Amicus Curiae Brief — South Central Bell Telephone Co. v. Alabama

MOTION FILED i)

JUL 20 i998 No. 97-2045

In The

Supreme Court of the United States

+

October Term, 1997

SOUTH CENTRAL BELL TELEPHONE COMPANY, e? ai.,

Petitioners,

vs.

STATE OF ALABAMA AND

STATE DEPARTMENT OF REVENUE,

Respondents.

On Petition for Writ of Certiorari to

the Supreme Court of Alabama

MOTION OF AMICI CURIAE ALLIEDSIGNAL INC., AVON

PRODUCTS, INC., BURGER KING CORPORATION, CYTEC

INDUSTRIES, INC., DARDEN RESTAURANTS, ELI LILLY AND

COMPANY, GEORGIA-PACIFIC CORPORATION,

MATSUSHITA ELECTRIC CORPORATION OF AMERICA,

MORTON INTERNATIONAL, INC., NABISCO, INC.,

PICCADILLY CAFETERIAS, INC., R.J. REYNOLDS TOBACCO

COMPANY, THE PRUDENTIAL INSURANCE COMPANY OF

AMERICA, AND TRICON GLOBAL RESTAURANTS, INC. IN

SUPPORT OF PETITION AND BRIEF AMICI CURIAE

WILLIAM L. GOLDMAN

Counsel of Record

CARL R. ERDMANN

McDERMOTT, WILL & EMERY

Attorneys for Amici Curiae

600 13th Street, N.W.

Washington, D.C. 20005-3096

(202) 756-8000

utz

147471 (800) 274-3321 * (800) 359-6859 M nrgesat

A DIVISION OF COUNSEL PRESS erctese, ine.

AlliedSignal Inc., Avon Products, Inc., Burger King

Corporation, Cytec Industries Inc., Darden Restaurants, Eli Lilly

and Company, Georgia-Pacific Corporation, Matsushita Electric

Corporation of America, Morton International, Inc., Nabisco,

Inc., Piccadilly Cafeterias, Inc., R.J. Reynolds Tobacco

Company, The Prudential Insurance Company of America, and-

Tricon Global Restaurants, Inc. (“amici”) hereby move, pursuant

to S. Ct. R. 37.2, for leave to file a brief amicus curiae in support

of the petition for a writ of certiorari to the Supreme Court of

Alabama. Amici are filing this motion because Respondents have

declined to consent to this amicus curiae brief.' A copy of the

proposed brief is attached.

As more fully explained at pages 1.2 of the attached brief

under “Interest of Amici Curiae,” amici are corporations

incorporated in States other than Alabama and conduct business

in interstate commerce, including in Alabama. All suffer the effects

of Alabama’s discriminatory franchise tax since they are forced

to bear a heavier franchise tax burden than competing corporations

that are incorporated in Alabama.

The brief will assist the Court in determining whether to grant

certiorari because amici are uniquely positioned to point out: (1)

the importance of this case to all foreign corporations doing

business in Alabama in view of Alabama’s continuing enforcement

of its discriminatory taxing scheme; (2) the need to for this Court

to grant certiorari in this case in view of Alabama’s inability to

comply voluntarily with clear precedent of this Court; and (3) the

challenge to the integrity of this Court’s decisions in view of (i)

Alabama’s continuing reliance on its earlier decision in White v.

Reynolds Metal Co., 558 So. 2d 373 (Ala. 1989), cert. denied,

496 U.S. 912 (1990) (“Reynolds”), despite subsequent decisions

1. In response to a request for consent of Respondents to the filing of an

amicus curiae brief, Respondents’ counsel replied by letter of July 14, 1998,

that “the Alabama Revenue Department respectfully declines to consent to your

filing an Amicus Brief on behalf of your clients who are not parties to this litigation.”

of this Court that have repudiated Reynolds; and (ii) Alabama's

use of res judicata to block attempts by taxpayers who were

strangers to Reynolds from obtaining judicial review of Alabama's

unconstitutional tax, a denial of due process that also conflicts

directly with a decision of this Court. Given Respondents’

position on the res judicata issue (i.e., that non-parties are bound

by Reynolds), it is particularly ironic that Respondents would

not consent to this brief on the grounds that amici were “not

parties to this litigation.”

Accordingly, Amici respectfully request that the Court grant

leave to file the attached brief amici curiae.

Respectfully submitted,

WILLIAM L. GOLDMAN

Counsel of Record

CARL R. ERDMANN

McDERMOTT, WILL & EMERY

Attorneys for Amici Curiae

600 13th Street, N.W.

Washington, D.C. 20005-3096

(202) 756-8000

TABLE OF CONTENTS

THIS COURT SHOULD GRANT CERTIORARI

BECAUSE THE RULING OF THE ALABAMA

SUPREME COURT IS IN DIRECT CONFLICT

WITH DECISIONS OF THIS COURT, AND,

UNDER THE CIRCUMSTANCES HERE,

CERTIORARI IS PARTICULARLY

WARRANTED IN ORDER TO PROTECT THE

INTEGRITY OF THIS COURT'S

EES SEF

1. The fact that Alabama’s “extreme

application” of res judicata prevents

taxpayers who were strangers to the Reynolds

case from relying on subsequent Commerce

Clause decisions of this Court compounds

the unconstitutionality of the result

PE BURG Bes ach nod 6oeeseedosecess.

il

Contents

Page

2. Alabama inappropriately relies on Reynolds

to avoid compliance with this Court's

subsequent decisions in Fulton, Oregon

Waste, and Associated Industries. ....... 9

3. Alabama also relies inappropriately on

Reynolds in claiming that, even if its franchise

tax on foreign corporations is

unconstitutional, any relief should be

prospective for all taxpayers and that none

of its unconstitutional tax collections need

be ee . .ocscceuasceseecbeceenss 12

QComaieshan ..cccccccccdhenesceseesescscessseves

TABLE OF CITATIONS

Cases Cited:

Associated Indus. v. Lohman,

Si1 U.S. G41 (IDDE) 2. cccccccccccccess 3, 5, 7, 8, 9, 10

Commissioner v. Sunnen, 333 U.S. 591 (1948) ...... 7,8,9

Fulton Corp. v. Faulkner,

516 U.S. 325 (1996) ..... 6... c cece en eeee 3, 5, 7, 8, 9, 10

Harper v. Virginia Dep't of Taxation,

S09 U.S. 86 (1993) ... 2. ccc c cece cccececcececes 12

Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945) ... 8

Contents

Page

H. P. Hood & Sons, Inc. v. D« Mond,

arene GI I i eS 5

Hudson v. Louisiana, 450 U.S. 40 6 ee 4

Hughes v. Oklahoma, 441 U.S. 322 (1979) ......... 5

James Beam Distilling Co. v. Georgia,

I ae I i 12

Limbach v. Hooven & Allison Co.,

i & f EERa Rae Se os pe Sr ae 4,7, 8

McKesson Corp. v. Division of Alcoholic B

everages &

Tobacco, 496 U.S. 18 (1990) .............. sti 12

Michelin Tire Corp. vy. Wages, 423 U.S. 276 (1976) .. S

Monroe v. Gladwin Corp., Ala. S. Ct. No. 1961871

Petition For Extraordinary Writ (Jan. 30, 1998),

reprinted in State Tax Notes, 97 STN 174-1 )

8 YP RR Sie onrrer ie aaa 13

Newsweek v. Florida Dep't of Revenue,

SU a Pas ae 12

Oregon Waste Sys. v. Department of Envtl Quali

.v. . Quality,

Pee WB ov cn nccskcccdciccs 3, 5, 7, 8, 9, 10, 11

Pittsburgh v. Alco Parking Corp.,

ae I i ad re eh ace oe 4

iv

Contents

Reich v. Collins, 513 U.S. 106 (1994) ............. 12

Richards v. Jefferson County, 517 U.S. 793 (1996)... 2, 6,9

State v. Plantation Pipeline Co., 265 Ala. 69,

cert. denied, 352 U.S. 943 (1956) ............... 7

White v. Reynolds Metals Co., 558 So. 2d 373 (Ala.

1989), cert. denied, 496 U.S. 912 (1990) ........ passim

William E. Arnold Co. v. Carpenters Dist. Council,

SEF BRA Geen 0 cob cdevwendebaseedandueees 4

Statutes Cited:

Rie, Gas BGO 0 cctbedesddedbbesdciedesens 10

Bie, Gate BESO 6 okkcceevdaébdteneetseatocne 1, 10

United States Constitution Cited:

BS, Goeet, OE EOE DS cccescesesédsoccnen caer 2

Rules Cited:

Pat, R, Gow BD sacs ccvcccssdvccgesetdavtendes 6

BD. Ge GD i ccicesccascdtvawnccdevcaneaeussise 4

BD. GR BR. FF ccvccvccccaccctussbvtscesécvctevnes l

Contents

S. Ct. R. 37.2(b)

S. Ct. R. 37.6

Other Authorities Cited:

Ala. Const. of 1901 art. XII, § 229

The Federalist No. 42 (James Madison)

R. Stern, et al., Supreme Court Practice 208

(7th ed. 1993)

Page

Ihe Sarg 3,4

CONSENT OF THE PARTIES

Petitioners have consented to the filing of this amicus curiae

brief, but Respondents have declined to consent. Amici,

therefore, have filed a motion for leave to file this brief in

accordance with S. Ct. R. 37.2(b).'

INTEREST OF AMICI CURIAE

Pursuant to S. Ct. R. 37, AlliedSignal Inc., Avon Products,

Inc., Burger King Corporation, Cytec Industries Inc., Darden

Restaurants, Eli Lilly and Company, Georgia-Pacific

Corporation, Matsushita Electric Corporation of America,

Morton International, Inc., Nabisco, Inc., Piccadilly Cafeterias,

Inc., R.J. Reynolds Tobacco Company, The Prudential Insurance

Company of America, and Tricon Global Restaurants, Inc.

(“amici”) respectfully submit this brief as amici curiae in support

of the petition for a writ of certiorari filed by Petitioners in the

above-captioned case.

Amici, corporations organized under laws of States other

than Alabama (referred to herein as “foreign corporations”), are

engaged in interstate commerce, including doing business in

Alabama. Consequently, amici are subject to the discriminatory

Alabama franchise tax on foreign corporations. Ala. Code

§ 40-14-41 (1993). This case is important to amici because

Alabama continues to collect this tax from amici in reliance on

White v. Reynolds Metals Co., 558 So. 2d 373 (Ala. 1989),

cert. denied, 496 U.S. 912 (1990) (“Reynolds”). This places

amici at a competitive disadvantage to corporations engaged in

business in Alabama that are organized under the laws of

Alabama (referred to herein as “domestic corporations”).

1. The letters from counsel for Petitioners and Respondents have been

filed with the Clerk of the Court. Pursuant to S. Ct. R. 37.6, amici state that

no counsel for a party has written this brief in whole or in part and that no

person or entity, other than amici, has made a monetary contribution to the

preparation or submission of this brief.

2

Furthermore, in view of Alabama's continuing exploitation

of Reynolds in collecting the tax, asserting res judicata in this

case, and contending that any relief should be prospective only

if the tax is ever declared unconstitutional, it is particularly

important to amici that this Court grant certiorari in this case.

Otherwise, it is apparent that Alabama will continue to levy

and collect its clearly unconstitutional tax for as long as possible,

and it is doubtful whether Alabama will ever comply voluntarily

with the Commerce Clause’ precedents of this Court. In the

meantime, amici are at risk that future litigation efforts in

Alabama will be similarly frustrated by the contentions Alabama

has made in this case. Amici, like other foreign corporations in

Alabama, intend to pursue claims for refunds of franchise tax

for past years.

SUMMARY OF ARGUMENT

Alabama’s continuing reliance on Reynolds to justify its

discriminatory taxing scheme (despite subsequent decisions of

this Court) and Alabama’s resort to res judicata to avoid judicial

review (also in conflict with a decision of this Court) are an

affront to this Court’s Commerce Clause jurisprudence. This

Court should grant certiorari to protect the integrity of its

decisions.

Alabama's “extreme application” of res judicata directly

conflicts with Richards v. Jefferson County, 517 U.S. 793

(1996) by depriving Petitioners, who were strangers to Reynolds,

of due process. In addition, Petitioners are deprived of the ability

to rely on both subsequent Commerce Clause decisions of this

Court and further factual development, a harsher result than

applies to the parties themselves in an earlier tax case. This

further compounds the unconstitutionality of the result below.

2. U.S. Const. art. I, § 8, cl. 3.

3

The unconstitutionality of Alabama's discriminatory

taxation of foreign corporations has been confirmed by

subsequent decisions of this Court, which have repudiated the

constitutional analysis in Reynolds. Consequently, it is important

for this Court to grant certiorari in order to bring Alabama’s

reliance on Reynolds to an end.

Finally, in view of still more precedent of this Court

confirming a State’s obligation to provide meaningful backward-

looking relief, this Court also should reject Alabama's arguments

for prospective relief only. Alabama must not be permitted to

ignore this Court’s precedent and then retain its unconstitutional

tax collections.

ARGUMENT

THIS COURT SHOULD GRANT CERTIORARI

BECAUSE THE RULING OF THE ALABAMA SUPREME

COURT IS IN DIRECT CONFLICT WITH DECISIONS

OF THIS COURT, AND, UNDER THE CIRCUMSTANCES

HERE, CERTIORARI IS PARTICULARLY WARRANTED

IN ORDER TO PROTECT THE INTEGRITY OF THIS

COURT’S DECISIONS.

It is important for this Court to grant certiorari in this case

because of Alabama’s continuing reliance on and continuing

exploitation of Reynolds — a 1989 decision that is

unquestionably in direct conflict with this Court’s subsequent

decisions in Fulton Corp. v. Faulkner, 516 U.S. 325 (1996)

(“Fulton”); Oregon Waste Sys. v. Department of Envtl. Quality,

511 U.S. 93 (1994) (“Oregon Waste”); and Associated Indus.

v. Lohman, 511 U.S. 641 (1994) (“Associated Industries”).

3. This case involves a direct “conflict between a decision of the highest

state court and that of the Supreme Court on a matter of federal law [which]

is a strong reason for the granting of certiorari.” R. Stern, et al., Supreme

(Cont'd)

4

Every position Alabama takes with respect to every issue

(including res judicata, the constitutionality of its discriminatory

franchise tax on foreign corporations, and the relief to be

accorded taxpayers if the tax ultimately is held to be

unconstitutional) is grounded on the State’s continued reliance

on Reynolds. Furthermore, Alabama's arguments in this case

confirm that all future litigation in Alabama involving these

issues also will be infected by the State’s claim that, until

Reynolds is directly overruled, the State is entitled to continue

to rely on Reynolds in collecting and then retaining the franchise

taxes paid by foreign corporations. As noted by Justice Maddox

in his concurring opinion, the only opinion issued by a member

of the majority in the Alabama Supreme Court:

[A]lthough I realize that the [United States] Supreme

Court has released some opinions that could be

interpreted as indicating a change in that Court’s view

of the constitutionality of state taxes such as that at

issue in this case, the fact remains that the Supreme

Court refused to review this Court’s decision in

Reynolds Metals, and that, as of today, Reynolds

Metals remains the law.

South Central Bell Co. v. Dept. of Revenue, Pet. App. 7a.*

(Cont'd)

Court Practice 208 (7th ed. 1993); see also S. Ct. R. 10. The Alabama

Supreme Court's disregard of clear precedent of this Court bears striking

resemblance to the Ohio Supreme Court's actions in Limbach v. Hooven &

Allison Co., 466 U.S. 353 (1984), where this Court granted certiorari because

“a state court has disregarded a federal constitutional ruling of this Court.”

Id. at 362: see also Hudson v. Louisiana, 450 U.S. 40, 42 (1981); William E.

Arnold Co. v. Carpenters Dist. Council, 417 U.S. 12, 14 (1974); Pittsburgh

v. Alco Parking Corp., 417 U.S. 369, 371-72 (1974).

4. “Pet.” references are to the petition for a writ of certiorari filed in

this case. “Pet. App.” references are to the appendices to the petition.

5

It is intolerable for a State to continue in this fashio

ignore and avoid the clear, unequivocal constitutional ah

of this Court. Such intransigence itself raises a serious Commerce

Clause concern. A State must not think that, because of an earlier

decision in that State, it may ignore with impunity subsequent

decisions of this Court and collect plainly unconstitutional taxes

That is exactly what Alabama is doing. ,

Apparently, Alabama thinks that Fulton, Ore

Associated Industries apply everywhere in ty re

except in Alabama and that it is permanently shielded from

further Commerce Clause precedent of this Court because of

the 1989 decision in Reynolds. Such a notion is a direct affront

thee + genom ane because it would result in varying

Ss of constitution ti i i

which business is pal cory ace scpetina tc eaaadan

Under these circumstances, it is important for this Court to

grant certiorari in order to protect the integrity of its decisions

Alabama must be told that it must conform its taxing practices

to the requirements of the Commerce Clause as clearly stated

5. This Court has repeatedly recognized the i i

Nation as one economic unit. ' ee ee

{I}n order to succeed, the new Union would have to avoid the

tendencies toward economic Balkanization that had plagued

relations among the Colonies and later among the States under

the Articles of Confederation.

Oregon Waste at 98 (citing Hughes v. Oklahoma, 44

, » 441 U.S. 322 (1979)); see

generally The Federalist No. 42 (James Madison). “{[O]ur economic unit is

the Nation, which alone has the gamut of powers necessary to control the

economy, . . . [and] has as its corollary that the states are not separable

economic units.” Oregon Waste at 98-99 (citing H. P Hood

Du Mond, 336 U.S. 525 (1949)). : ses nedks

6

by this Court. Otherwise, Alabama will be rewarded for its

intransigence, and other States will be encouraged to hold out

for as long as possible in similar circumstances in the hope of

retaining their unconstitutional gains.

In this case, the decision of the Alabama Supreme Court is

particularly egregious in view of the multiplicity of decisions

of this Court with which it is in direct conflict.

1. The fact that Alabama’s “extreme application” of res

judicata prevents taxpayers who were strangers to the

Reynolds case from relying on subsequent Commerce Clause

decisions of this Court compounds the unconstitutionality

of the result below.

Alabama's application of res judicata, in effect, creates a

new, unprecedented class action — a class of all foreign

corporations doing business in Alabama — without any of the

usual class action protections. See Fed. R. Civ. P. 23. Petitioners

have demonstrated that the res judicata issue warrants this

Court’s review in light of the direct conflict with this Court's

decision in Richards v. Jefferson County, 517 U.S. 793 (1996),

another case from Alabama. See Pet. 19-24. As in Richards, the

“extreme application” of res judicata to Petitioners in this case

“deprived them of the due process of law guaranteed by the

Fourteenth Amendment.” /d. at 797.

Amici wish to point out that the “extreme application” of

res judicata in this case also has the effect of preventing

taxpayers, who were strangers to the Reynolds case, from being

able to rely on subsequent Commerce Clause precedent of this

Court, including cases that are directly contrary to Reynolds. It

is hard to imagine a more “extreme application” of res judicata

given the general recognition that the parties themselves in an

earlier tax case are not prevented from relying on such

7

subsequent decisions of this Court when later tax years are

litigated. See Limbach v. Hooven & Allison Co., 466 U.S. 353

(1984) (“Hooven II”); Commissioner v. Sunnen, 333 U.S. 591

(1948); see also State v. Plantation Pipeline Co., 265 Ala. 69,

cert. denied, 352 U.S. 943 (1956).

In Sunnen, this Court rejected the attempt by the

Commissioner of the Internal Revenue Service to invoke

collateral estoppel in a later tax year, noting that collateral

estoppel —

is designed to prevent repetitious lawsuits over

matters which have once been decided and which

have remained substantially static, factually and

legally. It is not meant to created vested rights in

s lete or erroneous

with time, thereby causing inequities among

taxpayers.

Sunnen, 333 U.S. at 599 (emphasis added).° It is interesting to

note that there was no suggestion that the more preclusive

doctrine of res judicata was potentially applicable.

. 6. In the present case, intervening developments of both the law and

significant facts have occurred. As discussed below in part 2, the legal basis

upon which Reynolds was decided was unequivocally rejected by this Court

in Fulton, Oregon Waste, and Associated Industries. Further, the Alabama

Supreme Court based the decision in Reynolds in part upon an asserted lack

of proof that the franchise tax in fact discriminates against foreign

corporations. Reynolds, 558 So. 2d at 370. The trial court in this case found

no such evidentiary gaps.

The Court finds that the Taxpayer's evidence in this action

clearly and abundantly demonstrates that the franchise tax on

foreign corporations discriminates against them for no other

reason than the state of their incorporation.

Pet. App. 21a-22a (footnote omitted). Therefore, intervening developments

in both the law and the facts have occurred, a circumstance that would render

collateral estoppel inapplicable if the parties were the same.

The result in Hooven II is particularly illuminating. In

Hooven II, the taxpayer argued that the Ohio Tax Commissioner

was barred by collateral estoppel because of the prior holding

in Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945)

(“Hooven I’), which held that the “original package” doctrine

of the Import-Export Clause of the United States Constitution

prevented the State from taxing certain imported goods.

However, the original package doctrine was subsequently

invalidated in Michelin Tire Corp. v. Wages, 423 U.S. 276

(1976), although the Court never specifically overruled Hooven

I. The Ohio Supreme Court agreed with the taxpayer’s argument

that, notwithstanding the intervening decision of this Court,

the Commissioner was collaterally estopped from re-litigating

the validity of the original package doctrine in Hooven I] because

Hooven I| dealt with the same issues and the same taxpayer. In

reversing, this Court held that

[t]he years involved in this tax case, however, are

not the same tax years at issue in Hooven |. Because

of this, Commissioner v. Sunnen, supra, is pertinent

and, indeed, is controlling . . .

Hooven II, 466 U.S. at 362. This Court held that collateral

estoppel could not repudiate this Court’s intervening

pronouncement, noting that the reason for limiting the scope

of collateral estoppel is especially strong when important

constitutional issues are involved and the “constitutional analysis

of the earlier case is repudiated by this Court’s intervening

pronouncement.” /d.

In this case, Alabama argued for res judicata so that it could

avoid both the unmistakable impact of this Court’s decisions in

Fulton, Oregon Waste, and Associated Industries (which have

repudiated the constitutional analysis of Reynolds) and

Petitioners’ further factual development. Thus, in addition to

(

9

being in direct conflict with Richards, the “extreme application”

of res judicata also is contrary to Sunnen and plainly a denial

of due process. How can a stranger to an earlier decision be

more bound by that decision in dealing with different taxable

years than the parties to that decision would be? This Court

should not permit its decisions to be avoided in this way.

2. Alabama inappropriately relies on Reynolds to avoid

compliance with this Court’s subsequent decisions in Fulon,

Oregon Waste, and Associated Industries.

Alabama's principal defense of its facially discriminatory

treatment of foreign corporations against Commerce Clause

challenge is its reliance on the compensatory or complementary

tax doctrine as applied in Reynolds. In setting forth its

complementary tax argument in its brief in this case to the

Alabama Supreme Court, the State made no fewer than 18

references to Reynolds. State Department of Revenue’s Brief to

Ala. Sup. Ct. (“DOR Brief”), pp. 23-34 (May 25, 1997).

But, the subsequent opinions of this Court in Fulton,

Oregon Waste, and Associated Industries, which more fully

delineated the three requirements for application of the

compensatory or complementary tax doctrine, directly repudiate

the Alabama Supreme Court's analysis in Reynolds. For

example, in Reynolds, the Alabama Supreme Court stated:

The question, as we see it, is whether the franchise

tax on foreign corporations invidiously discriminates

against them by imposing a grossly disproportionate

tax on them for no other reason than to provide a

competitive advantage to domestic corporations. We

emphasize the term “invidiously” because the tax

will be sustained if its classifications are rationally

related to a legitimate state purpose and because, in

10

enacting taxing statutes, legislatures are not required

to reach equality with mathematical precision.

558 So. 2d at 382. But, in Associated Industries, this Court

rejected as irrelevant the State’s motive in enacting a tax, stating:

A court need not inquire into the purpose or

motivation behind a ... law in order to determine

that, in actuality, the law impermissibly discriminates

against interstate commerce.

511 U.S. at 641. This Court also confirmed, in Associated

Industries, that there is a “strict rule of equality” in applying

the complementary tax doctrine. The State must show that its

tax on interstate commerce does not exceed its tax on intrastate

commerce. 511 U.S. at 646.

The Alabama Supreme Court in Reynolds also failed to

analyze, as required by this Court’s decisions, whether the taxes

in issue (the domestic franchise tax and the domestic shares tax

paid by domestic corporations and the foreign franchise tax

paid by foreign corporations) were imposed on “substantially

equivalent events” so that they served “as mutually exclusive

‘prox{ies}]’ for each other.” Oregon Waste, 511 U.S. at 103;

Fulton, 516 U.S. at 340 n.6. The franchise tax on domestic

corporations is imposed on their capital stock regardless where

they engage in business, whereas the franchise tax on foreign

corporations is imposed on the amount of their capital employed

in Alabama.’ A domestic corporation's issuance of capital stock

and the employment of capital in a State are not substantially

equivalent events. If Alabama wants to tax corporations on the

amount of their capital employed in Alabama, it can and should

impose such a tax on a nondiscriminatory basis on both domestic

7. Ala. Code § 40-14-40 and Ala. Code § 40-14-41 are set forth at Pet.

App. 90a-97a.

and foreign corporations. Until it does so, a separate decision

to tax domestic corporations on their capital stock cannot serve

as a basis for taxing only foreign corporations on their capital

employed in Alabama.*

Rather than address the three requirements for application

of the complementary tax doctrine, as appliéd by this Court's

post-Reynolds decisions, Alabama essentially argues that these

decisions “do not constitute a significant (if any) departure from

the standards in effect at the time” Reynolds was decided. DOR

Brief, p. 32. That argument would merely confirm that Reynolds

was wrong when it was decided. But the point here is that, in

all events, taxpayers are entitled to have Reynolds reconsidered

in light of this Court's subsequent decisions. That is what

Alabama seeks to avoid — for as long as possible.

8. This Court has made it clear that —

the concept of the compensatory tax . . . is merely a specific

way of justifying a facially discriminatory tax as achieving a

legitimate local purpose that cannot be achieved through

Oregon Waste at 102 (emphasis added). There is no justification for using

different tax bases for taxing foreign and domestic corporations in this case

since a nondiscriminatory method is plainly available. Amici understand that

the Alabama Constitution prevents the State from imposing an apportioned

tax on the domestic corporations based on their capital employed in the state.

Ala. Const. of 1901 art. XII, § 229. But this constraint in the Alabama

Constitution can hardly justify a taxing scheme that violates the Commerce

Clause of the United States Constitution.

12

3. Alabama also relies inappropriately on Reynolds in

claiming that, even if its franchise tax on foreign corporations

is unconstitutional, any relief should be prospective for all

taxpayers and that none of its unconstitutional tax

collections need be refunded.

Alabama’s arguments to the Alabama Supreme Court for

prospectivity are more of the same — reliance on Reynolds and

a complete disregard of this Court’s precedents. Alabama ignores

this Court’s clear precedent regarding a State’s obligation to

provide “meaningful backward-looking relief.” See Newsweek

v. Florida Dep't of Revenue, 118 S. Ct. 804 (1998); Reich v.

Collins, 513 U.S. 106 (1994); Harper v. Virginia Dep't of

Taxation, 509 U.S. 86 (1993); James Beam Distilling Co. v.

Georgia, 501 U.S. 529 (1991); McKesson Corp. v. Division of

Alcoholic Beverages & Tobacco, 496 U.S. 18 (1990).

Despite all of this precedent of this Court, the State argued

below to the Alabama Supreme Court that:

[T}he Alabama Court of Civil Appeals in White v.

Reynolds Metals Company, 558 So. 2d 367 (Ala.

Civ. App. 1989), ruled that its decision that the

Alabama franchise tax scheme unconstitutionally

discriminates against foreign corporations would be

given prospective application. The ruling regarding

the prospective application ... has never been

reversed. Consequently, should this Court decide

on the merits of the case adversely to the Department,

it should give deference to the Court of Civil

Appeals’ ruling under the doctrine of stare decisis

in deciding whether to grant prospective application.

DOR Brief, p. 45.

13

Re Apparently, Alabama recognizes the doctrine of stare decisis:

it Is Just confused as to which court's precedent it should follow.’

The important point here is that such arguments further confirm

the need for this Court to grant certiorari. Otherwise, it is apparent

that Alabama will continue disregarding this Court’s precedent.

CONCLUSION

This Court’s denial of certiorari in Reynolds has emboldened

aa mse isions of this Court in an effort to collect

i tax for as long as ible. Such a strategy i

serious challenge to this Court's Commerce Clause jurisprudence

Accordingly, amici urge this Court to grant certiorari in this case

in order to protect the integrity of this Court’s decisions and make

it plain that such a strategy must ultimately be unavailing. In

addition, given the clear precedent of this Court, amici also suggest

that it would be appropriate for this Court to summarily reverse

without plenary review.

Respectfully submitted,

WILLIAM L. GOLDMAN

Counsel of Record

CARL R. ERDMANN

McDERMOTT, WILL & EMERY

Attorneys for Amici Curiae

600 13th Street, N.W.

Washington, D.C. 20005-3096

(202) 756-8000

July 20, 1998

9. Not only is Alabama arguing for denial of taxpayers’ right to substantial

backward-looking relief, Alabama also has foiled taxpayers’ attempts to avail

themselves of a predeprivation remedy by withholding payment of franchise tax

and placing bonds in escrow with the Alabama courts. See Monroe v. Gladwin

Corp., Ala. S.Ct. No. 1961871, Petition For Extraordinary Writ (Jan. 30, 1998),

reprinted in State Tax Notes, 97 STN 174-1 (Sept. 9, 1997).