.2d 1139 (8th Cir.), cert. denied, 469 U.S. 834

ee

TUTE‘ ceateicecetandindtinasitenmnntciettninadantes inti a 22, 23

Cunningham v. Macon & Brunswick R.R., 109

A Se 9

Dept. of Revenue v. James B. Beam Distilling Co.,

377 U.S. 341 (1964) 0 7

Edelman v. Jordan, 415 U.S. 651 (1974)... 10

England v. State Board of Medical Examiners,

OR eee 11

Exxon Corp. v. Eagerton, 462 U.S. 176 (1983) ....9, 18, 25

Fair Assessment in Real Estate Ass’n v. Me-

Nary, 454 U.S. 100 (1981) 18

First of McAlester v. Oklahoma Tax Comm'n, 709

P.2d 1026 (Okla. 1985) 0 21

Florida v. Long, 108 S.Ct. 2354 (1988) ....... 7, 11, 15, 19

Ford Motor Co. v. Dept. of Treasury, 323 U.S.

ERNE ne ME eae 10

Gelpceke v. City of Dubuque, 68 U.S. (1 Wall.) 175

NPI? senrtibnstensicnndeiiaiiestierialititatasetacheeee a tia 17

General Oil Co. v. Crain, 209 U.S. 211 (1908)... 9

Goodman v. Lukens Steel Co., 107 8.Ct. 2617

i REESE eens San 11

Great Northern Life Ins. Co. v. Read, 322 U.S. 47

Great Northern R. Co. v. Sunburst Oil & Refining

Co., 287 U.S. 358 (1982) ....................... 4,6, 17,18

vi

TABLE OF AUTHORITIES—Continued

Page

Griffith v. Kentucky, 479 U.S. 314 (1987) ............ 11,12

Hanover Shoe, Inc. v. United States Shoe Machin-

ery Corp., 392 U.S. 481 (1968) ................0.0000... 11

Havemeyer v. lowa County, 70 U.S. (3 Wall.) 294

EE LES on ana en TE ee 17

Heckler v. Mathews, 465 U.S. 728 (1984) ............ 24, 25

Hooper v. Bernalillo_County Assessor, 472 U.S.

I aaa re 17, 25

Hopkins v. Clemson Agricultural College, 221 U.S.

ikl a 8,9

H.P. Hood & Sons, Inc. v. DuMond, 336 U.S. 525

RR RE LEME SORE eS Me SAR RTE AE OP 22

Huffman v. Pursue, Ltd., 420 U.S. 592 (1975)... 19-20

Huie v. Private Truck Council, Inc., 466 N.E.2d

435 (Ind. 1984) . 20

lowa-Des Moines Nat'l Bank v v. _ Bennett, 284 U. Ss.

fg ee eae tn ne 7,8

Kennecott Copper Co. v. State Tax Comm'n, 327

I I I 10

LaRoque v. State, 583 P.2d 1059 (Mont. 1978) .... 20

Lemon v. Kurtzman, 411 U.S. 192 (1973) ....... 4, 6, 14, 19

Lewis v. BT Investment Managers, Inc., 447 U.S.

i eR ee 21, 24

Linkletter v. Walker, 381 U.S. 618 (1965)... 6, 11

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

435 U.S. 702 (1978)... - —

McGoldrick v. Berwind-White Coal “Mining Co.,

I nT 24

Mempnis Steam Laundry Cleaner, Inc. v. Stone,

RE 7

Metropolitan Life Insurance Co. v. Commissioner.

373 N.W.2d 399 (N.D. 1985)... 21

Midland Bank & Trust Co. v. Olsen, 717 S.W.2d

tac acee a 20

Moore v. Sims, 442 U.S. 415 (1979) . 20

Montana Nat'l Bank v. Yellowstone “County, 276

ee eee 7

vii

TABLE OF AUTHORITIES—Continued

: Page

Nat'l Can Corp. v. Washington Dept. of Revenue,

109 Wash. 2d 878, 749 P.2d 1286, app. dismissed

and cert. denied, 108 S.Ct. 2030 (1988)... 17, 21, 23

Nippert v. City of Richmond, 327 US. 416

EERSTE AEE =P. 21, 24

Northeast Bancorp, Inc. v. Board of Governors,

4 © YF Seen niiee hive 21

Northern Pipeline Construction Co. v. Marathon

Pipe Line Co., 458 U.S. 50 (1982). 611

Ohio Oil Co. wv. Conway, 279 U.S. 813 (1929) _. 8

Owen v. City of Independence, 445 US. 622

RESET ICE Ie TOE ee eT 13, 15, 16

Palmer v. Ohio, 248 U.S. 32 (1918)... 8,9

Pembaur v. City of Cincinnati, 106 S.Ct. 1292

REESE eee ane ee ae ee alae ae ll

Pennhurst State School & Hospital v. Halderman,

465 U.S. 89 (1984). 10

Pennzoil Co. v. Texaco, Inc., 107 S.Ct. 1519

I seicctlieteieh healt cee ieee 20

Philadelphia v. New Jersey, 437 U.S. 617 (1978) .. 24

Private Truck Council of America, Inc. v. Quinn,

oe ee ee 23

Prudential Insurance Co. v. Benjamin, 328 U.S.

SR ech ats 21

Quern v. Jordan, 440 U.S. 332 Ss 13

Saint Francis College v. Al-Khazraji, 107 S.Ct

I a 7,11

Salorio v. Glaser, 461 A.2d 1100 (N.J.), cert. de-

nied, 464 U.S. 993 (1983)... sts 17, 21

San Antonio School District v. Rodriguez, 411

2 ) . ae 14

Siour City Bridge Co. v. Dakota County, 260 U.S.

RRR ee eee 7

Southern Pacific Co. v. Arizona, 925 U.S. 761

Ce earn eR 21, 22

Tyler Pipe Industries v. Washington Dept. of Rev-

enue, 107 S.Ct. 2810 (1987). 9, 18, 24

United States v. Johnson, 157 U.S. 537 (1982). 6,12

viii

TABLE OF AUTHORITIES—Continued IN THE

Page

ee a ee Supreme Court of the United States

Cir.), cert. denied, 454 U.S. 896 (1981) —........ 9 OcToBER TERM, 1988

United States v. Yazell, 382 U.S. 341 (1966)... 18

Ward v. Love County, 253 U.S. 17 (1920) _........ 7,8,9

“oa v. United States, 107 S.Ct. 702 . Nos. 88-192 and 88-325

Western & Southern Life Insurance Co. v. State

Board of Equalization, 451 U.S. 648 (1981)... 21

Westinghouse Electric Corp. v. Tully, 63 N.Y.2d MCKESSON CORPORATION,

191, 470 N.E.2d 853 (1984)... 20 . Petitioner,

White Mountain Apache Tribe v. Williams, 810

F.2d 844 (9th Cir.), cert. denied, 479 U.S. 1060 DIVISION OF ALCOHOLIC BEVERAGES AND TOBACCO,

EE ES EET ne erat ee = 23 DEPARTMENT OF BUSINESS REGULATION, and

Will v. Michigan State Police, No. 87-1269... i 13 OFFICE OF THE COMPTROLLER, STATE OF FLORIDA,

Williams v. Vermont, 472 U.S. 14 (1985) —... 18, 25 Respondents.

Zobel v. Williams, 457 U.S. 55 (1982) 0. 17, 25

CONSTITUTIONAL PROVISIONS:

Commerce Clause, U.S. Const., Art. I, § 8, cl. 3... passim

On Writ of Certiorari to the Supreme Court of Florida

Due Process Clause, U.S. Const. Amend. V.___ _ 24 AMERICAN TRUCKING ASSOCIATIONS, INC., et ai.,

Equal Protection Clause, U.S. Const. Amend. Petitioners,

RARE Ai rac os eaa sie seta es nate o passim v.

Supremacy Clause, U.S. Const., Art. VI, el. 2......4, ne Maurice SMITH, DiREcTOR, ARKANSAS HIGHWAY

AND TRANSPORTATION

US. Const. Amend. XI... 0 ee —_

STATUTES:

en Peden . 13, 23 On Writ of Certiorari to the Supreme Court of Arkansas

BOOKS & TREATISES:

Academy for State and Local Government, Where

Will the Money Come From: Finding Reliable

Revenue for State and Local Governments in a

BRIEF OF THE NATIONAL CONFERENCE OF

STATE LEGISLATURES, NATIONAL LEAGUE OF

CITIES, NATIONAL GOVERNORS’ ASSOCIATION,

Changing Economy (1986) 15 U.S. CONFERENCE OF MAYORS,

J. Choper, Judicial Review in the National Politi- NATIONAL ASSOCIATION OF COUNTIES, AND

Oe 22-23 INTERNATIONAL CITY MANAGEMENT ASSOCIATION;

Dowling, Jnterstate Commerce and State Pow er,

6S US ULL ll ee ere

J. Story, The Constitution

JOINED BY THE MULTISTATE TAX COMMISSION

22 AS AMICI CURIAE IN SUPPORT OF RESPONDENTS

22

INTEREST OF THE AMICI CURIAE

Amici National Conference of State Legislatures, Na-

tional League of Cities, National Governors’ Association,

U.S. Conference of Mayors, National Association of

Counties, and International City Management Associa-

tion are organizations whose members include state,

county, and municipal governments and officials through-

out the United States; they have a compelling interest

in legal issues that affect state and local governments.

Amicus Multistate Tax Commission is the official ad-

ministrative agency of the Multistate Tax Compact. The

Compact has been entered into by eighteen States and

the District of Columbia as full members; ten additional

States have joined the Commission as associate members.'

The Commission has a vital and continuing interest in

state tax disputes that may dramatically affect the ad-

ministration of state tax systems.

These cases concern the effect of the invalidation of

state tax statutes under the Commerce Clause. In both

cases, petitioners brought suits in state court challenging

the constitutionality of the taxes; in both cases the state

supreme court ultimately held that the taxes discrim-

inated against out-of-state taxpayers in violation of the

Commerce Clause. In both cases the petitioners then

demanded full refunds of the taxes collected during the

period that the unconstitutional taxing schemes were in

effect—claims that in each case ran into the hundreds of

millions of dollars. These demands were rejected by both

courts below.

a

'The current full members are Alaska, Arkansas, California,

Colorado, the District of Columbia, Hawaii, Idaho, Kansas, Minne-

sota, Missouri, Michigan, Montana, New Mexico, North Dakota,

Oregon, South Dakota, Texas, Utah, and Washington. The asso-

ciate members are Alabama, Arizona, Georgia, Louisiana, Mary-

land, Massachusetts, New Jersey, Ohio, Pennsylvania, and Tennes-

see. This brief should not be read to reflect the views of any

member State that files a separate brief in this case.

Amici and their members have a profound practical

interest in the refund rules that the Court will address

in these cases. States and local governments draw much

of their revenue from the taxation of entities that are en-

gaged in interstate commerce. Yet, as the Court has

repeatedly noted, its Commerce Clause jurisprudence is

at times confusing and unpredictable; that problem is

compounded by the changing nature of many state econo-

mies, which poses novel problems for state and local tax-

ing authorities. These factors make it inevitable that

taxing schemes occasionally will be found to run afoul of

the Commerge Clause. If refunds for these violations are

too readily available, state and local governments will

face not only revenue shortfalls but also unexpected and

potentially ruinous liability. At the same time, the pros-

pect of disruptive refund liability will discourage States

and local governments from tapping constitutionally per-

missible sources of funds.

Because amici have special expertise in tax litigation

in state courts, and because they will be directly affected

by the Court’s decision here, they submit this brief to

assist the Court in the resolution of these cases.”

INTRODUCTION AND SUMMARY OF ARGUMENT

The petitioners in both of these cases assume that the

*fvailability of a refund is controlled by Chevron Oil Co.

v. Huson, 404 US. 97 (1971), and they accordingly

devote virtually all of their arguments to a simple appli-

eation of the three Chevron factors. But in doing so,

petitioners skip over a more fundamental question:

whether Chevron applies at all in cases agvinst state

governments brought in state courts pursuant to state

causes of action. Questions of remedy and retroactivity

that arise in lawsuits based on state law are, after all,

2 The parties have consented to the filing of this brief pursuant

to Rule 26 of the Rules of this Court. Their letters of consent have

heen filed with the Clerk of the Court.

4

typically resolved by state courts according to their own

rules. So far as retroactivity is concerned, “the choice

for any state may be determined by the juristic phi-

losophy of the judges of her courts” (Great Northern R.

Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 365

(1932)), and this Court generally has left it to state

courts to formulate remedies for state violations of the

federal Constitution’s Equal Protection and Sup

peti

must shoulder the burden of establishing that use of a

federal retroactivity test imposed by this Céurt—and

the Chevron test in particular—is somehow compelled

by federal law.

1. In our view, petitioners have not carried either

part of their burden. They have failed even to attempt

to demonstrate the propriety of using the Chevron test

in these cases. Certainly, nothing in Chevron itself—a

ease involving a federal court dispute between private

parties over the meaning of federal maritime law—sug-

gests that its standard should control in suits against

state governments brought in state courts. In fact, there

are compelling reasons to make retroactivity the excep-

tion in such cases. “‘[O)}ne of the first principles of

constitutienal adjudication’” is “ ‘the basic presumption

of the constitutional validity of a duly enacted state or

federal law’” (Lemon v. Kurtzman, 411 U.S. 192, 208

(1973) ‘(plurality opinion) (‘citation omitted)); holding

States retroactively liable when their taxing officials re-

lie! on such laws in good faith “could seriously under-

mine the initiative of state legislative and executive offi-

cials alike.” Jd. at 207-208.

Beyond that, the imposition of retroactive liability on

etate and local governments may—and in these cases

would—place dramatic and unexpected burdens not on

wronedeers, as in cases where such liability is impdésed ©

for violations of law by private parties, but on the

“blameless and unknowing taxpayers” who ultimately

would have to foot the bill. City of Newport v. Fact Con-

certs, Inc., 453 U.S. 247, 267 (1981). Of course, we

recognize the force of petitioners’ argument that per-

sons injured by a State’s violation of the Constitution

should be made whole. But this consideration bears little

weight when the violation involves the Commerce Clause,

which does not create rights that are personal to the

injured party.

2. More fundamental than the defects in the standard

they offer is petitioners’ failure to provide constitutional

considerations justifying the creation of any federal re-

fund rule by this Court for use in state proceedings.

A federal rule of retroactivity is not necessary to deter

constitutional violations; state courts can be trusted to

apply their normal refund rules in a nondiscriminatory

manner in adjudicating Commerce Clause claims, and to

provide relief when state legislatures attempt to evade

the requirements of the Clause.

At the same time, petitioners have no constitutional

right to be “made whole” for the States’ violations of

the Commerce Clause. The Clause does not give petition-

ers an absolute entitlement to operate in interstate com-

merce without restriction; instead, it allocates power

over commerce between the federal and state govern-

ments. The benefits that petitioners derive from the na-

tional free trade area that prevails in the absence of

congressional action is incidental. The Clause thus was

not designed to protect personal rights. And because the

Clause does not secure any personal right of petitioners,

it is a matter of indifference to the Constitution whether.

once barriers to commerce are removed, a refund also is

made available.

In any event, even if the Commerce Clause is under-

stood to create rights that are in some sense personal

to petitioners, it entitles them to no more than non-

discrimination. As in the equal protection area, a viola-

tion of this right may be cured by a mandate of future

equal treatment; that mandate need not be extended into

the past.

ARGUMENT

THE CHEVRON TEST SHOULD NOT CONTROL THE

AVAILABILITY OF REFUNDS IN THESE CASES

A. The Constitution Does Not Require The Payment Of

Tax Refunds When A State Tax Statute Is Struck

Down As Unconstitutional

1. At the outset, it is clear that the Constitution

does not, as a general rule, require the use of remedies

for constitutional violations that will set aside completed

transactions or disturb settled patterns of conduct.

“*'T)he federal Constitution has no voice upon the sub-

ject’ of retrospectivity” (United States v. Johnson, 457

U.S. 587, 542 (1982), quoting Great Northern R. Co. v.

Sunburst Oil & Refining Co., 287 U.S. 358 (1982)), and

the Court’s holdings in recent years accordingly “have em-

phasized that the effect of a given constitutional ruling

on prior conduct ‘is subject to no set “principle of abso-

lute retroactive invalidity.”’” Lemon v. Kurtzman, 411

U.S. 192, 198-199 (1973) (Lemon I1) (‘citations

omi'ted:. See Linkletter v. Welker, 381 U.S. 618, 624

(1965).

The Court has applied this understanding in a variety

of settings, declining to give retroactive effect to rulings

involvihg a number of constitutional provisions. See, ¢.¢.,

Lemon Il (First Amendment); Northern Pipeline Con-

struction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 88

(1982) (Article III); Buckley v. Valeo, 424 U.S. 1, 142

(1976) (separation of powers); Connor v. Williams, 404

U.S. 549, 550-551 (1972) ‘(Equal Protection Clause) ;

City of Phoenix v. Kolodziejski, 399 U.S. 204, 213-214

(1970) (same); Cipriano v. City of Houma, 395 U.S.

701, 706 (1969) (same). See also Caban v. Mohammed,

441 U.S. 380, 416 (1979) (Stevens, J., dissenting). The

7

Court has similarly declined to disturb completed trans-

actions or to require full retroactive effect when imple-

menting decisions that involve important federal statutory

guarantees, such as the Voting Rights Act (see Allen v.

State Board of Elections, 393 U.S. 544, 572 (1969));

Title VII of the Civil Rights Act of 1964 (see Florida v.

Long, 108 8. Ct. 2354 (1988) ; Arizona Governing Comm.

v. Norris, 463 U.S. 1073 (1983); Los Angeles Dept. of

Water & Power v. Manhart, 435 U.S. 702, 722-723

(1978) ); and 42 U.S.C. § 1981 (see Saint Francis College

v. Al-Khazraji, 107 8. Ct. 2022, 2025 (1987) ).

2. Citing two Lochner-era decisions—Carpenter v.

Shaw, 280 U.S. 363 (1930) and Ward v. Love County,

253 U.S. 17 (1920)—the American Trucking Association

(ATA) petitioners nevertheless suggest (Br. 28) that

the Constitution, of its own force, mandates the payment

of refunds when state taxes are collected under a scheme

that subsequently is found to be unconstitutional.’ The

* Petitioner McKesson argues ( Br. 24-27) that this Court's hold-

ings mandate the payment of refunds as a remedy for unconstitu-

tional taxes. With the arguable exceptions of Carpent«r and Ward,

however, none of the cited cases even remotely supports such a prop-

osition. Several simply invalidated state taxes under the Commerce

or other Clauses. Dept. of Revenue v. James B. Beam Distilling Co.

377 U.S. 341 (1964); Memphis Steam Laundry Cleaner, Jac. &.

Stone, 342 U.S. 389 (19562); Best & Co. v. Maxwell, 311 US. 454

(1940). Others held that a taxpayer hose property is overassessed

in violation of the Equal Protection Clause may seek reduction of

its assessment as a remedy, and cannot be obligated to seck relief

in the form of a higher assessment for other taxpayers (Siour City

Bridge Co. v. Dakota County, 260 U.S. 441 (1923)), or that a State

may remedy an equal protection violation by raising taxcs on the

favored class (Montana Nat'l Bank v. Yellowstone County, 276 U.S.

499 (1928)). Atchison, T. & SF. RR. v. O'Connor, 223 U.S. 280,

287 (1912), was a refund action brought in federal court; the Court

noted that the State permitted actions for taxes mistakenly paid

and “presume/d) that a judgment [of unconstitutionality! in the

present action would satisfy the | state! law.” And Jowe-Dee Moines

Nat'l Bank v. Bennett, 284 U.S. 299, 247 (1991), can best be read

as standing only for the proposition that “a taxpayer who has been

relatively short shrift that petitioners devote to what

should be a dispositive argument, however, suggests that

they have some doubt about the continuing vitality of

these decisions. That doubt is well-placed.

Even at the time they were decided, there was room

to question what the Court actually held in Carpenter

and Werd. Language in decisions rendered immediately

prior to Werd suggested that state sovereign immunity

could be asserted to preclude federal constitutional claims

in state court. See, ¢.g., Palmer v. Ohio, 248 U.S. 32, M

(1918) (“The right of individuals to sue a in

either a federal or a state court, cannot be

the Constitution or laws of the United States”); Hopkins

». Clemson Agricultural College, 221 U.S 636, 642 (1911)

‘addressing a Fourteenth Amendment claim brought in

state court, Court observed that “without [a State's]

consent it cannot be sued in any court, by any person, for

any cause of action whatever”). Indeed, in Ohio Oi

Co. v. Conway, 279 U.S. 813 (1929), decided nine years

after Werd and one year before Carpenter, the Court

s

7

enjoined the collection of a Louisiana tax asserted

late the Equal Protection Clause because state law

not allow for a refund if the tax ultimately were

be unconstitutional, even where the taxpayer paid

both protest and compulsion” (td. at 815); the Court's

conclusion that this absence of a state remedy posed the

risk of irreparable injury to the taxpayer ( ibid.)

tainly suggested that the Constitution would not of its

own force mandate payment of a refund.

The years since Carpenter and Ward were decided have

been no kinder to the decisions. Except in Carpenter itself

i

;

No. 87-1303 (Jan. 18, 1989), slip op. 9-10.

(which relied on Ward), this Court has never cited either

decision for the proposition that States must make re-

funds available for taxes exacted in violation of the Con-

stitution.* To the contrary, the Court in Exxon Corp. v.

Eagerton, 462 U.S. 176 (1983), expressly left it to a

state court to determine the availability of a refund

remedy after a state tax statute was invalidated under

the Supremacy Clause (id. at 196-197)—precisely the

constitutional violation at issue in Carpenter. Indeed,

in recent years the Court has repeatedly declined to order

refunds in cases striking down state taxing statutes under

the Commerce Clause. Instead, the Court has remanded

the cases to the state courts for a determination of the

availability of refunds—a course the Court followed in

both American Trucking Ass’ns, Inc. v. Scheiner, 107 8.

Ct. 2829, 2847-2848 (1987), and Bacchus Imports, Ltd. v.

Dias, 468 U.S. 263, 276-277 (1984), the decisions upon

which the separate petitioners here relied in bringing

their Commerce Clause challenges. See also Tyler Pipe

Industries v. Washington Dept. of Revenue, TO7 S. Ct.

2810, 2822 (1987). Such remands would hardly have

been necessary had the Constitution of its own force re-

quired the payment of refunds.’

‘ATA petitioners note (Br. 28) that Carpenter and Ward were

cited several years ago by the Fifth Circuit (United States v. Tax

Comm'n, 645 F.2d 4, 5 (5th Cir.), cert. denied, 454 U.S. 896 (1981) ).

That decision, however, involved an action against the State by the

United States, which is not subject to the defense of state sovereign

immunity.

5 In fact, giving Carpenter and Ward the reading contended for

by petitioners would be jnconsistent with the modern understanding

of state sovereign immunity. It is true that some cases, such as

Carpenter, Ward, and General Oil Co. v. Crain, 209 U.S. 211 (1908),

may be read to support the proposition that state sovereign im-

munity cannot be asserted in state court as a bar to a claim grounded

on the federal Constitution. The cases we cite above, however,

point in the other direction. See Palmer, 248 U.S. at 34; Hopkins,

221 US. at 642. See also Cunn'ngham v. Macon & Brunswick R.R.,

109 U.S. 446, 451 (1883). And the Court’s more recent decisions

10

B. State Courts Are Not Obligated To Use The Chevron

Test To Determine The Availability Of Tax Refunds

The conclusion that the Constitution does not compel a

refund is not the end of these cases, of course; it leaves

the question how to decide whether refunds are available.

The petitioners in both of these cases, however, offer an

assumption in place of an answer to this question: they

ground virtually their entire arguments on the bald as-

sertion that the retroactivity test of Chevron Oil Co. v.

Huson, 404 U.S. 97 (1971), governs the availability of a

refund when a state tax is invalidated as unconstitutional.

They accordingly devote the vast bulk of their briefs to

an analysis of the three Chevron factors. But in under-

taking this inquiry, petitioners skip over a more funda-

mental question—whether Chevron applies at all to suits

in state court that, like the ones in these cases, involve

state causes of action. The ATA petitioners assume with-

out discussion that Chevron controls the outcome; peti-

tioner McKesson simply asserts (Br. 31) that Chevron

must be applied in cases involving the federal Constitu-

tion, even when those cases are brought in state court

pursuant to state refund statutes.

under the Eleventh Amendment support the latter view. The Court

has made it clear that the Amendment bars federal courts from

entertaining actions against States seeking refunds for the uncon-

stitutional collection of taxes. See Edelman v. Jordan, 415 U.S. 651,

668-669 (1974); Kennecott Copper Co. v. State Tax Comm'n, 327

U.S. 573 (1946); Ford Motor Co. v. Dept. of Treasury, 323 U.S. 459

(1945); Great Northern Life Ins. Co. v. Read, 322 U.S. 47 (1944).

“(T)he significance of this Amendment,” the Court has added,

“ ‘lies in its affirmation that the fundamental principle of sovereign

immunity limits the grant of judicial authority in Art. III’ of the

Constitution.” Atascadero State Hospital v. Seanlon, 473 U.S. 234,

238 (1985) (quoting Pennhurst State School & Hospital v. Halder-

man, 465 U.S. 89, 98 (1984)). See Pennhurst, 465 U.S. at 98-99. By

ratifying the Constitution, the States thus did not consent to the

assertion against them of constitutional daims in federal court;

it is unclear why, by the same ratification, they should be deemed

to have waived the fundamental protection of sovereign immunity

in their own courts. See generally American Trucking Ass'ns, Ine.

v. Conway, 508 A.2d 408 (Vt. 1986), cert. denied, 107 8. Ct. 3262

(1987).

~ 11

There is no reason, however, why this should be so.

Chevrow itself involved a nonconstitutional federal claim

that had been brought in federal court. See 404 U.S. at

98-100. The decisions relied upon by the Chevron Court

in formulating its retroactivity standard likewise all in-

volved federal causes of action litigated in federal court,°

as have the civil cases in which the Court has applied

Chevron since 1971." On its face, then, the Chevron test

is most naturally read as stating a rule of federal com-

mon law that governs the remedies awarded by the fed-

eral courts in federal lawsuits. Petitioners do not explain

why the Chevron standard should be extended beyond that

category of cases.*

® See Hanover Shoe, Inc. v. United States Shoe Machinery Corp.,

392 U.S. 481 (1968) (federal antitrust action); Linkletter v.

Walker, 381 U.S. 618 (1965) (federal habeas corpus); Cipriano v.

City of Houma, 395 U.S. 701 (1969) (federal action under Equal

Protection Clause); Allen v. State Board of Elections, 393 U.S. 544

(1969) (action under Voting Rights Act); England v. State Board

of Medical Examiners, 375 U.S. 411 (1964) (federal abstention

rules); Chicot County Drainage Dist. v. Baxter State Bank, 308

U.S. 371 (1940) (federal res judicata rules).

7 See Saint Francis College, 107 S. Ct. at 2025; Goodman v.

Lukens Steel Co., 107 8. Ct. 2617, 2621 (1987); Northern Pipeline,

458 U.S. at 87-88. See also Long, 108 §. Ct. at 2359; Norris, 463

U.S. at 1105-1107; Manhart, 435 U.S. at 722-723. Cf. Pembaur v-

City of Cincinnati, 106 8. Ct. 1292, 1306 (1986) (Powell, J., dis-

senting).

® The Court has departed from Chevron in the criminal area, hold-

ing that a new constitutional rule should be applied to all cases

pending on direct review—but not, evidently, to cases in which final

judgment already had been entered—-at the time the rule was

adopted. See Griffith v. Kentucky, 479 U.S. 314, 328 (1987); com-

pare Allen v. Hardy, 478 U.S. 255 (1986). In adopting this ap-

proach, the Court has pointed to considerations derived from Article

IIt of the Constitution, reasoning that, once a new rule of criminal

procedure is announced, “the integrity of judicial review requires

that we apply that rule to all similar cases pending on direct re-

view”; “selective application of new rules violates the principle of

treating similarly situated defendants the same.” Griffith, 479 U.S.

12

In fact, in our view there are compelling reasons for

this Court not to mandate use of the Chevron test by

state courts in circumstances like those presented here—

where the plaintiffs are seeking remedies from state gov-

ernments pursuant to state refund procedures for viola-

tions of the Commerce Clause. If the Court believes that

a federal rule governing remedy is necessary in such

cases, proper solicitude for the character of state govern-

ments and an appreciation of the nature of the Com-

merce Clause suggest that a refund should be mandated—

as a matter of federal law—only when the unconstitution-

ality of the taxing statute is plain. But we believe that

there is no need for this Court to impose its own rule of

retroactivity; as in other settings, questions of remedy

are best left to the state courts to resolve as a matter of

state law. We address these points in turn.

1, The Chevron test fails to take into account the spe-

cial nature of the government defendant.

Despite the amount of space they devote to the Chevron

test, the ATA petitioners recognize (Br. 12-13) that an-

other standard may be appropriate to govern the avail-

ability of tax refunds, although the test they offer would

establish a rule of absolute retroactivity when a govern-

mental entity is held to have violated the Commerce

Clause. While petitioners are correct in suggesting that

at 323. See United States v. Johnson, 457 U.S. 537, 546-548, 555

(1982). These considerations plainly do not mandate the award of

refunds here. Both sets of petitioners obtained the benefit of

the Commerce Clause rules for which they contended: the un-

constitutional taxes were invalidated. Indeed, the Arkansas Su-

preme Court in ATA gave petitioners the benefit of a new constitu-

tional rule announced in Scheiner, a decision rendered while ATA

was pending on direct review. Griffith plainly does not speak to the

further question of remedy in Commerce Clause litigation such as

that involved here. In any event, it hardly need be added that the

federal interest in freeing persons who were incarcerated in viola-

tion of the Constitution is very different from the considerations

determining the availability of a refund remedy in a civil lawsuit.

13

a departure from Chevron is appropriate, we believe that

their proposed standard draws precisely the wrong lesson

from this Court’s decisions.

The ATA petitioners base their alternative standard

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

which they read to support the proposition that govern-

mental entities always should be required to make full

recompense for constitutional injuries. But Owen is in-

apposite here. There, the Court held only that a munici-

pality could not assert good faith immunity as a bar to

suit under 42 U.S.C. § 1983. The question in Owen was

“essentially one of statutory construction” (445 U.S. at

635), and was resolved by looking to the history and pur-

poses of Section 1983 (see id. at 635-636, 640-650, 657).

See also City of Newport v. Fact Concerts, Inc., 453 U.S.

247, 258 (1981). The Court thus held in Owen that, for

purposes of amenability to suit, municipalities should be

treated identically to private entities. See 445 US. at

639, 640. That holding plainly falls far short of a con-

clusion that governments have special obligations to pay

refunds or offer other forms of retroactive remedies in

circumstances where private parties would not be liable

for that relief.°

In fact, in a setting that is analogous to the one here—

where the issue involved remedy rather than amenability

to suit—the Court made it clear that the status of the

defendant as a governmental entity provides special fac-

*It is worth noting that a Section 198% action for a refund is

very likely unavailable in these cases. Money damages may not be

awarded against States in Section 1983 actions in federal court. See

Quern v. Jordan, 440 U.S. 332 (1979). The Court recently heard

arguments on the question whether States are “persons” who may

be sued under Section 1983 in their own courts, Will v. Michigan

State Police, No. 87-1269 (argued Dee. 5, 1988); as we explain in

our brief in that case, we believe that they are not. In any event,

as we note below (at 22-23), there is serious doubt that violations of

the Commerce Clause are cognizable under Section 1983.

14

tors cutting against the undoing of settled transactions

as a remedy, at least where the constitutional standard

governing liability was doubtful:

y

1, 411 U.S. at 207-208 (plurality opinion). The

Lemon Court therefore refused to set aside transactions

the State had entered into with private parties in

violation of the Establishment Clause. In the absence of

compelling constitutional considerations mandating retro-

activity (see id. at 201-203), the Court added that “|wje

do not engage lightly in post hoc evaluation vf such po-

litical judgment, founded as it is on ‘one of the first

principles of constitutional adjudication—the basic pre-

sumption of the constitutional validity of a duly enacted

state or federal law’” (id. at 208; quoting San Antonio

School District v. Rodriguez, 411 U.S. 1, 60 (1973));

“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 ne means

plainly unlawful.” Jd. at 208-209.

Other, related considerations reinforce the conelusion

that governmental units pursuing the public’s business

should receive more solicitude in the formulation of reme-

dies than private entities pursuing private ends. The

ATA petitioners demonstrate a profound misunderstand-

ing of the fiscal realities facing state and local govern-

ments when they cavalierly suggest that States found li-

able for refunds may suffer “at most inconvenience” ( Br.

35) and that “the refunds can be financed by new tax

15

levies” (Br. 37). In a time of almost universal budget

deficits and changing economies (cf. Academy for State

and Local Gov't, Where Will the Money Come From:

Finding Reliable Revenue for State and Local Govern-

ments in a Changing Economy (1986)), it is hardly a

simple matter for a State or a local government suddenly

to make unexpected outlays of hundreds of millions of

dollars. Pointing to these considerations, Justice Powell,

writing for five Justices in Norris, concluded that the

imposition of retroactive monetary liability on a State

was—Owen noiwithstanding—inappropriate in an action

under Title VII.

Noting that “the cost {of retroactive relief in Norris]

would fall on the State of Arizona.” and that “!p)re-

sumably other state and local governments also would be

affected directly” by the Court’s decision, the Court ex-

plained: “Imposing such unanticipated financial burdens

would come at a time when many States and local govern-

ments are struggling to meet substantial financial deficits.

Income, excise. and property taxes are being increased.”

Because the illegality of Arizona's conduct had not been

settled until the decision in Norris itself, the Court saw

“no justification * * * to impose this magnitude of burden

retroactively on the public.” 463 U.S. at 1106-1107. See

id. at 1110 (O'Connor, J.. concurring). Cf. Long. 108

S. Ct. at 2362-2363.""

These observations point up a central difference be-

tween liability imposed on public, as opposed to private,

* Indeed, dissenting in Scheiner, Justice O'Connor noted the reli-

ance interest that States have in expected sources of revenue: spe

cifically pointing to the Arkansas tax at issue here, Justice O'Connor

explained that Arkansas “opened its highways to the heaviest ¢rucks

only upon the understanding that it might collect sufficient reyenue

from those trucks by means of flat taxes to compensate for the

damage they do to its roads. If this flat tax is also unconstitutional.

then Arkansas is left with the damage but without the taxes.” 107

S. Ct. at 2849 (O'Connor, J. dissenting). The wsruption to the

State's finances obviously will be compounded many-fold if invalida-

tion of the tax is combined with retroactive liability.

16

defendants. When a private party acts to further its own

ends in an area where the law is unsettled, there is no

inequity in holding it fully liable if it is found to have

violated the law; doing so will simply require it to bear

the costs that it incurred in pursuit of its private pur-

poses. When a State or a local government is held liable,

in contrast, the ultimate burden falls not on a wrongdoer

but on “the shoulders of blameless or unknowing taxpay-

ers” (Fact Concerts, 453 U.S. at 267) in the form of

higher taxes or—peyrhaps more likely, given strapped state

treasuries—reduced benefits. Cf. ibid.; id. at 271. At least

in the Commerce Clause context, it is no answer to this

that “‘it is fairer to allocate any resulting financial loss

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

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

whose rights, albeit newly recognized, have been vio-

lated’” ‘ATA Br. 34, quoting Owen, 445 U.S. at 655).

As we explain more fully below (at 21-23), the Com-

merce Clause does not create rights that are personal to

the taxpayer; instead, it allocates power between the na-

tional and state governments. A Commerce Clause viola-

tion therefore tloes not deprive an injured party of

something to which it was “entitled” in the same sense as

does a due process violation of the sort at issue in Owen.

The balance therefore tips in favor of the public and

agninst the private interests.

2. The availability of a refund is a question of remedy

that should he settled by state courts-as a matter

of state law.

a. The considerations outlined above suggest that

Chevron should not govern in these cases. Rather than

create a new rule of retroactivity or remedy, however,

the Court can best reconcile the competing interests here

by allowing the state courts to determine the availability

of a refund according to state law. As a general matter,

after ail, questions of remedy that arise in state causes

of action are resolved by state courts according to their

17

own rules. As this Court explained more than 50 years

ago, in perhaps its most famous statement on the sub-

ject of reiroactivity, “{a] state in defining the limits

of adherence to precedent may make a choice for itself

between the principle of forward operation and that of

relation backward”; “|t|he choice for any state may be

determined by the juristie philosophy of the judges of her

courts, their conceptions of law, its origin and nature.”

Great Northern R. Co. v. Sunburst Oil & Refining Co..,

287 U.S. 358, 364, 365 (1932). See Havemeyer v. Iowa

County, 70 U.S. (3 Wall.) 294, 303 (1865); Gelpeke v.

City of Dubuque, 68 U.S. (1 Wali.) 175, 206 (1863).

Of course, state courts are free to apply the Chevron

standard (or something that looks like it) in settling

upon appropriate remedies—and many do'—but their

misapplication of Chevron in a lawsuit grounded on state

law does not provide federal grounds for complaint.

Absent overriding federal constitutional considerations,

the availability of a tax refund—which involves “essen-

tially issues of remedy” (Bacchus, 468 U.S. at 276-277)

—therefore should be settled by state law. And the sim-

ple fact that the injury giving rise to the remedy involved

the federal Constitution does not make reference to state

law inappropriate. After invalidating underinclusive

state programs under the Equal Protection Clause, for

example, the Court has left it to the state courts to de-

termine, as a matter of state law, whether the pool of

beneficiaries should be expanded or contracted. See

Hooper v. Bernalillo County Assessor, 472 U.S. 612,

624 (1985) ; Zobel v. Williams, 457 U.S. 55, 64-65 (1982).

! See, e.g., Nat'l Can Corp. v. Washington Dept. of Revenue, 109

Wash.2d 878, 749 P.2d 1286, app. dismissed and cert. denied, 108

S. Ct. 2030 (1988) ; Salorio v. Glaser, 461 A.2d 1100 (N.J.), cert. de-

nied, 464 U.S. 993 (1983). Some States, however, have developed

their own retroactivity tests. See, e.g., Ashland Oil, Inc. v. Rose, 350

S.E.2d 521 (W.Va. 1986), app. dismissed, 107 S. Ct. 1949 (1987).

18

See also Williams v. Vermont, 472 U.S. 14, 28 (1985).

The Court has followed an identical course in leaving to

the state courts the formulation of a remedy for a viola-

tion of the Supremacy Clause. Exxon Corp., 462 U.S.

at 196-197. Indeed, in the Commerce Clause area the

Court already has at least implicitly acknowledged the

relevance of state law in determining entitlement to a

refund; the Court has declined to resolve refund claims

coming from state courts, explaining that it would “not

take upon itself in this complex area of state tax struc-

tures to determine how to apply its holdirg!s|.” Tyler

Pipe Industries, 107 S. Ct. at 2822. See Bacchus, 468

U.S. at 276-277. This course, we believe, is a sensible one.

Leaving the development of remedies to the state courts

may give States a flexibility that will benefit both out-of-

state taxpayers and the public: States may, for example,

use tax credits or other forms: of relief in the place of

more disruptive refunds.

Having said this, we recognize that there obviously

are federal components to the questions here: one of

these cases involves the effect to be given a decision of

this Court rather than, as in Swnhurst, of the highest

court of a State; in both cases the controversy that led

to the remedy question involved the meaning of the fed-

eral Constitution, although petitioners proceeded under

state refund statutes. It therefore might he appropriate

for this Court to mandate the use of particular (or na-

tionally uniform) remedies if doing so were necessary

to effectuate the Commerce Clause." Cf. Chapman v.

12 Unless it is necessary to effectuate the Commerce Clause—and

as we explain in text, it is not—there are no federal policies here

militating in favor of the creation of a nationally uniform refund

remedy. Compare West Virginia v. United States, 107 S. Ct. 702,

705-707 (1987); Clearfield Trust Co. v. United States, 218 U.S. 263

(1943). To the contrary, the area of taxation is one in which the

State’s interest in using its own rules is especially compelling. See,

e.q., Fair Assessment in Real Estate Ass'n v. MeNary, 454 U.S. 100

(1981). See generally United States v. Yazell, 382 U.S. 841 (1966).

19

California, 386 U.S. 18, 21 (1967). Absent the existence

of a special federal interest that would be furthered by

particular remedies, however, the choice of remedy should

be left to state law. And as we explain below, there is no

such federal interest in these cases.

b. Petitioners assert (ATA Br. 28-33; McKesson Br.

37-40) that a federal rule mandating retrospective relief

is necessary to deter state legislatures from enacting, and

state executives from enforcing, tax schemes that are

inconsistent with the Commerce Clause. But this argu-

ment proves too much. It leads to the conclusion that

retrospective relief should be awarded by this Court when-

ever governmental entities are found to have acted in

violation of the Constitution or federal law, except per-

haps in cases where the invalidity of the governmental

action could not possibly have been anticipated. As noted

above, however, the Court has rejected such an approach.

Indeed, in other contexts the Court has found that the

specter of retrospective liability is not necessary “to en-

sure compliance with [its] decisions.” Long, 108 S. Ct.

at 2362. See Norris, 463 U.S. at 1106-1107 (opinion of

Powell, J.,); id. at 1110 (O’Connor, J., concurring).

Moreover, given the highly disruptive effects of retro-

spective liability, petitioners’ approach threatens to over-

deter by “undermin|[ing] the initiative of state legislators

and executive officials alike.” Lemon I/, 411 U.S. at 207-

208 (plurality opinion).

More fundamentally, petitioners themselves distort the

Constitution when they suggest (ATA Br. 29-30 &

n.20) that the Court should create special constitutional

remedies because state courts cannot be trusted to adjudi-

cate evenhandedly claims grounded on _ constitutional

violations. Noting that “Art. VI of the United States

Constitution declares that ‘the Judges in every State shall

be bound’ by the Federal Constitution, laws, and treaties,”

this Court repeatedly has refused “to base a rule on the

assumption that state judges will not be faithful to their

constitutional responsibilities.” Huffman v. Pursue, Ltd.,

‘

20

420 U.S. 592, 611 (1975). See Pennzoil Co. v. Texaco, Inc.,

107 S. Ct. 1519, 1528 (1987); Moore v. Sims, 442 U.S.

415, 430 (1979).

In fact, the performance of state courts would not

support such an assumption. Those courts have, with

regularity, invalidated state statutes that are inconsistent

with the Commerce Clause; indeed, the Supreme Court

of Florida did just that in McKesson. See also, e.g.,

Huie v. Private Truck Council, Inc., 466 N.E.2d 435

(Ind. 1984). State courts also have awarded refunds to

taxpayers in appropriate cases where tax statutes were

invalidated under the Commerce Clause or other provi-

sions of federal law. As decisions cited by the ATA

petitioners indicate (Br. 31-32 n.22), state courts have

similarly been willing to provide retroactive relief when

legislatures attempted to evade the Commerce Clause by

enacting successive, unconstitutional levies. And when

state courts have declined to make refunds available after

finding tax statutes inconsistent with the Commerce

Clause or other provisions of federal law, they generally

have accompanied their holdings with carefully considered

analyses of the factors discussed above: reliance by state

authorities on the presumptive constitutionality of legisla-

tion, in combination with a well-founded fear that retro-

active relief would have devastating fiscal consequences

18 See, e.g., Huie v. Private Truck Council, Inc., 466 N.E.2d 435

(Ind. 1984) (previously collected taxes escrowed and then refunded

in Commerce Clause case); Burlington Northern R.R. Co. v. Board

of Supervisors, 418 N.W.2d 72 (lowa 1988) (refund where state

tax preempted by federal law); LaRoque v. State, 583 P.2d 1059

(Mont. 1978) (tax invalidated as inconsistent with federal law; re-

fund available if taxpayers complied with state refund procedures) ;

Westinghouse Electric Corp. v. Tully, 68 N.Y.2d 191, 470 N.E.2d

853 (1984) (Commerce Clause violation; court remanded for re-

computation of tax). See also Midland Bank & Trust Co. v. Olsen,

717 S.W.2d 580 (Tenn. 1986) (refund available from time of deci-

sion establishing illegality of tax).

21

for the public." The record thus demonstrates no need

for intervention by this Court.

ec. Petitioners also assert (ATA Br. 27-28; Me-

Kesson Br. 37-38) that refunds would provide the relief

necessary to make them whole for the States’ violations

of the Commerce Clause. As we suggested above, how-

ever, this assertion misunderstands the nature of the

interests protected by the Clause.

The Commerce Clause does not absolutely entitle tax-

payers to a right to trade freely between the States. It

does not, after all, “limit the authority of Congress to

regulate commerce among the several States as it sees

fit,” or detract from Congress’s authority to “ ‘confe[r]

upon the States an ability to restrict the flow of inter-

state commerce that they would not otherwise enjoy.’ ”’

Western & Southern Life Insurance Co. v. State Board of

Equalization, 451 U.S. 648, 652 (1981) (emphasis in

original) (quoting Lewis v. BT Investment Managers,

Inc., 447 U.S. 27, 44 (19801). See Northeast Bancorp,

Inc. v. Board of Governors, 472 U.S. 159, 174 (1985);

Prudential Insurance Co. v. Benjamin, 328 U.S. 408

(1946). Thus, nothing in the Clause gives individuals a

right to engage in commerce; instead, it allocates the au-

thority to regulate commerce “between the national and

state governments” (Southern Pacific Co. v. Arizona, 325

U.S. 761, 768 (1945) ), implementing “the great constitu-

tional purpose of the fathers” to grant Congress rather

than the States “the power ‘To regulate Commerce with

foreign Nations, and among the several States . . Sed

Nippert v. City of Richmond, 327 U.S. 416, 425 (1946).

The Court’s decisions in the Commerce Clause area are

4 See, e.g., Salorio v. Glaser, 461 A2d 1100 (N.J.), cert. denied

464 U.S. 993 (1983); Metropolitan Life Insurance Co. v. Commis-

sioner, 373 N.W.2d 399 (N.D. 1985): First of McAlester v. Okla-

homa Tax Comm'n, 709 P.2d 1026 (Okla. 1985 ); Nat'l Can Corp. v.

Washington Dept. of Reve nue, 109 Wash.2d 878, 749 P.2d 1286,

app. dismissed and cert. denied, 108 S. Ct. 2020 (1988); Ashland

Oil, Ine. v. Rose. 350 8.E.2d 531 (W.Va. 1986), app. dismissed, 107

S. Ct. 1949 (1987).

9)

_—- =

accordingly “replete with references to the national or

federc/ interests in preventing the burdensome state regu-

lation of interstate commerce.” Consolidated Freightways

Corp. v. Kassel, 730 F.2d 1189, 1144 (8th Cir.), cert.

denied, 469 U.S. 834 (1984) (emphasis in original)

(citing Bibb v. Navajo Freight Lines, 359 U.S. 520, 524

(1959); H.P. Hood & Sons, Inc., v. DuMond, 336 U.S.

925, 537-542 (1949); Southern Pacific, 325 U.S. at 775-

776).

Of course, individuals may benefit from the existence

of the national free trade area that, in the absence of

restrictive congressional action, is created by the dormant

Commerce Clause. But that benefit is incidental. Unlike

the Bill of Rights and the personal guarantees of the Civil

War Amendments, the Commerce Clause was designed to

serve national rather than individual ends by forestalling

the ‘drift toward anarchy and commercial warfare” that

“came ‘to threaten at once the peace and safety of the

Union.’” Hood & Sons, 336 U.S. at 533 (quoting J.

Story, The Constitution, Secs. 259-260). See 336 U.S. at

534, 537." Thus, despite occasional references in this

Court’s opinions “to a right to engage in interstate com-

merce, * * * the Commerce Clause was adopted, and the

dormant Commerce Clause doctrine evolved, not to pro-

tect individual rights, but to further the national interest

in an efficient economy.” Consolidated Freightways, 730

F.2d at 1145. See id. at 1144. It is for this reason that,

“Tt is true that the litigation is between private parties, but

the issues touch the relative jurisdiction of nation and state.” Dowl-

ing, Interstate Commerce and State Power, 27 Va. L. Rev. 1, 22-23

(1940).

'® As Professor Choper has noted, “when it is alleged that an

attempted state regulation intrudes into an area of exclusively na-

tional concern, the constitutional issue is wholly different from that

posed by an assertion that certain government action abridges a

personal liberty secured by the Constitution. * * |W |hen a person

alleges that one of the federalism provisions of the Constitution

has been violated, he implicitly concedes that one of the two levels

of government—national or state—has the power to engage in the

23 -

as Justice White has noted, the “weight of authority”

recognizes that a Commerce Clause violation is not cog-

nizable under 42 U.S.C. § 1983. Private Truck Council of

America, Inc. v. Quinn, 476 U.S. 1129 (1986) ( White,

J., dissenting from the denial of certiorari). See, e.(.,

Consolidated Freightways, 730 F.2d at 1144-1146: White

Mountain Apache Tribe v. Williams, 810 F.2d 844, 848-

849 (9th Cir.), cert. denied, 479 U.S. 1060 (1987) (no

Section 1983 cause of action to challenge violation of

another power-allocating provision of the Constitution,

the Supremacy Clause). See also Chapman v. Houston

Welfare Rights Organization, 441 U-S. 600, 612-615

(1979) ‘violation of the Supremacy Clause does not in-

fringe rights “secured by the Constitution” within the

meaning of 28 U.S.C. § 1343(3)); Connor v. Rivers, 25

F’. Supp. 937 (N.D. Ga. 1938), aff'd, 305 U.S. 576 (1939)

(predecessor to 28 U.S.C. § 1343/3) did not provide juris-

diction for a dormant Commerce Clause claim). See gen-

erally White Mountain Apache Tribe, 810 F.2d at 849-

850.

Against this background, petitioners err when they

Suggest that they somehow are entitled to redress for

the burden placed upon them by virtue of the States’

violations of the Commerce Clause. The Clause safeguards

the national interest in the free flow of commerce; the

Arkansas Supreme Court was thus correct. in holding

(ATA Pet. App. 4a) that the principal purpose of the

Clause is vindicated when state barriers to commerce are

dissolved. See Nat'l Can Corp. v. Washington Dept. of

Revenue, 109 Wash. 878, 749 P.2d 1286, app. dismissed

and cert. denied, 108 S. Ct. 2030 (1988). Because the

Clause does not secure any personal right of petitioners,

it is largely a matter of indifference to the Constitution

whether a refund remedy is available as well.

questioned conduct. The core of the argument is simply that the

particular government that has acted is the constitutionally im-

proper one.” J. Choper, Judicial Review in the National Political

Process 174-175 (1980).

24

d. In any event, even if the analysis above is incorrect

—that is, even if the Commerce Clause creates a right

that is in some sense persona] to the out-of-state taxpayer

—the Clause plainly does not entitle the taxpayer to any

particular level of tax. At best, out-of-state taxpayers

like petitioners have a right to nondiscrimination in the

form of treatment equal to that accorded in-state tax-

payers. As the Court has noted time and time again, it

is discrimination between residents and non-residents that

is the hallmark of a Commerce Clause violation. See,

e.g., Scheiner, 107 S. Ct. at 2839: Tyler Pipe Industries,

107 S. Ct. at 2828-2829; Armco Inc. v. Hardesty, 467

U.S. 638, 642 (1984); Lewis, 447 U.S. at 36-37: Phila-

delphia v. New Jersey, 437 U.S. 617, 626 (1978): Com-

plete Auto Transit, Inc. v. Brady, 430 U.S. 274, 287-288

(1977); Boston Stock Exchange v. State Tax Comm'n,

429 U.S. 318, 328 (1977); Nippert, 327 U.S. at 425;

McGoldrisk v. Berwind-White Coal Mining Co., 309 US.

33, 35, 49 (1940).

Any personal rights that exist under the Commerce

Clause are therefore closely analogous to those created

by the Equal Protection Clause ‘or the equal protection

component of the Fifth Amendment's Due Process

Clause). As in the Commerce Clause setting, “the right

to equal treatment guaranteed by the Constitution|’s

Equal Protection Clause] is not coextensive with any

substantive rights to the benefits denied the party dis-

criminated against.” Heckler v. Mathews, 465 U.S. 728.

739 (1984). This means that the remedy for a program

found to be discriminatory under the Equal Protection

Clause is “a mandate of equal treatment, a result that

can be accomplished by withdrawal of benefits from the

favored class as well as by expansion of benefits to the

excluded class.” /d. at 740 ‘emphasis in original). See

Califono v. Westcott, 443 U.S. 76, 94-95 (1979) (opinion

of Powell, J.). So far as we are aware, however, the

Court has never suggested that either the federal or the

state and local governments are obligated to remedy

25

equal protection violations by extending that mandate of

equal treatment into the past. Such a doctrine would

have incongruous results: it would mean, for example,

that a State that improperly accorded special benefits

to a small category of persons would either have to re-

claim those benefits or make them retroactively available

to everyone else in the population.

In our view, the Constitution does not require such

an outcome. Indeed, the Mathews Court, far from re-

quiring a retroactive equalization of benefits, permitted

Congress to make continued use of an improper classi-

fication into the future to protect the reliance interests

of the previously favored class. See 465 U.S. at 745-751.

Similarly, as we note above, the Court has left it to state

courts to determine, according to state law, how to

remedy the defects in state programs that are found to

violate the Equal Protection Clause. See Hooper, 472

U.S. at 624; Zobel, 457 U.S. at 64-65. See also Exxon

Corp., 462 U.S. at 196-197." Cf. Williams, 472 U.S. at

28. The same reasoning compels the conclusion that a

Commerce Clause violation is fully remedied when the

State terminates the improper discrimination. Questions

about the availability of any additional remedy should be

left to the state courts to resolve under state law.

17In these Equal Protection and Supremacy Clause cases the

Court reasoned that the remedy question involved severance, leaving

it to the state courts to determine whether benefit programs would

have been enacted in the absence of the unconstitutional limitation.

The holdings of the Florida courts below demonstrate the relevance

of the equal protection analysis to the Commerce Clause: the

Florida courts in effect severed the unconstitutional exemption,

leaving the larger tax program in effect. See McKesson Pet. App.

27a.

26

CONCLUSION

The judgments of the Supreme Courts of Arkansas

and Florida should be affirmed.

Respectfully submitted,

BENNA RUTH SOLOMON *

Chief Counsel

CHARLES ROTHFELD

STATE AND LOCAL LEGAL CENTER

444 N. Capitol Street, N.W.

Suite 349

Washington, D.C. 20001

(202) 638-1445

* Counsel of Record for the

February 21, 1989 Amici Curiae