LEVIN, TAX COMMISSIONER OF OHIO v. COMMERCE ENERGY, INC., ET AL.
No. 09-223
SUPREME COURT OF THE UNITED STATES
Argued March 22, 2010—Decided June 1, 2010
560 U.S. 413
Benjamin C. Mizer, Solicitor General of Ohio, argued the cause for petitioner. With him on the briefs were Richard Cordray, Attorney General, Alexandra T. Schimmer, Chief Deputy Solicitor General, Stephen P. Carney and Elisabeth A. Long, Deputy Solicitors, and Barton A. Hubbard, Assistant Attorney General.
Stephen C. Fitch argued the cause for respondents. With him on the brief was Gerhardt A. Gosnell II.*
*Briefs of amici curiae urging reversal were filed for the State of Illinois et al. by Lisa Madigan, Attorney General of Illinois, Michael A. Scodro, Solicitor General, and Jane Elinor Notz, Deputy Solicitor General, and by the Attorneys General for their respective jurisdictions as follows: Troy King of Alabama, Daniel S. Sullivan of Alaska, Terry Goddard of Arizona, Dustin McDaniel of Arkansas, John W. Suthers of Colorado,
Beth Heifetz, Gregory A. Castanias, David E. Cowling, Charolette F. Noel, Todd A. Lard, аnd Douglas L. Lindholm filed a brief for the Council on State Taxation as amicus curiae urging affirmance.
JUSTICE GINSBURG delivered the opinion of the Court.
This case presents the question whether a federal district court may entertain a complaint of allegedly discriminatory state taxation, framed as a request to increase a commercial competitor‘s tax burden. Relevant to our inquiry is the Tax Injunction Act (TIA or Act),
I
A
Historically, all natural gas consumers in Ohio purchased gas from the public utility, known as a local distribution company (LDC), serving their geographic area. In addition to selling gas as a commodity, LDCs own and operate networks of distribution pipelines to transport and deliver gas to consumers. LDCs offer customers a single, bundled product comprising both gas and delivery.
Today, consumers in Ohio‘s major metropolitan areas can alternatively contract with an independent marketer (IM) that competes with LDCs for retail sales of natural gas. IMs do not own or operate distribution pipelines; they use LDCs’ pipelines. When a customer goes with an IM, therefore, she purchases two “unbundled” products: gas (from the IM) and delivery (from the LDC).
Ohio treats LDCs and IMs differently for tax purposes. Relevant here, Ohio affords LDCs three tax exemptions that IMs do not receive. First, LDCs’ natural gas sales are exempt from sales and use taxes.
Plaintiffs-respondents Commerce Energy, Inc., a California corporation, and Interstate Gas Supply, Inc., an Ohio company, are IMs that market and sell natural gas to Ohio consumers. Plaintiff-respondent Gregory Slone is an Ohio citizen who has purchased natural gas from Interstate Gas Supply since 1999. Alleging discriminatory taxation of IMs and their patrons in violation of the Commerce and Equal Protection Clauses, Complaint ¶¶ 35-39, App. 11-13, respondents sued Richard A. Levin, Tax Commissioner of Ohio (Commissioner), in the U. S. District Court for the Southern District of Ohio. Invoking that court‘s federal-question jurisdiction under
The District Court granted the Commissioner‘s motion to dismiss the complaint. The TIA did not block the suit, the District Court initially held, because respondents, like the plaintiffs in Hibbs, were “third-parties challenging the constitutionality of [another‘s] tax benefit,” and their requested relief “would not disrupt the flow of tax revenue” to the State. App. to Pet. for Cert. 24a.
Nevertheless, the District Court “decline[d] to exercise jurisdiction” as a matter of comity. Id., at 32a. Ohio‘s Legislature, the District Court observed, chose to provide the challenged tax exemptions to LDCs. Respondents re-
The U. S. Court of Appeals for the Sixth Circuit reversed. 554 F. 3d 1094 (2009). While agreeing that the TIA did not bar respondents’ suit, the Sixth Circuit rejected the District Court‘s comity ruling. A footnote in Hibbs, the Court of Appeals believed, foreclosed the District Court‘s “expansive reading” of this Court‘s comity precedents. 554 F. 3d, at 1098. The footnote stated that the Court “has relied upon ‘principles of comity’ to preclude original federal-court jurisdiction only when plaintiffs have sought district-court aid in order to arrest or countermаnd state tax collection.” Hibbs, 542 U. S., at 107, n. 9 (citation omitted). A broad view of the comity cases, the Sixth Circuit feared, would render the TIA “effectively superfluous,” and would ”sub silentio overrule a series of important cases” presenting challenges to state tax measures. 554 F. 3d, at 1099, 1102 (citing Milliken v. Bradley, 433 U. S. 267 (1977); Mueller v. Allen, 463 U. S. 388 (1983)); 554 F. 3d, at 1099-1100.
In so ruling, the Sixth Circuit agreed with the Seventh and Ninth Circuits, which had similarly read Hibbs to rein in the comity doctrine, see Levy v. Pappas, 510 F. 3d 755 (CA7 2007); Wilbur v. Locke, 423 F. 3d 1101 (CA9 2005), and it disagreed with the Fourth Circuit, which had concluded that Hibbs left comity doctrine untouched, see DIRECTV, Inc. v. Tolson, 513 F. 3d 119 (2008). Noting that respond-
After unsuccessfully moving for rehearing en banc, App. to Pet. for Cert. 1a-2a, the Commissioner petitioned for certiorari. By then, the First Circuit had joined the Sixth, Seventh, and Ninth Circuits in holding that Hibbs sharply limited the scope of the comity bar. Coors Brewing Co. v. Méndez-Torres, 562 F. 3 d 3 (2009). We granted the Commissioner‘s petition, 558 U. S. 989 (2009), to resolve the disagreement among the Circuits.
II
A
Comity considerations, the Commissioner dominantly urges, preclude the exercise of lower federal-court adjudicatory authority over this controversy, given that an adequate state-court forum is available to hear and decide respondents’ constitutional claims. We agree.
The comity doctrine counsels lower federal courts to resist engagement in certain cases falling within their jurisdiction. The doctrine reflects
“a proper respect for state functions, a recognition of the fact that the entire country is made up of a Union of separate state governments, and a continuancе of the belief that the National Government will fare best if the States and their institutions are left free to perform their separate functions in separate ways.” Fair Assessment, 454 U. S., at 112 (quoting Younger v. Harris, 401 U. S. 37, 44 (1971)).
Comity‘s constraint has particular force when lower federal courts are asked to pass on the constitutionality of state taxation of commercial activity. For “[i]t is upon taxation that the several States chiefly rely to obtain the means to carry
“An examination of [our] decisions,” this Court wrote more than a century ago, “shоws that a proper reluctance to interfere by prevention with the fiscal operations of the state governments has caused [us] to refrain from so doing in all cases where the Federal rights of the persons could otherwise be preserved unimpaired.” Boise Artesian Hot & Cold Water Co. v. Boise City, 213 U. S. 276, 282 (1909). Accord Matthews v. Rodgers, 284 U. S. 521, 525-526 (1932) (So long as the state remedy was “plain, adequate, and complete,” the “scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts, and a proper reluctance to interfere by injunction with their fiscal operations, require that such relief should be denied in every case where the asserted federal right may be preserved without it.“).2
Our post-Act decisions, however, confirm the continuing sway of comity considerations, independent of the Act. Plaintiffs in Great Lakes Dredge & Dock Co. v. Huffman, 319 U. S. 293 (1943), for example, sought a federal judgment declaring Louisiana‘s unemployment compensation tax unconstitutional. Writing six years after the TIA‘s passage, we emphasized the Act‘s animating concerns: A “federal court of equity,” we remindеd, “may in an appropriate case refuse to give its special protection to private rights when the exercise of its jurisdiction would be prejudicial to the public interest, [and] should stay its hand in the public interest when it reasonably appears that private interests will not suffer.” Id., at 297-298 (citations omitted). In enacting the TIA, we noted, “Congress recognized and gave sanction to this practice.” Id., at 298. We could not have thought Congress intended to cabin the comity doctrine, for we went
Decades later, in Fair Assessment, we ruled, based on comity concerns, that
B
Although our precedents affirm that the comity doctrine is more embracive than the TIA, several Courts of Appeals, including the Sixth Circuit in the instant case, have comprehended Hibbs to restrict comity‘s compass. See supra, at 420-421. Hibbs, however, has a more modest reach.
Plaintiffs in Hibbs were Arizona taxpayers who challenged a state law authorizing tax credits for payments to organizations that disbursed scholarship grants to children attending private schools. 542 U. S., at 94-96. These organizations could fund attendance at institutions that provided religious instruction or gave admissions preference on the basis of religious affiliation. Id., at 95. Ranking the credit program as state subsidization of religion, incompatible with the Establishment Clause, plaintiffs sought declaratory and injunctive relief and an order requiring the organizations to pay sums still in their possession into the State‘s general fund. Id., at 96.
Arizona‘s Revenue Director also invoked comity as cause for dismissing the action. We dispatched the Director‘s comity argument in a spare footnote that moved thе Sixth Circuit here to reverse the District Court‘s comity-based dismissal. As earlier set out, see supra, at 420, the footnote stated: “[T]his Court has relied upon ‘principles of comity’ to preclude original federal-court jurisdiction only when plaintiffs have sought district-court aid in order to arrest or countermand state tax collection.” 542 U. S., at 107, n. 9 (citation omitted) (citing Fair Assessment, 454 U. S., at 107-108; Great Lakes, 319 U. S., at 296-299).
Relying heavily on our footnote in Hibbs, respondents urge that “comity should no more bar this action than it did the action in Hibbs.” Brief for Respondents 42. As we explain below, however, the two cases differ markedly in ways bearing on the comity calculus. We have had no prior occasion to consider, under the comity doctrine, a taxpayer‘s com-
III
A
Respondents complain that they are taxed unevenly in comparison to LDCs and their customers. Under either an equal protection or dormant Commerce Clause theory, respondents’ root objection is the same: State action, respondents contend, “selects [them] out for discriminatory treatment by subjecting [them] to taxes not imposed on others of the same class.” Hillsborough v. Cromwell, 326 U. S. 620, 623 (1946) (equal protection); see Dennis v. Higgins, 498 U. S. 439, 447-448 (1991) (dormant Commerce Clause).
When economic legislation does not employ classifications subject to hеightened scrutiny or impinge on fundamental rights,5 courts generally view constitutional challenges with the skepticism due respect for legislative choices demands. See, e. g., Hodel v. Indiana, 452 U. S. 314, 331-332 (1981); Williamson v. Lee Optical of Okla., Inc., 348 U. S. 483, 488-489 (1955). And “in taxation, even more than in other fields, legislatures possess the greatest freedom in classification.” Madden v. Kentucky, 309 U. S. 83, 88 (1940).
Of key importance, when unlawful discrimination infects tax classifications or other legislative prescriptions, the Constitution simply calls for equal treatment. How equality is accomplished—by extension or invalidation of the unequally distributed benefit or burden, or some other measure—is a
On finding unlawful discrimination, we have affirmed, courts may attempt, within the bounds of their institutional competence, to implement what the legislature would have willed had it been apprised of the constitutional infirmity. Mathews, 465 U. S., at 739, n. 5; Califano v. Westcott, 443 U. S. 76, 92-93 (1979); see Stanton v. Stanton, 421 U. S. 7, 17-18 (1975) (how State eliminates unconstitutional discrimination “plainly is an issue of state law“); cf. United States v. Booker, 543 U. S. 220, 246 (2005) (“legislative intent” determines cure for constitutional violation). The relief the complaining party requests does not circumscribe this inquiry. See Westcott, 443 U. S., at 96, n. 2 (Powell, J., concurring in part and dissenting in part) (“This issue should turn on the intent of [the legislature], not the interests of the parties.“). With the State‘s legislative prerogative firmly in mind, this Court, upon finding impermissible discrimination in a State‘s allocation of benefits or burdens, generally remands the case, leaving the remedial choice in the hands of state authorities. See, e. g., Wengler v. Druggists Mut. Ins. Co., 446 U. S. 142, 152-153 (1980); Orr v. Orr, 440 U. S. 268, 283-284 (1979); Stanton, 421 U. S., at 17-18; Skinner v. Oklahoma ex rel. Williamson, 316 U. S. 535, 543 (1942). But see, e. g., Levy v. Louisiana, 391 U. S. 68 (1968).
In particular, when this Court—on review of a state high court‘s decision—finds a tax measure constitutionally infirm, “it has been our practice,” for reasons of “federal-state comity,” “to abstain from deciding the remedial effects of such a holding.” American Trucking Assns., Inc. v. Smith, 496 U. S. 167, 176 (1990)
If lower federal courts were to give audience to the merits of suits alleging uneven state tax burdens, however, recourse to state court for the interim remedial determination would be unavailable. That is so because federal tribunals lack authority to remand to the state court system an action initiated in federal court. Federal judges, moreover, are bound by the TIA; absent certain exceptions, see, e. g., Department of Employment v. United States, 385 U. S. 355, 357-358 (1966), the Act precludes relief that would diminish state revenues, even if such relief is the remedy least disruptive of the state legislature‘s design.7 These limitations on the remedial competence of lower federal courts counsel that they refrain from taking up cases of this genre, so long as state courts are equipped fairly to adjudicаte them.8
Comity considerations, as the District Court determined, warrant dismissal of respondents’ suit. Assuming, arguendo, that respondents could prevail on the merits of the suit,9 the most obvious way to achieve parity would be to reduce respondents’ tax liability. Respondents did not seek such relief, for the TIA stands in the way of any decree that would “enjoin ... collection of [a] tax under State law.”
As earlier noted, our unelaborated footnote on comity in Hibbs, see supra, at 425, led the Sixth Circuit to conclude that we had diminished the force of that doctrine and made it inapplicable here. We intended no such consequential ruling. Hibbs was hardly a run-of-the-mine tax case. It was essentially an attack on the allocation of state resources for allegedly unconstitutional purposes. In Hibbs, the charge was state aid in alleged violation of the Establishment Clause; in other cases of the same genre, the attack was on state alloсations to maintain racially segregated schools. See 542 U. S., at 93-94, 110-112. The plaintiffs in Hibbs were outsiders to the tax expenditure, “third parties” whose own tax liability was not a relevant factor. In this case, by contrast, the very premise of respondents’ suit is that they are taxed differently from LDCs. Unlike the Hibbs plaintiffs, respondents do object to their own tax situation, measured by the allegedly more favorable treatment accorded LDCs.
Hibbs held that the TIA did not preclude a federal challenge by a third party who objected to a tax credit received by others, but in no way objected to her own liability under any revenue-raising tax provision. In context, we clarify, the Hibbs footnote comment on comity is most sensibly read to affirm that, just аs the case was a poor fit under the TIA, so it was a poor fit for comity. The Court, in other words, did not deploy the footnote to recast the comity doctrine; it intended the note to convey only that the Establishment Clause-grounded case cleared both the TIA and comity hurdles.
Respondents steadfastly maintain that this case is fit for federal-court adjudication because of the simplicity of the relief they seek, i. e., invalidation of exemptions accorded the
Comity, in sum, serves to ensure that “the National Government, anxious though it may be to vindicate and protect federal rights and federal interests, always endeavors to do so in ways that will not unduly interfere with the legitimate activities of the States.” Younger, 401 U. S., at 44. A confluence of factors in this case, absent in Hibbs, leads us to conclude that the comity doctrine controls here. First, respondents seek federal-court review of commercial matters over which Ohio enjoys wide regulatory latitude; their suit does not involve any fundamental right or classification that attracts heightened judicial scrutiny. Second, while respondents portray themselves as third-party challengers to an allegedly unconstitutional tax scheme, they are in fact seeking federal-court aid in an endeavor to improve their competitive position. Third, the Ohio courts are better positioned than their federal counterparts to correct any viola-
C
The Sixth Circuit expressed concern that application of the comity doctrine here would render the TIA “effectively superfluous.” 554 F. 3d, at 1099; see id., at 1102. This concern overlooks Congress’ point in enacting the TIA. The Act was passed to plug two large loopholes courts had opened in applying the comity doctrine. See supra, at 423, and n. 3. By closing these loopholes, Congress securеd the doctrine against diminishment. Comity, we further note, is a prudential doctrine. “If the State voluntarily chooses to submit to a federal forum, principles of comity do not demand that the federal court force the case back into the State‘s own system.” Ohio Bureau of Employment Servs. v. Hodory, 431 U. S. 471, 480 (1977).
IV
Because we conclude that the comity doctrine justifies dismissal of respondents’ federal-court action, we need not decide whether the TIA would itself block the suit. See Great Lakes, 319 U. S., at 299, 301 (reserving judgment on TIA‘s application where comity precluded suit). See also Sinochem Int‘l Co. v. Malaysia Int‘l Shipping Corp., 549 U. S. 422, 431 (2007) (federal court has flexibility to choose among threshold grounds for dismissal).13
It is so ordered.
JUSTICE KENNEDY, concurring.
The Court‘s rationale in Hibbs v. Winn, 542 U. S. 88 (2004), seems to me still doubtful. Nothing in the Court‘s opinion today expands Hibbs’ holding further, however, and on that understanding I join the opinion of the Court.
JUSTICE THOMAS, with whom JUSTICE SCALIA joins, concurring in the judgment.
Although I, too, remain skeptical of the Court‘s decision in Hibbs v. Winn, 542 U. S. 88 (2004), see ante this page (KENNEDY, J., concurring), I agree that it is not necessary for us to revisit that decision to hold that this case belongs in state court. As the Court suggests, Hibbs permits not just the application of comity principles to the litigation here, but also application of the Tax Injunction Act (TIA or Act),
Congress enacted the TIA‘s prohibition on federal jurisdiction over certain cases involving state tax issues because federal courts had proved unable to exercise jurisdiction over such cases in the restrained manner that comity requires. See ante, at 423. As the Court explains, Congress’ decision to prohibit federal jurisdiction over cases within the Act‘s scope did not disturb that jurisdiction, or the comity
The Court posits that because comity is available as a ground for dismissal even where the Act is not, the Act‘s application to this case is irrelevant if comity would also support sending the case to state court. See ibid. The Court rests this analysis on our recent holding in Sinochem that a court may dismiss a case on a nonmerits ground such as comity without first resolving an accompanying jurisdictional issue. See ante, at 432 (citing 549 U. S., at 431). The Court‘s reliance on Sinochem is misplaced, however, because it confuses the fact that a court may do that with whether, and when, it should. As Sinochem itself explains, courts should not dismiss cases on nonjurisdictional grounds where “jurisdiction ... ‘involve[s] no arduous inquiry‘” and deciding it would not substantially undermine “judicial economy.” 549 U. S., at 436 (quoting Ruhrgas AG v. Marathon Oil Co., 526 U. S. 574, 587-588 (1999)). In such circumstances, Sinochem reiterates the settled rule that “the proper course” is to dismiss for lack of jurisdiction. 549 U. S., at 436. That is the proper course here.
The TIA prohibits federal courts from exercising jurisdiction over any action that would “suspend or restrain the assessment, levy or collection of [a] tax under State law.”
Because the Court appears to agree that even Hibbs does not endorse such a narrow view of the Act‘s jurisdictional bar, see ante, at 430-432, 432, n. 13, the “proper course” is to dismiss this suit under the statute and not reach the comity principles that the Court correctly holds independently support the same result, Sinochem, supra, at 436. Here, unlike in Sinochem, there is no economy to deciding the case on the nonjurisdictional ground: The same analysis that supports dismissal for comity reasons subjects this case to the Act‘s jurisdictional prohibition, even as construed in Hibbs. Compare ante, at 421-433, with Sinochem, supra, at 435-436 (approving dismissal of a suit on forum non conveniens grounds because dismissal on personal jurisdiction grounds would
That is not a legitimate approach to this important area of the law, see ibid., and the Court‘s assertion that our civil rights precedents require it does not withstand scrutiny. If it is indeed true (which it may have been in the civil rights cases) that federal jurisdiction is necessary to ensure a fair forum in which to litigate an allegedly unconstitutional state tax scheme, the Act itself permits federal courts to retain jurisdiction on the ground that “a plain, speedy and efficient remedy” cannot be had in state court.
Because I believe the Act forbids the approach to federal jurisdiction over state tax issues that the Court adopted in Hibbs, I would not decide this case in a way that leaves the door open to it even if the Court could find a doorstop that accords with, rather than upends, the settled principle that judges presented with multiple nonmerits grounds for dismissal should dismiss on jurisdictional grounds first. But the tension the Court‘s decision creates with this settled principle should be enough to convince even those who do not share my view of the TIA that the proper course here is to dismiss this case for lack of jurisdiction because Hibbs’ construction of the Act applies at most to the type of true third-party suit that Hibbs describes, and thus does not save this case from the statute‘s jurisdictional bar.
I agree with the Court that principles of comity bar the present action. I am doubtful about the Court‘s efforts to distinguish Hibbs v. Winn, 542 U. S. 88 (2004), but whether today‘s holding undermines Hibbs’ foundations is a question that can be left for another day.
Notes
“The procedures for mass assessment and collection of state taxes and for administration and adjudication of taxpayers’ disputes with tax officials are generally complex and necessarily designed to operate according to established rules. State tax agencies are organized to discharge their responsibilities in accordance with the state procedures. If federal declaratory relief were available to test state tax assessments, state tax administration might be thrown into disarray, and taxpayers might escape the ordinary procedural requirements imposed by state law. During the pendency of the federal suit the collection of revenue under the challenged law might be obstructed, with consequent damage to the State‘s budget, and perhaps a shift to the State of the risk of taxpayer insolvenсy. Moreover, federal constitutional issues are likely to turn on questions of state tax law, which, like issues of state regulatory law, are more properly heard in the state courts.” Perez v. Ledesma, 401 U. S. 82, 128, n. 17 (1971) (opinion concurring in part and dissenting in part).