Amicus Curiae Brief — DaimlerChrysler Corp. v. Cuno

INTEREST OF AMICI CURIAE

The States have a compelling interest in preserving the

sovereign right to use tax incentives to encourage businesses to

locate and invest within their borders. Tax incentives are crucial

to the States’ ability to compete in the global marketplace and to

attract investment to economically depressed areas. Indeed, if

States are no longer free to encourage in-state economic activity

through tax incentives, their ability to compete in the global

marketplace and to cultivate development in economically

depressed areas will be crippled. These incentives do not violate

the dormant Commerce Clause so long as they do not burden

out-of-state economic activity or impede the free flow of

commerce.

The States also have an interest in preserving the

constitutional and prudential standing limitations on plaintiffs

seeking to voice generalized grievances, directed at a State’s

taxing and spending decisions, that are common to all members

of the public or citizens of a State. If citizens of a State were

granted standing in federal court to challenge state expenditures

without demonstrating a concrete, particularized injury, the

ability of the States to govern would be seriously impeded. The

political branches of State and Federal government are the proper

venues to address such grievances.

SUMMARY OF ARGUMENT

The Sixth Circuit’s decision should be vacated since it

should never have been adjudicated in federal court and it is

wrong on the merits.

This case should never have been adjudicated in federal

court because each of the Respondents lacks standing to

challenge Ohio’s investment tax credit. The constitutional

minimum for standing requires a showing that the plaintiff has

suffered or will imminently suffer an “injury in fact” that is both

“concrete and particularized” and “actual or imminent,” not

“conjectural” or “hypothetical,” and it must be “likely, as

opposed to merely speculative,” that the injury will be redressed

by a favorable decision. The Respondents who are Ohio citizens

whose only injury results from their status as Ohio taxpayers,

have not alleged an injury that is sufficiently particularized to

satisfy the “injury in fact” prong of the constitutional standing

test. The Respondents who are Michigan citizens whose claims

of reduced employment opportunities and loss of indirect

benefits that they would have received, indirectly, from state and

local governments if a DaimlerChrysler facility had located in

Michigan, cannot satisfy either the “injury in fact” or

“redressability” prongs of the test. The only remaining

respondent, Kim’s Auto and Truck Service, Inc. (“Kim’s Auto”),

an Ohio corporation slated for displacement as a result of

increased economic activity in Ohio, does not allege an interest

within the zone of interests regulated by the Commerce Clause.

This case was wrongly decided on the merits because tax

credits merely designed to influence location decisions do not for

that reason violate the dormant Commerce Clause. The purpose

of the dormant Commerce Clause is to prevent the States from

protecting local industry from market forces by erecting

structural barriers to the free flow of commerce. Accordingly, a

state tax or regulation only violates the dormant Commerce

Clause if it denies the citizens of a state free access to a market

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or it discriminates against products manufactured or business

operations performed in another state. The investment tax credit

invalidated by the Sixth Circuit did neither. Its purpose and only

effect was “to encourage the growth and development of

intrastate commerce and industry,” something this Court has

__ described as a “laudatory goal.” Trinova Corp. v. Michigan

Dep’t of Treasury, 498 U.S. 358, 385-86 (1991).

Furthermore, investment tax credits should not be held to

violate the dormant Commerce Clause if they are equivalent to

pure subsidies in purpose and economic effect. Pure subsidies

funded out of a state’s general revenue do not burden interstate

commerce, but merely assist local business. Analogous tax

incentives in the form of tax credits are no more discriminatory

than subsidies as long as they do not penalize businesses for

products manufactured or operations performed out-of-state.

ARGUMENT

ot Respondents lack standing.

The “irreducible constitutional minieown” for standing

requires a showing that the plaintiff has suffered an “injury in

fact” that is “fairly traceable” to the actions of the defendant, and

that is “likely [to] be redressed by a favorable decision.” Lujan

v. Defenders of Wildlife, 504 U.S. 555, 560-561 (1992) (internal

quotations and alterations omitted). Additionally, a plaintiff

must satisfy the requirements for prudential standing, which

encompasses “the general prohibition on a litigant’s raising

another person’s legal nghts, the rule barring adjudication of

generalized grievances more appropriately addressed in the

representative branches,” and, of particular relevance in this case,

“the requirement that a plaintiff's complaint fall within the zone

of interests protected by the law invoked.” Elk Grove Unified

Sch. Dist. v. Newdow, 124 S. Ct. 2301, 2309 (2005) (quoting

Allen v. Wright, 468 U.S. 737, 751 (1984)). As developed

below, each of the Respondents lacks either Article III standing

or prudential standing to challenge Ohio’s investment tax credit.

a. The Ohio Taxpayers failed to allege a

sufficiently particularized injury.

The Ohio Taxpayers’ sole injury results from their status

as state taxpayers—they claim that Ohio’s investment tax credit

“depletes the funds of the State of Ohio to which [they]

contribute through their tax payments, thereby diminishing the

total funds available for lawful uses and imposing

disproportionate burdens on [them].” Complaint, 4 40. This

injury, shared by virtually all Ohio state taxpayers, is not an

“injury in fact.”

An “injury in fact” is “an invasion of a legally protected

interest which is (a) concrete and particularized and (b) ‘actual or

imminent,’ not ‘conjectural’ or ‘hypothetical.’”” Lujan, 504 U.S.

at 560 (internal citations omitted). To be “particularized,” “the

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injury must affect the plaintiff in a personal and individual way,”

id. at 560 n.1, as opposed to an undifferentiated, “generalized

grievance” that is “common to all members of the public,”

United States v. Richardson, 418 U.S. 166, 176-77 (1974).

“Absent the necessary allegations of demonstrable, particularized

injury, there can be no confidence of ‘a real need to exercise the

power of judicial review’ or that relief can be framed ‘no broader

than required by the precise facts to which the court’s ruling

would be applied.’” Warth v. Seldin, 422 U.S. 490, 508 (1975).

A. plaintiff cannot meet the particularized injury

requirement, outside the Establishment Clause context, based

solely on his status as a federal taxpayer. Frothingham v.

Mellon, 262 U.S. 447, 487 (1923). Suits premised on federal

taxpayer status are not cognizable in federal court because a

taxpayer’s “interest in the moneys of the Treasury . . . is shared

with millions of others; is comparatively minute and

indeterminable; and the effect upon future taxation, of any

payment out of the funds, so remote, fluctuating and uncertain,

that no basis is afforded for an appeal to the preventive powers of

a court of equity.” IJd.; see also Flast v. Cohen, 392 U.S. 83,

102-03 (1968) (holding that federal taxpayer status is sufficient

to confer standing only when the taxpayer directly challenges an

exercise of Congress’s taxing and spending power and “show{s]

that the challenged enactment exceeds specific constitutional

limitations upon the exercise of [that] power and not simply that

the enactment is generally beyond the powers delegated to

Congress by Art. I, § 8”); id. at 114 (Stewart, J., concurring)

(“{A] taxpayer may not ‘employ a federal court as a forum in

which to air his generalized grievances about the conduct of

government or the allocation of power in the Federal System.””’);

Valley Forge Christian College v. Americans United for

Separation of Church & State, Inc., 454 U.S. 464, 477-79

(1982); United States v. Richardson, 418 U.S. 166, 173-74

(1974); Doremus v. Bd. of Educ., 342 U.S. 429, 433-34 (1952);

Alabama Power Co. v. Ickes, 302 U.S. 464, 478-479 (1938).

5

At least five members of the present Court have written

or joined in opinions recognizing that state taxpayers, like federal

taxpayers, ordinarily lack federal standing. ASARCO, Inc. v.

Kadish, 490 U.S. 605, 612-18 (1989) (plurality opinion of

Kennedy, J., joined by Rehnquist, C.J., and Stevens and Scalia,

J.J.) (applying Frothingham direct injury requirement in

concluding that a state taxpayer claim brought in state court

would have been dismissed if it had been brought in federal court

for lack of Article Il standing); Nike, Inc. v. Kasky, 539 U.S.

654, 669 (2003) (Breyer, J., joined by O’Connor, J., dissenting)

(commenting that state taxpayers “ordinarily lack federal

‘standing””’). In ASARCO, Justice Kennedy wrote for a plurality

that a group of state taxpayers and a teacher’s association would

have lacked Article [II standing to challenge the validity of an

Arizona law governing mineral leases on state lands had they

brought their challenge in federal court. ASARCO, 490 U.S. at

617-18. Quoting Frothingham, Justice Kennedy explained that,

“({ajs an ordinary matter, suits premised on federal taxpayer

status are not cognizable in the federal courts,” and that the Court

“ha[d] likened state taxpayers to federal taxpayers, and thus. . .

refused to confer standing upon a state taxpayer absent a showing

of ‘direct injury,’ pecuniary or otherwise.” Jd. at 613-14.

Virtually every circuit to address the “state taxpayer

standing” issue post-ASARCO has similarly concluded that state

taxpayer status is insufficient to confer Article III standing.’ See

' The notable exception is Arakaki v. Lingle, 423 F.3d 954 (9th Cir. 2005), in

which a Ninth Circuit panel held that plaintiffs’ status as Hawaiian taxpayers

was sufficient to confer standing to raise equal protection and due process

challenges to a Hawaiian agency’s appropriations of state tax revenue. /d. at

969. The decision in that case applied pre-ASARCO circuit precedent, without

significant analysis, which held that state taxpayers had standing to seek to

enjoin a state’s “‘appropriating, transferring, and spending’ of taxpayers’

money from the state treasury’s general fund.” Jd. at 968 (quoting Hoohuli v.

Ariyoshi, 741 F.2d 1169, 1180 (9th Cir. 1984)). The court explained that,

notwithstanding Justice Kennedy’s plurality opinion in ASARCO, “[oJur

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Tarsney v. O'Keefe, 225 F.3d 929, 938 (8th Cir. 2000); Coyne ex:

rel. Ohio v. American Tobacco Co., 183 F.3d 488, 494-95 (6th

Cir. 1999); Board of Educ. v. New York State Teachers

Retirement Sys., 60 F.3d 106, 110-11 (2d Cir. 1995); Colorado

Taxpayers Union, Inc. v. Romer, 963 F.2d 1394, 1402-03 (10th

Cir. 1992); see also Women's Emergency Network v. Bush, 323

F.3d 937, 943-44 (llth Cir. 2003) (recognizing that “state

taxpayers [ordinarily] lack a sufficiently personal interest to

challenge laws of general applicability, since their injury is not

significantly different from that suffered by taxpayers in

general”). Several of these courts recognized that, in addition to

gutting the “injury in fact” prong of the Article I] standing test, a

contrary holding would raise serious federalism concerns. A

state taxpayers’ attack on state spending in federal court

implicates “the integrity of our federal government’s structure.”

Colorado Taxpoyers Union, 963 F.2d at 1403 (quoting Hoohuli,

741 F.2d at 1183 (Wallace, J., dissenting)); accord, e.g., Taub v.

Kentucky, 842 F.2d 912, 919 (6th Cir. 1988). “If taxpayers were

granted standing to challenge state expenditures without

demonstrating a direct injury, the ability of states to govern could

be seriously impeded.” Tarsney, 225 F.3d at 938 (noting that if

state taxpayer status conferred federal standing, state taxpayers

“could sue on the basis of religious beliefs to challenge state

funding for executions, stem cell research, civil unions, or

various civil rights laws”); accord Colorado Taxpayers Union,

963 F.2d at 1403 (noting state taxpayer standing “could unduly

constrict experimental state welfare legislation a~d undermine

local self-determination.”’).

decision in Hoohuli remains the law of the circuit until our court, sitting en

banc, overrules it, or until the Supreme Court, in a majority opinion, plainly

undermines its principles.” Jd. at 969 (emphasis added). Of course, Arakaki

and Hoohuli appear ureconcilable with another Ninth Curcuit decision, Beil v.

City of Kellogg, 922 F.2d 1418 (9th Cir. 1991), in which a Ninth Circuit panel

cites ASARCO and expressly states that “[{t}he same constitutional standing

principles [applicable to federal taxpayers} apply to those suing in federal

court as state taxpayers.” Jd. at 1423.

7

The Article Ill “particularized injury’ requirement

precludes taxpayers from “employ{ing] a federal court as a forum

in which to air . . . generalized grievances about the conduct of

government.” See Flast, 392 U.S. at 106. For the reasons

identified by the plurality in ASARCO, and in subsequent

decisions of the Second, Sixth, Eighth, and Tenth Circuits, this

Court should hold that the constitutional limitations on “taxpayer

standing” in federal court are no less applicable when a party

challenges a state’s taxing and spending decisions than when a

party challenges Congress’s taxing and spending decisions.

b. The Michigan Plaintiffs failed to allege a

sufficiently concrete or redressable injury.

The Michigan Plaintiffs claim that, “{ijf the

{DaimlerChrysler facility} had . . . been located in Michigan, [it]

would have provided economic opportunities, in the form of jobs

and/or certain tax revenues to the benefit of certain local

governments and the State of Michigan.” Complaint, 4 42.

These claims of potential lost revenue and economic

opportunities are insufficiently concrete and too speculative to

constitute an “injury in fact.”

An “injury in fact” “must be concrete in both a qualitative

and temporal sense.” Whitmore v. Arkansas, 495 U.S. 149, 155

(1990). The injury to the plaintiff must be “‘distinct and

palpable,’ as opposed to merely ‘[a]bstract,’ and the alleged harm

must be actual or imminent, not ‘conjectural’ or ‘hypothetical.’”

Id. (internal citations omitted). Moreover, the plaintiff must

further establish that it is “likely, as opposed to merely

speculative, that the injury will be redressed by a favorable

decision.” Lujan, 504 U.S. at 561 (internal quotations omitted).

The Michigan Plaintiffs allege two general injuries

resulting from DaimlerChrysler’s locating decision, neither of

which satisfies the concreteness or redressability requirements

for Article IT] standing. The Michigan Plaintiffs’ first claim is

that they would have benefitted from increased employment

8

opportunities had DaimlerChrysler located in Michigan. ~

Complaint, 4 42. However, the Complaint offers nothing to

suggest that any of the Michigan Plaintiffs would have

personally been eligible for a qualitatively better job at a new

DaimlerChrysler facility in Michigan. “Plaintiffs must

demonstrate a ‘personal stake in the outcome’ in order to ‘assure

that concrete adverseness which sharpens the presentation of

issues’ necessary for the proper resolution of constitutional

questions.” Los Angeles v. Lyons, 461 U.S. 95, 101 (1983).

Because “the ‘injury in fact’ test . . . requires that the party

seeking review be himself among the injured,” Sierra Club v.

Morton, 405 U.S. 727, 734-735 (1972), quoted in Lujan, 504

U.S. at 563, general increases in employment opportunities

cannot confer Article III standing in the absence of allegations of

an individualized impact. In any event, it is “merely speculative”

as opposed to “likely” that any of the Michigan Plaintiffs would

personally be eligible for a better job as a result of a favorable

decision in this case. See Lujan, 504 U.S. at 561.

The Michigan Plaintiffs’ other alleged injury—that they

would benefit as a result of “certain tax revenues t« the benefit of

certain [unnamed] local governments and the State of Michigan,”

Complaint, {/ 42—is even less concrete and less likely to be

redressed by a favorable decision in this case. They do not allege

that their state or local taxes will be reduced or that additional

benefits will be available to them. Moreover, they do not allege

any particularized injury that would differentiate any of their

injunies from those of any other taxpayer. See ASARCO, 490

U.S. at 613-14 (commenting that the Court had “likened state

taxpayers to federal taxpayers, and thus . . . refused to confer

Standing upon a state taxpayer absent a showing of ‘direct

injury,” pecuniary or otherwise.” Jd. at 613-14; see also

discussion supra § I.a. Even more importantly, the Michigan

Plaintiffs fail to explain how additional revenue flowing to

“certain local governments and the State of Michigan” will

necessarily inure to their benefit. Thus, their injury is entirely

9

speculative because it depends on whether the state and local

governments described in the Complaint would pass through

some of the benefits received as a result of a new

DaimlerChrysler facility.

c. Kim’s Auto failed to allege an injury

within the zone of interests protected by

the dormant Commerce Clause.

Kim’s Auto, an Ohio corporation which alleges in the

Complaint that it was slated for displacement as a result of the

DaimlerChrysler expansion, see Complaint, 4 41, lacks

prudential standing. Prudential standing is lacking unless “the

interest sought to be protected by the complainant is arguably

within the zone of interests to be protected or regulated by the

statute or constitutional guarantee in question.” Association of

Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153

(1970), quoted in Clarke v. Securities Indus. Ass'n, 479 U.S.

388, 396 (1987). Kim’s Auto’s interest in this litigation is not

within the zone of interests regulated by the dormant Commerce

Clause.

The purpose of the Commerce Clause is to ensure “that

every farmer and every craftsman shall be encouraged to produce

by the certainty that he will have free access to every market in

the Nation, that no home embargoes will withhold his exports, .

and no foreign state will by customs duties or regulations

exclude them[, and that] every consumer may look to free

competition from every producing area in the Nation to protect

him from exploitation by any.” Dennis v. Higgins, 498 U.S. 439,

449-50 (1991) (quoting H.P. Hood & Sons, Inc. v. Du Mond, 336

U.S. 525, 539 (1949)). Accordingly, its negative implications

“prohibit[ }] economic protectionism — that is, regulatory measures

designed to benefit in-state economic interests by burdening out-

of-state competitors,” New Energy Co. v. Limbach, 486 U.S.

269, 273 (1988), “laws that would excite those jealousies and

retaliatory measures the Constitution was designed to prevent,”

10

C & A Carbone v. Town of Clarkstown, 511 U.S. 383, 390

(1994); see also Nat'l Solid Waste Mgmt. Ass'n v. Pine Belt

Reg'l Solid Waste Mgmt. Auth., 389 F.3d 491, 499 (Sth Cir.

2004), cert. denied, 126 S. Ct. 332 (2005).

Thus a market participant alleges an injury within the

zone of interests protected by the Commerce Clause if he alleges

that a state has denied him free access to a market, and a

consumer falls within the zone of interests protected by the

Commerce Clause if he alleges that a state‘has imposed barriers

to free competition resulting in economic exploitation. Compare

Oxford Assocs. v. Waste Sys. Auth., 271 F.3d 140, 146-47 (3d

Cir. 2001) (holding plaintiff building owners had standing to

challenge municipal waste authority’s coercive fee structure

designed to benefit a particular waste treatment plant because “‘as

consumers of waste processing services, [they were] within the

zone of interests intended to be protected by the Commerce

Clause”); with Nat'l Solid Waste Mgmt. Ass'n, 339 F.3d at 499-

500 (holding municipalities and waste authority lacked

prudential standing to facially attack allegedly discriminatory

waste management ordinances under dormant Commerce Clause ~

because “[their] injury is not related to any out-of-state

characteristic of their business”). By contrast, a local business

displaced by expanding intrastate economic activity is not

injured in a manner the dormant Commerce Clause was intended

to guard against.

Kim’s Auto claims to be displaced by in-state economic

expansion. It does not allege that Ohio has denied it free access

to a market or has otherwise imposed barriers to free

competition. Injuries to in-state economic interests due to tax

incentives designed to benefit in-state economic interests are not

within the zone of interests the dormant Commerce Clause was

intended to prevent. Accordingly, Kim’s Auto lacks prudential

standing to proceed with this case in federal court.

11

II. Ohio’s investment tax credit does not violate

the dormant Commerce Clause.

a. Tax credits do not violate the dormant

Commerce Clause unless they burden the

free flow of commerce.

“{T jhe Framers intended the Commerce Clause as a cure

for [Confederation-era] structural ills,” specifically, the early

States’ use of “state taxes and duties [that] hindered and

suppressed interstate commerce.” Quill Corp. v. North Dakota,

504 U.S. 298, 312 (1992); see also Gibbons v. Ogden, 22 U.S. 1

(9 Wheat.) 1, 231 (1824) (Johnson, J., concurring) (“If there was

any one object riding over every other in the adoption of the

constitution, it was to keep the commercial intercourse among

the States free from all invidious and partial restraints.”’), quoted

in Camps Newfound/Owatonna v. Town of Harrison, 520 U.S.

564, 571 (1997). Up to this point, this Court has interpreted the

dormant Commerce Clause in a manner consistent with its

original goal—i.e., to limit the States’ ability to favor local

industry through protectionist measures that inhibit the free flow

of commerce. Accordingly, the antidiscrimination principle

implicit in the Commerce Clause has only been held to preclude

the States from “discriminatorily tax[ing] the products

manufactured or the business operations performed in any other

State.” Boston Stock Exch., 429 U.S. at 337, quoted in Armco,

Inc. v. Hardesty, 467 U.S. 638, 646 (1984).

2 Alexander Hamilton's personal involvement with state tax subsidization

may provide some insight into his belief as to the scope of the Commerce

Clause as it was originally intended. In 1791, while serving as the first

Secretary of the Treasury, Hamilton organized z yroup of investors and

requested the New Jersey Assembly pass legislation incorporating the

Society for Establishing Useful Manufactures (the “Society”). The

legislation would encourage the Society’s activity in New Jersey, in part,

12

The Sixth Circuit’s decision unties the dormant

Commerce Clause principle from its constitutional moorings.

The “very purpose of the Commerce Clause was to create an area

of free trade among the several States.” Boston Stock Exch., 429

U.S. at 328 (quoting McLeod v. J.E. Dilworth Co., 322 U.S. 327,

330 (1944)); see also West Lynn Creamery v. Healy, 512 U.S.

186, 207 (1994) (Scalia, J., concurring) (“The purpose of the

negative Commerce Clause, we have often said, is to create a

national market.”); C & A Carbone, 511 U.S. at 390 (“The

central rationale for the rule against discrimination is to prohibit

state or municipal laws whose object is local economic

protectionism ...”’). It follows then that the Commerce Clause

only prohibits state action inhibiting free trade. See American

Trucking Ass'‘ns, Inc. v. Scheiner, 483 U.S. 266, 282 (1987)

(“The precise issue is . . . do the [state’s taxing mechanisms]

discriminate against some participants in interstate commerce in

a way that contradicts the central purpose of the Commerce

Clause?’’) (emphasis added).

The tax credit invalidated by the Sixth Circuit imposed

no burden on free trade—it did not “deprive citizens [of any

State] of their mght to have access to the markets of other States

on equal terms,” Granholm v. Heald, 125 S. Ct. 1885, 1896

by providing “that all lands, tenements, heriditaments, goods .. . to the

said society belonging, shall be, and they are hereby declared to be free,

and exempt, from all taxes charges and impositions whatsoever, under the

authority of this State, whether for State or for county uses....” William

Paterson, The Charter of the Society for Establishing Useful Manufactures,

Laws of New Jersey, revised and published under the authority of the

Legislature, 1800, § IV. The legislation gave the Society a state tax

exemption, the power to condemn property for its own use, and control

over a significant portion of the northern New Jersey water supply. This

led to the establishment of the nation’s first industrial park. Peter K.

Eisinger, The Rise of the Entrepreneurial State 15 (The University of

Wisconsin Press 1988). It seems unlikely that Hamilton would have

encouraged New Jersey to enact this legislation if he believed its

constitutionality was suspect.

13

(2005), or “discriminatorily tax the products manufactured or the

business operations performed in any other State,” Boston Stock

Exch., 429 U.S. at 337; see-also Robert J. Firestone, State

Investment Tax Credits Do Not Violate the Dormant Commerce

Clause, 36 St. Tax Notes 189, 192 (2005) (noting that this Court

has only invalidated tax credits “for the performance of an in-

state business activity, such as manufacturing, selling, or

services) (footnotes omitted). The credit is only tangentially tied

to economic activity because it encourages businesses to invest

within Ohio without otherwise encouraging in-state, or

discouraging out-of-state, economic activity.

This Court has never suggested the Commerce Clause

precludes States from influencing a business’s capital acquisition

decisions through subsidization or investment tax credits. To the

contrary, the Court has made clear that “States are free to

‘structure their tax systems to encourage the growth and

development of intrastate commerce and industry.”” Trinova

Corp. v. Michigan Dep't of Treasury, 498 U.S. at 385-86 (1991)

(quoting Boston Stock Exch. v. State Tax Comm'n, 429 U.S. 318,

336 (1977)). Indeed, the Court has described it as “a laudatory

goal” for a State to design its tax system in a manner that will

“promote investment” for the purpose of “provid{ing] jobs and

prosperity” for its citizens. Trinova Corp., 498 U.S. at 385. The

investment tax credit struck down by the Sixth Circuit did just

that and nothing more.

The purpose of Ohio’s investment tax credit was

undoubtedly to encourage economic investment in specific zones

within Ohio. However, “the Commerce Clause does not prohibit

all state action designed to give its residents an advantage in the

marketplace, but only action of that description in connection

with the State's regulation of interstate commerce.” New Energy

Co. of Ind. v. Limbach, 486 U.S. 269, 278 (1988) (emphasis

added). Moreover, this Court has repeatedly made clear that a

State’s encouragement of in-state economic investment, even its

14

competition with other States for economic investment, does not

constitute regulation of interstate commerce. While regulation of

interstate commerce, if discriminatory, is prohibited by the

dormant Commerce Clause, competition between states “for a

share of interstate commerce . . . lies at the heart of a free trade

policy.” Boston Stock Exch., 429 U.S. at 336-37 (emphasis

added), quoted in Armco, Inc. v. Hardesty, 467 U.S. 638, 646

(1984), and in Westinghouse Elec. Corp. v. Tully, 466 U.S. 388,

407 n.12 (1984); see also Firestone, supra, at 197 (“The dormant

Commerce Clause does not require a state to use its tax laws to

subsidize investment in another state merely because it reduces

the cost of doing business in its own state. . . . [S]uch incentives

encourage new business to enter the state and compete with

existing local businesses, promoting, rather than hindering,

interstate commerce.”).

The dormant Commerce Clause prevents States from

imposing barriers to free trade. It does not prevent the States

from competing with each other for economic investment.

Accordingly, the States are free to design their tax systems in a

manner that will “promote investment” for the purpose of

“provid[ing| jobs and prosperity” for their citizens. Trinova

Corp., 498 U.S. at 385. So long as a State’s tax system does not

restrain the free flow of commerce by (1) “depriv[ing] citizens

{of a State] of their right to have access to the markets of other

States on equal terms,” Granholm, 125 S. Ct. at 1896, or (2)

“discriminatorily tax[ing] the products manufactured or the

business operations performed in any other State,” Boston Stock

Exch., 429 U.S. at 337, it does not violate the dormant

Commerce Clause.

15

b. Tax credits do not violate the dormant

Commerce Clause if they are equivalent to

pure subsidies in purpose and effect.

“(D]irect subsidization of domestic industry does not

ordinarily run afoul” of the dormant Commerce Clause. /d.; see

Fireside Nissan v. Fanning, 30 F.3d 206, 216 (Ist Cir. 1994)

(“[S}tates may directly subsidize local industry as long as they do

so without burdening the ability of interstate competitors to sell

their products in the state.”). “‘A pure subsidy funded out of

general revenue ordinarily imposes no burden on interstate

commerce, but merely assists local business.” West Lynn

Creamery, 512 U.S. at 199 (emphasis added); see also C & A

Carbone v. Town of Clarkstown, 511 U.S. 383, 394 (1994)

(striking down ordinance that required all solid waste generated

in respondent town to pass through its solid waste facility, but

recognizing that the town could have “subsidize{d] the facility

through general taxes or municipal bonds”); Hughes v.

Alexandria Scrap Corp., 426 U.S. 794, 816 (1976) (Stevens, J.,

concurring) (“[The Commerce Clause does not] inhibit a State’s

power to experiment with different methods of encouraging local

industry. Whether the encouragement takes the form of a cash

subsidy, a tax credit, or a special privilege intended to attract

investment capital, it should not be characterized as a ‘burden’

on commerce.”); Firestone, supra, at 196 (“The Court_has

nowhere said that a state cannot structure its taxes to reduce the

cost of doing business locally or to give a boost to the local

economy. . . . As long as a state tax provision does not

discriminate, the dormant Commerce Clause does not go so far

as to require a state legislature to subsidize the economic

development of another state in activities in which it has no

sovereign interest.”) (footnote omitted).

Clearly, there would have been no dormant Commerce

Clause implications if Ohio had subsidized the DaimlerChrysler

expansion without using its tax system. The only question then

is whether an investment tax credit should be treated differently

16

even though “the real-world impact of [the] subsidy mirrors the

effect of the credit.” Walter Hellerstein and Dan T. Coenen,

Commerce Clause Restraints on State Business Development

Incentives, 81 Cornell L. Rev. 789, 835 (1996).

The Sixth Circuit concluded that there was a bright-line

distinction between subsidies and tax credits, for purposes of

Commerce Clause analysis, that “results from the fact that the

tax credit involves state regulation of interstate commerce

through its power to tax.” Cuno v. DaimlerChrysler, Inc., 386

F.3d 738, 746 (6th Cir. 2004). However, the investment tax

credit at issue here had no greater extraterritorial effects than an

analogous subsidy. The investment tax credit merely sought to

reward businesses for investing in Ohio with even greater

rewards for businesses investing in designated special needs

areas within the State. More importantly, the amount of the

credit was tied exclusively to the amount a business invested in

Ohio and where in Ohio the investment was made—the credit

did not penalize businesses for operations conducted out-of-state.

The purely formalistic distinction between tax credits and

subsidies drawn by the Sixth Circuit makes little sense in this

context. In order to violate the dormant Commerce Clause, the

challenged regulatory measure must be “designed to benefit in-

state economic interests by burdening out-of-state competitors.”

New Energy, 486 U.S. at 473 (emphasis added); see also

Westinghouse, 466 U.S. at 407 n.12 (“We reiterate that it is not

the provision of the credit that offends the Commerce Clause, but

the fact that it is allowed on an impermissible basis, i.e., the

percentage of a specific segment of the corporation’s business

that is conducted [in-state].”). The reason pure subsidies

generally do not burden interstate commerce is that they “merely

assist[] local business,” West Lynn Creamery, 512 U.S. at 199,

i.e., they benefit in-state economic interests without burdening

out-of-state competitors. Tax incentives designed to “merely

assist local business” without penalizing out-of-state interests are

no more discriminatory than analogous subsidies.

17

c. States frequently must use incentives to

compete with foreign nations for economic

investment.

Respondents’ argument that federal court intervention is

necessary to “save the States from themselves” from what they

see as a principally interstate “race to the bottom” dramatically

oversimplifies what is truly a global marketplace for economic

investment. Foreign nations, just as the United States, regularly

use location-based tax incentives. See, e.g., Robert J. Rolfe &

Richard A. White, Investors’ Assessment of the Importance of

Tax Incentives in Locating Foreign Export-Oriented Investment:

An Exploratory Study, 14 J. Am. Tax’n Ass’n, 39, 40 (1992)

(noting that tax incentives are used by more than 70 countries);

151 Cong. Rec. $5437, 5444 (daily ed. May 18, 2005) (statement

of Sen. Voinovich) (“As a former Governor who had to compete

against Japan, Canada, China and Europe for new business

projects, | know just how important a role tax incentives can play

in attracting new businesses.”); cf Economic Development and

the Dormant Commerce Clause: the Lessons of Cuno v. Daimler

Chrysler and Its Effect on State Taxation Affecting Interstate

Commerce: Hearings Before the Subcomm. on the Constitution

of the House Comm. on the Judiciary, 109th Cong. (May 24,

2005) (hereinafter Hearings) (testimony of Bruce Johnson,

Lieutenant Governor of Ohio) (testifying that Ohio competes for

economic investment with Canada, Mexico, and nations in Asia).

Accordingly, a decision by this Court prohibiting the States from

utilizing these tools would constitute unilateral disarmament of

the United States in the global competition for new investment.

Canada is a major source of competition for economic

investment in a number of industries, see, e.g., Mark Anderson,

Twin Cities Face Stiff Competition in Luring Biotechs, Finance

* See generally Peter D. Enrich, Saving the States from Themselves:

Commerce Clause Constraints on State Tax Incentives for Business, 110

Harv. L. Rev. 377 (1996).

18

& Commerce, July 2, 2003 (describing biotech industry study

which identified Montreal, Toronto, and Vancouver as among

the most affordable cities to locate new labs and plants); JoAnne

Napier-Chaisson, Inventive Incentives, available at

http://www.canadafocus.com/2003/sec04.htm (describing

competitive advantages of Canadian provinces and identifying

Canadian tax incentives offered in biopharmaceutical and

information and communication technology industries), and

investment tax incentives have been frequently employed by

Canadian provinces to gain a competitive advantage over the

United States. For example, Quebec has utilized tax incentives

“to transform itseif into a highly attractive location . . . to build

manufacturing plants and conduct biopharmaceutical research.”

Napier-Chaisson, supra; see id. (quoting Francis Fox, executive

with Rogers AT&T Wireless, identifying, as the source of

Montreal’s success, that “Montreal offers the best tax credits on

the Eastern Seaboard”’).

Ontario has had similar success in the film industry,

luring filmmakers away from the United States through tax

incentives. See, e.g., Jennifer Grzeskowiak, Waving some cash

in Hollywood's direction, American City & County, Sept. 2005,

at 22; Come play with me, Economist, Apr. 16, 2005, at 29

(identifying Canada as “a haven for so-called ‘runaway

production’”’); Barney Gimbel, Skip Canada, Shoot Here,

Fortune, Apr. 4, 2005, at 32. “Canada has proved a major thorn

for the New York and Los Angeles entertainment communities,

drawing production away from the United States.” Roger

Armbrust, Ontario Pushes for Film Credits, Back Stage, Dec.

17, 2004, at 4. Between April 2003 and March 2004, $1.9

billion in foreign projects were filmed in Canada, and States

have begun offering similar incentives to lure projects back to

the United States. See Grzeskowiak, supra, at 22-23 (quoting

Alex Schott, director of Lousiana Governor’s Office of Film and

Television Development, commenting that Louisiana enacted

filmmaking tax -incentives in 2002 in order to “duplicate

19

Canada’s success”); Gimbel, supra, at 32; Richard A. Webster,

Filmmakers keep rolling into state to cash in on tax incentives,

New Orleans City Business, Dec. 27, 2004, at 31 (quoting

Schott, stating that developing infrastructure and labor force have

not been substantial hurdles in movie industry growth in

Louisiana because “[t]he production companies realize we’re

where Canada was 12 years ago”).

In the microelectronics industry, American jobs are being

lost to China and other Asian nations. In April 2005, George

Scalise, President of the Semiconductor Industry Association,

testified before the U.S. China Economic and Security Review

Commission that America’s dominance in the semiconductor

industry has been gradually eroding over the last decade largely

due to differences in tax policy and subsidization between Asian

nations and the United States. China's High Technology

Development, Hearing Before the U.S. China Econ. & Sec.

Review Comm'n (Apr. 21, 2005), http://www.uscc.gov

/hearings/2005hearings/written_testimonies/05_21 22wrts

/scalise_george_wrts.pdf (testimony of George Scalise).

According to Scalise, there is a “$1-plus billion 10-year cost

difference” between building and operating a new facility in Asia

versus the United States. /d. at 2. Scalise attributed about 10%

of the cost differential to reduced labor costs, 20% to capital

grants, and 70% to tax benefits. Jd. Scalise noted that States that

have succeeded in retaining facilities or attracting new facilities

have attempted to level the playing field with foreign nations

through, inter alia, “sales tax exemptions for machinery and

equipment, property tax caps, [research and development] tax

credits, business tax apportionment and ad valorem tax

abatements.” Jd. at 8.

Last year, Portland, Oregon was the lone Western

Hemisphere competitor for a 300-mm silicon wafer plant set to

be constructed by Siltronic Corp., a German semiconductor

manufacturer. See News Release, Portland Development

Comm’n, Portlant Emerges as One of Five Sites Considered for

20

New Siltronic Plant, May 5, 2004, available at

http://www.pdc.us/new/releases/20040506.asp; Jack Lyne,

Portland Raising Subsidies in Global Skirmish for Siltronic’s

300-mm. Plant, The Site Selection Online Insider, Nov. 2004,

http://www.conway.con/ssinsider/incentive/ti04 i 1.htm. In order

to stay competitive with Singapore and other foreign sites,

Portland offered a generous subsidization package. Lyne, supra.

Without the capability to level the playing field in this manner,

the erosion of America’s market share in this industry will

almost certainly accelerate. |

The ability to offer tax incentives is often crucial to

individual States’ ability to retain the presence of multinational

corporations or capture their expansion projects. See, e.g.,

Hearings (testimony of Michele R. Kuhrt) (‘‘State tax incentives,

like the Ohio manufacturer’s tax credit, in many cases are a

critical factor for [multinational] companies . . . to construct new

facilities, buy new equipment, and hire additional workers.”’); id.

(testimony of Bruce Johnson) (testifying that incentives must be

made available to manufacturers because “[t]hey have a choice

of locations. They could locate either in Indiana, [llinois—

China, or Taiwan, for that matter’); see also Robert Westervelt,

Inducements Bear Fruit in Eastern Gulf Region, Chemical

Week, Apr. 15, 1997, at 27 (quoting global chemical company

executive, stating “[t]here’s a battle among competing sites

within the company . . . as to whether to invest in Europe, North

America, or elsewhere). In May 2005, Michele R. Kuhrt,

Director of Taxes and Financial Administration for the Lincoln

Electric Company, testified before a House subcommittee that

her company has a presence in Ohio, Georgia, California, and

twenty-six international locations, and that “taxes are a

significant and sometimes deciding factor on where we locate

our capital.” Hearings (testimony of Michele R. Kuhrt). Kuhrt

testified that “the economic factors present in many of the other

jurisdictions can make an investment decision to locate outside

the United States overwhelming,” but the Ohio credit invalidated

21

by the Sixth Circuit was an “important benefit” to the company,

“one that has ‘tipped the scales’ in several investment

evaluations.” /d.

States use incentives, not only to compete internationally

for economic investment, but to target investment in

economically depressed areas. For example, in August 2005, the

State of New York enacted an economic stimulus program

designed to encourage businesses to return to lower Manhattan,

S.B. 5930, 228th Ann. Leg. Sess. (N.Y. 2005), an area still

reeling in many ways four years after the terrorist attack on the

World Trade Center, see, e.g., Charisse Jones, Lower Manhattan

Still on the Rebound After 9/11, U.S.A. Today, Oct. 14, 2005, at

5A. Within eight weeks of the bill’s enactment, Goldman Sachs

and American Express made commitments to locate in lower

Manhattan, and negotiations were underway with several other

firms. See-Press Release, Sheldon Silver, Speaker of the

Assembly, Oct. 24, 2005, available at

http://assembly.state.ny.us/Press/2005 1024/.

Alabama has effectively used targeted subsidization to

revitalize the State's "Black Belt,” an impoverished region in

south-central Alabama known for its dark prairie soil. The

region is famously known for having “the richest soil and the

poorest people" in the United States. Arthur Raper, Preface to

Peasantry (1936). As of the 2000 U.S. Census, eight of the

twelve counties that make up the Black Belt were among the 100

poorest counties in the United States. John Archibald & Jeff

Hansen, Life is Short, Prosperity is Long Gone, Birmingham

News, May 12, 2002. With its poverty, poor education, infant

mortality, and unemployment, “[i}t is, according to statistical

measures and the people who struggle to improve life in the

* ‘The Black Belt is so named for its dark prairie soil. It is a swath of land

that stretches roughly from Columbus, Georgia to Columbus, Mississippi

through the center of Alabama, including the towns of Tuskegee, Selma,

Demopolis, and Eutaw. See, e.g., Kelley v. Bennett, 96 F. Supp. 2d 1301,

1309 n.11 (M.D. Ala. 2000).

22

region, Alabama’s Third World.” Jd. It is a place “where

doctors and hospitals are so scarce that pregnant women and sick

residents must travel up to 30 miles to the nearest health clinic. .

_ where there is no local bus service, where as many as a quarter

of all households have no car . . . where infant death rates during

parts of the 1990s surpassed those in Panama and Uruguay .. .

[and where] the percentage of births to teenage mothers was

higher than Uganda and Indonesia.” /d.

Through targeted tax incentives, Alabama is gradually

changing the Black Belt and breaking this cycle of poverty.

Thanks to tax incentives offered by the State, several automakers

have opened factories in and around the region. The automakers

themselves, along with auto-parts suppliers that have leveraged

proximity to the plants to increase profits, are reducing

unemployment and rekindling hope. See, e.g., Thomas Spencer,

Hyundai Helps Jobless Rate in Black Belt, Birmingham News,

Aug. 21, 2005, at C1; David Irvin, Selma Says Hallelujah Hanil

E-Hwa, Montgomery Advertiser, Aug. 13, 2005, at Al (reporting

first-tier Hyundai supplier’s decision to locate in Selma,

Alabama, and quoting Alabama Governor Bob Riley, stating

“(t}here’s greater economic hope in the Black Belt today because

more industries are locating here and the unemployment rates are

down’). The region’s average unemployment rate, in double

digits a year ago, had fallen to eight percent by June 2005.

Spencer, supra, at C1.

Because of Alabama’s commitment to revitalizing the

Black Belt, and similar incentive programs offered by other

States, some foreign competitors have been less successful in

attracting new investment in the auto manufacturing industry.

Ontario, Canada, one of America’s chief competitors in the

industry, has been losing market share over the last several years

due to its reluctance to match subsidy packages offered by

Alabama and other States. See, e.g., Napier-Chaisson, supra

(quoting Jim Padilla, Ford Motor Co. executive, stating that

Ontario needed to “step up” in order for it to consider locating a

23

new manufacturing plant in Oakville, Ontario); id. (noting that,

in 2003, DaimlerChrysler met with Ontario and Canadian

officials to discuss whether $300 million in assistance would be

available for a new plant in Windsor, Ontario).

In 2002, a group of mayors in Ontario organized to lobby

their national and provincial governments to aggressively

respond to American incentive packages (the “Ontario Mayors”).

In an October 2002 letter to the Canadian Minister of Industry

and the Ontarian Minister of Enterprise, Innovation and

Opportunity, the mayors asserted that “[t}he lack of an aggressive

automotive policy over the past 13 years in Canada/Ontario has

coincided with no new assembly plants here and an explosion of

auto assembly plants in the US South and Mexico.” Letter,

Ontario Mayors for Automotive Investment, at 3, available at

http://www.city.windsor.on.ca/home/letter.pdf. The Ontario

Mayors urged their governments to “re-establish Ontario and

Canada as one of the top jurisdictions in the world for

automotive investment” through support packages that are

“material, definitive and competitive.” /d., at 3-4; see also

Report from the Econ. Dev. & Tourism Servs. Dep’t re:

Automotive Manufacturing Initiatives, Mar. 14, 2005,

http://www.catharines.com/cityservices/citydepartments

/corpsupportsvcs/Agendas_Minutes/docs/Minutes

/OSgmmar21.pdf (discussing continuing activities of Ontario

Mayors and Canadian Automotive Partnership Council and

possibility of Toyota locating a new manufacturing facility in

Niagara). ;

Investment tax incentives, such as the tax credit

invalidated by the lower court, enhance substantially the States’

ability to compete globally for economic investment and to

revitalize economically blighted areas. An affirmance of the

decision below would therefore almost assuredly reduce

America’s market share in a number of industries.

24

CONCLUSION

For the foregoing reasons, the decision of the Sixth

Circuit should be reversed.

Pa

RESPECTFULLY SUBMITTED,

CHARLES J. CRIST, JR.

ATTORNEY GENERAL

CHRISTOPHER M. KISE

SOLICITOR GENERAL

Fla. Bar. No. 0855545

Counsel of Record

ERIK M. FIGLIO

DEPUTY SOLICITOR GENERAL

Fla. Bar No. 0745251 -

Office of the Attorney General

Suite PL-01, The Capitol

Tallahassee, FL 32399

(850) 414-3681

(850) 410-2672 (fax)

25

uit, U.S

FILEp ~~

21 ie DEC 2 - zoa5

Nos. 04-1704 & 04-1724 MEOETHE CLERK |

IN THE —

SUPREME COURT OF THE UNITED STATES

DAIMLERCHRYSLER CORPORATION, PETITIONER

Vv

CHARLOTTE CUNO, ET AL., RESPONDENTS

WILLIAM W. WILKINS, TAX COMMISSIONER

FOR THE STATE OF OHIO, PETITIONER

v.

CHARLOTTE CUNO, ET AL., RESPONDENTS

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF OF AMICI CURIAE FORD MOTOR COMPANY

AND GENERAL MOTORS CORPORATION

IN SUPPORT OF PETITIONERS

JEROME B. LIBIN

DAVID G. LEITCH Counsel of Record

Senior Vice President & KENT L. JONES

General Counsel KENDALL L. HOUGHTON

FoRD MOTOR COMPANY JEFFREY A. FRIEDMAN

SUTHERLAND ASBILL &

THOMAS A. GOTTSCHALK BRENNAN LLP

Executive Vice President 1275 Pennsylvania Ave., N.W.

& General Counsel Washington, D.C. 20004

GBNERAL MoTors Corp. (202) 383-0100

Counsel for Amici Curiae

CT

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

i

_ QUESTIONS PRESENTED

1. Whether respondents have standing to bring this action

to enjoin enforcement of the provision of Ohio law that

allows an investment tax credit against the State’s coiporate

franchise tax.

2. Whether the investment tax credit provided by Ohio law

against the State’s corporate franchise tax violates the

Commerce Clause of the Constitution, U.S. Const. Art I, § 8,

cl.3. '

ii

CORPORATE DISCLOSURE STATEMENT

Ford Motor Company (“Ford”) is a_ publicly-held

corporation. Ford has no parent corporation, and there is no

publicly-held corporation that owns. 10% or more of Ford’s

stock.

General Motors Corporation (“GM”) is a publicly-held

corporation. GM has no parent corporation, and there is no

publicly-held corporation that owns 10% or more of GM’s

stock.

iii

TABLE OF CONTENTS

Page

a iii esccidcestscessetesecntncesintineicecce i

CORPORATE DISCLOSURE STATEMENT. .........:scesss0ssee ii

a a iii

TABLE OF AUTHORITIES ..sssosssssssssssssssessstsee iv

CF EL AL 1

INTEREST OF AMICI CURIAE .iccssssssssssssssssssssssssuessssecsen 2

SUMMARY OF ARGUMENT ......cccscsssssssscssssssesssecssseeseee 4

I lekecinieiistiiiniapeidiicletsteihietsiieenaihiiaiain hea 7

iv

TABLE OF AUTHORITIES

Cases . Page

ASARCO Inc. v. Kadish, 490 U.S. 605 (1989)..... 13, 14, 15, 19

Bacchus Imports Ltd. v. Dias, 468 U.S. 263 (1984).............. 23

Boston Stock Exchange v. State Tax Commission,

GP UD, BOG CRF FP cecrrssestssesssctscntinsnionnind 6, 20, 22, 24-25

Coyne v. The American Tobacco Co., 183 F.3d 488

OF il, ee inceccininsicitasstcictictnibitiiaaitiad seein 13, 16, 17

Cuno v. DaimlerChrysler, Inc., petition for cert. filed (U.S.

April 18, 2005) (No. 04-1407) oo... cceecesseeseesseeneeseeeneeees 12

Doremus v. Board of Education,

DER UD, Gar Cee eritnrncitnnscresinncsinssinctatiina 5,9, 12, 13,14

Duke Power Co. v. Carolina Environmental Study Group,

GIB UB. FO II cetcierscctscssinisttincsninavstaneinsinigilieagh 6, 17, 19

Flast v. Cohen, 392 U.S. 83 (1968) .........ccccccseeseeseeees 8, 10, 11

Friends of the Earth, Inc. v. Laidlaw Environmental Services

(TOC), Inc., 528 U.S. 167 (2000)... ccccsecseereseeeeenes 8, 16

Frothingham v. Mellon, 262 U.S. 447 (1923) ..........:0008 passim

Gladstone Realtors v. Village of Bellwood,

OEE ULE. FE CID F IR ccnscccncrsnectsnnniniesnnqsctssiaresinnenivnttinniniaiae 16

Kim's Auto & Truck Service, Inc. v. City of Toledo, petition

for cert. filed (U.S. June 1, 2004) (No. 03-1629), cert.

denied, 125 S. Ct. 2988 (2005)...........csscceseeeeseseeeees 6, 17-18

Kraft General Foods v. lowa Dept. of Revenue and Finance,

SOG ULB. 73 COTTE ccccosesscssessenssvessneensneeninatintannasiniis 28

Los Angeles v. Lyons, 461 U.S. 95 (1983)......c:ccccesseseserseerees 15

Maryland v. Louisiana, 451 U.S. 725 (1981)............. 25-27, 29

Schlesinger v. Reservists Committee to Stop the War,

QB ULB, FEB (IG PD ccewccccssccsevsnsscscsccsstsvesescsnsernssoesnnstincneie 10

Simon v. Eastern Kentucky Welfare Rights Org.,

GBB US, FO CII cccerscssssecssessvitsenimemnaiinniiiiauiiiai 16

In ex rel Snyder v. State Controlling Board, \1 Ohio App. 3d

270, 464 N.E. 2d 621 (1983).......ccsccsrcsscerccorrcescsrseessooeoreees 19

United States v. Richardson, 418 U.S. 166 (1974).........0000... 10

Vv

Valley Forge Christian College v. American United For

Separation of Church and State, Inc.,

a passim

Walling v. Michigan, 116 U.S. 446 (1886) ..............cccecceceeees 29

Warth v. Seldin, 422 U.S. 490 (1975) ....cccccccccccesseeserereeeenennees 16

West Lynn Creamery, Inc. v. Healy, 512 U.S. 186 (1994) ....21

Westinghouse Electric Corp. v. Tully, 466 U.S. 388 (1984).. 25

Whitmore v. Arkansas, 495 U.S. 149 (1990) ...........cccccceeee 5, 16

Constitutional Provisions and Statutes

EEE ee i

A a a 7

N.Y. Tax Law 210.3 (McKinney Supp. 1983-1984)............. 25

Ohio Rev. Code § 5733.05(B) ....ccccccccccccessessessessecsessueenenes 28-29

Miscellaneous Authorities

Fallon, Meltzer, Shapiro, Hart & Wechsler’s The Federal

Courts and the Federal System (5" ed. 2003) .....ccc..ses00« 10

13 Wright, Miller & Cooper, Federal Practice and

Procedure §3531.10 (2d ed. 1984) ........cccccccccccecseeseeserenens 13

IN THE

SUPREME COURT OF THE UNITED STATES

Nos. 04-1704 & 04-1724 -

DAIMLERCHRYSLER CORPORATION, PETITIONER

v.

CHARLOTTE CUNO, ET AL., RESPONDENTS

WILLIAM W. WILKINS, TAX COMMISSIONER

FOR THE STATE OF OHIO, PETITIONER

v.

CHARLOTTE CUNO, ET AL., RESPONDENTS

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF OF AMICI CURIAE FORD MOTOR COMPANY

AND GENERAL MOTORS CORPORATION IN

SUPPORT OF PETITIONERS

This brief is filed, with the written consent of the parties

lodged with the Clerk of this Court, on behalf of Ford Motor

Company and General Motors Corporation as amici curiae in

support of petitioners. '

' No counsel for a party to this case authored this brief in whole or

in part, and no person or entity other than the amici curiae made a

monetary contribution to the preparation and submission of this

brief.

2

INTEREST OF AMICI CURIAE

1. The Merits Of This Case Address A Matter Of

Substantial Economic Importance To Amici.

The amici curiae are corporations engaged in capital

intensive business activities. These activities include, in

particular, the manufacture and sale of automobiles and

trucks in the United States and in worldwide markets. In the

course of these commercial activities, the amici make

significant capital investments in States such as Michigan

and Ohio and also make large investments in foreign

locations. In planning these capital investments, the amici

necessarily consider commercial factors such as _ the

availability of skilled labor and the relative costs of

constructing and operating facilities in different locations.

The local tax structures and local tax rates that apply to

manufacturing operations are among the many significant

cost factors that are considered in selecting the location for

such facilities.

The amici operate manufacturing facilities in several

States that possess investment tax credit provisions that are

similar or identical to those addressed in this case. For

example, amicus Ford Motor Company currently employs

more than 14,000 people in the State of Ohio and more than

66,000 people in the State of Michigan, and has made more

than $11 billion of capital expenditures in these States over

the last five years. In addition, during the last five years,

Ford has made over $4 billion of capital expenditures in other

States that have similar or identical tax credit provisions.

_ Amicus General Motors Corporation currently employs

more than 20,000 people in Ohio and more than 75,000

people in Michigan, and has made over $12 billion of capital

expenditures in these States in the last five years.

3

Throughout the Nation as a whole, in other States that have

tax credit provisions similar to those at issue in this case,

General Motors has invested more than $3 billion in the

construction or expansion of manufacturing facilities within

the last five years.

In the current conditions of the world economy, the ability

of state and local governments to provide tax credits to

facilitate the location and expansion of manufacturing activity

within their borders is a matter of great importance.’ The

availability of such tax credits allows the States to provide a

more level playing field for American manufacturing in

worldwide markets. And, the availability of these credits also

thereby assists employers such as the amici in their efforts to

provide employment opportunities, and the economic benefits

of employment, in those locations.

2. The Standing Question Is A Matter Of Recurring

Importance To Amici, And Was Raised By Them In The Court

Below.

In the district court, respondents took the position that this

action should be remanded to state court because, as they

frankly acknowledged, “there are substantial doubts about

their ability to satisfy either the constitutional or the

prudential limitations on standing” and, in particular, because

there is a “serious argument that [they] fail to meet the * * *

rigorous Article III tests for citizen/taxpayer standing.” Resp.

Supp. Motion for Remand (filed June 12, 2000), at 13, 14.

* Respondents acknowledged in their Complaint that the

“purpose” and the actual “effect” of state investment tax credits is

to influence the investment location decisions of capital intensive

businesses. Complaint 4 22.

4

The district court denied the motion to remand on the grounds

that the respondents include “taxpayers [who] have standing

to object to the property tax exemption and franchise—tax

credit statutes under the ‘municipal taxpayer standing’ rule

articulated in Massachusetts v. Mellon, 262 U.S. 447 (1923).”

Order of November 20, 2000, at 6-7. The court of appeals

did not address whether respondents satisfied the

constitutional standing requirements in this case. In granting

the petition for a writ of certiorari, however, this Court

directed the parties to address that standing issue.

The amici are often parties to tax agreements and to tax

determinations made by official government representatives,

and the amici routinely make substantial investments in

reliance upon such official tax determinations. Whether third

parties (such as respondents) have standing to attempt to

unsettle tax determinations made by a State that concern the

taxes owed by other parties (such as DaimlerChrysler) is thus

a question of recurring importance to the amici. The amici

therefore argued at the rehearing stage in the court below that,

under this Court’s settled decisions, respondents lack

standing to challenge the application of the Ohio investment

tax credit in this case. For these reasons, and also because

this standing requirement is jurisdictional, the amici will also

address this issue in this brief.

SUMMARY OF ARGUMENT

I. None of respondents has standing to bring this action to

enjoin enforcement of the Ohio investment tax credit. The

first group of respondents (the “Ohio Plaintiffs”) base their

claim of standing solely on their status as residents and

taxpayers in Ohio. The only injury they claim is that the

investment tax credit “depletes the funds of the State of Ohio

to which the plaintiffs contribute through their tax payments.”

Complaint 9 40. This Court rejected that exact claim of “state

5

taxpayer” standing in Doremus v. Board of Education, 342

U.S. 429, 433-434 (1952), holding that this asserted harm is

“too indeterminable, remote, uncertain and indirect” to

suffice. The claim of injury by a state taxpayer does not

satisfy the constitutional minimum for standing because it

asserts nothing more than a remote and hypothetical harm

suffered “in some indefinite way in common with people

generally.” Frothingham v. Meilon, 262 U.S. 447, 488

(1923).

The second group of respondents (the “Michigan

Plaintiffs”) assert that they have standing due to their status

as residents and taxpayers of Michigan. They claim that, if

DaimlerChrysler had not been induced by the Ohio

investment tax credit to refurbish its facility in Ohio, the

company might instead have chosen to relocate that facility to

Michigan which, in turn, might have benefited the Michigan

plaintiffs by adding additional tax revenues and job

opportunities in Michigan. These generalized and indefinite

claims of injury by the Michigan Plaintiffs are even more

“remote” and “speculative” than those of the Ohio Plaintiffs,

and they fail to establish standing for the same reasons.

Moreover, even if the generalized allegations of the

Michigan Plaintiffs were otherwise sufficient, they would fail

under the separate requirement of the standing doctrine that

the plaintiff must establish that a favorable court decision

would “redress” the claimed injury. Whitmore v. Arkansas,

495 U.S. 149, 155 (1990). The injury alleged by the

Michigan Plaintiffs (and by the separate Ohio respondent

named Kim’s Auto & Truck Service, Inc.) is directly and

exclusively the consequence of the location of the

DaimlerChrysler facility in Ohio. That injury could be

“redressed” only by a court order that would enjoin or

prevent the location of the DaimlerChrysler plant in Ohio.

Respondents have acknowledged, however, that the

6

DaimlerChrysler facility in Ohio was in fact completed in

2000 — even before the complaint in this case was filed — and

that petitioner has been continuously producing vehicles at

that location since that time. See Kim’s Auto & Truck

Service, Inc. v. City of Toledo, Pet. No. 03-1629, at 4-5, cert.

denied, 125 S.Ct. 2988 (2005). Recognizing that the plant

has already been completed, respondents did not seek to

enjoin the location of the DaimlerChrysler facility in Ohio.

There is no basis for any claim — and no claim has been

made — that granting the requested injunction against the

Ohio tax credit would cause the completed DainilerChrysler

facility in Ohio to be bulldozed and rebuilt at some different

location in some other State. There is thus plainly no

“substantial likelihood” that the relief requested would

redress the injury claimed by the Michigan Plaintiffs or by

Kim’s Auto. Duke Power Co. v. Carolina Environmental

Study Group, 438 U.S. 59, 75 n.20 (1978). Because their

claims of injury would not be “redressed” by the relief they

seek, they lack standing to challenge the state tax credit in

this case. /bid.

Il. If the Court reaches the merits, it should conclude that

the Ohio investment tax credit does not violate the

requirements of the dormant Commerce Clause. This Court

has held that any State may “compete with other States for a

share of interstate commerce” so long as it does not

“discriminatorily tax the products manufactured or the

business operations performed in any other State.” Boston

Stock Exchange v. State Tax Commission, 429 U.S. 318, 336-

337 (1977). The investment tax credit offered by Ohio serves

as an inducement to all taxpayers to make new business

investment in Ohio, and it does so without imposing any

additional tax burden on those taxpayers that choose to invest

elsewhere. The Ohio provision is constitutionally permissible

because it provides incentives for local economic