# Reply Brief — At&t Corp. v. Allen Et Ux., on Behalf of Themselves and All Others Similarly Situated > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0979%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Reply Brief - **Published:** January 1, 2004 - **Citation:** 541 U.S. 1027 ## Text AT&T Corp., Petitioner, V. BOBBY GENE ALLEN AND DEBORAH JANE ALLEN, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, Respondents. On Petition for Writ of Certiorari to the Oklahoma Court of Civil Appeals REPLY BRIEF KENNETH N. MCKINNEY CARTER G. PHILLIPS JEFFERSON I. RUST JOSEPH R. GUERRA* MCKINNEY & STRINGER, P.C. ROBERT N. HOCHMAN 101 North Robinson SIDLEY AUSTIN BROWN & Suite 1300 WOOD LLP Oklahoma City, OK 73102-5510 1501 K Street, N.W. (405) 239-6444 Washington, D.C. 20005 (202) 736-8000 LAURA A. KASTER DEBORAH S. DROLLER AT&T Corp. 900 Route 202/206N Room 3A213 Bedminster, NJ 07921 (908) 532-1888 Counsel for Petitioner April 6, 2004 * Counsel of Record AS NTO A ISR TIE TE AERO SIEE STATON ROLE RAST NN MSN NNN WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001 TABLE OF CONTENTS FPR OE PATTI Te sv sescncesseviveresarsisivascersnsonsies REPLY BRIEF CONCLUSION SOPHO HH HEHEHE EE HEHEHE HEHHEEEE HEE EEE OE EE EEE EEEEE CEEOL ELEEE OSES COSHH HOEHOOTHOHHHEHHEEHHH OTE EEESETESOEESEEESEEEE EEOC EE OOEES Page il TABLE OF AUTHORITIES CASES Page Alford Chevrolet-Geo v. Jones, 91 S.W.3d 396 CT, ADD. ZINE Disus These incentives, moreover, completely belie respondents’ simplistic claim that the order in this case will “not impact any state’s ability to collect taxes.” Op. 6. 7 York would not entertain a suit challenging the collection of taxes in other States when those States prohibit such suits. Even without this conflict, however, this case warrants review. This Court recently granted certiorari in the absence of any split in authority in order to review an isolated decision that merely chilled California’s ability to conduct residency audits as part of its tax enforcement efforts. See Petition for Writ of Certiorari, Franchise Tax Bd. v. Hyatt, No. 02-42 (U.S. filed July 2, 2002) (“California Petition”)? The decision in this case is not an isolated problem; an [Illinois court recently upheld a multi-state class certification order that violates the sovereignty of other States in precisely the same manner as the order in this case. P.J.’s Concrete Pumping Serv., Inc. v. Nextel W. Corp., 803 N.E.2d 1020 (III. App. Ct. 2004). Moreover, the orders in this case and in Nextel have far greater and more immediate adverse impacts on the sovereign right of States “‘to administer [their] own fiscal operations,’” Alcan Aluminium, 493 U.S. at 338, than was true in Hyatt. These orders do not merely chill ancillary enforcement efforts, they permit over-collection suits that other States bar, and create perverse incentives for the under- collection of taxes. The decision in this case plainly warrants review in this Court, the only Court that can prevent these fundamental harms to the sovereign interests of other States. 2. Respondents’ attempt to show that the decision in this case is consistent with the due process requirements set forth in Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985), fails for essentially the same reasons. Respondents rely on the same boot-strapping premise that this case is not a tax refund action. Opp. 15-17. Not only is this contention wrong, see supra 2-3, it is irrelevant. Due process prohibits Oklahoma from applying its substantive law to claims * California’s petition cited only two lower court state decisions involving cooperative federalism principles in two non-tax cases. See California Petition at 12-14. 8 involving taxes, taxpayers and transactions entirely beyond its borders, regardless of the nature of those claims. Nor is it true that there is no “material conflict” between Oklahoma’s law and that of the 27 other affected States. Op. 17-19. Texas, New York and Florida may all recognize 4 general “futility” exception to their administrative exhaustion requirements. But both Texas and New York flatly prohibit direct actions against vendors for over-collection of taxes, whether or not administrative remedies are exhausted. See supra at 2-3. And Florida has squarely held that its exhaus- tion requirement applies in precisely the circumstances presented here. /d. at 3. Finally, the fact that respondents seek injunctive relief does not obviate the constitutional infirmity of the class certification order. Op. 19-22. Enjoin- ing the collection of taxes in other States based on the extra- territorial application of Oklahoma law directly interferes with the sovereign rights and prerogatives of those States. 2, Unable to defend the constitutional propriety of the order in this case, respondents seek to shield it from review. They stress that the decision of the Court of Civil Appeals is unpublished and thus is not binding precedent. Op. I, 3, 5. But this Court has not permitted publication status to insulate intermediate state court decisions from review where, as here, those decisions clearly violate federal law. See, e.g., Perry v. Thomas, 482 U.S. 483, 488-89 (1987) (reviewing and reversing unpublished, interlocutory decision in which intermediate state court refused to compel arbitration in accordance with federal law); see also Smith v. United States, 502 U.S. 1017, 1020 n.* (1991) (Blackmun, O’Connor and Souter, JJ., dissenting) (“Nonpublication must not be a convenient means to prevent review”). Whether or not the decision of the Court of Civil Appeals must be followed by other Oklahoma courts in the future, that decision necessarily harms the sovereign rights of other States. Nor does the interlocutory nature of the decision preclude review. The Oklahoma Supreme Court has decided, by a 5-4 9 vote, that Oklahoma courts can entertain over-collection suits brought by non-resident taxpayers whose own States prohibit those very claims. This Court has repeatedly reviewed interlocutory state court decisions in cases, such as this one, where the federal issue is whether state courts have the power to entertain certain claims at all. See Pet. 3 (describing cases); see also Perry, 482 U.S. at 488-89. in this case, moreover, “a refusal immediately to review the state court decision” will not just “seriously erode federal policy.” Cox Broad. Corp. v. Cohn, 420 U.S. 469, 483 (1975). Where, as here, non-residents are barred from suing vendors for alleged over-collection of taxes, the very act of permitting such suits violates the sovereign rights of other States and the principles of cooperative federalism that underlie our system of government. Where interlocutory decisions cause immediate harms to important federal interests, this Court does not postpone review while the merits are improperly addressed. See, e.g., Perry, 482 U.S. at 488-89; Southland Corp. v. Keating, 465 U.S. 1, 6-8 (1984); Local No. 438 Constr. & Gen. Laborers’ Union v. Curry, 371 U.S. 542, 546-50 (1963). Indeed, there is a very real danger that the interests of affected States will never be vindicated if review is denied now. Large class actions create enormous pressures for defendants to settle rather than risk massive damages awards. AT&T has neither all of the incentives nor all of the resources that a State would have to litigate this case to a final judgment. Yet the States will be directly harmed by a settlement, which will create strong incentives for other vendors to resolve all good faith doubts in favor of under- collection, given the comparative risks of under-collection versus over-collection of state taxes. See COST Br. 8-9. * By contrast, there is little chance that non-residents will ever be excluded from the class. While certification orders can be amended, the question of including non-residents in the class has been decided as one of jurisdiction, not one of class definition. Indeed, the trial court has “repeatedly rejected” AT&T’s jurisdictional argument, Op. 8, insisting ~ 10 It would be particularly inappropriate for this Court to countenance such impairments of the sovereign interests of numerous States based on the finality requirement of 28 U.S.C. § 1257. The final judgment rule itself is rooted in principles of federalism that compel respect for the sovereign rights of States. But these very principles have been violated by Oklahoma’s approval of the class certification order in this case. A statute designed to ensure federal court respect for state judicial processes should not shield from review a state- court decision that intereferes with the judicial processes and sovereign legislative judgments of 27 other States. Because the final judgment rule does not stand as a barrier to this Court’s review of interlocutory state-court decisions that violate federal arbitration and venue policies, see Perry, 482 U.S. at 488-89; Southland Corp., 465 U.S. at 6-8; Mercantile Nat’! Bank v. Langdeau, 371 U.S. 555, 558 (1963), it cannot preclude review of an interlocutory decision that “impairs . . . legitimate State tax policies” and “directly den[ies] the sovereign interests of sister States.” MTC Br. 2. | Finally, immediate review will not result in any inefficiency or undue expense. Op. 5. While such review will not terminate litigation by Oklahoma taxpayers, it will end litigation on causes of action that non-residents have no right to bring and that Oklahoma courts cannot entertain, and thus will significantly simplify the litigation and eliminate the need for further proceedings following this Court’s review of a final judgment. In all events, considerations of judicial economy must yield where, as here, an interlocutory decision creates an intolerable risk of interference with the core sovereign rights of other States. CONCLUSION This Court should grant the petition for a writ of certiorari. that it is “law of the case.” Pet. App. 47a. Respondents do not suggest how the issue could even arise again in any subsequent proceedings. KENNETH N. MCKINNEY JEFFERSON I. RUST MCKINNEY & STRINGER, P.C. 101 North Robinson Suite 1300 Oklahoma City, OK 73102-5510 (405) 239-6444 LAURA A. KASTER DEBORAH S. DROLLER AT&T Corp. 900 Route 202/206N Room 3A213 Bedminster, NJ 07921 (908) 532-1888 Respectfully submitted, CARTER G. PHILLIPS JOSEPH R. GUERRA* ROBERT N. HOCHMAN SIDLEY AUSTIN BROWN & WOOD LLP 1501 K Street, N.W. Washington, D.C. 20005 (202) 736-8000 Counsel for Petitioner April 6, 2004 * Counsel of Record --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0979%3A3. Public record. Not legal advice.