Opposition Brief — Duffy v. Wetzler

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NQ¥Y &S B92

Gee CLERK

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No. 92-521

IN THE

Supreme Court of the United States

October Term, 1992

EUGENE H. DUFFY, et ai.,

Petitioners,

against

JAMES W. WETZLER, er ai.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE NEW YORK

SUPREME COURT, APPELLATE DIVISION—SECOND DEPARTMENT

Brief for Respondents Wetzler, Chu and Regan in

Opposition

ROBERT ABRAMS

Attorney General of the State of New York

Attorney for Respondents Wetzler, Chu

and Regan

The Capitol

Albany, NY 12224

($18) 473-0330

JERRY BOONE

Solicitor General

PETER H. SCHIFF

Deputy Solicitor General

and Counsel of Record

DENISE A. HARTMAN

Assistant Attorney General

of Counsel

Dated: November 19, 1992

THE REPORTER COMPANY, INC.—Walton, NY 13856—800-252-7181

Syracuse Office, University Building, Syracuse, NY 13202—315-426-1235

NYC Office—30 Vesey St.. New York, NY 10007—212-7326978—800-800-4264

(2559—LC7-704—1992)

Questions Presented

1. Whether this Court’s decision in Davis v Michigan

Dept. of Treasury, 489 U.S. 803 (1989), may be applied

prospectively only.

2. Whether petitioners’ claim that they have been arbi-

irarily denied a clear and certain remedy provides a basis for

granting the writ of certiorari.

3. Whether petitioners’ claimed conflicts with this

Court’s decisions in Howlett v Rose, 496 U.S. 356 (1990);

Hafer v Melo, US. » 112 5.44%. 356, 1164. e6. 2a

301 (1991), or Felder v Casey, 487 U.S. 131 (1988), provide

a basis for granting the writ of certiorari.

Table of Contents.

Page

Questions PYCscnted ...... 0s es enaws tae i

CAPUENORS THCIOW ike ks eet |

SUT TMICTION os oS ee cae oe eee 2

watemoent of the Cause .... 065 sci ccuenee 2

ARGUMENT:

POINT I. The decision below does not violate the

Supremacy Clause and it fully accords with

this Court’s decisions in Davis and Beam . 7

PoINT II. Petitioners’ argument that they have been

denied a clear and certain remedy does not

provide a basis for granting a writ of cer-

HOPRTT ss 55s os 0e-di wee O 8

POINT III. The decision below does not conflict with

Hafer, Howlett, or Felder ..........00+. 1]

COMUCIMSOOR a sec oe ek Sw oi eee eee 15

TABLE OF AUTHORITIES.

Page

CASES:

Al-Jundi v Estate of Rockefeller, 885 F2d 1060 (2d Cir.

Te ahh eek pear evces 13

Alliance of Am. Insurers v Chu, 77 N.Y.2d 573, 569

aoe eee soe. 97) N.E.26 672 (1991).......... 10

American Trucking Associations v Smith, 496 U.S.

EE 9

Ashland Oil, Inc. v Caryl, 497 U.S. 916 (1990)...... 9

Axelrod v New York State Teachers Retirement Sys-

tem, 154 A.D.2d 827, 546 N.Y.S.2d 489 (3d Dept.

gk noe ss bans r va ssccccenes 10

Bass v State of South Carolina, 414 S.E.2d 110 (1991),

pet for cert pending, No. 91-1697 ............. 9

Chevron Oil Co. v Huson, 404 U.S. 97 (1971)... 6, 8, 10

Davis v Michigan Dept. of Treasury, 489 U.S. 803

a passim

Duffy v Wetzler, 148 Misc. 2d 459, 555 N.Y.S.2d 543

(Sup Ct Queens Co 1990), mod, 174 A.D.2d 253,

579 N.Y.S.2d 684 (2d Dept. 1992), appeal dis-

missed, 79 N.Y.2d 976, 583 N.Y.S.2d 190, 592

N.E.2d 798 (1992), lv denied, 80 N.Y.2d 890, 587

N.¥.S.2d 900, 600 N.E.2d 627 (1992)....... passim

iV.

Edelman v Jordan, 415 U.S. 651 (1974)............ 12

Felder v Casey, 487 U.S. 131 (1988)....... 41, 13, 14

Flushing Nat'l Bank v Municipal Assist. Corp., 40

N.Y.2d 731, 390 N.Y.S.2d 22, 358 N.E.2d 848

te Ey | Sr A NRE ES City ee sory on 10

Foss v City of Rochester, 65 N.Y.2d 247, 491 N.Y.S.2d

128. 480 N.Eh2e 710 CPSBS) oo wn wc cee caes 10

Gager v White, 53 N.Y.2d 475, 442 N.Y.S.2d 463, 425

N.E.2d 851, cert denied sub nom. J.E. Guertin Co.

v Cachet. 454 U.S. 1066 (1981)... cc bec cicade 10

Garrett v Bamford, 538 F.2d 63 (3d Cir), cert denied,

See a PET COPED Cee ieee ae eee beeches 14

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

Pe oa a ee te ee ed alae ae eae ee 12

Guernee v Aetna Life and Casualty Co., 55 N.Y.2d 184,

448 N.Y.S.2d 145, 433 N.E.2d 128, cert denied,

BT ac OT CEE < 0500-0 s 6b oe HAS S eem 10)

Hafer v Melo, Ce acca Pe ee ee oe ee

ee ee SOc Jb cso eek eae es as Oe be

Hardwick v Cuomo, 891 F.2d 1097 (3d Cir. 1989)... 9

Vv.

Harper v Virginia Department of Taxation, 241 Va.

232, 401 S.E.2d 868 (1991), cert. granted and

judgment vacated by ____ US. » CHT B.S.

2883, 115 L. ed. 2d 1049 (1991), on remand, 242

Va. 322, 410 S.E.2d 629 (1991), cert. granted, No.

71-734, . UZ, , 112 S. Ce. 1934, 118 L.

OM. Man 8 KONO coc na cc hny beens nase 8, 9, II

Hellerstein, Matter of v Town of Islip, 37 N.Y.2d 1, 371

N.Y.S.2d 388, 332 N.E.2d 279 (1975).......... 10

Howlett v Rose, 496 U.S. 356 (1990). ......... We be F-

Hurd v City of Buffalo, 41 A.D.2d 402, 343 N.Y.S.2d

950 (4th Dept. 1973), affd, 34 N.Y.2d 628, 355

N.Y.S.2d 369, 311 N.E.2d 504 (1974).......... 10

James B. Beam Distilling Co. v Georgia, U.S.

ll? S. Ct. 2439, 115 L. ed. 2d 481

REPRE DC 5c vw Cee a neeie a ee OR a ee ke 6, 7,8

Jones v Berman, 37 N.Y.2d 42, 371 N.Y.S.2d 422, 332

Paces dee A UDO 5 ok ve naeeaaks Civeecee ween 14

Lamboy, Matter of v Gross, 126 A.D.2d 265, 513

PO. Raby Ses CEM THOME. ISG) ih con ita aa wae 14

Martin v Lavine, 39 N.Y.2d 72, 382 N.Y.S.2d 956, 346

Secu Fe ES sg oneal ee 14

McCann, Matter of v Scaduto, 71 N.Y.2d 164, 524

W.¥.S. 20 398, 519 N.E.2d 309 (1967) ......... 10

Vi.

McKesson Corp. v Division of Alcoholic Beverages &

Temacco, 496 U.S. 18 (1990) ... 2. ces cceiss 9

National Mines Corp. v Caryl, 497 U.S. 922 (1990)... 9

Oak Beach v Town of Babylon, 100 A.D.2d 930, 474

N.Y.5.20 S16 (26 Dept. 1984) 2.05... 050 ccness 14

Pledger v Bosnick, 811 S.W.2d 286 (Ark 1991), pet for

COFT DCIIERE, IND. SEs57D ccc ccc esc vencncrs 9

Schumaker v Town of Cortlandt, 124 A.D.2d 129, 511

N.Y.S.2d 351 (2d Dept.), lv denied, 70 N.Y.2d

603, 518 N.Y.S.2d 1026, 512 N.E.2d 552 (1987) 10

Sheehy v Montana Dept. of Revenue, 250 Mont 437,

820 P.2d 1257 (1991), pet for cert pending, No.

U8 SSSA AAD eg eer eam aan EAE 9

Swanson v North Carolina, 329 NC 576, 407 S.E.2d

791, affd on rehg, 330 NC 390, 410 S.E.2d 490

(1991), pet for cert pending, No. 91-1436 ...... 9

Swanson v Powers, 937 F.2d 965 (4th Cir 1991), cert

denied, it nines OR Or TO oe OO.

ee b'nk AKA A RW D 13

Williams v Smith, 781 F.2d 319 (2d Cir. 1986) ...... 13

FEDERAL STATUTES:

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Sa So 5) rere era are 2

SS D5 ee a aa aaa nr passim

Vil.

NEW YORK CONSTITUTION:

a cw cs cae es koe cee eens 2

NEW YORK STATUTES:

Spee IED co 3 oc kv wavs coe an debe chee 14

Bo 8) ee eae err enael Aaa hy 7

DS OES a oc deo cada wae ee 7

PO CdS walk weld yada oka aeolian a ee ye

ee en et aR A 3

eS he Per re rere et en rt 3

aS nh Ae RRR See 3

SE ey arr MB ont anny Rap ee 3

i a oo a oe ee eee 2

S OEIC 3) TRRUMIBED. vc ks cawecicsceecs 2,3,4

Se PN ck oe oa eRe eae eee 3

Be O rR Ue e ee NO re ACAD yen A Ar 3

2 | ae ea eer as EAN Mees An a Ae 5

MISCELLANEOUS:

New York City Administrative Code § 11-1712(c)(3).. 3,4

No. 92-52]

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1992.

EUGENE H. DUFFY, et al.,

Petitioners,

-against-

JAMES W. WETZLER, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE NEW YORK

SUPREME COURT APPELLATE DIVISION—SECOND DEPARTMENT

Brief for Respondents Wetzler, Chu and Regan in

Opposition

Opinions Below

The opinion of the New York State Supreme Court, Ap-

pellate Division, Second Department (Pet. App. la-18a) is

reported at 174 A.D.2d 253, 579 N.Y.S.2d 684.! The opin-

ion of the New York State Supreme Court, Queens County

(Pet. App. 25a-38a), is reported at 148 Misc. 2d 459, 555

N.Y.S.2d 543. The orders of the New York State Court of

Appeals dismissing petitioners’ appeal (Pet. App. 5la-52a)

and denying petitioners’ motion for leave to appeal (Pet.

App. 58a-59a) are reported respectively at 79 N.Y.2d 976,

583 N.Y.S.2d 190, 592 N.E.2d 798, and 80 N.Y.2d 890, 587

N.Y.S.2d 900, 600 N.E.2d 627 (1992).

Jurisdiction

The opinion of the Appellate Division, Second Depart-

ment was entered on January 15, 1992 (Pet. App. 18a). The

dismissal by the New York State Court of Appeals, sua

sponte, of petitioners’ appeal as of right pursuant to section

S601(b)(1) of the New York Civil Practice Law and Rules

was dated April 7, 1992 (Pet. App. 51a). The denial by the

New York State Court of Appeals of petitioners’ motion for

leave to appeal pursuant to sections 5602(a)(1)(1) and

5514/a) of the New York Civii Practice Law and Rules was

dated July 7, 1992 (Pet. App. 58a). The jurisdiction of this

Court is invoked under 28 U.S.C. § 1257(a).

Statement of the Case

For fifty years prior to this Court’s decision in Davis v

Michigan Department of Treasury, 489 U.S. 803 (1989)

(**Davis’’), New York has excluded from taxation pensions

paid to former officers and employees of the State of New

York and its subdivisions and agencies. N.Y. Const. Art.

XVI, § 5; former N.Y. Tax Law § 612(c)(3). Pensions paid

'Pet. App.” refers to the appendix to the certiorari petition in No.

to other retirees, including former employees of the federal

government, were subject to taxation.2 Former N.Y. Tax

Law § 612(a).

This Court’s decision in Davis, which struck down provi-

sicns of the Michigan tax laws exempting from taxation

retirement benefits paid by that State or its political subdivi-

sions while taxing retirement benefits paid by all other

employers including the federal government as violative of

4 U.S.C. § 111 and the principles of intergovernmental tax

immunity, sent shock waves through at least twenty States

that had similar tax provisions. New York immediately

acted to conform its tax laws to the Davis ruling, amending

section 612(c)(3) of the Tax Law to exclude from taxation

pensions paid to former officers and employees of the fed-

eral government. L. 1989, ch. 664, §§ 1, 2.5 The amendment

was made applicable to federal pension benefits received in

taxable years beginning on or after January 1, 1989. L.

1989, ch. 664, § 3.

Two months after this Court decided Davis, petitioners,

retired federal employees and their spouses, commenced this

action against various New York State and City officials, and

the City of New York, in New York Supreme Court, Queens

County, seeking declaratory, injunctive and monetary relief

under state and federal law. In their second amended com-

plaint, petitioners alleged as a first cause of action under 42

U.S.C. § 1983 that the pre-1989 New York State and City tax

laws violated their rights under 4 U.S.C. § 111, princi-

*Since 1981, the first $20,000 in pension income to all reurees w!

have attained the age of 59'/2, including federal retirees, has been exc

from taxation. N.Y. Tax Law 612(c)(3-a); L. 1981, ch 103, § 60

‘Corresponding provisions in section 11-17i2(c)(3) of the New

City Administrative Code were also amended to conform 1

ruling.

ples of intergovernmental tax immunity, and the Due Proc-

ess and Equal Protection Clauses of the United States Con-

stitution. As a second cause of action, petitioners sought a

declaration that section 612(c)(3) of the Tax Law and sec-

tion 11-1712(c)(3) of the New York City Code violated

these same constitutional and statutory provisions. As a

third cause of action, petitioners sought an injunction

against the State and City respondents to prevent them from

continuing to collect taxes on federal pensions for the years

1986 through 1989. Petitioners alleged as a fourth and final

cause of action that the City of New York is liable for

monies had and received. Petitioners also sought class certi-

fication. Respondents duly answered and interposed various

defetises.

Petitioners moved for partial summary judgment on their

second cause of action for declaratory relief and renewed a

prior application for class certification. Both the State and

City respondents cross-moved for summary judgment dis-

missing the complaint taking the position that Davis should

be given only prospective effect.

In its Memorandum Decision dated April 10, 1990, Su-

preme Court, Queens County, reasoned that, regardless of

whether Davis is to be applied retroactively, New York

State law requires refunds (Pet. App. 3la-33a, 148 Misc. 2d

459, 465-66, 555 N.Y.S.2d 543, 546-48). The court granted

judgment in favor of petitioners declaring that the City and

State personal income tax scheme which taxed federal pen-

sion benefits received prior to January 1, 1989, while ex-

empting from taxation State and local pension benefits, was

discriminatory, invalid and unconstitutional in light of

Davis, and that petitioners are entitled to refunds of personal

income taxes paid on federal pension benefits for the years

1986 through 1988, provided that they file for refunds and

meet the procedural requirements for refunds under the Tax

Law (Pet. App. 37a, 148 Misc. 2d at 470, 555 N.Y.S.2d at

550).4 The court also enjoined respondents from assessing

and collecting personal income taxes on federal pension

benefits received in the years 1986 through 1988 id from

interfering with petitioners’ rights to file for a -efund of

personai income taxes paid on federal benefits for the years

1986 through 1988 (Pet. App. 35a-36a, 148 Misc. 2d at 470,

555 N.Y.S.2d at 550).

The court granted, in part, respondents’ motion to dismiss

petitioners’ first cause of action for monetary relief under 42

U.S.C. § 1983 on the ground that petitioners failed to show

that the named State and City defendants had personally

engaged in any civil rights violation (Pet. App. 34a-35a, 148

Misc. 2d at 467-69, 555 N.Y.S.2d at 548-49). The court also

dismissed petitioners’ fourth cause of action against New

York City for monies had and received because petitioners

failed to comply with a State law protest requirement (Pet.

App. 36a-38a, 148 Misc. 2d at 469-70, 555 N.Y.S.2d at

549-50). Finally, the trial court denied petitioners’ motion for

class certification because class relief is inappropriate where

governmental actions are involved and subsequent plaintiffs

will be adequately protected under the doctrine of stare

decisis (Pet. App. 29a-3la, 148 Misc. 2d at 464-65,

*The State respondents do not concede that petitioners ““have satisfied

all procedural requirements imposed by the New York Tax Law”, as

asserted in the Petition, page 5, note 2. We do recognize, however, that

taxpayers who have filed adequate and timely claims on the basis of Davis

with the New York State Department of Taxation and Finance pursuant to

New York Tax Law §§ 686, 687, need take no further action to protect their

rights until and unless the Department denies such claims after a final

resolution of this case.

555 N.Y.S.2d at 546). An order and judgment was entered

accordingly on July 26, 1990 (Pet. App. 39a-44a).°

On appeal and cross appeal, the Appellate Division, Sec-

ond Department, in its Opinion and Order of January 15,

1992, modified the order and judgment of Supreme Court,

Queens County, by deleting those portions of that order and

judgment which granted petitioners’ declaratory and injunc-

tive relief, and as so modified, affirmed (Pet. App. la-18a).

The Appellate Division held that state law does not require

refunds unless there is an antecedent determination that

Davis is to be applied retroactively (Pet. App. 7a, 174

A.D.2d 253, 258-59, 579 N.Y.S.2d 684, 687). The court,

after examining this Court’s decision in James B. Beam

Distilling Co. v Georgia, ie sicmee A Oe oe

115 L. ed. 2d 481 (1991), ruled that the appropriate analysis

of the prospectivity issue is governed by Chevron Oil Co. v

Huson, 404 U.S. 97 (1971) (Pet. App. 7a-14a, 174 A.D.2d at

259-64, 579 N.Y.S.2d at 688-91). The Appellate Division

recognized that while Beam clearly proscribed the use of

selective prospectivity, it did not address the precedentiai

Vitality of pure prospectivity or otherwise overrule the anal-

ysis of Chevron Oil (Pet. App. 13a-14a, 174 A.D.2d at

263-64, 579 N.Y.S.2d at 690). Because Michigan had con-

ceded in Davis that a refund was appropriate, the Appellate

Division concluded that Beam’s proscription against the use

of selective prospectivity was not implicated (Pet. App. 16a,

‘Petitioners made four post-judgment motions (1) for leave to renew

or reargue their application for class certification; (11) to supplement their

pleadings; (111) to permit intervention by a number of other taxpayers; and

(iv) for an award of attorneys’ fees to plaintiffs’ counsel under the common

fund doctrine. Supreme Court denied all such motions by orders entered

October 5, 1990, which orders were subsequently affirmed by the Appel-

late Division, Second Department in its Opinion and Order of January 15,

1992 (Pet. App. 17a).

174 A.D.2d at 265, 579 N.Y.S.2d at 691). Applying the three-

pronged Chevron Oil analysis, the court heid that Davis should

be given only prospective effect (Pet. App. I4a-l6a, 174

A.D.2d at 264-65, 579 N.Y.S.2d at 691).

The Appellate Division also agreed with the trial court's

conclusion that the cause of action for damages under 42

U.S.C. § 1983 should be dismissed, adding that, in any event,

defendants are protected by the doctrine of qualified immunity

(Pet. App. 16a-17a, 174°A.D.2d at 266, 579 N.Y.S.2d at 692).

Lastly, the Appellate Division agreed that class certification

was properly denied, and that the cause of action against the

City respondents for monies had and received was properly

dismissed (Pet. App. 16a-17a, 174 A.D.2d at 266, 579

N.Y.S.2d at 692).

The New York State Court of Appeals sua sponte dismissed

plaintiffs’ appeal taken as of right pursuant to N.Y. C.P.L.R.

5601(b)(1) by order dated April 7, 1992 (Pet. App. S5la-52a).

The Court of Appeals subsequently denied plaintiffs’ applica-

tion for leave to appeal pursuant to N.Y. C.P.L.R. 5601(a)(1)(1)

and 5514(a) by order dated July 7, 1992 (Pet. App. 58a-59a).

ARGUMENT

POINT I

The decision below does not violate the Supremacy

Clause and it fully accords with this Court’s decisions in

Davis and Beam.

The central issue raised in the petition for writ of certiorari

is whether this Court’s holding in Davis must be applied

retroactively to permit federal pensioners to recover state and

local taxes paid on their pensions between 1986 and 1988. As

petitioners have conceded, this question is identical to the

issue raised by the petitioners in a matter scheduled for brief-

ing and argument before this Court in the current Term.

Harper v Virginia Department of Taxation, 242 Va 322, 410

S.E.2d 629 (1991), cert. granted, No. 91-794, U.S. R

112 S. Ct. 1934, 118 L. ed. 2d 541 (1992) (“‘Harper’’). Peti-

tioners’ attempt to recast the prospectivity issue into one of

whether a state court has “the power to change the effective

date of a Congressional enactment”’ (Pet, p 9) is unavailing.

This argument and counterarguments are aptly made by the

petitioners and respondents in Harper in their briefs to this

Court.© Consequently, there is no need to grant certiorari in

this matter to address the Davis issue.

Moreover, we believe the decision cf the Appellate Divi-

sion, Second Department is in all respects sound. Beam clearly

does not preclude the application of the analysis of Chevron

Oil to the determination of whether a decision of this Court

should be given purely prospective effect. As is discussed in

the Brief of Respondent Virginia Department of Taxation in

Harper and in the Amici Curiae Brief of the State of Utah,

joined by the State of New York and others, filed in support of

respondent in Herper, the Chevron Oil analysis leads to the

conclusion that Davis should be applied prospectively only.

POINT II

Petitioners’ argument that they have been denied a clear

and certain remedy does not provide a basis for granting a

writ of certiorari.

Petitioners also argue as a basis for seeking certiorari (Pet,

pp 18-21) that respondents, and the New York courts, have

©We note that, should this Court decide in Harper that Davis must be

applied retroactively as a federal matter of choice-of-law, the issue of

whether New York provides a remedy as a matter of state law remains to be

decided in this case.

acted disingenously “‘to defeat the enforcement of a federal

right”’ (Pet, pp 18-19). Specifically, petitioners assert that in

the case of Hardwick v Cuomo, 891 F.2d 1097, 1105-06 (3d

Cir. 1989), the ““Attorney General of New York repesented to

the federal courts that prospectivity is not a defense under the

personal income tax law of New York” (Pet, p 18). Hardwick,

however, was completely unrelated to this case. There, non-

resident taxpayers promptly challenged the constitutionality of

recently enacted New York tax provisions which established

progressive personal income tax rates on nonresidents by

relating them to their total income. Unlike the situation in

Hardwick, the issue of prospectivity is raised here because of

the longstanding, unchallenged, widespread and reasonable

reliance on the validity of pension income tax provisions.

Respondents are not being disingenuous or otherwise “playing

fast and loose with the courts”’ (Pet, p 18). Rather, as has this

Court in American Trucking Associations v Smith, 496 U.S.

167 (1990); McKesson Corp. v Division of Alcoholic Bever-

ages & Tobacco, 496 U.S. 18 (1990); and Beam,’ as well as

the courts of our sister states applying the doctrine in similar

tax cases,® respondents are working to develop the law regard-

ing the doctrine of prospectivity in accordance with constitu-

tional principles and sound public policy. It cannot be

7See, also, Ashland Oil, Inc. v Caryl, 497 U.S. 916 (1990) (per

curiam), National Mines Corp. v Caryl, 497 U.S. 922 (1990) (per curiam).

*See, e.g., Harper v Virginia Dept. of Taxation, 241 Va 232, 401

S.E.2d 868 (1991), cert granted and judgment vacated by

eines WP te . 111 S. Ct. 2883, 115 L. ed. 2d 1049 (1991), on remand,

242 Va 322, 410 S.E.2d 629 (1991), cert granted, No. 91-794,

U.S. , 112 S.Ct. 1934, 118 L. ed. 2d 541 (1992); Swanson v

North Carolina, 329 NC 576, 407 S.E.2d 791, affd on rehg, 330 NC 390,

410 S.E.2d 490 (1991), pet for cert pending, No. 91-1436; Sheehy v

Montana Dept. of Revenue, 250 Mont 437, 820 P.2d 1257 (1991), per for

cert pending, No. 91-1473; Bass v State of South Carolina, 414 S.E.2d 110

(1991), pet for cert pending, No. 91-1697, Pledger v Bosnick, 811 S.W.2d

286 (Ark. 1991), pet for cert pending, No. 91-375.

said that application of the prospectivity doctrine and analysis

of Chevron Oil to this case is “‘arbitrary”’.

Next, petitioners’ argument (Pet, p 21) that the decision

below discriminates against a federal right is answered

simply by the fact that the Appellate Division applied the

federal doctrine of prospectivity to a claimed federal right

as it believed this Court would do as a matter of federal

law.? Moreover, the New York courts have resolved against

petitioners’ their argument that the New York refund stat-

’The courts in New York have applied the prospectivity analysis of

Chevron Oil to determine whether a judicial decision is to be applied

prospectively only, although they have generally concluded the conditions

for applying the decisions prospectively only were not satisfied in those

cases. See, e.g., Gager v White, 53 N.Y.2d 475, 483-84, 442 N.Y.S.2d 463,

465-66, 425 N.E.2d 851, 853-54, cert denied sub nom. J.E. Guertin Co. v

Cachat 454 U.S. 1086 (1981); Guernee v Aetna Life and Casualty Co., 55

N.Y.2d 184, 191-93, 448 N.Y.S.2d 145, 146-48, 433 N.E.2d 128, 130-31,

cert denied, 459 U.S. 837 (1982); Matter of McCann v Scaduto, 71 N.Y.2d

164, 176 n 3, 524 N.Y.S.2d 398, 403 n 3, 519 N.E.2d 309, 314 n 3 (1987);

Axelrod v New York State Teachers Retirement System, 154 A.D.2d 827,

828, 546 N.Y.S.2d 489, 490 (3d. Dept 1989); Schumaker v Town of

Cortlandt, 124 A.D.2d 129, 137-39, 511 N.Y.S.2d 351, 356-58 (2d Dept.),

ly denied, 70 N.Y.2d 603, 518 N.Y.S.2d 1026, 512 N.E.2d 552 (1987). A

related prospectivity analysis has been employed by the New York courts

in real property tax refund cases where the governmental entity reasonably

relied on the revenues and where retroactivity would ‘‘cause disorder and

confusion in public application affairs even though there may be a strict

legal right.”” See, Foss v City of Rochester, 65 N.Y.2d 247, 260, 491

N.Y.S.2d 128, 135, 480 N.E.2d 717, 724 (1985); Matter of Hellerstein v

Town of Islip, 37 N.Y.2d 1, 13-14, 371 N.Y.S.2d 388, 399, 332 N.E.2d 279,

287 (1975); Hurd v City of Buffalo, 41 A.D.2d 402, 405-406, 343 N.Y.S.2d

950, 953 (4th Dept. 1973), affd, 34 N.Y.2d 628, 355 N.Y.S.2d 369, 311

N.E.2d 504 (1974).

Neither case cited by petitioners in support of their argument that the

New York Court of Appeals has “categorically rejected” financial hard-

ship to deny a remedy involved the prospectivity of a judicial decision.

Flushing Nat'l Bank y Municipal Assist. Corp., 40 N.Y.2d 731, 390

N.¥.S.2d 22, 358 N.E.2d 848 (1976), involved New York City legislation

which imposed a three year moratorium on actions to enforce the city’s

(Footnote continued.)

utes require refunds regardless of any defense that Davis

should be applied prospectively only; thus that state law

issue does not present a basis for granting the writ of

certiorari.

POINT III

The decision below does not conflict with Hafer, Howlett

or Feider.

Petitioners’ argument that the decision below conflicts

with various decisions of this Court become academic if this

Court affirms Harper, as we believe it should. Their conten-

tions provide no independent basis for granting the writ of

certiorari even if this Court were to hold in Harper that

Davis must be applied retroactively.

Petitioners argue (Pet, p 22), cryptically, that the Appel-

late Division, in dismissing their cause of action under 42

U.S.C. § 1983, somehow redefined their federal cause of

action, thereby creating a conflict with Howlett v Rose, 496

U.S. 356 (1990). They claim that they are entitled to a final

and binding determination under section 1983 that respond-

ents “‘may no longer enforce the illegal scheme”’. The Ap-

pellate Division, however, did not redefine the federal cause

of action, but merely applied federal law to the circum-

stances of this case, and held that New York’s former tax

(Footnote continued.)

Outstanding short-term obligations. In fact, in Alliance of Am. Insurers v

Chu, 77 N.Y.2d 573, 569 N.Y.S.2d 364, 571 N.E.2d 672 (1991), the Court

of Appeals, in dicta, recognized that legislation which retroactively affects

pre-existing rights may be sustained after balancing a number of factors,

including “‘fairness to the parties, reliance on pre-existing law, the extent of

retroactivity and the nature of the public interest to be served by the law”.

77 N.Y.2d at 586, 569 N.Y.S.2d at 370, 571 N.E.2d at 678.

laws did not violate petitioners’ rights because Davis is to

be given only prospective effect. Aside from this fact, to the

extent that petitioners argue that they are entitled to a decla-

ration or an injunction that respondents may not interfere

with their rights to refunds, petitioners are in effect seeking

retroactive relief in the form of damages against the State of

New York, a remedy clearly barred by the Eleventh Amend-

ment. See, Edelman v Jordan, 415 U.S. 651, 663 (1974);

Great Northern Life Ins. Co. v Read, 322 U.S. 47, 53-54

(1944). And because the New York Legislature immediately

amended the State’s former Tax Law to bring it into compli-

ance with the Davis ruling, effective for all pension benefits

received after January |, 1989, any need for declaratory or

injunctive relief with regard to the former statute was obvi-

ated. Thus respondents fail to understand how the decision

below conflicts with Howlett v Rose.

Next petitioners contend (Pet, p 22) that they are entitled

to damages from the State respondents in their individual

Capacities, and that the Appellate Division’s decision in this

regard conflicts with Hafer v Melo, U.S. » 112 S.

Ct. 358, 116 L. ed. 2d 123 (1991). The Appellate Division,

however, correctly held that petitioners failed to make a

factual showing that respondents were personally and di-

rectly involved in any violation of their federal rights. Each

of the named petitioners submitted self-assessing personal

income tax returns and voluntarily paid income taxes on

their pensions received prior to 1989. Except for the mere

processing of these returns and payments, there was no

involvement by anyone from the State, let alone respond-

ents, in collecting or assessing taxes on petitioners’ federal

pensions. Nor could respondents have participated in deny-

ing any refund claims, as petitioners did not file administra-

tive claims for refunds with the Department of Taxation and

“~

Finance until long after this action was commenced.!9 An

action for damages under 42 U.S.C. § 1983 against a gov-

ernmental official in his or her individual capacity lies only

upon a factual showing that the official caused the depriva-

tion of a federal right. See, Al-Jundi v Estate of Rockefeller,

885 F.2d 1060 (2d Cir. 1989); Williams v Smith, 781 F.2d

319, 323-324 (2d Cir. 1986). Even if personal involvement

in the alleged deprivation had been shown, the Appellate

Division was clearly correct in holding that the respondents

are shielded from liability by qualified immunity. See,

Swanson v Powers, 937 F.2d 965 (4th Cir. 1991), cert

denied, US. , 112 S. Ct. 871, 116 L. ed. 2d 777

(1992). Neither of the Appellate Division’s rulings with

regard to the section 1983 claim for damages conflicts in

any way with Hafer v Melo.

Lastly, petitioners argue (Pet, pp 23-24) that the Appel-

late Division’s rationale for denying their application for

class certification conflicts with this Court’s decision in

Felder v Casey, 487 U.S. 131 (1988). The Appellate Divi-

sion denied class certification based on New York precedent

holding that class certification is generally inappropriate

where governmental actions are involved and subsequent

plaintiffs will be adequately protected under the doctrine of

stare decisis (Pet App 16a-17a, 174 A.D.2d at 266, 579

N.Y.S.2d at 692.

In Felder v Casey, the Court held that a Wisconsin notice-

» Of-claim statute may not be applied to § 1983 actions be-

cause such a device “‘predictably alter[ed] the outcome of

§ 1983 claims depending solely on whether they [were]

'OVhese claims, as well as all others seeking refunds on the basis of

Davis, are being held in abeyance pending the final outcome of this

litigation.

brought in state or federal court’’. 489 U.S. 131, 152. The

general rule in New York that class certification is inap-

propriate where governmental operations are involved and

subsequent piaintiffs will be adequately protected is merely

a presumption based on New York’s class action statute

which contains a prerequisite that a class action be the

superior method for adjudicating the controversy. NY

C.P.L.R § 901(a)(5); see, Martin v Lavine, 39 N.Y.2d 72,

75, 382 N.Y.S.2d 956, 958, 346 N.E.2d 794, 796 (1976);

Jones v Berman, 37 N.Y.2d 42, 57, 371 N.Y.S.2d 422, 432,

332 N.E.2d 303, 311 (1975); Oak Beach v Town of Babylon,

100 A.D.2d 930, 930, 474 N.Y.S.2d 818, 819-20 (2d Dept.

1984); cf., Matter of Lamboy v Gross, 126 A.D.2d 265,

273-74, 513 N.Y.S.2d 393, 399 (1st Dept. 1987). This generai

rule is not outcome-determinative. In this case petitioners

have not shown that similarily situated taxpayers will not be

adequately protected by the doctrine of stare decisis. Regard-

less of class certification, if petitioners are successful, other

taxpayers seeking refunds for taxes paid on their federal

pensions need only file timely claims with the Department of

Taxation and Finance to obtain their refunds.'! Aside from

the ministerial task of calculating the amount of taxes paid

that were attributable to federal pension income,

"Garrett v Bamford, 538 F.2d 63 (3d Cir), cert denied, 429 U.S. 977

(1976), cited by petitioners, Br, pp 23-25, is inapposite. There, numerous

homeowners brought an action on behalf of themselves and other members

of a class challenging a county method of assessing property taxes as

racialiy discriminatory. The Third Circuit held that the federal action was

not barred by the Tax Injunction Act because plaintiffs lacked a plain,

speedy and efficient remedy in the Pennsylvania state courts. The court

there was concerned that without the class action mechanism, the financial

burden for each individual taxpayer of gathering extensive evidence and

expert testimony weuld make the litigational expense of the states’ statu-

tory review procedures “forbidding, if not insurmountable”. 538 F.2d at

471. Such insurmountable financial and evidentiary burdens will not be

sutfered by individual taxpayers who are not named parties in this action.

the administrative procedure for obtaining refunds will not

be cumbersome. There has been no showing that respond-

ents will flaunt any declaratory judgment in petitioners’

favor such that stare decisis will not adequately protect the

rights of similarly situated taxpayers. Thus, petitioners’

argument does not provide a basis for granting a writ of

certiorari.

CONCLUSION

The writ should be denied.

Dated: Albany, New York

November 19, 1992

Respectfully submitted,

ROBERT ABRAMS

Attorney General of the State of New

York, Attorney for Respondents

Wetzler, Chu and Regan