McKesson Corporation v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida

PETITIONER: McKesson Corporation
RESPONDENT: Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida
LOCATION: Circuit Court of Orange County, Florida

DOCKET NO.: 88-192
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: Florida Supreme Court

CITATION: 496 US 18 (1990)
REARGUED: Dec 06, 1989
DECIDED: Jun 04, 1990
ARGUED: Mar 22, 1989

ADVOCATES:
Mr. Andrew L. Frey - ON BEHALF OF PETITIONERS IN No. 88-325
A. Raymond Randolph Jr. - ON BEHALF OF RESPONDENTS IN No. 88-325
David G. Robertson - ON BEHALF OF PETITIONER IN No. 88-192
H. Bartow Farr, III - ON BEHALF OF RESPONDENTS IN No. 88-192

Facts of the case

Question

Media for McKesson Corporation v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida

Audio Transcription for Oral Argument - March 22, 1989 in McKesson Corporation v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida

William H. Rehnquist:

We will hear argument next in No. 88-192, McKesson Corporation v. Division of Alcoholic Beverages of Florida, consolidated with No. 88-325, American Trucking Associations v. Maurice Smith.

Mr. Frey, you may proceed whenever you are ready.

Mr. Andrew L. Frey:

Thank you, Mr. Chief Justice, and may it please the Court, in 1983, the Arkansas Legislature enacted the Highway Use Equalization tax, imposed for the right to operate certain heavy trucks on the State's highways.

This tax was assessed at a rate of five cents a mile, up to a ceiling of $175 or 3,500 miles of operation.

All operations each year in excess of 3,500 miles were untaxed.

Now, because vehicles base registered in Arkansas tend to make much more extensive use of the State's highways than non-Arkansas vehicles, the free ride given by Arkansas for operations in excess of 3,500 miles resulted, as both courts below found, in a substantially lower tax cost per mile for Arkansas than for non-Arkansas truckers.

In fact, most members of the petitioner class paid the five cent a mile option, and the average cost for the in-state vehicle was one cent per mile.

Now, before this HUE tax even went into effect, this suit was filed challenging the validity of the tax on various grounds, and on behalf of a subclass consisting of non-Arkansas base registered truckers, a challenge was made under the commerce clause to the HUE flat tax on precisely the grounds ultimately upheld by this Court in the Scheiner case some four and a half years later.

Now, this extended effort by interstate truckers to rid themselves of the discriminatory HUE tax... I think it is important to appreciate what we went through during this period.

We began with an effort to have the tax proceeds placed in escrow rather than deposited in the State treasury, to facilitate refunds in the event that the tax was struck down.

That was rejected.

We went through the lower Arkansas courts and the Arkansas Supreme Court, and they upheld the validity of the tax under the commerce clause.

The case came up here.

Eventually, after the Scheiner decision, it was remanded.

After it was remanded, the State continued to collect the tax, doing everything in its power to delay the inevitable decision holding it un-Constitutional under the principles of Scheiner.

As a result of these efforts, we came back to Justice Blackmon, a circuit justice, seeking the imposition of an escrow to stop the bleeding, basically, and it was granted, and the funds from August 14, 1987 on were placed in escrow.

This, I think, is what produced legislation in Arkansas in October of 1987 repealing the HUE tax and replacing it with a tax of 2.5 cents per mile, but not flat... it would be paid by everybody.

The Arkansas Supreme Court actually did not get around to invalidating the HUE tax in this case until March of 1988.

Now, in what some might consider a tacit admission of weakness on the merits of the retroactivity issues brought before this court for review, Arkansas devotes nearly half of its brief to strikingly novel and, we think, quite farfetched arguments designed to avoid the merits, such is the contention that the 11th Amendment bars the exercise of appellate jurisdiction over a Federal question decided by a State court in any case that could not have been brought within the original jurisdiction of the Federal courts.

Now, unless there are questions on issues of this sort, I would like to devote my limited time to the merits of the retroactivity issue.

Anthony M. Kennedy:

Well, it seems to me that the question is not only retroactivity, but assuming that the tax is retroactively stricken, what the remedy is.

Mr. Andrew L. Frey:

I do not believe that question is the question for this Court at this time.

That is, this is a suit that was brought under the illegal exactions provision of the Arkansas Constitution, and I think that it has to be taken as matters stand in this Court, although there is an unresolved claim of sovereign immunity in the case, as matters stand in this Court, in light of the decision of the Arkansas Supreme Court, Arkansas will give refunds if these taxes were exacted in violation of Federal law.

Whether they were exacted in violation of Federal law depends, in Arkansas' view, on the application of the Chevron test.

Anthony M. Kennedy:

And is that a statutory refund procedure?

Mr. Andrew L. Frey:

It happens to be Constitutional.

It is a provision under the Arkansas Constitution.

Sandra Day O'Connor:

So you do not argue that there is some Federal rule requiring a refund whenever a State tax is struck down as un-Constitutional?

Mr. Andrew L. Frey:

We would argue that if we were pressed to it in a subsequent stage of this case.

We do not argue that now.