Petition for A Writ of Certiorari — Cleveland v. Illinois Bell Telephone Co.

Supreme Court brief1972

Ask Donna

What actually matters in this document.

Text

ae —asees © Aa a ee

-TELIN OIS BELL TELEPHONE COMPANY, ET AL.,

| go Se en * Respondents,

‘PETITION For A. WRIT OF ¢ CERTIORARI -TO ues

UNITED STATES COURT. OF APPEALS

Fee : : ‘ ee er ? -- Petitioner,.

OR TEE REVERTH OHROUET.

Sie hae 3G Se

ae _ Watnarp J. Lassens, °

et te Alamos 8. Worse,

8 OS 11 South LaSalle Street,

= Fa Chicago, Tilinois 60603,-

Pes Se eg ——— for Petitioner. :

Eieox, Lassmms @ Wort, ou

11 South LaSalle Street,

December 17, 1971.

wns

MIEN API

% * ‘ .

’

‘ ; iN

a 5

wee Ay

x ; -

e ‘ ga

my ;

. : ‘

+ ° :

. » x °

. wo

3 .

. 2

. .

° »% D

. a’

. ic * ae ; $a -

2. .

e * ® < é

. ° . ‘

. p 4 . ta

. . ‘

. - 2

ai s

- :

= .2? y

. oe

. 6 ty a:

. 2 3

. : J ‘. .

J See 2

% z :

7 4 @e:-

_ ea ae t=

ee = .

. ——— . Fe mi

: ; " *

; i

Pa ae AS .

. " ¥

* .

. _ = ot f

r - “8

° Se tk eee

7 . ~ .

. . 2

7 .

. *\ ; . e

. . \

. a

jour™ : .

~ °

* 7

. Ps :

2 és 7 ° 3

. Z in

. i “ =

o- . *

7 .

“eo

é . .

: F - a

7 =) a

. s a

if ,

tt °

. .

. J .

’ = .

. .

. ° . Nee

, .

- . as :

ia we —

ees ’

, of 7

af a a a :

: . ) . . :

. ° ,

‘: _ nie ‘

on A

-e

_ TABLE OF CONTENTS.’

, . ee = es “...) PAGE

Opinions: Below ........... Pree , = Be shiek wea gees «(2

Jurisdiction .:....... ee dine re peo

Questions Presented. ; ea Ae 0 eS Ee aes Rae eek le

; ‘Statutory Provisions Involved. tees . oleae Xe 2

_ Statement of the ee A PRErA > ceenee Pit f

5 Reasons for: Granting ‘the Writ.:........ : RA i 4

1.° The Court of Appeals erroneously held that ~~

state and local taxes on telephone charges, even

_ where separately billed as taxes, are ‘‘amounts See

paid for communication services. ’’

The-dgcision below places. in jeopardy an im-

. portant principle of federal tax law adminis-

tration affecting all taxes passed on to con-

sumers ard conflicts with decisions .of this

Court, other Courts of Appeals, including the

Seventh Circuit, and the Court of Claims, and

is contrary. to Congressional intent. ee cates

2. Does‘a district court have jurisdiction of a sleek

action under Federal Rule 23 to recover federal.

excise taxes?

‘This is an. important federal eacation which

_has not been, but should be, decided. by this

‘ Court. The decision below is inéompatible with —

; holdings of this pies and other courts vores

_ Conelusion yesh enh oe Saw eA ee wa VOWS SSSR eras

Appendix DEE pee eigen OS Ane atens Sane San cake

x rs

- Taste or AUTHORITIES.

Cases Cited. |

hacied v. Fahs, 939 F. 2d 163 (C. A. 5, 1966)........

Consolidated Flour Mills v. _PH- Orth. Co., ‘i4 F. 2d

* 898 (C.:A. 7, 1940)....... Sevan ad dead 5 cues enc 9

- Continental Baking Co. v. Suckow Milling Co., lat F.

2d 337 (C. A.'7, 1939)....... Cd Ce eee ees 8,9

Greeer Clinch Coal Co. v. Board of Education, 13 I.

App. 208, 141 N. E. 2d 393 (195A). .9.-.- 20-2005: 9

‘Bast St. Louis v. Union. Electric: Co., 37 Tih. 2a 530, 999.

N. E. 24-522, cert. denied, 390 U. S. (1967)..... 12-

. Eisen v: Carlisle and Jacquelin, 391 F. 2a 555 (c.. A.

Electric Storage Battery’ Co: v. . MeCaisghn, 54 F. 2d q

814 (E. D. Pa. 1931), aff’d, 63 F. 24715 (C. A. 3, -

Gat citaiaaW lu wcksdeknwiaed Soars 18°

” Escott v. Barchris Const. Corp., 340 F. 9a 731 (C. A.

2,°1965), cert. denied, sub nom., Drexel & a v. Hall, r! me

382 U. S. 816 is ei eeeeey Sage ae hase wnanorns << 14

Esplin v. Hirschi, 402 F. 2d 94 (C. A. 10, 1968), cert.

denied, 394 U. S. 928 (1969)...........2. ps ae

Foley v. Hershey, 409 F. 2d 827 (C. A. 7; 1969)...:7. 18

Golding Bros. ‘Co. v. Dumaine, 93 F. 2d 162, 164 (C..A. -

1, 1937), cert. denied, 303 U. S. 660 (1938)......... 8

‘Gould v. Gould, 245 U. S. 151 (1917)........... Re

Green v. Wolf Cotp., 406 F.. 2d 291 (C.. ‘AL 2, 1968),

~ cert. denied, 395 U.S. 977 (1969)........ on we 14

- Gully v. Interstate Natural Gas Co., 82 F. 2d 145 (C. A. :

| 45 1936), cert. denied, 298 U. S. as es 18

_. » Hammond v. Lenfest, 398 F. 24°705 (C. A. 2, 1968)... 18°

2 Harkins v. United States, 66-2 U.S. T. C. 9543 (E. se

* Okla. 1966), aff’d on other bins 375. F. 2d" 239

ee eh ee ee ree 16°.

Herrington v. United ince 416 F. 2d 1029 (C. A. 10, :

| hast MAT Oe \ Nee tev eet ees 16, 17

Hohmann v. Packard Instr. Co., 399 F. 2d 711 bd A. ;

ee ee ee POO ee 140

-. Houghton v. Shafer, 392 U. 8. 639, 640 (1968). 2s... BO

| Ismert- Hincke Milling Company v. United States, 90 |

2 Mi MERI Us ck ce oxcy Gacerca noses: 8

‘Kales v. United States, 115 F. 2d 497 1 (¢. A. 6, 1940),

aff’ 314 U. 8. 186 (1941)... 00.600. eteneee dees a

~ Koepke v.: Fontecchio, 177 F. 24 125 (C. A. 91949) ..”

‘Lash’s Products v. - United States, 278 U.S. 175 (1999)

Lge FORDE SEE EES oie ara 5, 8, 9,:10

Lipsett v. “United States, 37 F. R. D. 549 (8. D. N.Y.

1965), aff ’d 359 F. 2d 956 (C. A. 2, 1966). ..... ans ae

McConnell v. United States, 295 F. Supp. 605 (E. D. 3

‘Tenn. 1969)...... STP PORT error Te ee eraeeew ere

‘ Metealf ¥. Swank, 444 F. 2d 1358 (C. A, ‘3 1971). Bvie. a

-Moundridge Milling Co. v. Cream of Wheat | Comps | a

105°F. 2d 366 (C. A. 10, 1939).......... eee Ge .

National Forge & Ord. Co. v. United mane 151 VF ;

Supp. 937 (Ct. Cl. PR FRc p ieee hae oe B:

Northern Natural Gas Co. Y. Pana 292 F. io gil s

. 619 (D. Kan. 1968):........ SDE Ryan rece ces Oe] cae W

ig Oatis v. Crown Zellerbach Corp. ‘ 398 KF. 2d 496 (cA es

5, 1968) a gpg Bip naa Se SPM h nett re ae KwinAe et fae

Snyder v. Harris, 394 U.S. 332 (1969) Gee aea 19

2 o

‘ : :

- ‘iw |

Standard oil Oo. vy. State, 283 3 Mich, “85, 276'N. W. 908 she

BIE 6 a Bas BE Neg ii bape le 9

‘Star Motor Co: vy. United States, 4 F ‘2a oon (Ct. : :

JS Ee hieriemen rer cory Ceti acre n eat) OD» aia Ev

‘Supreme Tribe of Ben Hur. Vv. Candle, 255 U. Ss. 356

DE ins aaa eae eee ob de ae

~ Tax Review ‘Board Vv. Esso Standard Div., 424 Pa. 355,

Bre Be DMT ROUT. oe dg ios eae 9

‘United States v. Yellow Cab Co, 340 U. S. 5a, 554-5°.

(1951) so bebe epee vgs dapma de nibu's Bee cul cis ys My AT

‘Wayne ‘County Produce Co. Vv. me Mott Co., 24 :

N. Y. 351, 155 N? E. 669 (1927) . cette paws - §

- Wolff v: Selective S service Board, 372 F. 2d 817 ca

2, 1967) oon ieee pas as

STATUTES, RUves: anpb ReGuLations, ‘

" Civil Rights Act of 1964, 42 U.S.C. § 2000-5 0.0.05... 18,

Federal Ruiles of Civil. Procedure: are en le 33 .

Rule 19 . . eae ers fan uy PE tia Sart 2b « aha ruaer 3

Rule 23....... Rep re a weno arn: | | 14,17

“Mlinois Revised Statutes (1969) : Ris meee

Ch. 24, §.8-11-2 Gh tan its isthe. OS

/Ch. 1113, § 36(a) 2.2.00.. err ate ret Lae meted iete 8

“Ch. 1113, § 36(b) ..... cad mateo «ee eal 2 2

(/ Ch, 120, §,467.1 eS emcee i ae

oon eae Revenne Code, 26 U. S. C.: Were aks ae

'§ 164(a)(b)(c)’. 5S etek i apne ts tain age Peerabs .

o§ 4216(b) es Ras eee re ae

a) Ee ee ear Sy ee te VO

. Re ee ee

= ry >

od,

| tek

§ 4251(a) . pecan MPTE TP e t Sea 7

§ 4252 : EE ae mie gp ihn Mia OE PORE ede § eR

$0004 ooo. 5.38. Wrist are asiiel weit 3, 6, 7.

Pe hae A ee) ie a

i #T42(a) . rect... So nasa enh Cea nee ee

Js 7422(a) oF aan iste aie ae 7, 19

_ Tadicial Code,, 28 v. S. C.: Pens oust 3 ¥

Ble. WOW time aesie eer ene. on

a § 1346¢a) (1) - Ueto alrer pe se ens 01.2, 16, 19

$1346 (a)(2) 02 ee sc epeMe darter

“* $1346(b)’ BGA tire eee Or ee SRS ee

; 38 Gia es i stNaap exbigerntees

* -Regilations detscia Revenue) 26. C. PF. R.: :

SI Si sion ran ae oes oo a;

pina curse EEO eR er \ g

SMe 5 OT I Fe “A eo

Foe oc, CM CRON Reed STAR Oi ect 8. Dee a

SS obs ie. te ouecas peck 7

§ 49,4254-1 0.0.2... Ye ek ages con ee

| § 301. 6402. ee See tes erate Pe ee se 15,17

/ Reyenue Ritiebee. _

Rev. Rul. 69-151, 1969-1, G. B, 288" ae ites ae

Rev: Rul. 68-93, 1968-1; C. B. 488° . err, ie

‘ Rev. Rul. 68-92, 1968-1,’ 0. dh Se Pa

- Rev. Rul. 63-37, 1963-1, C. B,'242 . Saaha eee hak ae,

Rev, Rul. 63-8, 1963-1, OB. 254 0 ees. UL

Rev. Rul. 58-299, 1958-1, G, Bi 486 oo NL oe

‘Rev. Rul. 56-391, 1956-2, C. B. 837-838 reel ain oe

, Rev. Rul. 56-390, 1956-2, C. B. 887 ..........4h. "6

" Rev. Rul. 56-248, 1956-1, C. B. 518 ....,..... ie Yara

Orner. :

ae a : Sh

- Advisory Conmitiee’s Note to Rule 23, 39 F. R. D. 69,

ee ROPE Te a dapaccas Ciena es here dd

Kalven and Rosenfield, The Contemporary Function of

Kaplan, Continuing Work ef. the C ivil Committee :

1966 Amendments of the Federat- Rulés of Civil Pro-.

cedure, 81 Harv. L. Rev. 306 (1967) covetocegig hty ISD,

‘Moore's Fed. Prac. (2d Ed. 1969) : . .

Vol. 3A, { MO7T[S] ... ........00- re Peorer 16

Vol. 3B, 9-23.95, p..23-1851 .............. tenaon? ae

S. Rep. No. 1559, 80th Cong., 2d Sess. 11-12 .......... 17

. _

+ the Class Suit, 8 U. of Chi, L. Rev, 684 (1941)... vs

— THE

| Supreme Court of the GBniten States

Ocroser Term, 1971:

{ ar

‘ROBERT (. AGRON,

ee Ma Petitioner,

vs:

ILLINOIS ‘BELL TELEPHONE COMPANY, ET aL.,

; . Respondents.

Se ;

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT.

‘Petitioner Robert C. Agron prays that a’ writ of certi-

orari issue to review the. judgment of the United States

Court of Appeals for the Seventh Cireuit eritered in this

case on September 22, 1971.

* . . es

OPINIONS BELOW.

. . The opinion of the Court -of Appeals (App. la) is not

yet reported. The opinions of the District Court’ (App.

‘18a and 23a) are reported at 319 F. Supp. 418 and 325 F.

ae 487 (N. D..IIL, 1970).

a ath Grek Seis hare

| PTR Opec he Ne tREe h Rey ONO

JU RISDICTION.

The Court of Appeals entered judgment on Bepteimbei

22, 1971. The jurisdiction of this Court is invoked under

28 v.58 Ss. C.§. 1254(1). : .

‘

r QUESTIONS PRESENTED.

1. Are state and loeal taxes charged to telephone sib-

seribers and separately stated on telephone bills includable —

in the federal telephone tax as ‘‘amounts paid for. .

communieation serv ices’? (26 U.S. C. § § 4251)?

. 2. If refunds are due, they are owed to 3,000,000 sub-

seribers, the: bulk of whose claims are too small to warrant

individual action, but together total more than $10,000,000.

Does a federal court have jurisdiction to entertain a class |

refund suit on their behalf or is such suit barred by

sovereign immunity? ae

STATUTORY PROVISIONS INVOLVED.

The applicable statutory material is set forth at App.

27a. | mae a

' STATEMENT OF THE CASE.

After his individual and class refund claims were denied

by the Internal Revenue Service (‘‘IRS’’), petitioner

brought this statutory action under 28:USC § 1346(a) (1)

individually (Count I) and on behalf of three million sub-

seribers of Illinois Bell Telephone Company (‘‘IBT’’)

‘who are situated similarly to him (Count II) to recover

“from the United States refunds exceeding $10,000,000 for

communication seryices taxes collected illegally since Oc-

tober, 1965. The federal communication services tax, In-

_ ternal Revenue Code (‘‘IRC”’), 26.USC §§ 4251-4254, cur-

rently authorizes a 10% telephone tax on ‘‘aniounts paid

for * * * communication services * * *.’’ IRC § 4251(a).

For some years the State of Illinois and various munici- -

_palities have collected taxes based on telephone service

charges or ‘‘gross receipts’’. (Ill. Rev. Stat. (1969) Ch.

120, § 467.1; Ch. 24, § 8-11-2). IBT pays these taxes but ‘is

authorized to and does collect from subscribers the amount

of such taxes together with the cost of collection (TH. Rev. .

Stat. (1969) Ch."1112, §§ 36(a)(b)). These taxes are stated

separately on telephone bills in a’column designated ‘‘Due

to. State and Local Taxes’’. The Government and IBT

have been collecting the federal telepherfe tax not only on |

telephone services.but also upon these state and local taxes.

On cross-motions for summary judgment, the district

court held that the state and local taxes.were not amounts

paid for communication services and that it was illegal to

collect the federal tax on top of the state and local taxes.

319 F. Supp. 418; App. -18a. While granting petifioner

_ judgment for.the amount of his individual claim, $23.98,

the court held that there was no federal jurisdiction over

a class action to recover tax refunds on the theory that

sovereign immunity required a refund claim for each of

the 3,000,000 subscribers. 325 F. Supp. 487; App. 23a.*

. * The district court also held that in an action against the -

United States, IBT could net be joined as a‘defendant in Counts

II and III antl that Count III,-which stated a derivative claim

on behalf of IBT for its subscribers under IRC § 6415(a), could

not be maintained. App. 23a. Petitioner does not argue these is- .

sues here, but, reserves them shoeuld the Court issue a writ of

certiorari not otherwise limited. We merely nate the underlying

facts as to why IBT’s joinder was necessary and proper under

Federal Rule. 19. As of about 1969. the total refund due exceeded

$10,000,000. The amount being overcollected from IBT subscribers

as a class currently exeeeds $5,000,000 a year. The Government

’ has no records to determine thé amount of refunds due to the sub-

_seribers as a class or individually. The total refund due to the,

class as a whole may be. determined from. IBT records. IBT.

Nal Swe

EO AO VERE TS eH &

T aubibkal ee

ater ia ct) uid Dea:

Neneh

semen

pdstods °

wet es

> EOP QUA tRee

weed anil

oSaabesos

“ 4

6. einen Sa. baiting falc iii Miiese war

Sn nee eal) Cent a ee

4 |

The Court of Appeals reversed (App.‘la). Although it

held unsound the Government’s principal argument that

the separately stated state and local taxes are ‘‘amounts

paid for communication services’’ becanse they are in-

eluded in the ‘‘sunr of all charges’’ in the telephone bills

(App. 14a, n. 14), the court gave effect to that very conten-

tion by: coneluding that they are ‘‘part of the price IBT -

demands for its services’’ (App. 12a, 15a). Because of its

‘disposition of the merits, the’ court did nof_reach the

procedural-jurisdictional TssTles concerning the Clete and

derivative actions and joinder of parties.

Ret 3,

REASONS FOR GRANTING THE WRIT.

- 1.. The Court of Appeais erroneously held that state

and local taxes on telephone charges, even where sepa-

rately billed ” taxes,-are “‘amounts ‘paid for communica-

: tion services.’

The* deciston: below ‘places m jeopardy an important

principle of federal tax law -administration affecting all

taxes passed on, to consumers and conflicts with decisions ©

‘of this Court, other Courts of Appeals, including the Sev-

enth Circuit, and the Court of Claims, and is contrary to

Congressional intent.

records also’ show the amount overpaid by individual subseribers *

at least for a significant period. ‘The refund dtie each subseriber

may also be computed from telephone bills rendered to subscribers

‘by. IBT, but few subscribers will have retained their complete bills

for the period in question and cannot know how much to claim. —

Administratively a refund will be most feasible iif earried out _

through IBT which is the collecting ageney for the I ‘nited States.

IBT may be the proper party to receive. the ‘refund’ from the .

United States on behalf of its subscribers: Counts IT and III pray

for jiidgment against the United States for a refund for the total

amount overcollected from all subseribers from October, 1965. to rt

date and for an accounting by IBT to determine the amount of

the refund. See Rappaport ‘Affiday it, Jt. App. 81-4. A

The Court -of Appeals stated that the Government was

wrong in its principal argument ‘that the state and local

taxes are amounts paid for communication'‘services because

they are computed in the ‘‘sum of all charges” included i in

the telephone bill. App. 14a, n.. 14. Yet the court. gave

effeet to this very contention. This fundamental ineonsist-

ency is inexplicable but the court’s reliance upon Lash’s

Products. vOnited States, 278.U. S. 175 (1929) is clear

error: or: (1) i in conflict with Lash’s Products it failed to give

effect to the established rule that the price paid for goods .

_ does not include taxes that are separately stated; and (2)

it misapplied Lash’s Products and: confused the issue .

what is the ‘‘price, paid”? with. what are the ‘‘goods’’ 0

‘*services’’ subject to tax, an issue. not before the Court

in Lash’s Products.

A. The Court below sslatonatyund and misanplied

Lash’s Products. In that ease a federal tax was imposed on

_ manufacturers to the extent of 10% of the price for which

soft drinks were sold. No state or local taxes «rére involved.

' This-Court held that for’ purposes of computing the tax, |

the price included the. federal tax unless it was separately

stated. That ease concerned what was the price paid for _

goods which were concededly soft drinks subject to. tax.

_. The court below failed to discern that the issue hére is

not merely the method of computing the price paid for

. communication services but whether the items in question

—state-and local taxes—are in fact and law. charges for

“eommuniecation, serviees.”’ Only by first determining that

they are could the court reach the question. whether they

are ineludable as amounts paid for communication services

if stated separately. But.the court below never really con-

sidered whether state and local taxes -were charges’ for

_-eommmnieation services. Instead, it merely concluded,

based on Lash’s Products, that since IBT charged sub-

seribers for such taxes, they must be amounts paid for.

FP! ee 1 e cd

EO ae

PPAR RONEN?

;

Se ad ne a i ot Te

‘

1 LEIA OU TELE ED EPR CEES

fh WAR Oe ws Nor AY ree, nemERE eg

e am hk IRs

> 7. aan —- mS &™ bt Pee PS YUE Asse Ae 0 eEeeEeeEeEeEeEeEeEeEeE————ewe Maw

oa pe SU A ge a Si 4. PA oe eee VO 1 Ag OAS im Sr @, —_ DESL IPODS ae on wee te aiies ~ ad - —_ ee = we

- ° . e

_commiinication services because they are a Pe of the

ot . price IBT demands for its services.’”’ (App. 15a.) The

court thus followed the Gav ernment’s ‘‘sum of all charges’?

argument, which is based on IRC §-4254, while stating that

it recognized this contention was fallacious (App. 14a, note

14). The court below confused the i issue of what fs the price

paid for ‘‘communication services’’ with the issue of

"whether state and local taxes are ‘communication serv-

_ ices’’ subject -te-the federal tax.. ;

The decision is not only inherently inconsistent but

squarely at odds with’ the communication services tax

_ |.” Statute, regulations and rulings which make clear that the

tax applies only to charges for.telephone services and that

whether an item included in the bill is subject to federal

tax must be independently examined to aseertain whether

it is for ‘communication services.’’ The court’s conclusion }

that Congress intended that ‘‘the- amount charged by

a teléphone company should not, be broken down into its

component parts for purposes of. computing the tax’? (App.

14a, n. 14), is plainly erroneous. The whole thrust of the

‘statute and the Government’s own regulations and rulings

is to the contrary. The bill must be and is broken down to :

| determine whether the item charged by IBT is in fact for :

a communication services’ Thus, charges included in the bill

| ¢ * for ‘tyellow- page’’ direetories are not subject to tax be-

cause they are really for advertising. Rev. Ruling 58-299, _

1958-1 C. B. 436 and-Cf. Rev. Ruling 68-92, 1968-1 C. B. 488.

In a whole variety of rulings under ‘this tax the IRS has

considered the nature of the services for which charges’

° -, are made to determine whether such charges are for com-

- munication services of for something: else. These. rulings

reveal that the amounts paid must be for some kind of

telephonic service, equipment or facilities:! These rulings

1. See, eg. Rev. Ruling 56-248, “1956-1 C. B. 518; Rev.

Ruling: 56-390, 1956-2 C. B. 837; Rev. Ruling 68-93, 1968-1-C. B.

488; and Rev. Ruling 56-391, 1956-2 C. B-°837-8,

Items’ included ‘in the bill. must also be excluded when expressly

exempted by the statute. IRC. — g).

ve : _— 7 |

are consistent with the statute itself which limits communi- ;

cation services to amounts paid for ‘‘telephone service’’’

ge $ 4251¢a)). See also IRC $§ 4252(a)(b) and 4254

)(1). | :

The régulations confirm what + is clear on the face of /the

statute as to the meaning of ‘‘amounts paid for communi-

cation services.’ Thus Regulations § 49. 4251- 1 (26 C. F.R.

§ 49. 4251- 1; C. B.: 1963-2, 550) provides in ee =?

“(a) In general. Section -4251 imposes. a tax on

amounts paid for general telephone service; toll tele-:

phone service; telegraph service ; teletypewriter ex- °

change service ; wire mileage service; and wire and

equipment service. * * * (emphasis i is supplied through-

ont. this Petition unless otherwise stated).

‘See dis §§ 49.4251-3(b), 49. 4252- (a) (b), 49. 1252-2(a) (b) ;

49,.4252-4(a) and 49. 4254- 1(a).

From the face of the statute, the regulations and. oie :

it plainly appears that the amount paid for communication |

services embraces only charges made by IBT for. its tele-

phone services and does not embrace state or local taxes

~ measured by the charge for the communication services, as “

the district: court correctly held (319 F. ial at 421;

App. 22a).

Even ‘tf the statute, regulations - and rulings did not

clearly exclude the local taxes as charges for communica- .

* tion services, it certainly cannot be said that ‘they are

clearly includable. For this reason, too, the court bela

has run afoul of decisions of this Court expressing the |

_ universal and fundamental principle that in the interpre-

tation of tax statutes any ambiguity must be construed

strictly against the government. Gould v.-Gould, 245 U. S.

151, 153 (1917) (“In case of doubt [tax statutes] are con-

strued most strongly against the government, and f ™. favor

of the citizen. ns ee \

iB. The federal tax consequences of separately stating

‘ . J federal, state or local taxes has had application in a variety

-,. Of important tax ‘contexts over the years and, .as this case

. illustrates, down to the present time. - It has long been en- |

Te grained in federal tax statutes and regulations. In Lash’s

: Products, this Court held, in accordance with: the Revenue

| Service’s own regulations, that where the price of goods

sold included’the federal tax iii a composite or single price

and did not state separately the amount of. the federal tax

on ‘‘soft drinks’’, the price of the goods sold upon which. the

federal tax was based included the federal tax itself. When

the ‘soft drinks”’ tax was held inapplicable to sweet cider,

the purchaser, under contracts which had separately stated

__the federal ‘tax, was permitted to recover the taxes he

paid to his vendor. Judge Cardozo, then speaking for the

New York Court of Appeals, stated : This i is not a case

where. the item of the tax is absorbed in a total or com-

posite price to be paid at all events. . . . This is a case

where the promise of the buyer is to pay a stated price, and

8 put the seller in funds for the payment ofa tax besides.

vere? Wayne, County Produce Co. v. Duffy- Mott Co., 244

N. Y. 351, 155 N. E669 (1927). 3

Following these decisions, the Courts of iano and the _

Court of Claims have consistently held that the distinction:

in stating or not stating separately taxes, as well as other

items, is’ one with a considerable difference to federal tax-—

payers. See, e.g., cases concerning refunds of processing

taxes declared invalid: Golding Bros. Co. v. Dumaine, 93

_F. 2d 162, 164 (C. A. 1, 1937); Moundridge Milling Co. v.

~ Cream of Wheat Corp:, 105 F. 2d 366 (C. A. 10, 1939) ; and.

” Ismert-Hincke Milling Company v. United States, 90 Ct. Cl.

-27 (1940). - Indeed, a leading case concerning such“refunds .

_ and giving effect to the failure to set forth taxes as a separ-

ate item was a Seventh Circuit decision, Continental Baking

Co. v. Suckow Milling Co., 101 F. 2d 337 at 338 (CA 7,

Omer ME ARORA PNT, Ph

si ai as Dene ulgeni fae Cre A ele aide oes OP i ae asta

ss... ’

- ne Didi

Da * . ‘ yen

Promnvire Chine GPa OTN Leah

eo,

EUW RAY Ten,

‘

isi gl hi it Whi dam i Ranches bs oeisse

: 9

; 1939). ‘ee ‘also Consolidated Flour Mills v. PH Orth Co. ™

- 114 F. 2d 898, 903 (C. A.’7, 1940). Similarly, the Court: ‘of>

Claims has held that the federal excise tax on automobiles —

did not. apply..to. actual. freight charges when stated ‘sep-

arately,. ome Motor sit v. United States, 41 F. od 901-(Ct.

. Cl. 1930). ie.

In relying on the oft- quoted. statement i in Lash’s Products

. that the ‘‘price is ‘the total sum paid for the goods”’, the:

court below (App. 11la-12a, 142 15a) patently failed to take _

into account the distinction recognized in Lash’s Products,

and followed in the other eases cited above, that the price °

paid for goods does not include taxes which are stated sep-

_aratgly. Instead, the court below held that since it found

that under state law the state and local taxes were imposed |

on IBY, not. the. subscribers, it was immaterial that the j

taxes were stated separately because they were part of

IBT’s price. The.court said (App. 12a): — |

| “That tle cost of taxes imposed on manufacturers

and retailers is added into the price at which goods .

are sold, even if such taxes are itemized and specifi-

cally identified, simply increases the price. the con-

sumer must pay to receive the goods or ‘services.’

Assuming, arguendo, that the state and local taxes are im-

posed ‘on IBY and only the burden on subscribers, ’ that

‘fact has never before been of significance when the taxes |

2. The consequences to. taxpayers. of separately stating .taxes

also has importance in relation to state law. In Taz ‘Review Board

v. Esso Standard Div., 424 Pa. 355, 227 A. 2d 657 (1967)- the

court held tkat the separately stated federal gasoline tax would

not be included ‘in calculating a local sales or ‘‘gross receipts”’

tax. The same result was.reached in Standard Oil Co. v. State,

283 Mich. 85, 276 N. W. 908 (1937) on ‘the theery that the state.

‘sales tax and federal gasoline: tax attached simultaneously at the

moment of sale. In the,case at bar the state and local ‘‘nlessages’”’

taxes and the communication services tax are generated simul-

taneously at the moment telephone service is. purchased. See also

Crerar Clinch Coal Co. v.-Board of Education, 13 I. App. 2d 208,

141 N. E. 2d 393 (1957) (exempt taxpayer could not deduct

: sales tax from purchase price where tax was not mparetey stated).

SAA SS EPS EE LOE PIP SI ;

SALE BABE SLIP BEBE R ie.

por, >

en!

Piacente aH NTS ee FR

f% ‘ Pe >

ey We ac

PE moo

“

y mey Me siry

FAL Ay ae Bik or ain ant,

a Sabie ead PN oe a

were sepacvately stated. In Lash’ s Products the tax was .

imposed on the manufacturer but, under this Court’s opin-

ion and the comniissioner’ s own regulations, it would not

have been included i in the price of the goods had it been

separately: stated. In the processing’*tax cases cited above

' the tax was on the processer, but the buyers were. entitled.”

to refunds since the taxes would not. be deemed on of ;

-the price paid if separately stated.

Congress also hay recognized repeatedly, as has the IRS

itself until ‘its 1969 ruling i in this case, that different fed-_

eral. tax. consequences flow from the fact that taxes are

separately stated, regardless of where. the legal incidence

of:those taxes lie =

“(i)} This, : where Congress has sousidaved specifically

‘the question whether state and local sales taxes are part

_ of the federal tax base, as it did in the retailers’ excise |

- taxes, former ~§ 4051, IRC, it excluded such state and local .

sales bacon tiveun the federal retailer excise tax. base. Sec-..

‘tion 4051, which. was repealed by the Excise. Tax Redue-

tion Act.of 1965, pr ovided that the tax base was to exclude,

“if stated asa separate chatge, the amount of any. retail

sales tax imposed ly any State * * * or political subdivi-

sion * * *y whether the liability for such tax is imposed 0 on

‘the vendor or the vendee.”’

_ (ii) The IRS reached the same peault an the statute

was silent and it had to pass on, the question under the Ae

Ze manufacturers’ excise ‘tax law. IRC § 4216(b) provides

‘rules for determining a constructive sales price in the cake

of manufacturers’ excise taxes, where thosd taxes are.

3. The notion. that no federal. tax significance attaches to. \

the fact that state and local, taxes. are separately; stated if the

taxes are imposed on the seller or person rendering the service -

had. not the slightest ‘foundation in federal‘ law until the IRS

fashioned its special 1969 tax ruling for this case long after this

litigation had begun in 1967. Rev. Ruling 69-151, 1969-1 C. B.-

288° (Jt. App: 27). While not expressly citing the 1969 ruling,

~ Court of Appeals clearly adopted it. See App. Aa.

et ee ae ee

based upod manufacturers’ prices but the particular onthe

_¢les ‘are sold at. retail. Neither that provision nor’ the

applicable regulations make speeific reference. to the treat-_

ment of local taxes. The IRS concluded (Rev. Rul. € 63-37,

1963-1 C. B, 242) that the policy of equating the ‘fax with

- what would be paid if the articles were sold to ‘wholesale

— distributors, requires that & local tax which. is equivalent

to.a sales tax (in the particular case involved the tax was

referred. to as a ‘‘gross. income tax’? or “privilege’” tax) 3

should not be obnsidered part of the price 7. which the

manufacturers”. tax Is. based.

(iii) In Revenue Ruling 63-8, 1963-1 C. .B. 254, the

IRS. reached the same result regarding the cabaret tax. 22

(§ 4231(6)) ‘and held that a state privilege tax imposed."

on certain retailing | and service business activities could,

if passed on to patrons, be -exeluded in determining the .

- amount upon which the federal cabaret tax is to be com-

. puted. As in the case of the manufacturers’ excise tax, the

statute contained no -explicit instructions’. regarding the-

treatment of state or local taxes. Although § 4231(6) was

also tepealed in 1965, the feasoning is especially relevant

here since the cabaret tax provisions appeared i in the same

chapter, as the communication services tax.’.

Based on the foregoing three: “reasons, as well: as- his |

discussions ‘‘ with ‘the*national office of the Internal Rev-

enue ‘Service’? Lawrence N. Woodworth, Chief of Staff of |

the Joint. Comimittec on Internal Revenue Taxation,- wrote

Tilinois Congressm an Sidney. ‘Yates on January 16, 1967

- that with respect to the state and logal taxes here involved:

“any state or local tax which is in sabstanee a retail

sales tax (regardless of the terminology used by the

State or local ‘government in describing that tax), if

the amount of the tax is separately stated-on the bill,

will be excluded from the amount: upon which the com-

munications tax will be based.’”*

_ Aa e

4. The ‘Government retognized in. the court ssasried that the |

‘taxes here are asians to sales. taxes.

Xa EG 2

A copy of this lettter is attached to the refund claims filed

herein. (Supp. App. Ex. 4 to ‘Ex. 1 and Ex. 3 to Ex. 3.)

The IRC also prov ides that retail occupation and gaso-

_ line excise ta¥ts may be deducted from income taxes by

_ consumers if separately stated and paid by ‘them even

though the taxes’ are imposed on their vendors. See IRC

N 164(a)(b)(c). This is clear ev idence that while state and

local excise taxes may be imposed on vendors for state law

purposes, federal law has long considered such taxes as

imposed on the consumer, so long as they are separately

stated and passed on to him. The Code ‘recognizes, as did

the Illinois Supreme Court with. respect to the loeal taxes -

here involved, East St. Louis v. Union Electric Co., 37 TM.

2d 532, 229 N, E. 2d 522, cert. denied, 390 U. S. 948 (1967),

‘as did the district court, 219 F. Supp: 421, App. 2ia, 22a,

indeed, as did the Court of Appeals, App. 6a, 7a, the eco-

nomic reality that a separately stated tax falls on the con-

sumer and fhat the seller or utility is merely a collecting

conduit. The City of C ‘hicagp expressly recagnized in the .

preamble to its amended tax ordinance that the taxes were

being imposed in substance on thé consumers, not the

utility.- See App. 29a. : 1

This Court should grant its writ of certiorari th resolve

finally this important issue of statutory construction, .

which bears not only on ‘the communication servi¢es tax but |

also in the context of other federal (and state) tax laws

where a distinction has been drawn with repeet to taxes

which are separately stated; to resolve conflifts with dé-

cisions of. this Court and other federal coyrts ; ‘and to

correct a decision which is in the teeth of the telephone tax

statute, regulations and pre-1969 rulings. , The decision

helow directly affects not only the 3,000,000/subseribers of

"IBT but-also other telephone subseribers in the State of

Mllinois who gbtain telephone service fron ron-Bell com-

panies.’ The IBT subscribers nee ‘have already’ been

Ged by more than $10,000,000 between 1965 and 1969,

and, unless this Court reviews the decision below, will ~ -

continue to be overtaxed at. the rate of more — $3,000,000

annually.

2. Does a. district cai ies jurisdiction of a pw .

uction under — Rule 23 to recover federal excise

taxes?

This is an important federal question which i not

‘been, but ‘should be, decided by this Court. The decision

below is incompatible with holdings of this Court.and dither:

courts, - ¢ .

The basic i issue here is one of Seda parte

Rule 23 of the Federal Rules of Civil Procedure apply to ;

- tax refund actions, or are such suits: barred by the doctrine

of sovereign immunity. The district court held that the -

Government has consented to suit only wheré each indi-

vidual taxpayer -has filed a “claim for refund setting forth .

_ the-amount due him and that a class’ refund claim will not = 5

" satisfy jurisdictional requirements. 325 F. Supp. at 488; q-

App. 23a-24a. This is an important issue which has given . _ om

difficulty to lower federal courts but which has not, to our®

- knowledge, been considered specifically by this Court.

“t There is no real dispute that if the district ‘court has

jurisdiction to apply Rule 25 to tax refund suits, this is a

‘ elassie case for application of the rule.*

’ ‘

‘

cua one :

vy etate

5. - The record does not disclose and petitianer does not know .

whether there aré other state and loral taxes in states ‘ther than

-Iilinois which present the identical isaue as here. . : =

6. The Government conceded betow that the prerequisites of : /

Rule 23(a) are met. It is equally clear that the facets of this case

bring it squarely within Gauses (A) and (B) of Rule 23(b)(1). .-

The ‘Reporter to the’. Advisory Committee states that clause. (A) _

‘takes in eases where the party is obliged by law to treat the

members of the class alike’’ and cites as illustrations ‘“‘a ‘utility

acting toward enstomers”’ and ‘‘a government imposing a tax.’

Kaplan, note 8, infra, 81 Harv. L. Rey. 356, 388 (1967). Clause

Unless.a class action is maintained millions of taxpayers

‘whose individual claims are too small to warrant the, filing

_af individual refund claims and refund suits will have no

practical means of recovering their overpayments and the

Government will retain an illegal multi-million dollar wind- -

fall. . The courts: frequently have held’ that in similar cir-

cumstances a class action, is maintainable i in order to open

the door of justice to small claimants, to bring about effi--

cieney in judicial administration and reduce the timie and

expense of the litigants and the courts. in reaching’ a uni-

form decision on the merits affecting a large. number of

persons.” This tax refund aetion, is me oipeenerted within

the letter and purpose of Federal Rule 23 aceérding to all

leading commentators’ on the Federal Rules.

fe ae

(B) plainly applies since an adverse etiniinition of plabntiff’s

would as a practical matter be dispositive of the interests

of the other members * * * or substantially impair or impedej their -

“ee

elaim

ability to protect their interests. ”’ Indeed, the Court of Appeals

disposed of the Clercland case merely by disposing of ‘the merits

of the Agron case.’ Rule 23(b) (3) also applies. It can scarcely be

doubted that one common question predominates over all others,.

namely, whether it is lawful to collect the tax by adding .the state.

and local taxes to the federal tax base. This ultimate issue of

governmental liability is the same as to petitioner and each mem-

ber of the class. There is no sound reason why all subhserjbers and

the Government: shauld not-receive the benefit or detriment of the

final judgment on the merits, :

7. See, «g., Escott v. Barchris Const. Corp. 340 oar at

733 (C. A: 2 1965). cert. denied sub nom... Vrerel & Co. Hall,

382 17. s. 816; Tohmann v. Packard Instr. Co.. 399 F. 2a THI. 715

(C. A. Moog: Eisen v. Carlisle’ and Jacquelin, 391 F. 2d 555,

560, 566-7 7 “(C. A. 2. 1968): Esplin v. Hirschi, 402 F. 2d 94,101

(C. A. 10, Seuss cert. denied, 394 V. S. 928 (1969): and Green vy.

Walf- Corp., 406 F. 24 291, 297. 300, 301 (C. A.- 3. 1968), -cert.

denied, 395 U. S. 977 (1969):

8: See the Advisory C ommittee’ Ss note fo Rule 93.39 F. R. D. 69,

. 100-104; Kalven and Rosenfield, The Contemporary Function. of

the Class Suit, 8 UV. of Chi. Li. Rev. 684, G85, 692% H94-5, 698, 699,

-714- 717 (1941), a leading article. relied orf by the Committee : and

an article by the Reperter to the- Committee written in an unh-

official capacity, Kaplan, Continwiitg Work of the Civil Commit-..

: o-

15 |

The Government’s pibieecctaae: to a class action is ‘for

each of 3,000,000 telephone subscribers to file individual °

refund claims: and follow the administrative ‘refund-liti-

gation route taken by petitioner. | But everyone knows that

several million subscribers with ‘claims of $25.00 or less

are simply not going to take the path of administrative’

strangulation. If they did, the.Government would be. faced

with the impossible task of processing and determining the

validity and accuracy of several million small claims, a .

result which the Government would hardly desire ‘and of

course does not anticipate. Moreover, only those sub-

seribers who have retained their complete monthly tele-

phone bills for many years can determine the amount of

their individual claim. In sum, the Government’s ‘‘alter-

_native’’ to a class action would insure the.death. knell of.

refunds to a large class of small: claimants, is without —

support in law and“%s an ignoble. effort to avoid payment

_ of millions of dollars of tax refunds to millions of small

: taxpayers. aes. :

Nevertheless, the district court accepted the Govern-

ment’s contention that it did not have jurisdiction under

Count IT to: maintain a class action. The court said that the

claim filed by petitioner on behalf of the class was “un-

satisfactory’? and that each subscriber must file his own

claim setting forth the amount -due and exhaust his ad-

“ministrafive remedy. "325 F. Supp. at 488, App. 23a- 242.

In effect, the court applied the doctrine of sovereign im-

‘munity. The coyrt reached this result by relying upon:’

TRC § 7422(a) which states that no tax refund suit ‘shalb

be maintained ‘‘until a claim for refund ... has been . .”,

filed’’, the regulations with respect thereto, 26 C. F. R.

§ 301.6402-2; and ‘various lower court cases,’ including

nl ee

tec: 1966. Amendments of the’ Federal Rules of Civ ‘iI Proceilure.

81 Harv. L. Rev. 356, 387-8, 390, 391 (1967). See-also. 3B Moore’s

Fed. Prae. (2d Ed. 1969) § 23.95, p, 23-1851. which states that a -

"class action will lie against the United States for tax refunds.

;

“ran

- ‘ te : 16 ;

Herrington v. United States, 416 F. 2d 1029 (C. A. 10,

1969) ; Harkins v. United States, 66-2 U. S. T. C. § 9543

(E. D. Okla. 1966), aff’d on other grounds, 375 F.2d 239°

(C. A. 10, 1967) ; McConnell v. United States. 293 F. Supp.

605 (E.°D. Tenn. 1969); and Lipsett v. United States “4

F. R. D. 549-(S. D. N.Y. 1965), aff’d 359 F. 2d 956 (CL 2

2, 1966). While these cases are in certain respects pacer

_guishable* or. support petitioner, in other respeets they *

appear to ‘support ‘the decision below. For the reasons

stated below the decision of the district conrt was wrong,

is in conflict with other decisions of this Court and lower

’ federal courts, and there |i ds = fer the eXCTELSe of this. -

(Court’s supervisory powers now.

A. The district court’s application ef sovereign im-

munity to limit its jurisdiction conflicts with decisions of

this Court and other courts. The Government has con-

sented to be sued for tax refunds. Section 1346(a) (1) of

ihe Judicial Code, 28 USC § 15 6(a) (1), upon- which this

‘action is based, confers original jurisdiction i in the district -

courts over ‘any civil action against the United States

for the recovery of. any... tax....’* When consent is given

‘it is liberally anal: and no “sensible reason can

be imagined- why”’ the remedy should be paraly zed. United

Stafes v. Yellow Cab Co., 340 UVS. sane 55425 (1951)."" In

ad — a a

9. For example, they involved income tax re ‘funds: whieh may

present additional issues not relevant here.

10. Petitioner’s efforts to secure class relief commenced in

"November, 1967 when his firsf suit was filed. If this Court should

dee ide only the merits, and remand the class action isstie tq the

- Court. of Appeals, it ‘will be at ledst six vears before the latter

issue is finally. adjudicated. If it should be decided that a class .

‘ refund action does not li, the delay will work an. injustice to

taxpayer-subseribers -betause’ even those whose claims are large’

enough to warrant individual action will have their claims cut

down by the three-year statute of limitations on tax refunds.

11. See also 3A Moore’s Fed. Prac: (2d Ed. 1969) § 20.07[3},

p. 2864. a

; 73 ow

Yellow Cab this Court observed that Congress made the

Federal Rules of Civil Procedure applicable under the Tort

_ Claims Aci, 28 USC § 1346(b), and held that the -Govern-:

ment could be Sued &s a third- party defendant, notwith-

standing a clainf of sovereign immunity:. See especially

340 U. S. 553, n. 9 and S. Rep. No. 1559,-80th Cong., 2d

Sess. 11-12. Since § 1346(a)(1) ‘with respect to tax refund

‘actions and § 1346(b) with-respect to Tot Claim aetions

were enacted at the same ‘time and since both provide for

federal jurisdiction over. ‘‘any civil action”? it is clear that

Congress considered the Federal Rules were applicable to

tax refund as wélfas to Fert-Glaim actions. Accordingly,

even if Rule 23 could be construed as an extension of the

7 jurisdiction of the court—which it is not—this authority

was plainly. granted by — in 28 u. S. C. § 1346(a)

(1). a ° .

Theeei is nothing in IRC § 7422(a) which expressly bars

a class refund claim. Nor is there anything in Regulation

§ 301.6402-2,° which expressly prohibits a claim. on behalf

of a class. Petitioner did file a refund claim on behalf of

~ the class: The claim was denied. Hence, federal jurisdiction

exists.'*

12. This conclusion is supported also by the fact that Congress

has “@enied injunctive and declaratory - relief a: ‘tax matters. See.

had intended for elass relief under Rule ‘ Fe to be i emaaead by

to tax refiind actions it would eg said so.

In Northern Natural Gas Co. Grounds, 292 F. Supp. 619,

‘641-644 (D. Kan. 1968) the aaa held that a class action could

be maintained against the I ™nited States*under the Tort Claims

Act and the-Tucker Aet. (28 USC $ 1346(a) (2) ) even though the -

Government argued that it is not liable to sutit by a class w vithont

we! eonsent.

J The elass claim here meets the purpose and requirement

of po Statute and regtflation. Supp. App. Ex. 3. It fully. apprises

the Government, of the nature of the claim and avoids litigating

every claim’”’ asserting identical. grounds for rélief. Herrington

v. Wnited States, 416 F. 2d 1029, 1032 (C. A. 10, 1969). The

fact that the -precise*amount of* refund due each: subscriber -or

” o

STATO NENT ST EN a PN Meee

SOC Re RRR RRM RRA TE:

coat | lel ac

estas

ee eee a Sane

’

ee, as are ae

18 .

B. The district court also erred in concluding that each

member of petitioner’s class must file a refund elaim and

exhaust his administrative remedy. The exhaustion doctrine:

isinapplicable where, as here, there is involved only an issue

of law and there is nothing of an administrative nature to

be done. Houghton v. Shafer, 392 U. §. 639, 640 (1968) ;

Gully, v. Interstaté Natural Gas Co., 82 F. 2d 145, 148

(CA 5, 1936), cert. denied, 298 U. S. 688; Koepke v.

Eontecchi#-A77 F. 2d 125, 128 (CA 9; 1949); Wolff v..

Selective Service Board, 372 F. 2d 817, 825 (CA 2, 1967);

‘ Hammond v. Lenfest, 398 F. 2d 705, 713, 714 (CA 2, 1968) ;

Foley v. Hershey, 409 F. 2d 827 (CA‘7, 1969).

Even if applicable, the exhaustion doctrine has been satis-

fied by petitioner. His individual and class claims have

exhausted the, administrative remedy on behalf of himself .

and all other subscribers,-and thereby vested the district

court with jurisdiction qn behalf of all. In Oatis v. Crown

Zellerbach Corp., 398 F. 2d 496 (CG. A. 5, 1968), the court

heid that a class action could -be seniadaiaadl under § 706(e),

of the Civil. Rights -Act of 1964, 42 U.S.C. § 2000-5(¢),

even though the members of the class had not filed” a charge

with the Equal: Employment Opportunity Commission,

a condition precedent to seeking judicial relief under

§ 706(e). The court said (p. 498): ‘**.*'* once an aggrieved

to all subscribers is not stated in the claim is of no consequence.

. The regulations and statute do not require it. National Forge

& Ord. Co. v. United States, 151 F. Supp: 937, 941 (Ct. Cl

1957) ; Burrell v. Fahs, 232 F.2d 163, 166 (CA 5, 1966): Electric.

Storage Battery Co. v. McCaughn, 54 F. 2d 814 (E. D. Pa. 1931).

“What the refund claitm and this action seek iS the’ total refund

due to all subscribers as a-elass.. This amount can be ascertained

from IBT records so that the total refund paid by the United

States will not exceed the amount overcollected. Thereafter,

, IBT,-as the Government's collecting and disbursing agent, may

make refunds to subscribers in such manner t@t will do. substan-.

. tial if” not precise justice to them. See Rappaport Affidavit, Jt.

App. 81-87. “‘‘In the’ administration of Interna! Revenue Laws, ;

we ‘are- concerned with-substance arid not form.’’ Kales y. United:

States. 115 F. 2d 497, 500 (CA 6,°1940), aff’d 314 U.S. 186 (1941 ).

- person raises a particular issie with the EEOC which he

_. has standing to raise, he may bring ani. action for himself

and the class of persons similarly situated * * *.’* See also,

Metcalf v. Swank, 444 F. 2d 1353, at 1358 (C._A. 7, 1971).

. The district court oyerlooked_its inherent equity,

jurisdiction to grant class relief. Federal. Rule 29 stands.

on a different footing than other: procedural rales. As —

this Court said in Suprenie Tribe of Ben Hur . Cauble.

255 U.S. 356, 366 (1921) [Reaffirmed‘in Snyder v. Harris,

394 _U. S. 332, 340, 355, n. 23 (1969) ]:

“Tt is true that jurisdiction, not warranted by the |

Constitution and laws of ‘the United: States, cannot

be conferred by a ruyle.of court, but class suits were

-known before the adoptien of our judicial system, and

were in use in English chancery. 1 Street, Fed. Eq.

Pr. § 549.”

On this basis this Court held that pone the jurisdictional

diversity requirement of § 238 of .the Judicial Code (now

28 U. S: C. $1332) if requisite diversity existed between

the original parties, fede a jurisdiction is not ousted merely

‘because later interv enors or members of the class repre- ;

sented by the or iginal parties are citizens of the same state

aS an adverse party.. ;

The jurisdictional restraint, if any, of IRC 6 7422(a)-

is no more applicable to class actions’ than is the juris-

dictional restraint of §1332 of the Judicial Code (28

U. S. C. § 1332) imposing the diversity requirement. The:

petitioner, having satisfied the jurisdictional requirements |

by filing a refund-claim, can maintain a class action for

subscribers who have, not made such a claim, in ‘the sama:

manner as a plaintiff who has satisfied the diversity of

citizenship requirement can bring a class aetion for persons \

similarly situated who cannot satisfy the diversity require- |.

ments. Since the court unquestionably had jurisdiction \

under 28 U.S. C. § 1346(a) (1) to grant relief to petitioner,

it also had jurisdiction to grant relief to the class. :

- . ° ¢, "7 . °

- Des ‘>, , 1 Mees . . . a ;

ih ah GR Wa otitis MB Le ‘Sik Bake SAR, WAR Reina katate tiie aa Ue ale aS IE ee RE eae, a ME Re Fi hat olaatas TiN

J) . “

° ‘ . . e .

: ’

‘ e .

NPE YT a

_ Conclusion. -

For the reasons Mereiasbewe stated, petitioner respect- :

fully requests that this Court issue a Writ of Certiorari to

: \ the Court of Appeals for the Seventh Cireuit, rever ‘se

; * the judgment of that court and grant such other: relief

é “~ as may be ee ss

: 3 Respectfully submitted, ve

5 . Avex E1sox, . : *

5 Witiarp J. Lassers,

“ | Aaron S. Worrr, ;

: “% ie 11 South LaSalle Street, .

7 ‘ 4 ~ Chicago, Tiinois 60603,

: ie Attorneys, for Petitioner.

Exsox, Lassers & Wotrr,

@i1 South LaSalle Street, a oe °

3 Chieago, Illinois 60603. _ oN ees

4 ~* December 17, 1971, ,

: . . *~‘

‘ ~

: \

4 ; f _ oa

a" .

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.