Levin v. Commerce Energy, Inc.

PETITIONER: Richard A. Levin, Tax Commissioner of Ohio
RESPONDENT: Commerce Energy, Inc., et al.
LOCATION:

DOCKET NO.: 09-223
DECIDED BY: Roberts Court (2009-2010)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 560 US 413 (2010)
GRANTED: Nov 02, 2009
ARGUED: Mar 22, 2010
DECIDED: Jun 01, 2010

ADVOCATES:
Benjamin C. Mizer - Solicitor General of Ohio, for the petitioner
Stephen C. Fitch - for the respondents

Facts of the case

In-state and out-of-state retail natural gas suppliers sued Ohio's Tax Commissioner in an Ohio federal district court alleging that Ohio's tax scheme was unconstitutional. The plaintiffs argued that because four local natural gas distribution companies benefited from certain tax exemptions that did not benefit the plaintiffs, despite their similar circumstances, the tax scheme violated the Commerce Clause and Equal Protection Clause. The district court dismissed the case for lack of jurisdiction, but the U.S. Court of Appeals for the Sixth Circuit reversed.

The Sixth Circuit held that federal comity concerns do not bar an action that challenges the tax benefits provided to just four specific entities, but not others similarly situated. The court recognized a circuit split over whether federal comity concerns prevent federal court jurisdiction over a matter. In reaching its conclusion, the Sixth Circuit sided with the Seventh and Ninth Circuits which have interpreted Hibbs v. Winn to mean that comity prevents federal court jurisdiction only when state taxpayers seek federal court orders allowing them to avoid paying state taxes. This was not at issue in this case, and the plaintiffs' success would not significantly intrude upon traditional matters of state taxation in Ohio; thus, the federal court had jurisdiction. The Sixth Circuit remanded the case in order for it to proceed.

Question

1) Did Hibbs v. Winn eliminate or narrow the doctrine of comity applied in Fair Assessment in Real Estate Association v. McNary, which broadly prevents federal court jurisdiction over cases that intrude on the administration of state taxation?

2) Do comity principles or the Tax Injunction Act prevent federal court jurisdiction over a case in which taxpayers allege, on equal protection and dormant commerce clause grounds, that their tax assessments are discriminatory relative to other taxpayers assessments?

Media for Levin v. Commerce Energy, Inc.

Audio Transcription for Oral Argument - March 22, 2010 in Levin v. Commerce Energy, Inc.

Audio Transcription for Opinion Announcement - June 01, 2010 in Levin v. Commerce Energy, Inc.

John G. Roberts, Jr.:

Justices Ginsburg has an opinion in this morning in case 09-223, Levin versus Commerce Energy, Incorporated and she's asked me to announce the opinion.

This case concerns the proper forum, state court or federal court, for adjudication of a taxpayer's claim that a state tax system violates the Federal Constitution.

The plaintiffs below and the respondents here are independent marketers who compete with the local public utilities for the sale of natural gas to Ohio's consumers.

They brought suit in federal court complaining that Ohio favors the public utilities by according them certain tax exemptions that are not available to independent marketers.

The favoritism, the independent marketers alleged, is impermissible under the Constitution's Commerce and Equal Protection Clauses.

In 1937 Congress adopted the Tax Injunction Act which provides that federal district courts “shall not restrain the collection of any tax imposed by a state when a plain, speedy and efficient remedy is available in state court.”

The independent marketers argue that the act does not apply to their complaint because they sought no decrease in their own tax liability, instead they wanted Ohio to increase the tax bill payable by their competitors, the local public utilities.

United States Court of Appeals for the Sixth Circuit ruled in favor of the independent marketers holding that their suit could be maintained in federal court.

We reverse that determination.

A doctrine known as comity which antedates the Tax Injunction Act and survives its passage, bars federal court adjudication of challenges to state tax laws or their administration so long as plain, adequate and complete relief is obtainable in state court.

That's a doctrine more embracive than the Tax Injunction Act and it stops plaintiffs like the independent marketers here from resorting to federal courts in the first instance to redress their complaints about uneven state taxation of commercial activity.

Now in reaching our decision we distinguish the Court's 2004 ruling in a case called Hibbs versus Winn.

In that case, Arizona citizens with no tax liability whatever of their own at stake challenged tax credits said to serve as subsidies for parochial school education.

In that establishment clause context if plaintiffs succeeded on the merits only one remedy would address their grievance, invalidation of the credits at issue.

In contrast in the instant case if the independent marketer's Commerce Clause or Equal Protection claims prevailed elimination of the credits accorded to public utilities would not be the inevitable remedy.

The tax bill of the independent marketers might be lowered instead or some other means of equalization devised.

For reasons our opinion develops Ohio authorities are best position to engage in that remedial inquiry.

Justice Kennedy has filed a concurring opinion.

Justice Thomas has filed an opinion concurring in the judgment in which Justice Saclia joins.

Justice Alito has filed an opinion concurring in the judgment.