West Point Wholesale Grocery Company v. City of Opelika

PETITIONER:West Point Wholesale Grocery Company
RESPONDENT:City of Opelika
LOCATION:Railroad Crossing

DOCKET NO.: 478
DECIDED BY: Warren Court (1957-1958)
LOWER COURT:

CITATION: 354 US 390 (1957)
ARGUED: Apr 24, 1957
DECIDED: Jun 17, 1957

Facts of the case

Question

Audio Transcription for Oral Argument – April 24, 1957 in West Point Wholesale Grocery Company v. City of Opelika

Earl Warren:

Number 478, West Point Wholesale Grocery Company, Appellant, versus City of Opelika, Alabama.

Mr. Schlesinger.

M. R. Schlesinger:

Mr. Chief Justice, members of the Court, may it please the Court.

In the case at bar, the City of Opelika, Alabama has imposed a flatsum license tax upon local merchants — upon non-local merchants entering its jurisdiction from the outside.

A tax necessarily discriminatory in its operation and indeed a tax which is discriminatory and in regard merely to the face of the ordinance itself in view of a contrasting rate structure applied to local merchants.

This controversy reaches this Court upon appeal from a fine judgment by an Alabama Court of Appeals.

That Court of Appeals in turn affirmed an Alabama trial court’s action in sustaining the defendant city’s demurrer to the plaintiff’s complaint for refund of tax.

The Alabama Supreme Court having denied certiorari, the appeal has been taken from the judgment of the appellate court.

Since this appeal calls into action — calls into question the state courts’ action upon the defendant’s demurrer, the fact as set out in the plaintiff’s compliant are of critical importance.

May I therefore review those facts in a rather brief fashion.

Section 82 of the Opelika City license schedule for the year 1953 imposed an annual license or privilege tax upon wholesale merchants.

That tax was according to certain graduated amounts depending upon the bracket of gross business, annual gross business into which the merchant happened to fall.

By way of example, Your Honors will observe that the lowest bracket requiring a tax of $35 was where the merchant did less than 100,000 of business a year, the top amount of $250 was reached when the merchant’s business exceeded to a million dollars per year.

And in addition, Section 82 imposed a tax at a very small fraction of 1% upon the gross business done by the merchant.

Now, that, if the Court please, is Section 82 but Section 82 applies only to wholesalers delivering wares in the City of Opelika from a point within Opelika.

For merchants delivering goods from outside Opelika into the City of Opelika, two special sections are applicable.

The first of those special sections is Section 130.

It imposes on merchants — on persons and firms et cetera bringing goods in from outside and delivering them in Opelika, an annual tax of $100.

That, however, is inapplicable to wholesale grocers who bring goods in from outside the City.

And that brings me to the second special section if I may say a special, special section, Section 130 (a), which is the Section with which this Court is primarily concerned.

Section 130 (a) imposes an annual flatsum license tax of $250 upon wholesale grocers who deliver in the City of Opelika wares which they have brought in — grocers — groceries which they have brought in from outside of the City.

May I therefore review in very bird’s eye fashion the three taxing patterns that we have here.

We have here Section 130 (a), imposing an annual license tax of $250 on wholesale grocers who bring in to Opelika from outside the City groceries.

Secondly, we have a $100 annual license tax, not of primary concern here which applies to others bringing in merchandise from outside the City and delivering in the City.

Finally, we have under Section 82 a favorable rate structure, a structure geared to gross receipts but applicable only to merchants delivering goods in Opelika from a point within the City of Opelika.

Now, as to the plaintiff in this action, the plaintiff is a wholesale grocer who delivered from his business over in Georgia groceries to his retail merchant customers in the City of Opelika.

Those deliveries were pursuant to orders taken by its salesmen which orders were transmitted over to the plaintiff in Georgia and accepted by it in Georgia.

The shipments, made pursuant to those orders, were in a continuous movement in the interstate commerce from Georgia into Alabama.

The plaintiff is a Georgia corporation.

Its only place of business is in Georgia.

M. R. Schlesinger:

It has no inventory stock of goods or office in the State of Alabama.

William O. Douglas:

Is that — doing business in Birmingham (Inaudible)

M. R. Schlesinger:

Yes, sir.

That is quite right, Mr. Justice Douglas.

And that would prompt me to observe that the fact that this tax is, you might say, more rather than less discriminatory or more rather than less burdensome on non-local business does not make it any of the less discriminatory or burdensome against interstate business.

But Your Honor is quite right, the discrimination involved here was not merely against Georgia business let us say but could very well have applied to Birmingham shippers as well.

The plaintiff paid the $250 pursuant to Section 130 (a), required of it to enter this Opelika market and it then brought this suit for refund, filing a complaint for refund of tax based upon constitutional grounds and particularly upon the principle that Section 130 (a) involving a $250 flatsum license tax violates the Commerce Clause as being an undue burden upon interstate commerce and as being discriminatory against interstate commerce.

Felix Frankfurter:

The — the license being for what?

Make one shipment into Opelika?

M. R. Schlesinger:

Yes, sir.

It had to pay the shipment — it had to pay the tax in advance and that is brought out by Section D, the penalty section.

Felix Frankfurter:

For a year?

$200 a year?

M. R. Schlesinger:

Yes, sir, each year.

Felix Frankfurter:

Each year.

M. R. Schlesinger:

It paid it on February 15 of 1953 in this case.

Felix Frankfurter:

Doesn’t have to pay it if he doesn’t send anything in.

M. R. Schlesinger:

Oh, no.

Oh, no, sir.

No, sir, but in order to enter the market there’s a preliminary it has to pay the $250.

And if the Court —

Earl Warren:

If all of the — if all of the wholesale groceries had been required to pay the same $250 you would still be here, wouldn’t you —

M. R. Schlesinger:

Oh, yes, sir, I would and I —

Earl Warren:

— (Voice Overlap) undue burden — undue burden?

M. R. Schlesinger:

Yes, sir.

I — I would still be here, if Your Honor please.

That’s one of our two points as Your Honor’s question suggest and I should like to dwell on that at a little greater length in a moment if I may.

I was adverting to the plaintiff’s complaint and as I’ve already indicated, the defendant’s demurrer to that complaint was sustained so we’re here on the facts as set out in that complaint.

Now, it is our position that this tax constituted an unconstitutional burden on interstate commerce for two reasons.

And before adverting to the point made by Mr. Chief Justice Warren, may I first observe that our first ground for complaint here is that the statute is unconstitutional on its face in view of the more favorable fair tax structure which was applied to local merchants.

M. R. Schlesinger:

And I refer in particular in that case and in this connection it becomes necessary to look at Section 82 of the city license schedule.

Section 82 imposes a graduated tax approximately proportionate to gross receipts on local merchants.

Section 130 (a) by contrast imposes upon wholesale grocers delivering groceries from a point outside Opelika the flatsum tax of $250.

And I think it is of some interest to this Court surely in connection with this first proposition that in order for our plaintiff taxpayer over in Georgia, required to pay this $250 tax, to bring his rate of taxation down to the rate paid by local wholesale grocers.

It would be necessary for him to ship in and sell in this community of something less than 13,000 soaps in amount of groceries at wholesale prices in excess in one single year, in excess of a quarter of a million dollars.

Hugo L. Black:

You mean to pay $250?

M. R. Schlesinger:

Yes, sir.

What I attempted to do, Mr. Justice Black, is to take Section 82 and compute at what point a local merchant would have paid $250 under that graduated schedule and it happens to break at $280,000.

Hugo L. Black:

Are you including in that — but the local merchant has to pay the tax on his house — store?

M. R. Schlesinger:

Oh, no, sir.

I’m — I’m referring — I am referring to this business.

The point being that in view of the contrasting treatment between Section 82 on the one hand and Section 130 (a) on the other hand, we submit to this Court that a more flagrant attempt by local merchants, by local wholesale grocers to thwart out-of-state non-local business in competition with them can scarcely be imagined.

Hugo L. Black:

Why do you say —

M. R. Schlesinger:

May —

Hugo L. Black:

Why do you say out-of-state?

M. R. Schlesinger:

I say that, sir, because the statute —

Hugo L. Black:

Order came from Montgomery?

M. R. Schlesinger:

Oh, it would — it would operate against the Montgomery —

Felix Frankfurter:

Out of city (Voice Overlap) —

M. R. Schlesinger:

— merchant as well.

Felix Frankfurter:

You mean (Voice Overlap) —

M. R. Schlesinger:

I said out-of-state and then I — in a series I said non-local, meaning to say that this is not confined to out-of-state and in Your Honor’s point if I may presume to say so is very well taken.

It is — it is — they’ve got the fence around Opelika so to speak and everything out of Opelika is thwarted but included of course and out of Opelika —

Felix Frankfurter:

Your argument —

M. R. Schlesinger:

— is your interstate commerce.

Felix Frankfurter:

— on this point in short is that the State can do what it will so long as it confines activities within the State, but you say even though it’s a fence around Opelika as regard to Mobile or Montgomery on (Inaudible), it may do that absolute regard to Georgia?

M. R. Schlesinger:

Well, I would say —

Felix Frankfurter:

Isn’t that your position?

M. R. Schlesinger:

— to Your Honor that of course we have here a City of Opelika tax and I will point out to Your Honors that in the Berwind-White opinion to which I want to refer in just a moment in Footnote 11, this Court through Mr. Justice Stone adverted to a law review article, your Berwind-White opinion was in 1940, adverted to a law review article pointing out that there were more than 800 municipal flatsum license taxes designed for the purpose of keeping out non-local competition.

Felix Frankfurter:

But you’re not interested in what it does to other people in Alabama —

M. R. Schlesinger:

No.

Felix Frankfurter:

— you’re interested in Georgia —

M. R. Schlesinger:

That’s right.

Felix Frankfurter:

— and Ohio.

M. R. Schlesinger:

That’s right.

Felix Frankfurter:

All right.

M. R. Schlesinger:

That’s right.

That’s right, sir.

Now, may I advert to the second proposition which was suggested by Mr. Chief Justice Warren, the statute is unconstitutional for a second reason and in this connection, it is unnecessary to look to Section 82, it is unnecessary at any rate to dwell on the treatment, the favorable treatment, the fair treatment which is accorded to the local merchants pursuant to that graduated gross receipts tax.

Suffice to say in this connection that wholesale grocers dealing in interstate commerce are subject under Section 130 (a) to a flatsum license tax.

A flatsum tax which they must pay, as Mr. Justice Frankfurter has suggested, before they enter the market and a flatsum tax which must be paid regardless of the amount of business done.

In Nippert against City of Richmond in 1946, the Supreme Court carefully delineated the discriminatory nature of the flatsum taxes as applied against any incident of the interstate commerce.

And in the course of its opinion, it reaffirmed and reemphasized its position respecting these flatsum license taxes as are brought out in the long line of cases, the so-called drummer cases starting with Robbins against Shelby County Taxing District back in 1887.

Felix Frankfurter:

Suppose it also includes a flat tax, the same flat tax on the local grocery or on the local wholesalers sending to the cities such as one in Opelika, in the local little corner groceries.

M. R. Schlesinger:

That —

Felix Frankfurter:

Would — would the Commerce Clause preclude the imposition of a flat tax of precisely the same amount on the purely local man?

M. R. Schlesinger:

I think, if Your Honor please —

Felix Frankfurter:

If it imposes (Voice Overlap) —

M. R. Schlesinger:

— that it clearly would.

Felix Frankfurter:

Pardon me?

M. R. Schlesinger:

I think it clearly would.

Felix Frankfurter:

It would?

M. R. Schlesinger:

It would, based on prior authority by this Court.

I refer particularly to Nippert against City of Richmond.

Felix Frankfurter:

Was the tax of the local fellow the same as the one that’s imposed on the interstate (Voice Overlap) —

M. R. Schlesinger:

It was on the — it was in the — in the Nippert case.

It was on the local fellow not having an established place of business.

It was the same as on the person who brought in from out-of-state.

Felix Frankfurter:

Well, —

M. R. Schlesinger:

Yes, sir.

Felix Frankfurter:

— it’s already a differentiation.

M. R. Schlesinger:

Mr. Justice Black, I believe it was or Mr. Justice Douglas.

I don’t recall which wrote the dissenting opinion there, expressed some contradictory views based on the fact that local merchants having a place of business in the jurisdiction, the tax to which they were subject was not indicated in the record which was before the Court.

But if the Court please, the essence of the distinction taken by this Court in its Berwind-White opinion between flatsum license taxes on the one hand and in that case a sales tax on the other hand was equality of rate structure.

Now, this local municipality can provide for equality of rate structure, it hasn’t done that though.

So —

Hugo L. Black:

How could they do it?

M. R. Schlesinger:

Pardon me?

Hugo L. Black:

How could they do it?

M. R. Schlesinger:

I should think they could do it, if Your Honor please, either by a compensating use or property tax or if they want to follow what is perhaps the invitation suggested by this Court in — in its Berwind-White opinion by a sales tax on the sales in the jurisdiction even though they’d be interstate sales.

And may I dwell on that point for just a moment since Your Honor has asked the question.

The Court will recall in the Berwind-White opinion, this Court held that a tax on an interstate sale by the point of destination, in that case it was New York City, is constitutional their being equality of rate with local sales and the seller incidentally having a local sales office.

Now, as the Court is more aware than I am amongst those outside of the Court, the debate rages as to whether this Court will eventually hold that the state of destination may always impose a sales tax whether or not there is a sales office.

But my point is that the Berwind-White case is thought to have gone a long way in permitting equality of rate structure but we’re not even at that point here.

We’re on the flatsum license tax.

Felix Frankfurter:

You would have no trouble if a gross tax was imposed on the sales within the State by the outside?

M. R. Schlesinger:

No, sir.

Felix Frankfurter:

The out-of-state?

M. R. Schlesinger:

No, sir.

Felix Frankfurter:

That’s —

M. R. Schlesinger:

No.

Felix Frankfurter:

That’s —

M. R. Schlesinger:

That’s what —

Felix Frankfurter:

Now, I suppose the other thing is clear by our decisions that a mere license to do business just as — they aren’t outside, they come in and do business flat or the flat rate unrelated to the rest of the case.

That’s not good.

M. R. Schlesinger:

No, sir.

But a license to do business measured by sales —

Felix Frankfurter:

I’m not talking about — I didn’t say it measured —

M. R. Schlesinger:

No, sir.

I just want to draw the distinction as Your Honor is doing.

M. R. Schlesinger:

I wanted to emphasize that.

Felix Frankfurter:

Now, this is — this is not — not quite either of those, is it, for the simple — this also would be bad if no outside or no — if — if there weren’t equality between the Georgia and the Birmingham?

That’s a complicating factor, isn’t it?

M. R. Schlesinger:

No, these flatsum taxes had never — I don’t think ever been in terms of the discrimination between state and interstate commerce.

I believe let’s take Nippert against City of Richmond or one of the alternative grounds under Memphis Steam Laundry there was a — no, I’ll strike that, Memphis Steam Laundry was a Tennessee tax but in Nippert, at any rate, it was a local tax.

Now, the defendant seeks to distinguish of all these Supreme Court cases, respecting the invalidity of a flatsum license tax as such and particularly the Nippert, the Memphis Steam Laundry and the old Robbins case on the grounds that a tax and I quote from its brief at page 4 from the defendants brief at page 4, “On the ground that the tax in those cases was levied upon the solicitation, the Court will bear in mind that the tax here is on delivery, was levied on the solicitation of sales to be later consummated by delivering in interstate commerce.”

Furthermore at the foot at page 4, the defendant in it’s brief to leave no doubts about that distinction which the defendant is seeking to have this Court adopt says, “This Court has never said that there is any impropriety in the levy of a flatsum license on the incident of delivery.”

Now, in point of fact and at least two of the drummer cases which recited in Berwind-White, Caldwell against North Carolina which appears and I — we have not had the opportunity of filing a reply brief, Mr. Chief Justice, which appears in 187 U.S.622 and in Crenshaw against Arkansas 227 U.S.389.

This Court did hold that a flatsum license tax on delivery was bad.

I must concede however that most of the questions which have arisen before this Court have involved the problem of whether a tax on solicitation is as bad as a tax on delivery.

The Court however has indicated that it is but suffice to say they were concerned with delivery, we’re concerned with the worst — worst leg of the question as it were in this particular controversy.

William O. Douglas:

What was your page number in the 187 citation?

M. R. Schlesinger:

That was 187 U.S.622.

William O. Douglas:

Thank you.

M. R. Schlesinger:

And the Crenshaw case, if I may repeat Mr. Justice Douglas, was 227 U.S.389.

William O. Douglas:

Thank you.

Felix Frankfurter:

Now, these delivery cases — in those cases when the tax is — not the delivery but the solicitation cases.

When the tax was paid thereafter you could ship the goods in without any further tax, couldn’t it?

M. R. Schlesinger:

I think that’s true.

I think that’s true, Your Honor.

I — I hesitate and say it’s true of all of them —

Felix Frankfurter:

No, but (Voice Overlap) —

M. R. Schlesinger:

— in an awful or bothersome but I’m just doing something.

Felix Frankfurter:

— so that this was a means of getting permission to do business in the State?

M. R. Schlesinger:

It’s — it’s an entry permit, pay at the gate when you come in but you’ve got to (Voice Overlap) —

Felix Frankfurter:

But I hear you say if you — before you deliver you have to pay, don’t you?

M. R. Schlesinger:

It’s the same — I think it’s the same thing, it’s in terms —

Felix Frankfurter:

I’m just trying to find out what the —

M. R. Schlesinger:

It’s the same thing.

Felix Frankfurter:

— what the events were without getting into the law.

M. R. Schlesinger:

Yes, sir, you’re —

Felix Frankfurter:

That is if a — if a fellow from Atlanta wants to ship in some grocery, what does he do?

What happens?

How is the tax —

M. R. Schlesinger:

He pays $250 and then he can ship for the balance of the year.

Felix Frankfurter:

Well, when does he pay?

M. R. Schlesinger:

He pays that at the beginning of the year because under —

Felix Frankfurter:

That’s if he’s engaged in the business of sending in?

M. R. Schlesinger:

Yes, sir.

Felix Frankfurter:

But suppose — suppose the first, somebody discovers there’s a grocery in Atlanta and he wants a good from them, what happens to state that concretely?

M. R. Schlesinger:

Concretely —

Felix Frankfurter:

A grocery in — in Opelika hears about a desirable wholesaler in Atlanta and he writes further, will you send me in the following goods?

Now, what is the wholesale grocer in Atlanta do to conform with the Opelika order?

M. R. Schlesinger:

The wholesale grocer in Atlanta makes out his check for $250 to the City of Opelika and he pays on the barrelhead before he may make the shipment, and if he doesn’t there’s a penalty in Section D which is before Your Honors.

Felix Frankfurter:

It doesn’t get it?

M. R. Schlesinger:

Well — now, in furtherance of this proposition that although a tax on delivery is — although a tax on solicitation is good, a tax on delivery as in this case is all right.

The defendant in its brief relies upon this Court’s opinion in its Berwind-White case.

Now, let’s just look at that case very briefly, it dealt as already indicated with a sale tax on an interstate sale.

In the course of its opinion, the Supreme Court reaffirmed at great length its flatsum decisions.

The defendant at page 4 quotes from a sentence from the remarks of that Court, and may I indicate that the quotation is from a part of a sentence from the remarks of this Court and omitted are the — is a phrase at the beginning of the sentence in the clause of the conclusion of that sentence.

Be that as it may however, a reading of that complete sentence from which the defendant has excised the part and a reading of the complete paragraph from which it has been brawn would indicate the Supreme Court’s thinking, respecting the invalidity of a flatsum tax not being confined to solicitation before commerce and therefore all right on delivery itself.

If there is to be any distinction and it is the defendant who suggest a distinction between a tax on delivery and a tax on solicitation.

Surely, the case wherein validity is no — is the case wherein validity is clearer when the tax is on the delivery in interstate commerce then it — is it in the case of a tax on solicitation to be followed by interstate commerce which is not to say however that the appellant suggests that any distinction be made on that ground of Tweedledee and Tweedledum.

Now, may I just withdraw from the trees for a moment and look at the forest.

Look at the forest in terms of local physical demands as contrasted with the desirability and the constitutional mandate that interstate commerce should not be unduly impeded.

It might very well be that a local taxing jurisdiction should look to interstate commerce to pay a fair rate of tax when it enters the local taxing jurisdiction.But that’s a far cry from what we have in this case.

We have, first of all, a flatsum license tax invalid on its face in contrast with a tax — a fair apportioned rate against local business.

And we have in the second place the fact that there is probably no need to look to that local taxing rate in view of the fact that this Court has repeatedly held that a flatsum tax which must be paid as a prerequisite to coming into the jurisdiction, which must be paid regardless of the amount of business done is by virtue of being a flatsum tax invalid as applied to intestate commerce.

Earl Warren:

Mr. Cope.

R. E. L. Cope:

I may — may it please the Court.

R. E. L. Cope:

The appellant in this case has raised two questions.

First, he says that this is a delivery at the end of a continuous journey on interstate commerce and hence it is not subject to a tax.

Second, that it is discriminatory.

First, we would like to deal with the two propositions which you asserted in the jurisdiction — the jurisdictional statement separately.

There have been numerous cases by this Court over a period of many, many years dealing with the question of municipal licenses and state licenses on matters involving interstate commerce in the conflict with the Commerce Clause.

Our time is too short to discuss all of those cases in detail but I would like to say briefly that in early history of those cases the decisions were very narrow in their scope.

The decisions almost universal — universally held that anything which in any amount touched interstate commerce constituted an imposition on interstate commerce and was an improper burden.

Now, at the time that the Berwind-White case opinion was delivered, it was held by municipal authorities as a very liberal construction on the part of this Court.

It was interpreted as having — actually announced new law as having perhaps overcome the previous narrow decisions which had been written during a period of 100 years before.

Now, briefly the Berwind-White case and its rather amazing that both counsel rely upon the same opinion.

Briefly, the Berwind-White case announces three propositions that we are primarily interested in.

The first proposition it firmly establishes that a local tax may be levied at the point of delivery.

I believe that in the Berwind-White case that it said that the taxable thing was the passing of title.

But in the case which was decided a short time later, I believe it’s known as the Fuel Corporation case.

That is Fuel Corporation versus Taylor.

They said it was not necessarily the passing of title which determined it but it was the passing of possession which was the taxable event.

Now, we say that under the Berwind-White decision, the Fuel Corporation case, there is no question but that a municipality may tax the incident of change in possession.

That is the incident of local delivery that we think is very, very clearly established.

Now, the Opelika ordinance simply says that any person who unloads or delivers wholesale groceries is subject to this tax.

Now, that is certainly a tax directly levied upon the change in possession and under the Berwind-White case, it is certainly entirely justified.

The next proposition which the Berwind-White case laid down affirmatively, I believe it had been touched upon probably in the Western Livestock case prior to that time, but it — it asserted in so many terms that there was no reason why interstate commerce should not bear its fair share of the local tax burden.

Prior to do that time, interstate commerce had been a sacred cow, insofar as bearing any share of the local tax burden was concerned, but by that decision and subsequent decisions it has been conclusively established that interstate commerce at the point of delivery should bear its fair and just and reasonable part of the local tax power.

The third proposition which was asserted and asserted affirmatively was that the case of Nippert versus the City of Richmond and some Robbins versus Shelby County Taxing District and the other so-called drummer cases are cases which are very, very narrow in their scope.

The decision explicitly says that this — that we do not overrule these decisions, but that we limit them in their scope to the solicitation of business, though as they say that you cannot levy a tax upon solicitation.

Now, the next question is, does that bar a flat license sum tax?

In this case a flat tax is levied of — of $250.

As suggested by Mr. Justice Frankfurter, perhaps by Mr. Justice Black, if the City of Opelika had levied a flatsum tax on all local wholesalers of $250 and a flatsum tax of $250, would there be any discrimination?

We most respectively submit that under the Berwind-White case there is absolutely nothing which precludes a flatsum license.

We know as a matter of practice that it is virtually impossible for a municipality that is a small municipality of some $12,000 or $13,000 to attempt to levy and collect from a non-resident corporation doing business in that city anything other than a flatsum license tax.

Those simple reason that the records of the company are not available, there is no means by which the tax can be enforced unless you resort to perhaps the States of Georgia or the States of Tennessee, and so as a matter of practical application the municipalities have found and that is a especially small municipalities that a flatsum license tax is necessarily levied.

R. E. L. Cope:

So we submit there is nothing unconstitutional in a flatsum license tax levied on the incident of delivery.

Now, the question — he says you pay this before you do business.

The license tax as it reads says that upon the — that any person unloading or delivering goods shall pay this tax.

It is a tax on the transfer of possession which was the tax expressly approved by the Court in the Fuel Corporation case.

Felix Frankfurter:

If no tax were paid on this, if the good were just brought in from Georgia and unload it at some grocery store in Opelika, could the city — is there a penalty provision for this (Voice Overlap) —

R. E. L. Cope:

There — there is a penalty provision, yes.

Felix Frankfurter:

What is penalty?

R. E. L. Cope:

A penalty?

I believe that your maximum fine for doing business without a license is —

Felix Frankfurter:

Well now, would the —

R. E. L. Cope:

— a $100 in municipal corporation.

Felix Frankfurter:

Would the grocery store in Opelika — could you go after the grocery store that received the good?

R. E. L. Cope:

No, sir, they — they would not be the violator in this case.

Felix Frankfurter:

So —

R. E. L. Cope:

This — this — the — the appellant would be the person who was unloading and delivering and who was making the change of possession —

Felix Frankfurter:

And that —

R. E. L. Cope:

— the local grocery store would simply be accepting possession.

Felix Frankfurter:

And that’s what makes this very different from Berwind and White.

That was a tax on the people who got control of New York on the purchases.

R. E. L. Cope:

Yes, but in — in — I believe that — that is your so-called sales tax of course —

Felix Frankfurter:

Was that — but that was —

R. E. L. Cope:

— which is in a different category.

However, the Berwind case made the vendor liable for that tax —

Felix Frankfurter:

Yes.

R. E. L. Cope:

— it had provisions whereby it might be passed on.

We — this Court of course has passed upon use taxes which compliment the sales tax, in fact for every state in the union.

Felix Frankfurter:

Would you mind telling me how you differentiate the Nippert case from this?

R. E. L. Cope:

The Nippert case is a case on solicitation.

The — the Supreme Court in the Nippert case said that it was on solicitation is this so-called drummer case.

In Berwind versus White, the Court expressly pointed out that there was a differentiation in the Nippert case.

Felix Frankfurter:

You mean the Nippert tax would have to be paid whether business has got in (Voice Overlap) —

R. E. L. Cope:

Whether you —

Felix Frankfurter:

— or not?

R. E. L. Cope:

Whether you ever sell anything, whether you ever deliver anything you are responsible for that tax if you so much as go to a man and solicit his business.

Felix Frankfurter:

But — but if he — if he’s been getting business and stuff they send in and then the flat tax called, you say that’s different?

R. E. L. Cope:

Perhaps, that is correct, Your Honor.

Felix Frankfurter:

That’s the point.

R. E. L. Cope:

We say that — we say that the tax is levied on — on a local incident which is at the end of the journey in interstate commerce, that is the local incident of delivery which is the change of possession and which a taxable event.

Felix Frankfurter:

But you don’t tax the $200 on that because thereafter you can do business for a year?

R. E. L. Cope:

It’s — it’s on all deliveries which may be made during the year.

Yes, it gives him — it gives him the license of the privilege of making deliveries for — for the further remainder of that tax year.

(Voice Overlap)

Felix Frankfurter:

So talking in terms of the cases about tax event, the tax event isn’t — the tax event isn’t completed or that’s merely a condition on which the tax falls, namely, if he sends in any goods then he must pay $200, would lead to sending goods thereafter everyday on, how does he plead with that?

R. E. L. Cope:

Well, we might say it is a tax on the continuous incident of delivery but without change in possession and without a delivery within the municipal corporation, there can be not tax.

Hugo L. Black:

Suppose the railroad delivered?

R. E. L. Cope:

Now, I believe, Mr. Justice Black, that they have held in one of the cases and I — and I think it was sales tax case and I — I admit that I do not recall.

But there — there was a scheme device in — in just such a manner whereby if one delivered by the railroad, but what they did was in an attempt to get around the Berwind case they shipped the property F.O.B. from the — from the adjoining state.

And that was when they said that while the title might have passed or might have changed in the adjoining state at the point of the F.O.B. shipment that still the possession was the taxable act and was subject to it.

There — there are a great many old cases which as I say are very difficult to — to reconcile because in the — in the many, many years which preceded the Berwind-White case there was very little if anything that you could do toward making interstate commerce bear any part of the burden.

The delivery view has come, I believe there was the Covington case which immediately preceded that and — and which was fairly liberal in its view.

It has only been recent that this Court has recognized that interstate commerce should bear a part of the municipal burden.

Now, with the Court’s permission I — I’ll proceed to the second part of my argument because I know that my time is beginning to run just a little short.

The next is assistance by counsel is that the tax which is here levied is discriminatory.

Now, he says that it is discriminatory on its face.

We’d like to call the Court’s attention to this fact that first all municipal taxes in the State of Alabama and I assume in other states are levied by virtue of — of legislative authority.

The legislature authorizes the — the levy of the tax.

In this particular case the — the Code of Alabama provides that a tax may be levied by municipalities for the purpose of raising revenue and also in the exercise of its police powers either or both.

We think that the — the significant part of that statute of course is the portion which gives the municipality the privilege of levying a license in the exercise of its police powers.

Now, in the — in levying a license in the exercise of police powers, it necessarily follows that the municipality must have the right to classify.

And actually, (Inaudible) being one classification, retail grocery store might be at another classification.

R. E. L. Cope:

Therefore without question your municipal authority has the right to classify various types of businesses in connection with the exercise of that police power.

Now, in this particular case they have classified merchants who operate places of business within the city in one category.

They have classified merchants who bring wholesale groceries in from other points and from without in levy category.

The question therefore with which we are presented is whether or not that is a valid classification.

Now, I’d like to just view a brief with my manner in which this case arose.

They filed a complaint which in substance alleges that they were doing the business and sets forth these various municipal ordinances which are involved.

They alleged in their complaint that these — these two ordinances constituted a discrimination.

Now, the — the Supreme Court of Alabama has held repeatedly that a business may be classified under the police powers where it operates from a given place of business within the municipality and where goods are brought in from without the municipality and that such a classification is presumptively a valid classification.

It is recognized that in the exercise of your police powers, your municipal police powers are that you have — you exercise a certain control over your local merchant, they are subject to your jurisdiction.

You are confronted with an entirely different problem when you have itinerant merchant bringing goods in from other states or elsewhere and — and selling those goods.

Therefore, the Court has said that a classification of a local store as contrasted with the classification of a store which is beyond the city is presumptively, and I use the word presumptively advisably, is presumptively a valid classification.

Now, the corollary to that is that if it is presumptively a valid classification then the allegations which are contained in the complaint constitute a conclusion of law.

When he says that this ordinance is discriminate against me, he isn’t alleging nothing more or less than a conclusion of law.

Our end was upon that theory that the trial court sustained the demurrer.

It was upon that theory that the Supreme Court of Alabama sustained the demurrers of the lower court.

They say and the rule of practice and procedure has always been in the State of Alabama that if you allege in order to allege a discrimination, you must allege the facts which constitute the discrimination.

The same thing is true of fraud and deceit in many other actions.

And the Court in substance says that we have what is prima facie, a valid classification, it is not inherently bad on its face.

Therefore the burden rests upon the appellant in this case to allege facts showing that this does actually discriminate against me.

Harold Burton:

Doesn’t the (Inaudible) it’s too late to do that?

R. E. L. Cope:

Not necessarily.

That gets back to your question of classification.

If you have one — one business in one classification then that is a valid classification prima facie, then you have a right to apply a different rate to him and what you do to a man in another classification.

Harold Burton:

But from the limit of that?

R. E. L. Cope:

There is a limit of course.

The — the Supreme Court of Alabama is not in the position of having to say it here, that this is either a valid tax or an invalid tax.They say if there is a discrimination, you simply allege the facts to show the discrimination and the tax will be tossed out.

Harold Burton:

You just found in the middle of the brief then?

R. E. L. Cope:

I just found on the grounds of classification that — that this is a valid classification, that in connection not for revenue, you can’t justify the revenue but we justified under the exercise of the police powers.

William J. Brennan, Jr.:

Well, what — what underlies the difference in classification?

R. E. L. Cope:

The — the fact that — well, perhaps — perhaps I — I should, if I may give you an illustration which is not necessarily applies to West Point Wholesale Grocery Company, but which applies to transients in general.

R. E. L. Cope:

Under — under the — as a part of the police powers it is a part of the duty to protect the citizens against fraud and deceit.

Now, we may have a truckload of genuine (Inaudible) rugs which were manufactured in — in Brooklyn brought in to our city, which are sold, they are shoddy, they are inferior, the people are here today and they’re gone tomorrow.

The — the exercise of the police power in order to protect those people against fraud and deceit, in order to properly supervise the — the non-resident activity, people we don’t know whether they are reputable, we don’t know whether they are disreputable.

I — I might — might suggest —

William J. Brennan, Jr.:

Well, in that illustration you’ve given, I take it the Brooklyn rug dealer if he paid the $250 could ship in the shoddy rugs, couldn’t he?

R. E. L. Cope:

He would have to — he would to have to you, you have certain procedures in which you go to the — in which you go to the clerk of course and you make your application, you make known all of your facts and you — your police department has some opportunity to discuss it —

William J. Brennan, Jr.:

Well, that —

R. E. L. Cope:

— we know that that man is in town, we know that he is making sales, he is not —

William J. Brennan, Jr.:

And just what is —

R. E. L. Cope:

— sleeping around.

William J. Brennan, Jr.:

Just what is it that the out-of-town wholesale concern has to supply in the way of information?

R. E. L. Cope:

That — that, Your Honor, I’m not prepared to say in the City of Opelika, it — it varies from — from city to city and I don’t know if there is any — any general rule.

William J. Brennan, Jr.:

Well, I mean is there anything in this ordinance that says anything except that you paid $250 if you’re shipping in goods from out-of-town, we’ll give you a license?

R. E. L. Cope:

I — I do not think that record will disclose our answer to that for the simple reason that this was a part of a comprehensive ordinance which — which covered the licenses of all businesses, all professions and trades and occupations and so forth and so on.

William J. Brennan, Jr.:

Was there a difference in the burden of — of municipal services in relation to an outsider than there is to a local merchant?

R. E. L. Cope:

I — I would think — I would think most definitely there is, Your Honor.

In the first place, you have your local merchant, he’s there everyday.

He’s responsible to any action, he’s responsible to any criminal action, he’s responsible to civil actions, he —

William J. Brennan, Jr.:

No, I mean in terms of — in terms of municipal services, for example is there more fire service or a different fire —

R. E. L. Cope:

No, I —

William J. Brennan, Jr.:

— service or different police service?

R. E. L. Cope:

— I wouldn’t say that that was — probably there is more prior service of course given to you — to your local merchant (Voice Overlap) —

William J. Brennan, Jr.:

How about police service?

R. E. L. Cope:

— established place of business.

William J. Brennan, Jr.:

How about police service?

R. E. L. Cope:

I would say that the police service that she was on foot at least insofar — of course insofar as protecting his place from breaking in.But insofar as protecting the public against irresponsible vendors, irresponsible tradesman, that your police — your police problem is — is quite a great problem.

William J. Brennan, Jr.:

Well, are — are you suggesting that we should indulge a presumption that this higher rate, the out-of-towners is based upon the necessity for some kind of policing services to see that local residents of Opelika are not defrauded by out-of-towners?

R. E. L. Cope:

That is exactly a part of it, Your Honor, yes.

In other words, is — it’s presumed to be a valid classification because of the exercise of police powers.

Now —

Earl Warren:

Under the ordinance does anybody have in the City, have any right to any discretion to deny a license of this kind?

R. E. L. Cope:

Oh, yes, the — the — your mayor and — and your city clerk duly —

Earl Warren:

What —

R. E. L. Cope:

— will have that discretion.

Earl Warren:

Under what circumstances does he —

R. E. L. Cope:

If — if the person or a person of bad character, if he was financially irresponsible, if he was a known criminal, if —

Earl Warren:

Is that in the ordinance?

R. E. L. Cope:

I’ll say I’m not completely sure about the entire text of the — of the — of this particular ordinance.

I am familiar with the text of a great many and I — I know in my —

Earl Warren:

Don’t you think that’s a rather important thing as to whether or not there is discretion to either to grant or deny or whether this is a matter of right that a person would have upon paying the $250?

R. E. L. Cope:

It — it’s entirely possible, Your Honor.

Earl Warren:

If it’s a police ordinance?

R. E. L. Cope:

It’s — it is of course a combination of police ordinance.

In the revenue, there’s no way that you can separate the two, it’s at least —

Earl Warren:

I thought you said it could not be sustained as a revenue ordinance?

R. E. L. Cope:

Well, I mean your entire ordinance, it’s — it’s a combination police of power, you — you levy a — you levy a license for revenue in order to carry out and to pay the expenses of your — of your police action which is involved.

Someone has to pay for — for maintaining that police service and for those services which were rendered.

Earl Warren:

Well, where will we find the discretionary power in any city officer to deny a license of this kind if a man pays this $250?

R. E. L. Cope:

I — I would hesitate to answer Your Honor but for the simple reason that I am not familiar with the ordinance in the — in the City of Opelika in its entirety or one of this clause which is in controversy.

Earl Warren:

Would you (Voice Overlap) —

R. E. L. Cope:

I know that in my — in my local City of Union Springs, we certainly have that provision because I wrote it, Your Honor, and I’m quite sure that it’s there.

William J. Brennan, Jr.:

Well, I — I don’t know Mr. Cope but apparently on — in this complaint, we’re given the full text of the ordinance which appears to be an amending ordinance incidentally.

R. E. L. Cope:

That — that is Section 130.

There were — there were some 130 sections which preceded that and there were probably some 75 sections which came after.

And it was Your — Your Honors which covers the entire field and which also provides utilities, it provides your procedure for the — for the issuance of licenses, all those things are covered in one license ordinance.

That — that of course is our — our entire contest on this is that it’s — it’s within the police power.

William J. Brennan, Jr.:

Well, it may be but the difficulty I have is where factually, do you support the — the classification.

R. E. L. Cope:

That — that —

Harold Burton:

Merely to say it’s within the police power doesn’t help us much.

R. E. L. Cope:

That — that, Your Honor, is — is a question that we raised, is that where it is within the police power granted by the State and the burden rests upon the person who is challenging the ordinance to allege the facts and to show the facts that it is a discrimination or that it is an abuse or is an improper exercise.

R. E. L. Cope:

We simply say that presumptively this was sound and the Supreme Court of Alabama said that presumptively it was sound.

Now, as matter of actual proof, as a matter of actual fact it might be shown to be sound or unsound, I don’t know (Voice Overlap) —

Hugo L. Black:

Are you saying —

R. E. L. Cope:

— that’s the facts in.

William J. Brennan, Jr.:

Would you make that same argument if this be instead of $250 were $2500?

R. E. L. Cope:

Well, I think, Your Honor, that’s rather difficult to say.

Yes, it — it might appear to be prohibitive.

I don’t think this appears to be prohibitive on its face.

He said you had to pay — make $280,000 worth of business in order to justify a license $250.

Well, (Voice Overlap) —

William J. Brennan, Jr.:

That is that local residency tax.

R. E. L. Cope:

That’s local — no, that’s local residence.

Well, a wholesale of grocery business, a grocery that isn’t doing $250,000 worth of business a year, he isn’t paying his rent.

Earl Warren:

He doesn’t have to do it all in one little city.

R. E. L. Cope:

No, that’s —

Earl Warren:

He might be doing it in 100 or 250 cities.

R. E. L. Cope:

That’s — that’s true, Your Honor.

But I mean as far as a local resident is concerned and —

Earl Warren:

He might send a consignment of less than $250 to your city — a little city and that might be the only one that he would send during the year but he’d still have to pay $250 —

R. E. L. Cope:

Well, I — of course our great — our great — one of our great problems is your transient merchant.

That — that is your transient, the man who is here today and gone tomorrow.

That is a man who really wears you out insofar as the exercise of your police power is concerned.

Earl Warren:

He wouldn’t certainly be a transient, he’d be — the business is solicited from him in another city and he sends his commodities there (Voice Overlap) —

R. E. L. Cope:

Well, he — he might — he might be transient, he might not but we have to — we have to write an ordinance with which we try to protect the entire community.

And we — we certainly can’t make that differential on only one delivery or whether — we — we don’t know when they come in from out-of-state until we’ve looked into it.

Hugo L. Black:

Your time is up but with the Chief’s sentence, I’d like to ask you a question on it.

R. E. L. Cope:

Yes, Your Honor.

Hugo L. Black:

Is the last part of your argument in page — the last paragraph in the Courts opinion which held that the complaint as a complaint was not sufficient under the Alabama rules of procedure?

R. E. L. Cope:

That is correct, Your Honor.

Hugo L. Black:

They held that the complaint did not allege sufficient fact?

R. E. L. Cope:

Did not allege any facts.

Hugo L. Black:

Support the conclusion that the pleader has been charged with unlawful discrimination.

R. E. L. Cope:

That is true.

Hugo L. Black:

As I understand it you are saying that — and that was the basis of their rule —

R. E. L. Cope:

And was the basic reasoning —

Hugo L. Black:

— in this case.

R. E. L. Cope:

The Supreme Court of Alabama has never said, “Well, this is a valid or an invalid ordinance.”

Hugo L. Black:

Then no trial of it?

R. E. L. Cope:

Then no trial, it was —

Hugo L. Black:

It was dismissed on the complaint?

R. E. L. Cope:

They — they filed the complaint, a demurrer was — was filed to it which raised a point, the demurrers was sustained by the trial court.

The plaintiff then took a non-suit with an appeal direct to the Court of Appeals simply on the pleadings and that’s as far as it ever gotten.

Hugo L. Black:

Is that — is that the custom there if they don’t — do not want to amend further to —

R. E. L. Cope:

Don’t amend further, you take —

Hugo L. Black:

Take a non-suit?

R. E. L. Cope:

— you take a non-suit with the bill of exceptions or rather it’s been the — yes.

Hugo L. Black:

Was it — was it open to them to file an amended complaint?

R. E. L. Cope:

Oh, yes, they — they were — they simply — the procedure, Your Honor, is I — is it — it had — when you — you can — you can take the non-suit either from — as matter of pleadings or you can take it during the — during the progress of a trial.

You can take it on an adverse ruling on the — on the admission —

Hugo L. Black:

But there —

R. E. L. Cope:

— of evidence.

Hugo L. Black:

Here it was (Voice Overlap) —

R. E. L. Cope:

Here it was on the demurrer that the lower court sustained the demurrer —

Hugo L. Black:

Now, in Alabama —

R. E. L. Cope:

— then —

Hugo L. Black:

— procedures it used to be — I don’t know what still is.

R. E. L. Cope:

Haven’t changed a great deal, Your Honor.

Hugo L. Black:

The plaintiff had a right to amend this complaint at that time.

R. E. L. Cope:

That’s right.

Hugo L. Black:

Or he could instead of amending his complaint, choose to rests on his allegation as being sufficient under the law?

R. E. L. Cope:

That’s right.

Hugo L. Black:

They chose to rest on the allegation for being sufficient —

R. E. L. Cope:

That —

Hugo L. Black:

— took it to the Court of Appeals.

R. E. L. Cope:

That’s entirely correct.

Hugo L. Black:

That Court held that that complaint was not sufficient under Alabama procedure.

R. E. L. Cope:

That is true, Your Honor.

That’s exactly the point we make.

Hugo L. Black:

And you’re — you’re arguing that the complaint was not sufficient?

R. E. L. Cope:

We are arguing that it — that it is not apparent on the face of the complaint that it is insufficient and that’s the only ground in which they could possibly stand.

Thank you.

M. R. Schlesinger:

May I take the two minutes —

Earl Warren:

You have —

M. R. Schlesinger:

— remaining —

Earl Warren:

You have a couple minutes left, yes.

M. R. Schlesinger:

I’d like to dwell on that procedural aspect which was discussed by Mr. Justice Black just a moment ago.

Hugo L. Black:

Well, I just — I thought that what he was talking about is trying to be sure that was it?

M. R. Schlesinger:

I am not — first, with Alabama procedure as Mr. Justice Black and Mr. —

Hugo L. Black:

Well, I’m not (Inaudible)

M. R. Schlesinger:

[Laughs] Well, you’ve had the experience, if Your Honor please.

But may I just point out to Your Honor, to the Court.

That I don’t think that a ruling — a reading of the opinion by the Court of Appeals discloses that it went off on the grounds that sufficient facts under Alabama procedure weren’t alleged.

I think that some distortion of the emphasis if I may — if I may say but rather that sufficient facts were not alleged to bring the federal constitution into operation.

That is to say, assuming the facts were as stated then there wasn’t a burden or discrimination against interstate commerce.

And I believe, if Court pleases, the cases cited by Court themselves would bear out that proposition, this long fight in the Alabama courts.

And the Alabama courts, if I may say to this Court, had not been reconciled to the — pardon me, Mr. Justice Black, have not been —

Hugo L. Black:

(Voice Overlap) —

M. R. Schlesinger:

— reconciled to the United States Supreme Court in this field.

Hugo L. Black:

That — that’s not unusual.

M. R. Schlesinger:

[Laughter]

Earl Warren:

Very well.