Opposition Brief — International Business Machines Corp. v. United States

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- Cou t ‘US.

FILED

@D | Nov 15-2000

No. 00-482

In the Supreme Court of the United States

INTERNATIONAL BUSINESS MACHINES CORP.,

PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

SETH P. WAXMAN

Solicitor General

Counsel of Record

DAVID W. OGDEN

Assistant Attorney General

DAVID M. COHEN

JEANNE E. DAVIDSON

TODD M. HUGHES

JEFFREY A. BELKIN

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTION PRESENTED

Whether a statute that allows interest to be paid on

overpayments of an “internal-revenue tax” (28 U.S.C.

2411) authorizes interest on refunds of a customs

assessment that Congress has specified “shall not be

treated as a tax for purposes of * * * any * * *

provision of law relating to the administration and

enforcement of internal revenue taxes” (26 U.S.C.

4462(f)(3)).

(I)

TABLE OF CONTENTS

Page

Opinions below .......... = 1

Jurisdiction .............0+ , 1

SCOINBINE «ss crnsvnicssnssenscrsseses ie

Argument ...... ashi aalaocalaiabeiiistrinaiakaiicsabtapiaedatn 5

SRnOTIUUTINNIUTII: ssicisicsiicdanticiei teint usin dceaveicabpicsidibaenibiacibaabs 10

TABLE OF AUTHORITIES

Cases:

American Nat'l Bank & Trust Co. of Chicago v.

Haroco, Inc., 473 U.S. 606 (1985) ...........ccccccccsssssscsseseseseees 9

Granfinanciera, S.A. v. Nordberg. 492 U.S. 33

ISTE sichishissicesbssactvennnapescensebinaidstnitaehaeeanstetnsedceuumiainensastavesnsnanteriaes 9

Library of Congress v. ; Shee, 478 U.S. 310 (1986) ........... 9

Mazer v. Stein, 347 U.S. 201 (1954) 9-10

McGoldrick v. Compagnie Generale Transatlantique,

a TINTED ssciicicspesodicienienshdanhinpintenioensensastosnsativenten 9

Stone v. Powell, 428 U.S. 465 (1976) .......c.cccccsssecsesessesseseees 9

United StatesShore Corp. v. United States:

907 F. Supp. 408 (Ct. Int’] Trade 1995) .0.........ccsescecseseseens 2

924 F. Supp. 1191 (Ct. Int’l Trade 1995) ............cccsssseseees 2

United States v. United States Shoe Corp.,

III ics iarihteneetesstitndinasaubiobabconcemn 3, 5, 6, 7

Constitution and statutes:

Ue Mae Rg BI TO, aseccassscnsesssnssssnecscrersesessensennnsases 2,6

Harbor Maintenance Revenue Act of 1986, 26 U.S.C

SITE?» asidbiedehieliiceantnpaiphenntanainebeuisinueninsieusntuhnebnbsosnsinnsnedeninusauienss 2

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eR I saci cls ktpharibiaebiseinabtninineatenince 5,7

TEIN °c aacalcaithaiekashipoelcaneminensncéobeniésononio 4,5,6

oe SEE EL Ae eT Ae OE 7

26 U.S.C. 9505(c) (1994 & Supp. IV 1998) 0... ceceseeesseesees 7

28 U.S.C. 2411 ‘ seninlsanshnsastanainaesesives 2,3, 4, 5, 6, 7,9

(III)

In the Supreme Court of the Gnited States

No. 00-482

INTERNATIONAL BUSINESS MACHINES CoRP.,

PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-14a)

is reported at 201 F.3d 1367. The opinion of the Court

of International Trade (Pet. App. 15a-21a) is reported

at 20 Ct. Int’l Trade 206.

JURISDICTION

The judgment of the court of appeals (Pet. App. 32a)

was entered on January 19, 2000. A petition for

rehearing and suggestion for rehearing en banc was

denied on May 31, 2000. (Pet. App. 33a). The Chief

Justice extended the time in which to file a petition for

writ of certiorari to September 28, 2000, and the

petition was filed on that date. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(i).

(1)

STATEMENT

1. In 1986, Congress enacted the Harbor Mainte-

nance Tax, 26 U.S.C. 4461, to help fund various harbor

improvement programs. That statute imposes a fee on

port use by importers, exporters, domestic shippers

and passenger liners. In 1995, however, the Court of

International Trade held that application of the Harbor

Maintenance Tax to exported goods violates the Export

Clause of the Constitution, which specifies that “[{nJo

Tax or Duty shall be laid on Articles exported from any

State” (U.S. Const. Art. 1, § 9, Cl. 5). United States

Shoe Corp. v. United States, 907 F. Supp. 408 (Ct. Int’l

Trade 1995). The judgment entered in that case re-

quired a refund of the Harbor Maintenance Tax pay-

ments on exports “together with interest and costs as

provided by law.” United States Shoe Corp. v. United

States, 924 F. Supp. 1191 (Ct. Int’l Trade 1995); Pet.

App. 39a-40a. The court stayed enforcement of that

judgment—and stayed proceedings in other similar

cases—until the conclusion of appellate proceedings.

Id. at 38a.

On January 5, 1996, the exporter in United States

Shoe filed a motion in the Court of International Trade

for an award of prejudgment and post-judgment inter-

est. On February 7, 1996, the court, while noting that it

lacked jurisdiction to alter the judgment from which an

appeal had already been taken in that case, stated that,

“(blecause the issue [of entitlement to interest] has

been fully briefed under the captioned case by the

attorneys involved in the numerous cases stayed

hereunder * * * the court will address this matter

under this caption.” Pet. App. 17a-18a. The court then

concluded that interest should be awarded on refunds of

the Harbor Maintenance Tax under 28 U.S.C. 2411,

which authorizes interest on “any overpayment in

respect of any internal-revenue tax” (ibid.). Pet. App.

19a-2la. The court did not calculate any award of

interest at that time; instead, the court stayed further

proceedings pending a final decision on appeal in that

case. Id. at 38a.

2. In 1998, in United States v. United States Shoe

Corp., 523 U.S. 360, this Court upheld the deter-

mination of the Court of International Trade that the

Harbor Maintenance Tax may not constitutionally be

applied to exported goods. After that ruling was en-

tered, the Court of International Trade devised a “test

case” procedure to determine the appropriate method

“for the entry of judgment with interest * * * .” Pet.

App. 36a. The parties thereafter designated the pre-

sent case as the test case for determining the propriety

of an award of interest.

On June 17, 1998, after receiving briefs from inter-

ested parties, the court (i) entered judgment for peti-

tioner in the principal amount of $330,689, (ii) specified

“that interest pursuant to 28 U.S.C. § 2411 is owing on

the aforesaid principal amount,” and (iii) ordered “that

all briefs on the issue of interest * * * filed in U.S. v.

United States Shoe Co., Court No. 94-11-00668 be

deemed filed herein.” Pet. App. 35a.’

3. In the court of appeals, the government argued

that neither 28 U.S.C. 2411 nor any other statutory or

constitutional provision authorizes an award of interest

on refunds of the Harbor Maintenance Tax. Petitioner

1 The Court of International Trade entered a similar judgment

in United States Shoe on June 26, 1998. Pet. App. 35a. The gov-

ernment filed its notice of appeal in this case and in United States

Shoe on August 7, 1998. The appeal in United States Shoe is

stayed pending final resolution of the appeal in this case.

elected to rely solely on statutory grounds and did not

rely upon any constitutional theory for an award of

interest.

The Federal Circuit reversed the judgment insofar as

it awarded interest in this case. Pet. App. la-14a, 3la.

The court concluded that 28 U.S.C. 2411—which

authorizes interest on “any overpayment * * * of any

internal-revenue tax”—has no application to this case

because Congress specified in 26 U.S.C. 4462(f)(8) that

the Harbor Maintenance Tax “shall not be treated as a

tax for purposes of subtitle F or any other provision of

law relating to the administration and enforcement of

internal revenue taxes.” Pet. App. 6a (quoting 26

U.S.C. 4462(f)(3)). Congress thus specified that the

Harbor Maintenance Tax is to be administered and

enforced as “a customs duty, and not a tax.” Jd. at 6a.

The court concluded that 28 U.S.C. 2411, which author-

izes interest only on overpayments of internal revenue

taxes, provides no basis for an award of interest on this

customs exaction. Pet. App. 12a-18a.’ Since petitioner

had not raised any constitutional basis for an award of

interest, the court of appeals did not address any such

contention.

4. Ina petition for rehearing and rehearing en banc,

however, petitioner sought to raise constitutional argu-

ments on appeal for the first time. The government’s

brief in response to the petition for rehearing noted

that petitioner had waived any constitutional argu-

ments by not presenting them in its opening brief. The

2 Petitioner does not now contend that the court of appeals and

the Court of International Trade erred in rejecting alternative

statutory grounds for awarding interest on Harbor Maintenance

Tax payments.

court of appeals denied the petition for rehearing and

rehearing en banc without opinion. Pet. App. 33a.

ARGUMENT

The decision of the court of appeals is correct and

does not conflict with any decision of this Court or any

other court of appeals. Moreover, the asserted consti-

tutional issues that petitioner now seeks to raise were

not raised in the court of appeals and are thus not

properly presented in this case. Further review is

therefore not warranted.

1. a. The only question properly presented to the

court of appeals was correctly resolved by that court.

The court of appeals correctly concluded that 28 U.S.C.

2411, which authorizes interest on “any overpayment

* * * of any internal-revenue tax,” does not apply to

this case because 26 U.S.C. 4462(f)(3) specifies that the

Harbor Maintenance Tax “shall not be treated as a tax

for purposes of * * * any * * * provision of law

relating to the administration and enforcement of

internal revenue taxes.” Ibid. (emphasis added). Con-

gress elected to treat the Harbor Maintenance Tax as a

customs duty, rather than as an internal revenue tax.

United States v. United States Shoe Corp., 523 U.S. at

365-366. In this context, interest cannot be recovered

against the United States under 28 U.S.C. 2411 because

that statute does not directly and unambiguously

provide for an award of interest for customs assess-

ments. See Library of Congress v. Shaw, 478 U.S. 310,

314 (1986).

Petitioner argued in the court of appeals that the

requirement that the Harbor Maintenance Tax be

“treated as if such tax were a customs duty” (United

States v. United States Shoe Corp., 523 U.S. at 365

(quoting 26 U.S.C. 4462(f)(2)) should not preclude “judi-

cial” awards of interest on “internal-revenue taxes”

under 28 U.S.C. 2411. Pet. App. 19a-2la. The court of

appeals correctly concluded, however, that the require-

ment that Harbor Maintenance Tax payments be

treated as customs duties in their “administration and

enforcement” (26 U.S.C. 4462(f)(3)) precludes their

treatment as an “internal-revenue tax” under 28 U.S.C.

2411. The court noted that the Internal Revenue Code

provides an entire body of provisions for enforcement of

internal revenue taxes, which includes a chapter on

“Judicial proceedings.” “That chapter includes provi-

sions regarding civil actions by the United States

(subchapter A), proceedings by taxpayers and third

parties (subchapter B), the Tax Court (subchapter C),

and court review of Tax Court decisions (subchapter

D).” Pet. App. 10a. The court properly concluded

(ibid.) that, in removing the Harbor Maintenance Tax

from the judicial and administrative enforcement

mechanisms that have been adopted for internal

revenue taxes, Congress necessarily precluded any ap-

plication to this customs assessment of a statute that

awards interest only for an “overpayment” of an

“{nternal-revenue tax.” 28 U.S.C. 2411.

b. Petitioner errs in asserting (Pet. 14-15) that this

Court implicitly resolved the question presented in this

case simply by stating in United States Shoe that this

customs assessment “bears the indicia of a tax.” 523

U.S. at 367. The question presented in United States

Shoe was whether the Harbor Maintenance Tax was an

unconstitutional “Tax or Duty” imposed on exports

(U.S. Const. Art. 1, § 9, Cl. 5) or was, instead, a per-

missible user fee designed merely to reimburse the

government for services that it provides to commerce.

523 U.S. at 367-370.* In addressing and resolving that

issue, the Court obviously did not address or consider

whether this assessment is an “internal-revenue ‘tax”

for the purposes of 28 U.S.C. 2411. The Court’s holding

in that case was nonetheless directly inconsistent with

petitioner’s claim here—for in United States Shoe the

Court expressly stated that, “for administrative, en-

forcement, and jurisdictional purposes, the [Harbor

Maintenance Tax] should be treated ‘as if [it] were a

customs duty’” and not as an internal revenue tax. 523

USS. at 367 (quoting 26 U.S.C. 4462(f)(1), (2)).4

2. Petitioner incorrectly asserts (Pet. 16) that the

judgment entered by the Court of International Trade

in the United States Shoe case—which states that the

exporter in that case may recover “interest and costs as

provided by law” (Pet. App. 40a)—bars the United

States from challenging the award of interest in this

case. In the first place, petitioner did not make this

claim in the court of appeals and is therefore barred

from raising it here. Secondly, the fact that the recited

order of the Court of International Trade generally

provided for an award of interest as “provided by law”

simply begs the question presented in the subsequent

proceedings in that court and in the court of appeals—

which is whether interest is “provided by law.” Indeed,

3 That question turned on whether the Harbor Maintenance

Tax possessed “the attributes of a generally applicable tax or

duty” or was “instead, a charge designed as compensation for Gov-

ernment-supplied services, facilities, or benefits.” 523 U.S. at 363..

‘ Petitioner errs in asserting that the United States utilizes

funds placed in the Harbor Maintenance Trust Fund to “fund ac-

tivities without seeking congressional appropriations” (Pet. 13).

The money placed in the Fund, and the interest earned on those

monies, may be withdrawn only by appropriation for specified

purposes. 26 U.S.C. 9505(b), (ce).

the Court of International Trade expressly acknowl-

edged the fact that its prior orders had not conclusively

resolved this issue by setting the present case as a test

case to address the interest issue in proceedings fol-

lowing the affirmance of the judgment on the merits in

United States Shoe. See page 3, supra.

Petitioner’s newly minted claim is, in fact, entirely

divorced from the record of this case. All of the parties

to these combined proceedings have recognized that the

government is not precluded from contesting whether

interest may be awarded on refunds of the Harbor

Maintenance Tax. All parties, including petitioner,

briefed the question of interest in this case. Pet. App.

15a. The Court of International Trade and the Federal

Circuit both addressed the interest question on the

merits in their decisions in this case. Indeed, this case

was expressly designated as the “test case” for address-

ing the interest issue by the Court of International

Trade. Jd. at 36a-37a; see page 3, supra. And, following

the entry of the judgment in this case, petitioner (along

with other parties challenging the Harbor Maintenance

Tax in the Court of International Trade) agreed to

“consent to entry of judgment with interest in this case

for the purpose of permitting the Government an

opportunity to appeal the award of interest

** * ” Pet. App. 35a (emphasis added).

Petitioner did not, at any point in the court of

appeals, assert that the government is precluded from

challenging the award of interest in this case. As a

result, the Federal Circuit had no occasion to—and did

not—-address petitioner’s novel contention. The sug-

gestion that this Court should address this new claim

sua sponte (Pet. 16-17) is thus both unwarranted and

inconsistent with the clear record of this case. See, e.g.,

Pet. App. 35a.°

3. Petitioner seeks to raise several other issues that

it failed to raise below. In particular, petitioner asks

this Court to determine whether any provision of the

Constitution would require interest to be paid on

refunds of the Harbor Maintenance Tax. That question,

however, was not raised by petitioner in its briefs in the

courts below. As a result, the court of appeals neither

considered nor addressed that question. Petitioner first

raised its constitutional arguments in a petition for

rehearing that was filed after the decision of the court

of appeals was entered in the government’s favor. The

court of appeals thereafter declined, without comment,

to consider petitioner’s new and belated contentions at

that late stage of this case. Especially in view of the

fact that neither of the courts below has addressed the

issues that petitioner now belatedly seeks to raise,

there are no “exceptional circumstances” that would

warrant review by this Court. See, e.g., Granfinan-

ciera, S.A. v. Nordberg, 492 U.S. 38, 38-39 (1989) (“[w]e

decline to address this argument because respondent

failed to raise it below”); Stone v. Powell, 428 U.S. 465,

481 n.15 (1976); McGoldrick v. Compagnie Generale

Transatlantique, 309 U.S. 480, 434 (1940). See also

American National Bank & Trust Co. of Chicago v.

Haroco, Inc., 473 U.S. 606, 608 (1985); Mazer v. Stein,

® Subsequent to the decision of this Court in United States

Shoe, the Court of International Trade amended the judgment in

that case to provide for interest pursuant to 28 U.S.C. 2411. That

order is itself currently stayed and is pending on appeal to the

Federal Circuit pending final resolution of this case. See note 1,

supra. Because that judgment remains pending on appeal, it

obviously does not preclude litigation of that same issue by the

United States in the court of appeals.

347 U.S. 201, 206 n.5 (1954) (“[w]Je do not reach for con-

stitutional questions not raised by the parties”).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.