# Opposition Brief — Ford Motor Credit Co. v. Michigan Department of Treasury

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2592%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2011
- **Citation:** 562 U.S. 1178

## Text

_ Supreme Court, U.S.
; FILED

ve e Y ” DEC 13 2010
oO, -

In The
Supreme Court of the United States

eee
FORD MOTOR CREDIT COMPANY,
Petitioner,
U.

DEPARTMENT OF TREASURY, TREASURER FOR THE
DEPARTMENT OF TREASURY, AND STATE OF
MICHIGAN,

Respondents

ON PETITION FOR A WRIT OF CERTIORARI
TO THE MICHIGAN COURT OF APPEALS

BRIEF IN OPPOSITION

Michael A. Cox

Attorney General!

B. Eric Restuccia
Michigan Solicitor General
Counsel of Record

P.O. Box 30212

Lansing, Michigan 48909
restucciac@michigan. gov
(517) 373-1124

Heidi [, Johnson Mehne \
Bruce C. Johnson

Assistant Attorneys General
Revenue and Collections Divisio

Attorneys for Respondents

QUESTIONS PRESENTED

Should this Court grant certiorari to

review the decision of a Michigan

court that atfirmed A curative
tatutory amendment where the
amendment did not retroactive

hange the law

1 Should this Court grant certiorar) t

clarify when a State may retroactively

change it tax law 1n a case where no
retroactive change in tax aw
occurred and where the ni}

retroactive change sought was by a
taxpayer who ougnt Lo retroactlvel\

apply an incorrect court aecision I

order to requ I 1 refund

PARTIES TO THE PROCEEDING

Petitioner is Ford Motor Credit Company

Respondents are Department of Treasury, Treasure:
ror thie ey partms rt yf | reasury ind State oft Mi ie ar ’

TABLE OF CONTENTS

QUESTIONS PRESENTED
PARTIES TO THE PROCEEDING
TABLE OF CONTENTS
TABLE OF AUTHORITIES
OPINIONS BELOW
JURISDICTION
CONSTITUTIONAL, STATUTORY, AND

REGULATORY PROVISIONS INVOLVED
INTRODUCTION
STATEMENT OF THE CASE

\. The nature of the dispute

B. Michigan sales tax statute governing th

had debt dedu tion
C. Ford's business and its refund claim

. The DaimlerChrysler decision and thi

Michigan Legislature's correction
ly Proces ding In the Mi higan court
REASONS FOR DENYING THE PETITION

lord ls eeking review of a State law
question that is not within this Court

jury) diction to review

| The peculiar factual circum tances ot thi
case would make this case a poor vehicle fo

considering retroactive cl anges to tax law

lll. Kven if this Court were to determine that

there was a retroactive chanve in the

Michigan tax law, anv such change is not
ae) ‘ :

contrary to this Court's decision in Carlton. ..... 17

fee Le NO oe ee yeh 20

TABLE OF AUTHORITIES

Page
Cases
Boyer-Campbell v. Fry,
271 Mich. 282; 260 N.W. 165 (1935) ................03. 13
DaimlerChrysler Services N.A., LLC v. Dep't of
Treasury,

271 Mich. App. 625; 723 N.W.2d 569 (2006) .... 4, 6
DaimlerChrysler Services N.A., LLC vu. Dep't of

Treasury,

477 Mich. 1043; 728 N.W.2d 228 (2007)............... 7
Detroit Edison Co. v. Department of Revenue,

320 Mich. 506; 31 N.W.2d 809 (1948).......0.000..... 14
Erie R.R. v. Tompkins,

SR Me ae I I eva os an ds cee ecento ence ee 15
Ford Motor Credit Co. v. Dep't of Treasury,

486 Mich. 962; 782 N.W.2d 771 (2010)................. fe)

GMAC, L.L.C. v. Dep't of Treasury,
286 Mich. App. 365; 781 N.W.2d 310 (2009) ..8, 11

Gregory vu. Ashcroft,

BOL U.S. 452 (1991) ooccccccccccsscccsccesseessceesscesece sees: 15
Harper v. Progressive Casualty Ins. Co.,

79 Mich. App. 764; 263 N.W.2d 1 (1977) ............ 14
Harris v. Reed,

i eR Me SL”, Ree ae er ee 16

Highland Farms Dairy, Inc. v. Agnew,
re ee ornciesisse en oe ccs oe 15

In re Oswalt,
444 Fa B24 (6th Cis. GOOG) nec cin de iedesscdeccccaseee. 14

-vi-

Macomb County Prof Deputies Ass'n v. Macomb
County,

182 Mich. App. 724; 452 N.W.2d 902 (1990) ...... tz
Mich. Comp. Laws § 205.541(2) 2.0.0... eceeeec eee eee 13
Nat'l Bank of Detroit v. Dep't of Revenue,

334 Mich. 132; 54 N.W.2d 278 (1952)................. 13
People v. Berg,

85 Mich. App. 639; 272 N.W.2d 167 (1978) ........ 14
Priest v. Canada Life Assur Co,

179 Mich. App. 731; 446 N.W.2d 352 (1989)...... iZ
SBC Mich. v. PSC (In re Complaint of Rovas),

482 Mich. 90; 754 N.W.2d 259 (2008)................. 3
Sweezy v. New Hampshire,

SO4 US. SOO CI aD vvsnsvicscntacivstcstereencet ee 1S
United States v. Carlton,

549 0.8. 96 (OOD) cnseescscdacca ee 2,11,12
Uphaus v. Wyman,

S60 U.S. 72 (IGG. caves L5
Statutes
Bt FP TOD nsiniiccworriasneee eee 7, 8, 9
BG ALG.C.. © TSO FE cardiecascccsanci eee ]
Mich. Comp. Liaaws § 205.51 «... See, e.g., In re Oswalt, 444 F.3d 524, 528-529 (6th Ci

2006)(holding that the Michigan Legislature's amendment to the
Michigan Mobile Home Commission Act governed the attachment
of a security interest even though enacted after the rights in the
bankruptey estate accrued because the amendment “clarified the
legislature's intent that creditors have the option of perfecting
their security interests by the recording of traditional mortyage

liens.").

M5

decide the issue of retroactive application because it
resolved the question as a matter of statutory
construction. For this reason, the Michigan Court of
Appeals could rely on the same analysis in Ford. The
resolution of the issue did not require a due process

analysis.

This understanding of Michigan law as to
which the Michigan court is the final arbiter Is
consistent with previous decisions of this Court.'6 In
Irie RR. v. Tompkins, this Court held that "whether
the law of the State shall be declared by its Legislature
Ina statute or by its highest court in a decision is not a
matter of federal concern."'? Moreover, this Court has
repeatedly recognized the authority of a State to
distribute its functions of government among the
various branches as it sees fit, and not necessarily
according to an inflexible federal model.!5

While Ford may disagree with the decision of the
Michigan Court of Appeals regarding the meaning of
the Michigan statute, the question remains one of
Michigan law. Therefore, it 1s a question that is to be
decided by Michigan courts, not by the federal courts.
16 Mrie RR. v. Tompkins, 304 U.S. 64, 77 (1938)

"7 erie, 3804 U.S. at 78.

‘8 Uphaus v. Wyman, 360 U.S. 72, 77 (1959); Sweezy v. New
Hampshire, 354 U.S. 234, 256-57 (1957)(Frankfurter, J.,
concurring in result); Highland Farms Datury, Inc. v. Agnew, 300
U.S. 608, 612-18 (1987) (Cardozo, Jd.) ("How power shall be
distributed by a state among its governmental organs is
commonly, if not always, a question for the state itself."). See also
Gregory v, Ashcroft, 501 U.S. 452, 460 (1991)(Through the
structure of its vovernment, and the character of those who
exercise government authority, a State defines itself as a

sovereign")

-16-

As this Court. has said many times, "This Court long
has held that it will not consider an issue of federal law
on direct review from a judgment of a state court if
that judgment rests on a state-law ground that 1s both
‘independent' of the merits of the federal claim and an
‘'adequate' basis for the court's decision." Such is the

case here.

Il. The peculiar factual circumstances of this
case would make this case a poor vehicle
for considering retroactive changes to tax
law.

As already noted, the Michigan Court of Appeals
did not decide the question raised by Ford in its
petition for certiorari. Having decided that the issue
presented was not a retroactive change to tax law, but
rather a curative action by the Legislature as to the
meaning of an existing statute, it did not decide the
issue of retroactivity, and any discussion in the opinion
of vested rights and retroactivity is obiter dictum. This
fact alone makes this case an unsuitable one for this
Court to revisit the issue of retroactive tax statutes.

Even if this case was about retroactivity, it
would not present a situation in which Ford faced the
classic type of retroactive change in tax treatment that
is typical of retroactivity cases. The State of Michigan
never demanded that Ford pay mere taxes for past tax
years. Rather, it was Ford — which had already filed its
tax returns and paid its taxes consistent with the
State's understanding of the statute - that sought to
change the tax treatment it had claimed for itself in

19 Harris v. Reed, 489 U.S. 255, 260 (1989).

-17

past years. Moreover, this” situation is_ easily
distinguished from all of the cases relied on by Ford,
some of which do not deal with a tax question at all,
and none of which deals with a situation where a
taxpayer is retroactively seeking a refund based on its
belief that an incorrect court ruling changed its tax
liability.

Thus, the facts of this case do not present the
circumstance in which a taxpayer relies on the
statutory language only to have a legislature change
the language of the act after the tax payer has relied
on the original language to its detriment.

Ill. Even if this Court were to determine that
there was a retroactive change in the
Michigan tax law, any such change is not
contrary to this Court's decision § in
Carlton.

Kven if the statute here was deemed to be a
retroactive change tn tax law, the decision sitisfies the
Carlton test for such statutes.

Ford's arguments about retroactivity miss the
mark. This is because Ford misapprehends the
rationale of this Court's cases and compounds that
error by discounting the underlying facts behind the
dispute over the retroactive amendment to Mich.
Comp. Laws § 205.541.

In its 2006 DaimlerChrysler decision, the
Michigan Court of Appeals changed a longstanding
interpretation of the bad-debt deduction in § 205.541, a
statute originally enacted in 1933. If that

-18

misinterpretation of the bad-debt deduction was not
immediately corrected, this error would have caused an
unanticipated $100,000,000 shortfall in an already
tenuous State budget.e Thus, when the Michigan
Legislature amended the statute to restore the original
meaning of the legislation, the Legislature had a
legitimate, rational basis for a statutory amendment.

There also was no detrimental reliance here.
Ford seeks deductions for tax periods extending back to
April 1, 2002. If it had already received these
deductions, and the State was asking Ford to repay the
deductions, perhaps Ford could claim that iis seitled-
expectations were being disturbed. But this is not what
happened.

During the time period in question, Ford never
sought a bad-debt deduction. It filed the claim for the
tax periods at issue, spanning the period between April
1, 2002 and December 28, 2007, for the most part after
the tax periods had ended, and after the initial
DaimlerChrysler decision indicated to Ford that it
might be entitled to a deduction to which it did not
previously seek a claim.?! From the time it filed the
claim, Ford was fully aware that the State was
contesting the propricty of the judicial interpretation
allowing the deduction, and that legislative action was

20 See Legislative Analysis, Sales and Use Taxes: Bad Debt
Deduction, State of Michigan's brief in the Michigan Court of
Appeals in Ford, filed March 6, 2009, Exhibit 2.

21 Ford's claim for October 1, 2007, through December 28, 2007,
was filed on December 28, 2007. This was after the curative
amendment was enacted. Therefore, the question of retroactive
application of the statutory amendment does not apply to this
time period.

1Y-

being contemplated to overrule the interpretation if it
was not overruled by the courts.

In short, Ford does not face new tax liabilities
that it will have to pay long after the periods in which
the habilities arose have ended. It does not even face
the loss of a deduction to which it previously believed it
was entitled. Ail it faces 1s the loss of a deduction it did
not think it was entitled to prior to the
DaimlerChrysler decision.

The period of retroactivity is also modest here.
Contrary to Petitioner's claim that there was "no limit"
to the amendment's retroactivity, Pet. 14, the
amendment's correction was limited 1n nature because
it does not affect final orders for which the rights of
appeal have expired. Petitioner fails to address the
limiting language placed in the amendatory language:
"this amendatory act is not intended to affect a refund
required by a final order of a court of competent
jurisdiction for which all rights of appeal have been
exhausted or have expired... ." Pet. App. 34-35.

In examining the factors under Car/ton, there
was no violation of Ford's rights under due process.

Dated:

CONCLUSION

The petition should be denied

December 2010

-20

Respectfully submitted,

Michael A. Cox

Attorney General

B. Eric Restuccia
Michigan Solicitor Genera!
Counsel of Record

P. O. Box 30212

Lansing, Michigan 48909
restucciae@michigan.gov
(517) 373-1124

Heidi L. Johnson-Mchney (?66178)
Bruce C. Johnson (?62645)
Assistant Attorneys General
Revenue and Collections Division

Attorneys for Respondents

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2592%3A2. Public record. Not legal advice.