# Reply Brief — Hibbs v. Winn

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0679%3A10

## Record

- **Collection:** Supreme Court brief
- **Document type:** Reply Brief
- **Published:** January 1, 2004
- **Citation:** 542 U.S. 88

## Text

No. 02-1809

—-

-- =

In The
Supreme Court of the Anited States

e

J. ELLIOTT HIBBS, in his official capacity as
Director of the Arizona Department of Revenue,

Petitioner,
v.

KATHLEEN M. WINN, Arizona taxpayer;
DIANE WOLFTHAL, Arizona taxpayer;
MAURICE WOLFTHAL, Arizona taxpayer;
LYNN HOFFMAN Arizona taxpayer,

Respondents.
.

On Writ Of Certiorari To The
United States Court Of Appeals
For The Ninth Circuit

S

PETITIONER’S REPLY ON THE MERITS

o
TERRY GODDARD
Attorney General of Arizona

MAry O’GRADY
Solicitor General

PAULA S. BICKETT
Chief Counsel, Civil Appeals

JOSEPH KANEFIELD*

Special Assistant Attorney General

1275 West Washington Street
Phoenix, Arizona 85007
(602) 542-8392

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831

i
TABLE OF CONTENTS
. Page
ee GI Gay BI I ccvcccecesccccscevscccscsecnsseneneneses i
TIT callintetsiiimrneisissasacincesseenteinainemndaiessianione 1

I. The Plain Language of the Tax Injunction Act
Prohibits This Challenge to Arizona’s Tax
STINT -sticsdsieciupaiehlasiaditaumeaapiapdiniteiuadenesnmniabieedninemates 1

II. The Tax Injunction Act’s Legislative History
Neither Overrides Nor Conflicts with Its Plain

III. The Tax Injunction Act’s Plain-Language Mean-
ing Is Entirely Consistent with This Court's
Precedent and with Many Lower Court Deci-

IV. The Principles of Comity Bar Respondents’
Federal-Court Lawsuit Challenging Arizona’s
IEE cincmnictintsisencectpcinicnbacuniuieatiaiinséuaiiabiiasiiiansiaties 10

V. Congress and This Court Have Entrusted State
Courts to Decide Federal Constitutional Issues.... 14

I iencesticiinineninnisnnisennnndcsasaiitatasnadineiadinsenaasaiene 16

ii
TABLE OF AUTHORITIES
Page
CASES
ACLU v. Bridges, 334 F.3d 416 (5th Cir. 2003)............. 8,13
Alden v. Maine, 527 U.S. 706 (1999) 2.0.0.0... cccccceeeeeeeeees 15
Allen v. Wright, 468 U.S. 737 (1984) .0........ccccceeceeeeeeeeeeees 10
Aluminum Co. v. Deptt of Treasury, 522 F.2d 1120
EE IES ETE en cD Se 5
Arkansas v. Farm Credit Services, 520 U.S. 821
TIP REE Sea: TY Oe 5,6
California v. Grace Brethren Church, 457 U.S. 393
RS ORE SIRE a a eT 6, 7, 14, 15
Colonial Pipeline Co. v. Collins, 921 F.2d 237 (11th
UE nae! ee 9
Comm. for Public Education and Religious Liberty
v. Nyquist, 413 U.S. 756 (1973).............cscccccssseceeeereeees 7,8
Davis v. Mich. Dept of Treasury, 489 U.S. 803
a ieetsanin 4
De Buono v. NYSA-ILA Med. and Clinical Servs.
i esbeeeinien 8
Ex parte Young, 209 U.S. 123 (1908) ...............ccccccceesseeeeeees 5
Fair Assessment in Real Estate Ass’n, Inc. v.
hs CIEE CREE, UII A UIIITITE Picancnsccisscnsconsensosssecssosssvenvesces 11
Fed. Election Comm’n v. NRA Political Victory
I scpusudonenneseccl 8
Great Lakes Dredge & Dock Co. v. Huffman, 319
SRE eee ee ene Cen ll

Griffin v. Prince Edward County School Bd., 377
RIS IS ee enn a OT

iil

TABLE OF AUTHORITIES -— Continued

Page
Idaho v. Coeur d’Alene Tribe, 521 U.S. 261 (1997) ..... 14, 15
In re Gillis, 836 F.2d 1001 (6th Cir. 1988).............:cccceeeeeee 9
Jefferson County v. Acker, 527 U.S. 423 (1999).......... 2, 3, 6
Kotterman v. Killian, 528 U.S. 921 (1999) ...........00.... 12, 15
Kotterman v. Killian, 972 P.2d 606 (Ariz. 1999)............... 12
Kraebel v. New York City Dep't of Hous. Pres. and

Dev., 959 F.2d 395 (2d Cir. 1992)..............ccccsccsssssseeeeseees 9
Louisiana v. McAdoo, 234 U.S. 627 (1914) ...... eee 10
Matthews v. Rodgers, 284 U.S. 521 (1932).............ccccccceees ll
Moskal v. United States, 498 U.S. 103 (1990)..............00000 5
Mueller v. Allen, 463 U.S. 388 (1983) ...........:ccccccceceeeeeeees 7,8
Nat'l Private Truck Council v. Okla. Tax Comm’n,

GES UB. GHB CRD cccevccvcccscessstsceccnseiivesennsaueuaanaaaneaa 5
Perez v. Ledesma, 401 U.S. 82 (1971) ............:ccccsssscessesesseees 6
Rhodes v. Killian, 528 U.S. 810 (1999)>............ccccceeeeeeeeees 12
Rosewell v. LaSalle Natl Bank, 450 U.S. 503 (1981).... 7, 14, 15
South Carolina v. Regan, 465 U.S. 367 (1984) ..........00000.. 10
Stone v. Powell, 428 U.S. 465 (1976) ...........ccccccccccceeeeeeeeees 15
Tully v. Griffin, 429 U.S. 68 (1976)............ccccccsesssssssssseseeees 6
United Statés Brewers Ass’n, Inc. v. Perez, 592 F.2d

BSED (Est Che, STDP occeccvcescesconcccsonssonssmnennninanaannannnannn 9
United States v. L.A. Tucker Truck Lines, Inc., 344

WEB. SB (REDD .«!
that are discussed in Aluminum ( >»
522 F.2d 1120, 1124 (6th Cir 197°
the added expense of litigating i» ‘h
financially unsound for the State ors
wealthy corporation's tax |iah
congestion in the federal courts |
controversies. Jd. (citing S Rep
(1987) and 81 Cong. Rec. 1416-17 14 F

6

(“the Tax Injunction Act may be best understood as but a
partial codification of the federal reluctance to interfere
with state taxation”); California v. Grace Brethren Church,
457 U.S. 393, 410 n.22 (1982) (“Congress worried not so
much about the form of relief available in the federal
courts, as about divesting the federal courts of jurisdiction
to interfere with state tax administration”); Tully v.
Griffin, 429 U.S. 68, 73 (1976) (the Tax Injunction Act “has
its roots in equity practice, in principles of federalism, and
in recognition of the imperative need of a State to adminis-
ter its own fiscal operations”); Perez v. Ledesma, 401 U.S.
82, 128 n.17 (1971) (Brennan, J., concurring in part and
dissenting in part) (reasons for the Tax Injunction Act
include that “federal constitutional issues are likely to
turn on questions of state tax law, which, like issues of
state regulatory law, are more properly heard in the state
courts”).

Respondents argue that the Court’s language inter-
preting the Tax Injunction Act to prohibit interference
with the state tax system is taken “out of context.” Resp.
Br. at 28. Although the Court’s Tax Injunction Act cases
have generally dealt with lawsuits that sought to interfere
with the State’s collection of taxes, the Court has never
suggested that the plain language of the statute should be
ignored in favor of a single purpose of the Act. To the
contrary, the Court has held that the “statutory text ‘is to
be enforced according to its terms’ and should be inter-
preted to advance ‘its purpose’ of ‘confin[ing| federal-court
intervention in state government.” Jefferson County, 527
U.S. at 433 (quoting Farm Credit Servs., 520 U.S. at 826-27).

The Tax Injunction Act’s federalism purpose is the
same purpose underlying the Johnson Act of 1934, 28
U.S.C. § 1342, which prohibits federal-court interference

with orders issued by state administrative agencies to
public utilities. See Grace Brethren, 457 U.S. at 410 n.22.
Respondents suggest that it is inappropriate to rely on the
legislative history of the Johnson Act to explain the Tax
Injunction Act. Resp. Br. at 17-18 n.10. But this Court
itself has looked to the Johnson Act as a guide for inter-
preting the Tax Injunction Act — which is hardly surpris-
ing, given the fact that Congress itself expressly relied on
the purpose underlying the Johnson Act when it enacted
the Tax Injunction Act. Grace Brethren, 457 U.S. at 410
n.22; Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503, 513-14
(1981) (“laJls Senator Bone made clear, ‘[mjost of the
arguments which were used in support of the Johnson Act
. apply in like manner’ to the Tax Injunction Act”)
(quoting 81 Cong. Rec. 1416 (1937)). Thus, Congress’s
reliance on the congressional purpose for enacting the
Johnson Act demonstrates that, in enacting the Tax
Injunction Act, it was concerned with federal interference
with a core sovereign function of state government as well
as interference with the State’s ability to collect revenue.

Ill. The Tax Injunction Act’s Plain-Language Mean-
ing Is Entirely Consistent with This Court’s
Precedent and with Many Lower Court Deci-
sions.

Apparently recognizing the weakness of their textual
and legislative history arguments, Respondents rely
heavily on decisions of this Court adjudicating the merits
of cases initiated in a federal district court that challenge
constitutional state tax credits or deductions: Committee
for Public Education and Religious Liberty v. Nyquist, 413
U.S. 756 (1973); Mueller v. Allen, 463 U.S. 388 (1983); and
Griffin v. Prince Edward County School Board, 377 U.S.

8

218 (1964). Resp. Br. at 21-23. Respondents acknowledge,
however, that the parties in these cases never raised the
Tax Injunction Act and that the Court did not discuss the
Act. It is well established that this Court does not consider
itself bound by prior sub silentio holdings “when a subse-
quent case finally brings the jurisdictional issue” before it.
Fed. Election Comm’n v. NRA Political Victory Fund, 513
U.S. 88, 97 (1994); see also Will v. Mich. Dept of State
Police, 491 U.S. 58, 63 n.4 (1989) (same); United States v.
L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 38 (1952)
(same). Moreover, the Tax Injunction Act allows federal
jurisdiction if there is no plain, speedy or efficient remedy
in the state courts. The Court may therefore presume that
the parties’ failure to raise the issue in Nyquist, Mueller,
and Griffin was due to the inadequacy of the state court
remedies. See De Buono v. NYSA-ILA Med. and Clinical
Servs. Fund, 520 U.S. 806, 810 n.5 (1997) (Court presumed
that lower court correctly determined that there was not
an adequate state remedy and therefore no bar under the
Tax Injunction Act given the State’s “active participation
in nearly four years of federal litigation with no com-
plaint about federal jurisdiction”). Therefore, Nyquist,
Mueller, and Griffin provide no assistance in determining
whether the Tax Injunction Act applies to state tax
credits.

Contrary to Respondents’ assertion, the plain-language
reading of the statute to cover challenges to tax credits
is not a novel one; or one that breaks with a line of lower
court authority. Many lower courts — including the district
court below — Rave held that challenges that may result in
“more” revenue for the State are barred by the Tax Injunc-
tion Act and principles of comity because such suits “re-
strain” or “enjoin” the “assessment” of tax. ACLU v. Bridges,

9

334 F.3d 416, 421-22 (5th Cir. 2003) (determining whether
an individual or organization qualifies for an exemption is
part of the “assessment” process and therefore a lawsuit
seeking invalidation of the exemption is barred by the Tax
Injunction Act); Kraebel v. New York City Dep't of Hous.
Pres. and Dev., 959 F.2d 395, 400 (2d Cir. 1992) (holding
that the Tax Injunction Act barred taxpayer’s constitu-
tional challenge to a property tax exemption and abate-
ment scheme); Colonial Pipeline Co. v. Collins, 921 F.2d
1237, 1242 (11th Cir. 1991) (rejecting the suggestion that a
suit that could result in the increase in state tax collec-
tions was outside the scope of the Tax Injunction Act
because the “requested relief, if granted, . .. would clearly
conflict with the principle underlying the Tax Injunction
Act that the federal courts should generally avoid interfer-
ing with the sensitive and peculiarly local concerns sur-
rounding state taxation schemes”); Jn re Gillis, 836 F.2d
1001, 1005 (6th Cir. 1988) (although the court found it
unnecessary to reach the Tax Injunction Act because the
suit was barred by the principles of comity, it noted a suit
that seeks to enhance state revenues may nonetheless fall
within the Act’s ban because “the Act is not, by its own
language, limited to the collection of taxes”); United States
Brewers Ass'n, Inc. v. Perez, 592 F.2d 1212, 1215 (1st Cir.
1979) (“[AJn order of a federal court requiring Common-
wealth officials to collect taxes which its legislature has
not seen fit to impose on its citizens strikes us as a par-
ticularly inappropriate involvement in a state’s manage-
ment of its fiscal operations.”)

There are of course cases holding to the contrary —
most notably, the decision of the Ninth Circuit below. That
is presumably why this Court granted certiorari. But
Respondents’ suggestion that reversal of the Ninth Circuit

10

would run contrary to an “overwhelming body of authority
and uniform practice” is without basis.*

IV. The Principles of Comity Bar Respondents’
Federal-Court Lawsuit Challenging Arizona’s
Tax Credit.

Respondents attempt to narrow the principles of
comity in the same way they do the Tax Injunction Act,
insisting that those principles apply only when a tax law
challenge “would stop a state from collecting revenue.”
Resp. Br. 40. But as with the Tax Injunction Act, principles
of comity are far more expansive than Respondents would
like. Respondents’ argument ignores the crucial federalism

* Respondents also err in contending that judicial interpretations
of the Anti-Injunction Act support the Ninth Circuit’s interpretation of
the Tax Injunction Act. Contrary to Respondent’s suggestions, Resp. Br.
32-37, the principles supporting the Anti-Injunction Act are fully
present in cases where the requested relief would increase federal tax
collections. See, e.g., Louisiana v. McAdoo, 234 U.S. 627, 632 (1914)
(recognizing that action to compel a higher tariff would “disturb the
whole revenue system of the government.”) Moreover, most of the
lower-court decisions that Respondents relied on were reversed on other
grounds. See Resp. Br. 36 (acknowledging that two of the cases were
reversed on appeal); see also Wright v. Regan, 656 F.2d 820 (D.C. Cir.
1981), rev'd by Allen v. Wright, 468 U.S. 737 (1984), on standing
grounds. Finally, Respondents fail to recognize a crucial distinction
between the Anti-Injunction Act and the Tax Injunction Act. In most
cases brought by plaintiffs seeking to invalidate federal tax credits or
exemptions conferred on other taxpayers, there is no other avenue of
relief in federal court and the Anti-Injunction Act does not apply. South
Carolina v. Reagan, 465 U.S. 367, 378 (1984) (“Congress did not intend
the [Anti-Injunction] Act to apply to actions brought by aggrieved
parties for whom it has not provided an alternative remedy.”) By
contrast, it is undisputed in this case that Respondents have an
adequate remedy in state court.

11

underpinnings of the Court’s comity decisions and the
disruptive effect on state tax administration that is caused
by challenges to state tax credits. In Fair Assessment in
Real Estate Association, Inc. v. McNary, this Court noted
that the principles of comity predate the Tax Injunction Act,
and found that “the very maintenance of [a lawsuit] would
intrude on the enforcement of the state [tax] scheme.” 454
U.S. 100, 114 (1981). Thus, while revenue interference
clearly falls under the scope of comity, the broader federal-
ism purpose of that doctrine covers all matters that
disrupt a state tax system, including challenges to state
tax credits.

The common theme throughout this Court’s decisions
regarding comity is that state tax matters should be heard
in state court unless those remedies are not “plain, ade-
quate, and complete.” See Fair Assessment, 454 U.S. at
116; Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S.
293, 297 (1943); Matthews v. Rodgers, 284 U.S. 521, 525-26
(1932) (“the mere illegality or unconstitutionality of a state
or municipal tax is not in itself a ground for equitable
relief in the courts of the United States”).° Consequently,
the issue is not whether a state tax challenge will increase
or decrease revenue to a State, as Respondents contend, but
rather whether the state court system provides an adequate
remedy for the challenger. There is no dispute that the
Arizona courts clearly provide such a remedy. Resp. Br. 11

* In Fair Assessment, the Court noted that there is no significant
difference between remedies that are “plain, adequate, and complete,”
as that phrase has been used in articulating the doctrine of equitable
restraint based on notions of comity, and those that are “plain, speedy
and efficient” as used in the Tax Injunction Act. Jd. at 116 n.8.

12

n.7. Thus, the district court correctly dismissed the Respon-
dents’ suit under the principles of comity.

Respondents also wrongly argue that their lawsuit
seeking a federal court order enjoining the state tax credit
will not disrupt Arizona’s tax administration. A federal-
court ruling that is inconsistent with the Arizona Supreme
Court’s decision in Kotterman v. Killian, 972 P.2d 606
(Ariz.), cert. denied, 528 U.S. 921 (1999) and cert. denied
sub nom. Rhodes v. Killian, 528 U.S. 810 (1999), would be
highly disruptive. First, if Petitioner complies with a federal-
court order enjoining him from allowing the tax credit for
contributions to school tuition organizations (STOs) that
contribute to religious schools, Arizona taxpayers who
nevertheless contributed to such STOs could file a refund
action in state court and that court must follow Arizona
Supreme Court precedent. Second, Respondents are wrong
that Kotterman did not include taxpayers who sought to
use the tax credit as parties. Taxpayers who intended to
take the Arizona private school tuition credit intervened in
the Kotterman lawsuit. See Pet. for Writ of Cert. Kotter-
man v. Killian, 528 U.S. 921 (1999) (No. 98-1716). There-
fore, allowing Respondents to pursue relief in federal court
creates a very real possibility that the Arizona Depart-
ment of Revenue will have to deal with inconsistent
adjudications.

The relief that Respondents seek is also inherently
disruptive because it could result in a court order prohibit-
ing the State from allowing tax credits for contributions to
STOs that give to religious schools, but permitting tax
credits to STOs that give to non-religious schools. This
relief would create new and onerous administrative
burdens on the Arizona Department of Revenue to deter-
mine what type of schools the different student tuition

13

organizations support through their scholarship programs.
This relief would also prevent the State from determining
conclusively which taxpayers are eligible for the tax credit
and which are not until this litigation and any appeals are
ended. Respondents’ assumption that a lawsuit interferes
with the State’s tax administration only if, in the end, the
State loses revenue ignores the fact that any change in tax
law affects tax administration.

Although Respondents acknoWledge that the State
may remedy an unconstitutional credit in a way that
decreases revenues, they inexplicably claim that this does

not implicate the revenue-protection purpose of the comity.

principle. Resp. Br. at 44-45. The parties to lawsuits
challenging tax provisions cannot predict the final remedy
that will be ordered by the court or adopted by the Legisla-
ture. Cf. Bridges, 334 F.3d at 421 (noting that “it is not
necessarily true that declaring exemptions unconstitu-
tional will result in the State collecting more taxes”). For
example, the Arizona Legislature could, in response to a
decision striking down the credit as it applies to religious
schools, expand the credit by allowing student tuition
organizations to distribute monies to public schools.

Because Respondents’ lawsuit interferes with Ari-
zona’s assessment of state taxes and requests relief that is
disruptive to Arizona’s tax administration, the Court
should affirm the district court’s dismissal based on the
principles of comity.

14

V. Congress and This Court Have Entrusted
State Courts to Decide Federal Constitutional
Issues.

The same theme permeates Respondents’ brief and
the briefs of their amici: regardless of the Tax Injunction
Act language, the Court should construe it (as well as
principles of comity) narrowly because otherwise States
will be able to “effectuatie) unconstitutional policies
through tax credits,” without any meaningful judicial
check. Resp. Br. at 47. In their opinion, state courts cannot
be trusted to correct federal constitutional violations,
which will remain unremedied unless federal! district court
review is authorized. See, e.g., Br. of Americans United for
Separation of Church and State at 13-15. This argument
blatantly ignores the very principles of federalism that are
fundamental to the Tax Injunction Act and the principles
of comity. See Idaho v. Coeur d'Alene Tribe, 521 U.S. 261,
275 (1997) (“A doctrine based on the inherent inadequacy
of state forums would run counter to basic principles of
federalism.”).

By enacting the Tax Injunction Act, Congress has
squarely rejected the notion that only federal district
courts are capable of deciding federal constitutional issues.
See Rosewell, 450 U.S. at 515 n.19 (noting that the Tax
Injunction Act “embodied Congress’ decision to transfer
jurisdiction over a class of substantive federal claims from
the federal district courts to the state courts, as long as
state procedures were ‘plain, speedy and efficient’ and
final review of the substantive claims could be obtained in
this Court”); Grace Brethren, 457 U.S. at 416-17 (“Carving
out a special exception for taxpayers raising First
Amendment claims would undermine significantly Con-
gress’ primary purpose ‘to limit drastically federal district

15

court jurisdiction to interfere with so important a local
concern as the collection of taxes.’”) (quoting Roseweil, 450
U.S. at 522).

This Court has also repeatedly recognized that state
courts have a constitutional obligation to uphold federal | .w
and has expressed its confidence in their ability to do so.
Coeur d'Alene Tribe, 521 U.S. at 275; see also Grace Brethren,
457 U.S. 417 n.37 (rejecting appellees’ argument “to the extent
that it assumes that the state courts will not protect their
constitutional rights”); Alden v. Maine, 527 U.S. 706, 755
(1999) (Court is “unwilling to assume the States will refuse to
honor the Constitution or obey the binding laws of the United
States”); Stone v. Powell, 428 U.S. 465, 494 n.35 (1976) (same).
Indeed, Arizona state judges and officers take an oath to
uphold the federal constitution. Ariz. Const. art. VI, § 26
(judges); Ariz. Rev. Stat. § 38-231 (officers). -

In addition, the Court has recognized that both the
Tax Injunction Act and the principles of comity have
safeguards that protect federal rights. See Grace Brethren,
457 U.S. at 415 n.31. Under the Tax Injunction Act,
litigants are entitled to federal-court relief if the state
court remedy is not “plain, speedy and efficient.” And,
under the principles of comity, litigants are entitled to
seek relief in federal court if the state-court remedy is not
“plain, adequate and complete.” Here, Respondents have
never contended that their remedy at state law was
defective. Indeed, the Arizona Supreme Court took original
jurisdiction in Kotterman to resolve the constitutional
challenge to the tax credit at issue here and this Court
denied review of that decision. Respondents’ disagreement
with the result in Kotterman is hardly a sufficient basis to
avoid the Tax Injunction Act and principles of comity.

16

Finally, Respondents fail to address one of the most
important safeguards in the Tax Injunction Act: this
Court’s review of federal issues arising out of state court
proceedings. Again, there is no reason to presume that the
sound judgment of state officials and review by state
courts will not be sufficient to prevent the parade of
horribles hypothesized by Respondents and their amici.
But should that parade materialize, there is also no reason
to assume that this Court will be unwilling or unable to
protect federal constitutional rights. Respondents’ con-
cerns are entirely unwarranted and should not be the
basis for overriding Congress’s decision to prevent federal
district court interference with the assessment of state
taxes.

°

CONCLUSION

For the foregoing reasons, this Court should reverse
the decision of the Court of Appeals for the Ninth Circuit
and affirm the district court’s dismissal of this matter.

Respectfully submitted,

TERRY GODDARD

Attorney General of Arizona
Mary O’GRADY

Solicitor General

PAULA S. BICKETT

Chief Counsel, Civil Appeals
JOSEPH KANEFIELD*

Special Assistant Attorney General
1275 West Washington Street
Phoenix, Arizona 85007

(602) 542-8392

*Counsel of Record

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0679%3A10. Public record. Not legal advice.