Amicus Curiae Brief — DaimlerChrysler Corp. v. Cuno

36) “OT paeD

Nos. 04-1704, 04-1724

—BEE-S - 2005

pies CrP MEME COUNT

Supreme Court of the United Seas oo

¢

DAIMLERCHRYSLER CORP., et al.,

Petitioners,

Vv.

CHARLOTTE CUNO, et al.,

Respondents.

and

WILLIAM W. WILKINS,

Tax Commissioner etc., et al.,

Petitioners,

v.

CHARLOTTE CUNO, et al.,

Respondents.

.

On Writs Of Certiorari To The

United States Court Of Appeals

For The Sixth Circuit

¢

BRIEF OF AMICUS CURIAE

WAYNE COUNTY, MICHIGAN,

IN SUPPORT OF PETITIONERS

¢

EDWARD M. THOMAS

Wayne County

Corporation Counsel

*MELVIN BUTCH HOLLOWELL

ALLEN BROTHERS, PLLC

Attorneys for Wayne County

400 Monroe St., Ste. 220

Detroit, MI 48226

(313) 962-7777

Attorneys for Petitioners

*Counsel of Record

|

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964 >

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ..............:...ccccessseesecssereeeeees ii

INTEREST OF AMICUS CURIAE.....0000...........cceeeeeeeees 1

STATEMENT OF THE CASE ...................:csseesseesseteseeees 2

SUMMARY OF ARGUMENT ...................c.:sessseesseeseeeees 3

SITET scibiecttibinsnivinttiapiiniapisintnininbinintamssieesieamaniubedin 5

I. THIS COURT DOES NOT SIT AS A SUPER-

LEGISLATURE DECIDING STATE POLICY,

THUS, RESPONDENTS CANNOT INVOKE

THIS COURT'S JURISDICTION TO IMPOSE

POLICY ON THE STATES ...0000..........ccesssseesnees 5

II. RESPONDENTS LACK STANDING TO CHAL-

LENGE OHIO’S TAX CREDIT STATUTE BE-

. CAUSE RESPONDENTS’ INJURIES ARE

CONJECTURAL AND NOT LIKELY TO BE

REDRESSED BY A FAVORABLE DECISION... 9

Ill. THE SIXTH CIRCUIT HAS MISAPPLIED

LONGSTANDING PRECEDENT IN THE AREA

OF INTERSTATE COMMERCE, AS THE TAX

INCENTIVES PROVIDED BY OHIO, AND BY

JURISDICTIONS LIKE WAYNE COUNTY DO

NOT CONSTITUTE AN UNDUE BURDEN ON

INTERSTATE COMMERCE, IN VIOLATION

OF THE DORMANT COMMERCE CLAUSE.... 12

SD be cilentatriiigeitnetvinensdonsneiiienecinevescinnttiinwhantaietis 15

SE SIP CUEED cr vcnscscnsnsecevsvecsotuiensesesossonsntenitities 15

TABLE OF AUTHORITIES

Page

CASES

ASARCO v. Kadish, 490 U.S. 605 (1989)............c ec cceeeeeeees 10

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

Ss I OP nsncciinsnhnincigsenpecntduiesiniliaiasnebetiegs 11, 12, 13, 14

Caterpillar, Inc. v. Department of Treasury, 488

SL Sk EE. HITT ocincnasceppnisinntdicandduandlinbersoubenghdan 14

Cuno v. DaimlerChrysler, Inc., 154 F. Supp. 1196

_____ | EASED EONS SEAS DRDO ONIN PMI CRE CORN OO IE POMP PNM 2,3

Cuno v. DaimlerChrysler, Inc., 386 F.3d 738 (6th

AI vsicinicsidienscissivenildbainnineatitininiinciatiecitnniiiiatidetelaia ted tehseradas 3

DaimlerChrysler Corp. v. Cuno, 126 S. Ct. 36 (2005)......... 3

DeShaney v. Winnebago Co. Dep't of Social Services,

Ne Se CAD scchinmccicindalitdisiniptisinidatanindsibiidicnbasnigeiceni 2

Day-Brite Lighting v. State of Missouri, 342 U.S.

SE TID witacishiiadbtiipisiaininhaiindbiapatbinidelinimiens int i nica inlatichimbaidiiaiy 5

Harisiades v. Shaughnessy, 342 U.S. 580 (1952)................ 5

H.P. Hood & Sons v. DuMond, 336 U.S. 525 (1949)......... 12

James v. Strange, 407 U.S. 128 (1972) .0.0.0 eee 5, 6

Kowalski v. Tesmer, 543 U.S. 125 (2004)..............0...0.0.. 9,11

Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).....9, 10

Roper v. Simmons, 543 U.S. 551 (2005)... ceeeeeee 15

Sniadach v. Family Finance Corp. of Bay View, 395

SR I GUT ceshadkcindinilasitascsitcieipiecie Ad alent 5

CONSTITUTION AND STATUTES

Ohio Rev. Code Ann. § 5733.33 ...........:ccccccesecesereeesseees ablecaa

ill

TABLE OF AUTHORITIES — Continued

Page

Tee SR, GS Ti asics ccticndecsocccen soonasonaeagpananansonssiphing passim

SP: SR, II, TEY saticisacinccccastincdnintivccicabiaiiiilihetiitadulbssnicnsin 2

Wayne County Charter, § 5.181 00.00.00... eeceecceeseeseeees 1

1

INTEREST OF AMICUS CURIAE’

Wayne County is the largest county in Michigan, with

a population of over two million. It was once headquarters

to all of “The Big Three.” Petitioner DaimlerChrysler is

headquartered in an adjacent county. Wayne County is

still headquarters to Ford Motor Co. and General Motors

Corp. Many of the Big Three manufacturing facilities,

along with the facilities of Petitioner DaimlerChrysler

Corp., are located in Wayne County, in part, because of tax

incentives enacted by both the Michigan legislature and

Wayne County government.

Wayne County, has the power to levy property taxes

and the power to enact tax incentives like the incentives

being challenged in this case. (Wayne County Charter,

§ 5.181). Not surprisingly, given Wayne County’s promi-

nence in the world’s automotive and manufacturing

history, it is the policy of Wayne County to capture and

encourage industrial and economic growth.

Wayne County has a vital interest in assuring that

disgruntled citizens, such as Respondents, not be allowed

to use the courts to overrule the legislative and policy

decisions of duly elected lawmakers. If the decision of the

Sixth Circuit is allowed to stand in this case, persons from

inside and outside the jurisdiction — regardless of injury or

motive — will have the imprimatur of this Court to attack

the self-governance principles inherent in a republican

form of government. The separation of powers requires

' Under Supreme Court Rule 37.6, amicus curiae state that no

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

entity or person, other than the amicus curiae, has made a contribution

to the preparation or submission of this brief.

2

that Respondents — and, indeed, all citizens — effect policy

decisions through their elected officials, and not through

the Court.’

¢

STATEMENT OF THE CASE

In 1998, Toledo, Ohio —- which is only 20 miles from

the southern border of Wayne County — and two local

school districts provided a $281 million tax incentive to

DaimlerChrylser to encourage it to continue its manufac-

turing presence in those communities. The Ohio statutory

scheme permitting the investment tax credit was enacted

“to encourage industrial investment and development in

Ohio, particularly in economically troubled areas.” Cuno v.

DaimlerChrysler, Inc., 154 F.Supp. 1196, 1198, 1201

(2001). The Ohio economy like Michigan’s is heavily

reliant on the manufacturing and automobile industries,

and has suffered through an exodus of jobs.

Respondents, plaintiffs below, filed a law suit chal-

lenging the constitutionality of the incentives under the

Commerce Clause and the Equal Protection Clause of the

United States Constitution. Respondents are individual

residents of Ohio, individual residents of Michigan, two

Ohio small businesses, and one not-for-profit Ohio corpo-

ration. Respondents do not allege any specific injury as a

result of the Ohio investment tax credit statute but,

rather, seek to “free all the states from the necessity of

engaging in escalating competition over incentives that

deprives all of them of needed revenues, while gaining a

* See DeShaney v. Winnebago Co. Dep't of Social Services, 489 U.S.

189, 203 (1989).

3

meaningful competitive edge for none.” (Op. Cert. at 6).

Respondents further argue that investment tax credits are

bad public policy (Op. Cert. at 6).

The United States District Court for the Northern

District of Ohio found that the challenged statute’s_pur-

pose “constitutes a legitimate state interest that clearly

has a rational nexus” to the tax credit. Jd. at 1201. The

court found that “[njotwithstanding Plaintiffs’ innovative

arguments” Ohio’s investment tax credit does not violate

the Commerce Clause. /d.

A panel of the United States Court of Appeals for the

Sixth Circuit held that the investment tax credit statute

(Ohio Rev. Code Ann. § 5733.33) is unconstitutional under

the Dormant Commerce Clause of the United States

Constitution because “the tax credit involves state regula-

tion of interstate commerce through its power to tax” even

though the investment tax credit “is equally available to

in-state and out-of-state businesses.” Cuno v. Daimler-

Chrysler, Inc., 386 F.3d 738, 743, 746 (6th Cir..2004). The

court did not address standing.

This Court granted certiorari and directed the parties

to brief the following question: whether Respondents have

standing to challenge Ohio’s investment tax credit, Ohio

Rev. Code Ann. § 5733.33. DaimlerChrysler Corp. v. Cuno,

126 S. Ct. 36 (2005).

«

SUMMARY OF ARGUMENT

I

This Court does not sit as a “super-legislature” to

second-guess the desirability of statutes. The states may,

4

“within extremely broad limits,” experiment with different

economic philosophies. Thus, even if this Court were to

find Ohio’s tax statutes unwise or ineffective, this Court is

still obligated by the Constitution to tolerate what it may

regard as a legislative mistake. Founded in 1796, before

Michigan was admitted to the Union, amicus Wayne

County’s experience is that tax incentives are both effec-

tive and necessary. Wayne County maintains that it is

good government to utilize tax resources for economic

viability.

II

Respondents lack standing to challenge the constitu-

tionality of Ohio’s tax incentive statutes because Respon-

dents have not suffered an “injury in fact” as a result of

those statutes nor is it likely that their alleged grievances

would be redressed by a favorable decision of this Court.

Ill

The Sixth Circuit has misapplied longstanding prece-

dent in the area of interstate commerce, as the tax incen-

tives provided by Ohio, and by jurisdictions like Wayne

County do not constitute an undue burden on interstate

commerce, in violation of the Dormant Commerce Clause.

+

5

ARGUMENT

I

THIS COURT DOES NOT SIT AS A SUPER-

LEGISLATURE DECIDING STATE POLICY,

THUS, RESPONDENTS CANNOT INVOKE

THIS COURT’S JURISDICTION TO IM-

POSE POLICY ON THE STATES

The question before this Court is not whether the

Ohio tax incentive statute is wise or unwise, desirable or

undesirable. James v. Strange, 407 U.S. 128, 133 (1972).

Sniadach v. Family Finance Corp. of Bay View, 395 U.S.

337, 339 (1969). The question before this Court is not what

economic philosophy Ohio should or should not embrace.

Id. The question before this Court is not whether Ohio’s

statute is effective or ineffective. The sole question before

this Court is whether the statute is constitutional. James,

407 US. at 133.

This Court has repeatedly held that it does not sit as

“a super-legislative body.” Sniadach, 395 U.S. at 339. Day-

Brite Lighting v. State of Missouri, 342 U.S. 421, 423

(1952). But, rather, “state legislatures have constitutional

authority to experiment with new techniques ... [and]

they may within extremely broad limits control practices

within the business-labor field so long as specific constitu-

tional prohibitions are not violated.” Jd. Indeed, this Court

need not concur in those legislative policies to hold the

enactments constitutional. Harisiades v. Shaughnessy, 342

U.S. 580, 590 (1952). Judicially this Court is obligated by

the Constitution to tolerate what it may regard as a

legislative mistake. Jd. Misguided laws may nonetheless

be constitutional. James, 407 U.S. at 133.

6

Thus, it is Respondents’ considerable burden to prove,

not that tax incentive statutes are unwise, but that they

are unconstitutional. Jd.

A. Tax Incentives Are Vital to Wayne County’s

Economy

Wayne County is the largest county in the State of

Michigan and the eleventh largest in the nation. It is

comprised of 44 cities, including Detroit. It is historically,

and culturally fused with the automobile industry and

heavy manufacturing. There have been thoughtful efforts

to diversify the economy by working to attract and develop

business growth in high technology, service, tourism,

entertainment, and health care industries. But Wayne

County is the home of the automobile. Wayne County’s

citizens work in its factories, and Wayne County’s economy

rises and falls with the number of cars purchased by

consumers.

For 30 years Wayne County’s economy has been in

serious decline. Its unemployment rate of six percent is

the highest in the nation. A recent study conducted by the

Initiative for a Competitive Inner City, indicates that

Wayne County's largest city, Detroit, lost more jobs be-

tween 1995 and 2003 than any other large American city.

Detroit has 400,000 fewer jobs today than it had in 1970.

As a result of these economic challenges, Wayne

County and other similarly situated municipalities have

needed to employ a strategy to assist the businesses that

are already located in Wayne County and to attract new

ones. One of those strategies is providing tax incentives to

those businesses in return for job creation.

7

Michigan Public Act 198 of 1974 allows a 50 percent

reduction in local property taxes to businesses for the

renovation expansion, or new construction of manufactur-

ing plants in Michigan. Wayne County is eligible to grant

abatements under this statute, and has done so with

success. Overall, this program has resulted in the creation

of 500,000 new jobs and the creation of 1.3 million jobs

throughout Michigan.

Michigan Public Act 328 of 1998 is targeted at “dis-

tressed” communities, abating all (100%) new personal

property taxes in designated geographic areas. Wayne

County has taken advantage of this for businesses within

its boundaries.

Michigan Public Act 146 of 2000, known as the obso-

lete Property Rehabilitation Act, encourages the redevel-

opment of obsolete buildings by freezing taxes on the

property for up to 12 years.

Tax Increment Finance Authority Districts have been

established in Wayne County to capture and re-invest

taxes for the development of projects such as Ford Field,

home of the Detroit Lions, and the Detroit Tigers’ Stadium

known as Comerica Park. Both stadiums have created

thousands of jobs in the county and metro region.

Other tax incentives have been employed with success

by Wayne County, such as the “Brownfield” program which

encourages the development of sites that are contraindi-

cated. Up to $1 million in credits are available.

A newer program created by the state, called the

Michigan Economic Growth Authority, provides tax incen-

tives for development in the areas of high technology and

research and development.

8

‘ These programs are the life-blood of Wayne County’s

job retention efforts. Wayne County must be able to utilize

these tools to survive in an increasingly tough economic

climate.

Many business, which are automotive suppliers or

automotive related, would prefer to be physically proxi-

mate to the auto companies based in Wayne County. Being

close to the customer provides economies of scale for

distribution and supply. But these suppliers and automo-

tive related companies, which form the backbone of Wayne

County’s job base, will locate elsewhere if the overall] cost

of doing business is lower elsewhere. Taxes are not the

only factor, but they are certainly a key factor.

The use of tax incentives to preserve Wayne County’s

job base is not an abstract economic theory, it is a means

to assist County citizens from the crisis of losing a job, and

the devastation that flows from it including lost homes,

health care, and the ability to buy groceries.

Wayne County is, therefore, committed to utilizing

these tax incentives as one effective tool in preserving its

economic base and way of life.

There are a number of factors that a company takes

into account when deciding whether doing business in a

particular locale makes sense. Some of those factors

include: the availability of workers; the opportunity to

grow; the regulatory environment; competition; access to

health care; location; and taxable costs of doing business.

There are other important, non-bottom line factors which

are considered, such as quality of life issues.

It is Wayne County’s economic development experi-

ence that the taxable cost of doing business rates high on

9

the list, and must be addressed if Wayne County is to be

competitive with other regions and the world market.

Il

RESPONDENTS LACK STANDING TO

CHALLENGE OHIO’S TAX CREDIT STAT-

UTE BECAUSE RESPONDENTS’ INJURIES

ARE CONJECTURAL AND NOT LIKELY TO

BE REDRESSED BY A FAVORABLE DECI-

SION

The doctrine of standing asks whether a litigant is

entitled to have a federal court resolve his grievance.

Kowalski v. Tesmer, 543 U.S, 125, ___, 125 S. Ct. 564, 567

(2004). The party invoking federal jurisdiction bears the

burden of establishing that jurisdiction. Lujan v. Defend-

ers of Wildlife, 504 U.S. 555, 561 (1992). Thus, since

Respondents here invoked the jurisdiction of this Court,

Respondents bear the burden of establishing that they

have standing. Jd.

A. Respondents Lack Article III Standing

This Court has held that the “irreducible constitu-

tional minimum” of standing contains three elements:

1. “Injury in fact” of a legally protected interest that

is, concrete and particularized, actual or imminent, and

not conjectural or hypothetical;

2. A causal connection between the injury and the

challenged action, an injury which is not the result of the

independent action of a third party; and

10

3. An injury that will likely, not speculatively, be

redressed by a favorable decision of the court. U.S. Const

art. III, § 1. Lujan, 504 U.S. at 560-561.

Here, Respondents cannot establish any of these

required elements. Respondents are individual residents

of Ohio, individual residents of Michigan, two Ohio small

businesses, and one not-for-profit Ohio corporation. Comp.

4 2-6. The Ohio Respondents allege that, as a result of

the tax credit, the revenues of their state have diminished

and that the tax credit impermissibly and disproportion-

ately shifts the tax burden to them. Comp. {{ 22, 40, 42.

In a similar case, this Court refused to confer standing

on state taxpayers, who alleged that a state statute

governing mineral leases “deprived the school trust funds —

of millions of dollars thereby resulting in unnecessarily

higher taxes.” This Court held that the taxpayers lacked

standing because “even if the first part of the assertion

were correct ... it is pure speculation whether the lawsuit

would result in any actual tax relief for respondents.”

ASARCO v. Kadish, 490 U.S. 605, 613, 614 (1989).

This Court went on to say, “[t]he possibility that

taxpayers will receive any direct pecuniary relief from this

lawsuit is ‘remote, fluctuating and uncertain’ ... and

consequently the claimed injury is not ‘likely to be re-

dressed by a favorable decision.’” Jd.

Like the taxpayers in ASARCO, the Ohio taxpayers,

in the case before the Court today, lack standing because

their lawsuit rests on conjecture and their claimed injury

would not likely be redressed by a favorable decision. /d.

Similarly, the Michigan Respondents’ lawsuit rests on even

greater speculation: that they lost “economic opportunity

in the form of jobs” because of the Ohio tax credit. Comp.

11

¥ 42. The Michigan Respondents speculate that, -had

DaimlerChrysler not expanded in Ohio, it would have

expanded in Michigan and given Respondents a chance at

jobs. That speculation does not even come close to an

“injury in fact,” caused by the challenged tax credit, which

would likely be redressed by a favorable decision.

B. Respondents Lack Standing To Raise The

Rights Of Others

An alternative threshold question of standing asks if

Respondents have standing to raise the rights of others.

Kowalski, 125 S. Ct. at 567. A party seeking third-party

standing must show: first, that the party asserting the

right has a “close” relationship with the person who

possesses the right; and, second, that there is a “hin-

drance” to the possessor’s ability to pretect his own inter-

est. Id. Here, Respondents have alleged no such cause of

action or no such relationship.

Further, the right to complain that a state law dis-

criminates in violation of the Commerce Clause belongs to

those against whom the law discriminates. Boston Stock

Exchange v. State Tax Comm’n, 429 U.S. 318, 321 n. 3

(1977). Here, Respondents lack third-party standing

because they do not allege that the tax credit discrimi-

nates against them. Jd.

12

Ill

THE SIXTH CIRCUIT HAS MISAPPLIED

LONGSTANDING PRECEDENT IN THE

AREA OF INTERSTATE COMMERCE, AS

THE TAX INCENTIVES PROVIDED BY

OHIO, AND BY JURISDICTIONS LIKE

WAYNE COUNTY DO NOT CONSTITUTE AN

UNDUE BURDEN ON INTERSTATE COM-

MERCE, IN VIOLATION OF THE DORMANT

COMMERCE CLAUSE

This Court has held that under the Federal Economic

Clause, a state (and by extension a political subdivision

thereof such as Wayne County) may enact its own philoso-

phy towards business taxation. Jd. In Boston Stock Ex-

change, this Court explained that, “Our decision today

does not prevent the States from structuring their tax

systems to encourage the growth and development of

intrastate commerce and industry. Nor do we hold that a

state may not compete with other states for a share of

interstate commerce; such competition lies at the heart of

a free trade policy. We hold only that in the process of

competition no state may discriminatorily tax the products

manufactured or the business operations performed in any

other state.” Jd. at 336-337.

In H.P. Hood & Sons v. DuMond, 336 U.S. 525 (1949),

Justice Robert Jackson articulated the Court’s position on

state regulation and the national economy. For the Court,

he wrote, “The Commerce Clause is one of the most prolific

sources of national power and an equally prolific source of

conflict with legislation of the state. While the Constitution

vests in Congress the power to regulate commerce among

the states, it does not say what the states may or may not

do in the absence of congressional action. [Perhaps] even

13

more than by interpretation of its written word, this Court

has advanced the solidarity and prosperity of this Nation

by the meaning it has given to these great silences of the

[Constitution].”

The “great silence” created by the Founding Fathers

in the Commerce Clause, has long meant that the states,

and municipalities like Wayne County, have great freedom

to enact economic programs to benefit businesses within

its boundaries, where Congress has not “spoken” in some

pre-emptive fashion, so long as the economic program does

not affirmatively discriminate against foreign cérpora-

tions. This great silence has come to be known as the

Dormant Commerce Clause theory.

The “Dormant Commerce Clause” theory has been

used to strike down undue burdens on interstate com-

merce. But such a burden was not found in Boston Stock

Exchange where tax incentives for intrastate benefits was

applied.

In the case before the Court today, the Sixth Circuit

cited Boston Stock Exchange but misapplied it by holding

that Ohio’s tax incentive was discriminatcry.

On the contrary, Ohio, like Wayne County, and like

other jurisdictions throughout the country, is constitution-

ally permitted to provide such tax incentives to businesses

within its borders because it has not imposed a tax burden

on products or business operations on a company in

another state. Taxing discrimination in this sense would

require some steps to actively hinder a company or prod-

uct line in another state, while creating the intrastate

advantage, and there is no evidence of that type of undue

tax burden on out-of-state businesses in this case.

14

Significantly, the Sixth Circuit’s decision is expressly

contrary to the leading state law case in the Sixth Circuit,

decided by the Michigan Supreme Court in Caterpillar,

Inc. v. Department of Treasury, 488 N.W. 2d 182 (Mich.

1992). In the Caterpillar case, the Michigan Department of

Treasury extended a capital acquisition deduction to

Caterpillar and other qualifying businesses for personal

property located within the state. Under-this Michigan

economic program, even if the business applying for the

tax deduction was headquartered in another state, the

company’s personal property located in Michigan triggered

the benefit. Jd. at 186.

The Michigan Supreme Court considered, with de-

tailed care, the precedents of this court, explaining that

the Michigan tax incentive program at issue was proper in

its promotion of intrastate commerce, while at the same

time, not being a discriminatory burden on interstate

commerce. Jd. at 192.

Caterpillar is consistent with this Court’s rulings in

Boston Stock Exchange, and other decisions cited herein. It

is entirely consistent with the tax incentive offered by the

state of Ohio to Petitioner DaimlerChrysler, and it is

consistent with the economic development and tax incen-

tive priorities of Wayne County.

Making Wayne County more business friendly, is not

illegal under the Dormant Commerce Clause. Businesses

that want to come into Wayne County from other counties

or states or countries, for that matter, have the equal right

to apply for these tax incentives.

¢

15

CONCLUSION

The Constitution sets forth, and rests upon, innova-

tive principles original to the American experience such as

federalism and a proven balance in political mechanisms

through separation of powers. Roper v. Simmons, 543 U.S.

551 125 S. Ct. 1183, 1200 (2005).

Respondents’ remedy lies in using those political

mechanisms to change the laws that Respondents disagree

with. Respondents’ remedy does not lie in the courts.

¢

RELIEF REQUESTED

Wayne County respectfully requests that this Court

reverse the decision of the Sixth Circuit.

Respectfully submitted,

EDWARD M. THOMAS

MELVIN BUTCH HOLLOWELL

December 5, 2005