DAIMLERCHRYSLER CORP. ET AL. v. CUNO ET AL.
No. 04-1704
Supreme Court of the United States
May 15, 2006
547 U.S. 332
*Together with No. 04-1724, Wilkins, Tax Commissioner for State of Ohio, et al. v. Cuno et al., also on certiorari to the same court.
Peter D. Enrich argued the cause for respondents in both cases. With him on the brief were Alan Morrison and Terry J. Lodge.†
Briefs of amici curiae urging reversal in No. 04-1704 were filed for the City of New York by Michael A. Cardozo and Leonard J. Koerner; for the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, et al. by Daniel W. Sherrick; for the Pacific Legal Foundation by Anthony T. Caso; for the Right Place, Inc., et al. by John J. Bursch; and for the Tax Executives Institute, Inc., by Eli J. Dicker and Gregory S. Matson.
Briefs of amici curiae urging reversal in No. 04-1724 were filed for the State of Florida et al. by Charles J. Crist, Jr., Attorney General of Florida, Christopher M. Kise, Solicitor General, and Erik M. Figlio, Deputy Solicitor General, and by the Attorneys General for their respective jurisdictions as follows: Troy King of Alabama, Terry Goddard of Arizona, Mike Beebe of Arkansas, Bill Lockyer of California, John Suthers of Colorado, Richard Blumenthal of Connecticut, M. Jane Brady of Delaware, Thurbert E. Baker of Georgia, Douglas B. Moylan of Guam, Mark J. Bennett of Hawaii, Lawrence Wasden of Idaho, Lisa Madigan of Illinois, Steve Carter of Indiana, Tom Miller of Iowa, Gregory D. Stumbo of Kentucky, Steve Rowe of Maine, J. Joseph Curran, Jr., of Maryland, Thomas Reilly of Massachusetts, Michael A. Cox of Michigan, Jeremiah W. (Jay) Nixon of Missouri, Jon Bruning of Nebraska, George J. Chanos of Nevada, Eliot Spitzer of New York, Wayne Stenehjem of North Dakota, Pamela Brown of the Northern Mariana Islands, W. A. Drew Edmondson of Oklahoma, Hardy Myers of Oregon, Tom Corbett of Pennsylvania, Roberto J. Sanchez-Ramos of Puerto Rico, Henry McMaster of South Carolina, Lawrence E. Long of South Dakota, Paul Summers of Tennessee, Greg Abbott of Texas, Mark L. Shurtleff of Utah, William H. Sorrell of Vermont, Rob McKenna of Washington, and Peggy A. Lautenschlager of Wisconsin; and for the National Governors Association et al. by Richard Ruda and James I. Crowley.
Henry M. Banta and Martin Lobel filed a brief for the Center on Budget and Policy Priorities as amicus curiae urging affirmance in No. 04-1704.
Robert F. Orr and Jeanette Doran Brooks filed a brief for the North Carolina Institute for Constitutional Law as amicus curiae urging affirmance in No. 04-1724.
Briefs of amici curiae were filed in both cases for DIRECTV, Inc., et al. by Betty Jo Christian, Mark F. Horning, and Lincoln L. Davies; and for the Tax Foundation by Kyle O. Sollie and Nory Miller.
Frederick R. Damm filed a brief for the Michigan Manufacturers Association as amicus curiae in No. 04-1704.
CHIEF JUSTICE ROBERTS delivered the opinion of the Court.
Jeeps were first mass-produced in 1941 for the U. S. Army by the Willys-Overland Motor Company in Toledo, Ohio. Nearly 60 years later, the city of Toledo and State of Ohio sought to encourage the current manufacturer of Jeeps—DaimlerChrysler—to expand its Jeep operation in Toledo, by offering local and state tax benefits for new investment.
I
Ohio levies a franchise tax “upon corporations for the privilege of doing business in the state, owning or using a part or all of its capital or property in [the] state, or holding a certificate of compliance authorizing it to do business in [the] state.” Wesnovtek Corp. v. Wilkins, 105 Ohio St. 3d 312, 313, 2005-Ohio-1826, ¶ 2, 825 N. E. 2d 1099, 1100; see
In 1998, DaimlerChrysler entered into a contract with the city of Toledo. Under the contract, DaimlerChrysler agreed to expand its Jeep assembly plant at Stickney Avenue in
Plaintiffs filed suit against various state and local officials and DaimlerChrysler in state court, alleging that these tax benefits violated the Commerce Clause. Most of the plaintiffs were residents of Toledo, who paid taxes to both the city of Toledo and State of Ohio. They claimed that they were injured because the tax breaks for DaimlerChrysler diminished the funds available to the city and State, imposing a “disproportionate burden” on plaintiffs. App. 18a, 23a, 28a.2
Defendants removed the action to the United States District Court for the Northern District of Ohio. See
The District Court declined to remand the case, concluding that, “[a]t the bare minimum, the Plaintiffs who are taxpayers have standing to object to the property tax exemption
Defendants sought certiorari to review the Sixth Circuit‘s invalidation of the franchise tax credit and plaintiffs sought certiorari to review the upholding of the property tax exemption. We granted certiorari to consider whether the franchise tax credit violates the Commerce Clause, 545 U. S. 1165 (2005); the Michigan Supreme Court had decided a similar question contrary to the Sixth Circuit‘s analysis here. See Caterpillar, Inc. v. Department of Treasury, 440 Mich. 400, 488 N. W. 2d 182 (1992). We also asked the parties to address whether plaintiffs have standing to challenge the franchise tax credit in this litigation.
II
We have “an obligation to assure ourselves” of litigants’ standing under Article III. Friends of Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 180 (2000). We therefore begin by addressing plaintiffs’ claims that they have standing as taxpayers to challenge the franchise tax credit.
A
Chief Justice Marshall, in Marbury v. Madison, 1 Cranch 137 (1803), grounded the Federal Judiciary‘s authority to exercise judicial review and interpret the Constitution on the necessity to do so in the course of carrying out the judicial function of deciding cases. As Marshall explained, “[t]hose who apply the rule to particular cases, must of necessity ex-
This Court has recognized that the case-or-controversy limitation is crucial in maintaining the “tripartite allocation of power” set forth in the Constitution. Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U. S. 464, 474 (1982) (quoting Flast v. Cohen, 392 U. S. 83, 95 (1968)). Marshall again made the point early on, this time in a speech in the House of Representatives. “A case in law or equity,” Marshall remarked,
“was a term... of limited signification. It was a controversy between parties which had taken a shape for judicial decision. If the judicial power extended to every question under the constitution it would involve almost every subject proper for legislative discussion and decision; if to every question under the laws and treaties of the United States it would involve almost every subject on which the executive could act. The division of power [among the branches of government] could exist no longer, and the other departments would be swallowed up by the judiciary.” 4 Papers of John Marshall 95 (C. Cullen ed. 1984).
As this Court has explained, “[n]o principle is more fundamental to the judiciary‘s proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies.” Raines v. Byrd,
The case-or-controversy requirement thus plays a critical role, and “Article III standing... enforces the Constitution‘s case-or-controversy requirement.” Elk Grove Unified School Dist. v. Newdow, 542 U. S. 1, 11 (2004). The “core component” of the requirement that a litigant have standing to invoke the authority of a federal court “is an essential and unchanging part of the case-or-controversy requirement of Article III.” Lujan v. Defenders of Wildlife, 504 U. S. 555, 560 (1992). The requisite elements of this “core component derived directly from the Constitution” are familiar: “A plaintiff must allege personal injury fairly traceable to the defendant‘s allegedly unlawful conduct and likely to be redressed by the requested relief.” Allen, supra, at 751. We have been asked to decide an important question of constitutional law concerning the Commerce Clause. But before we do so, we must find that the question is presented in a “case” or “controversy” that is, in James Madison‘s words, “of a Judiciary Nature.” 2 Records of the Federal Convention of 1787, p. 430 (M. Farrand ed. 1966). That requires plaintiffs, as the parties now asserting federal jurisdiction, to carry the burden of establishing their standing under Article III.3
B
Plaintiffs principally claim standing by virtue of their status as Ohio taxpayers, alleging that the franchise tax credit
Notes
The animating principle behind these cases was announced in their progenitor, Frothingham v. Mellon, decided with Massachusetts v. Mellon, 262 U. S. 447 (1923). In rejecting a claim that improper federal appropriations would “increase the burden of future taxation and thereby take [the plaintiff‘s] property without due process of law,” the Court observed that a federal taxpayer‘s
“interest in the moneys of the Treasury... is shared with millions of others; is comparatively minute and indeterminable; and the effect upon future taxation, of any payment out of the funds, so remote, fluctuating and uncertain, that no basis is afforded for an appeal to the preventive powers of a court of equity.” Id., at 486, 487.
This logic is equally applicable to taxpayer challenges to expenditures that deplete the treasury, and to taxpayer challenges to so-called “tax expenditures,” which reduce amounts available to the treasury by granting tax credits or
Standing has been rejected in such cases because the alleged injury is not “concrete and particularized,” Defenders of Wildlife, supra, at 560, but instead a grievance the taxpayer “suffers in some indefinite way in common with people generally,” Frothingham, supra, at 488. In addition, the injury is not “actual or imminent,” but instead “conjectural or hypothetical.” Defenders of Wildlife, supra, at 560 (internal quotation marks omitted). As an initial matter, it is unclear that tax breaks of the sort at issue here do in fact deplete the treasury: The very point of the tax benefits is to spur economic activity, which in turn increases government revenues. In this very action, the Michigan plaintiffs claimed that they were injured because they lost out on the added revenues that would have accompanied DaimlerChrysler‘s decision to expand facilities in Michigan. See n. 2, supra.
Plaintiffs’ alleged injury is also “conjectural or hypothetical” in that it depends on how legislators respond to a reduction in revenue, if that is the consequence of the credit. Establishing injury requires speculating that elected officials will increase a taxpayer-plaintiff‘s tax bill to make up a deficit; establishing redressability requires speculating that abolishing the challenged credit will redound to the benefit of the taxpayer because legislators will pass along the supposed increased revenue in the form of tax reductions. Neither sort of speculation suffices to support standing. See ASARCO Inc. v. Kadish, 490 U. S. 605, 614 (1989) (opinion of KENNEDY, J.) (“[I]t is pure speculation whether the lawsuit would result in any actual tax relief for respondents“); Warth, 422 U. S., at 509 (criticizing a taxpayer standing claim for the “conjectural nature of the asserted injury“).
A taxpayer plaintiff has no right to insist that the government dispose of any increased revenue it might experience
The foregoing rationale for rejecting federal taxpayer standing applies with undiminished force to state taxpayers. We indicated as much in Doremus v. Board of Ed. of Hawthorne, 342 U. S. 429 (1952). In that case, we noted our earlier holdings that “the interests of a taxpayer in the moneys of the federal treasury are too indeterminable, remote, uncertain and indirect” to support standing to challenge “their manner of expenditure.” Id., at 433. We then “reiterate[d]” what we had said in rejecting a federal taxpayer challenge to a federal statute “as equally true when a state Act is assailed: ‘The [taxpayer] must be able to show... that he has sustained... some direct injury... and not merely that he suffers in some indefinite way in common with people generally.‘” Id., at 433-434 (quoting Frothingham, supra, at 488); see ASARCO, supra, at 613-614 (opinion of KENNEDY, J.) (“[W]e have likened state taxpayers to federal taxpayers” for purposes of taxpayer standing (citing Doremus, supra, at 434)).
The allegations of injury that plaintiffs make in their complaint furnish no better basis for finding standing than those made in the cases where federal taxpayer standing was denied. Plaintiffs claim that DaimlerChrysler‘s tax credit depletes the Ohio fisc and “impos[es] disproportionate burdens on [them].” App. 28a. This is no different from similar claims by federal taxpayers we have already rejected under
State policymakers, no less than their federal counterparts, retain broad discretion to make “policy decisions” concerning state spending “in different ways... depending on their perceptions of wise state fiscal policy and myriad other circumstances.” ASARCO, supra, at 615 (opinion of KENNEDY, J.). Federal courts may not assume a particular exercise of this state fiscal discretion in establishing standing; a party seeking federal jurisdiction cannot rely on such “[s]peculative inferences... to connect [his] injury to the challenged actions of [the defendant],” Simon, 426 U. S., at 45; see also Allen, 468 U. S., at 759. Indeed, because state budgets frequently contain an array of tax and spending provisions, any number of which may be challenged on a variety of bases, affording state taxpayers standing to press such challenges simply because their tax burden gives them an interest in the state treasury would interpose the federal courts as “virtually continuing monitors of the wisdom and soundness” of state fiscal administration, contrary to the more modest role Article III envisions for federal courts. See id., at 760-761 (quoting Laird v. Tatum, 408 U. S. 1, 15 (1972)).
For the foregoing reasons, we hold that state taxpayers have no standing under Article III to challenge state tax or spending decisions simply by virtue of their status as taxpayers.4
Plaintiffs argue that an exception to the general prohibition on taxpayer standing should exist for Commerce Clause challenges to state tax or spending decisions, analogizing their Commerce Clause claim to the Establishment Clause challenge we permitted in Flast v. Cohen, 392 U. S. 83. Flast held that because “the Establishment Clause... specifically limit[s] the taxing and spending power conferred by Art. I, § 8,” “a taxpayer will have standing consistent with Article III to invoke federal judicial power when he alleges that congressional action under the taxing and spending clause is in derogation of” the Establishment Clause. Id., at 105-106. Flast held out the possibility that “other specific [constitutional] limitations” on Article I, § 8, might surmount the “barrier to suits against Acts of Congress brought by individuals who can assert only the interest of federal taxpayers.” 392 U. S., at 105, 85. But as plaintiffs candidly concede, “only the Establishment Clause” has supported federal taxpayer suits since Flast. Brief for Respondents 12; see Bowen v. Kendrick, 487 U. S. 589, 618 (1988) (“Although we have considered the problem of standing and Article III limitations on federal jurisdiction many times since [Flast], we have consistently adhered to Flast and the narrow exception it created to the general rule against taxpayer standing“).
Quite apart from whether the franchise tax credit is analogous to an exercise of congressional power under Article I, § 8, plaintiffs’ reliance on Flast is misguided: Whatever rights plaintiffs have under the Commerce Clause, they are fundamentally unlike the right not to ““contribute three pence... for the support of any one [religious] establishment.” 392
Flast is consistent with the principle, underlying the Article III prohibition on taxpayer suits, that a litigant may not assume a particular disposition of government funds in establishing standing. The Flast Court discerned in the history of the Establishment Clause “the specific evils feared by [its drafters] that the taxing and spending power would be used to favor one religion over another or to support religion in general.” Id., at 103. The Court therefore understood the “injury” alleged in Establishment Clause challenges to federal spending to be the very “extract[ion] and spen[ding]” of “tax money” in aid of religion alleged by a plaintiff. Id., at 106. And an injunction against the spending would of course redress that injury, regardless of whether lawmakers would dispose of the savings in a way
Plaintiffs thus do not have state taxpayer standing on the ground that their Commerce Clause challenge is just like the Establishment Clause challenge in Flast.
III
Plaintiffs also claim that their status as municipal taxpayers gives them standing to challenge the state franchise tax credit at issue here. The Frothingham Court noted with approval the standing of municipal residents to enjoin the “illegal use of the moneys of a municipal corporation,” relying on “the peculiar relation of the corporate taxpayer to the corporation” to distinguish such a case from the general bar on taxpayer suits. 262 U. S., at 486, 487; see ASARCO, 490 U. S., at 613-614 (opinion of KENNEDY, J.) (reiterating distinction). Plaintiffs here challenged the municipal property tax exemption as municipal taxpayers. That challenge was rejected by the Court of Appeals on the merits, and no issue regarding plaintiffs’ standing to bring it has been raised. In plaintiffs’ challenge to the state franchise tax credit, however, they identify no municipal action contributing to any claimed injury. Instead, they try to leverage the notion of municipal taxpayer standing beyond challenges to municipal action, in two ways.
A
First, plaintiffs claim that because state law requires revenues from the franchise tax to be distributed to local governments,
And in fact events have highlighted the peril of assuming that any revenue increase resulting from a taxpayer suit will be put to a particular use. Ohio‘s General Assembly suspended the statutory budget mechanism that distributes franchise tax revenues to local governments in 2001 and again in its subsequent biennial budgets. See Amended Substitute H. B. 94, 124th General Assembly § 140 (2001), available at http://www.legislature.state.oh.us/BillText124/124_HB_94_ENR.pdf (all Internet materials as visited May 12, 2006, and available in Clerk of Court‘s case file); Amended Substitute H. B. 95, 125th General Assembly § 139 (2003), available at http://www.legislature.state.oh.us/BillText125/125_HB_95_EN2_N.pdf; Amended Substitute H. B. 66, 126th General Assembly § 557.12 (2005), available at http://www.legislature.state.oh.us/BillText126/126_HB_66_EN2d.pdf. Any effect that enjoining DaimlerChrysler‘s credit will have on municipal funds, therefore, will not result from automatic operation of a statutory formula, but from a hypothesis that the state government will choose to direct the supposed revenue from the restored franchise tax to municipalities. This is precisely the sort of conjecture we may not entertain in assessing standing. See ASARCO, supra, at 614 (opinion of KENNEDY, J.).
B
The second way plaintiffs seek to leverage their standing to challenge the municipal property tax exemption into a
Gibbs held that federal-question jurisdiction over a claim may authorize a federal court to exercise jurisdiction over state-law claims that may be viewed as part of the same case because they “derive from a common nucleus of operative fact” as the federal claim. Id., at 725. Plaintiffs assume that Gibbs stands for the proposition that federal jurisdiction extends to all claims sufficiently related to a claim within Article III to be part of the same case, regardless of the nature of the deficiency that would keep the former claims out of federal court if presented on their own.
Our general approach to the application of Gibbs, however, has been markedly more cautious. For example, as a matter of statutory construction of the pertinent jurisdictional provisions, we refused to extend Gibbs to allow claims to be asserted against nondiverse parties when jurisdiction was based on diversity, see Owen Equipment & Erection Co. v. Kroger, 437 U. S. 365 (1978), and we refused to extend Gibbs to authorize supplemental jurisdiction over claims that do not satisfy statutory amount-in-controversy requirements, see Finley v. United States, 490 U. S. 545 (1989). As the Court explained just last Term, “[w]e have not... applied Gibbs’ expansive interpretive approach to other aspects of the jurisdictional statutes.” Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U. S. 546, 553 (2005) (applying
What we have never done is apply the rationale of Gibbs to permit a federal court to exercise supplemental jurisdic-
Plaintiffs’ reading of Gibbs to allow standing as to one claim to suffice for all claims arising from the same “nucleus of operative fact” would have remarkable implications. The doctrines of mootness, ripeness, and political question all originate in Article III‘s “case” or “controversy” language, no less than standing does. See, e. g., National Park Hospitality Assn. v. Department of Interior, 538 U. S. 803, 808 (2003) (ripeness); Arizonans for Official English v. Arizona, 520 U. S. 43, 67 (1997) (mootness); Reservists Comm. to Stop the War, 418 U. S., at 215 (political question). Yet if Gibbs’ “common nucleus” formulation announced a new definition of “case” or “controversy” for all Article III purposes, a federal court would be free to entertain moot or unripe claims, or claims presenting a political question, if they “derived from” the same “operative fact[s]” as another federal claim suffer-
Lewis emphasized that “[t]he remedy must of course be limited to the inadequacy that produced the injury in fact that the plaintiff has established.” Ibid. Plaintiffs’ theory of ancillary standing would contravene this principle. Plaintiffs failed to establish Article III injury with respect to their state taxes, and even if they did do so with respect to their municipal taxes, that injury does not entitle them to seek a remedy as to the state taxes. As the Court summed up the point in Lewis, “standing is not dispensed in gross.” Id., at 358, n. 6.5
All the theories plaintiffs have offered to support their standing to challenge the franchise tax credit are unavailing. Because plaintiffs have no standing to challenge that credit, the lower courts erred by considering their claims against it on the merits. The judgment of the Sixth Circuit is therefore vacated in part, and the cases are remanded for dismissal of plaintiffs’ challenge to the franchise tax credit.
It is so ordered.
JUSTICE GINSBURG, concurring in part and concurring in the judgment.
Today‘s decision, the Court rightly points out, is solidly grounded in longstanding precedent, Frothingham v. Mellon, decided with Massachusetts v. Mellon, 262 U. S. 447 (1923), and Doremus v. Board of Ed. of Hawthorne, 342 U. S. 429 (1952), decisions that antedate current jurisprudence on standing to sue. See ante, at 343, 345. Frothingham held nonjusticiable a federal taxpayer‘s suit challenging a federal-spending program. See 262 U. S., at 487 (describing taxpayer‘s interest as “minute and indeterminable“). Doremus applied Frothingham‘s reasoning to a state taxpayer‘s suit. 342 U. S., at 434. These decisions exclude from federal-court cognizance claims, not delineated by Congress, presenting generalized grievances. An exception to Frothingham‘s rule, recognized post-Doremus in Flast v. Cohen, 392 U. S. 83 (1968), covers certain alleged violations of the Establishment Clause. The Flast exception has not been extended to other areas. See Bowen v. Kendrick, 487 U. S. 589, 618 (1988); cf. Enrich, Saving the States from Themselves: Commerce Clause Constraints on State Tax Incentives for Business, 110 Harv. L. Rev. 377, 417-418 (1996).