OPINION OF THE COURT
LEVIN V. COMMERCE ENERGY, INC.
560 U. S. ____ (2010)
SUPREME COURT OF THE UNITED STATES
NO. 09-223
RICHARD A. LEVIN, TAX COMMISSIONER OF OHIO,
PETITIONER
v. COMMERCE ENERGY, INC., et al.
on writ of certiorari to the united states court of
appeals for the sixth circuit
[June 1, 2010]
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), 28 U. S. C.
§1341, which prohibits lower federal courts from restraining “the
assessment, levy or collection of any tax under State law where a
plain, speedy and efficient remedy may be had in the courts of such
State.” More embracive than the TIA, the comity doctrine applicable
in state taxation cases restrains federal courts from entertaining
claims for relief that risk disrupting state tax administration.
See
Fair Assessment in Real Estate Assn., Inc. v.
McNary,
454
U. S. 100 (1981). The comity doctrine, we hold, requires that a
claim of the kind here presented proceed originally in state court.
In so ruling, we distinguish
Hibbs v.
Winn,
542 U. S. 88
(2004), in which the Court held that neither the TIA nor the comity
doctrine barred a federal district court from adjudicating an
Establishment Clause challenge to a state tax credit that allegedly
funneled public funds to parochial schools.
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. Ohio Rev. Code Ann. §5739.02(B)(7) (Lexis
Supp. 2010); §§5739.021(E), .023(G), .026(F) (Lexis 2008);
§§5741.02(C), .021(A), .022(A), .023(A) (Lexis 2008). LDCs owe
instead a gross receipts excise tax, §5727.24, which is lower than
the sales and use taxes IMs must collect. Second, LDCs are not
subject to the commercial activities tax imposed on IMs’ taxable
gross receipts. §§5751.01(E)(2), .02 (Lexis Supp. 2010). Finally,
Ohio law excludes inter-LDC natural gas sales from the gross
receipts tax, which IMs must pay when they purchase gas from LDCs.
§5727.33(B)(4) (Lexis 2008).
B
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 28 U. S. C. §1331,
Complaint ¶6, App. 3, respondents sought declaratory and injunctive
relief invalidating the three tax exemptions LDCs enjoy and
ordering the Commissioner to stop “recognizing and/or enforcing”
the exemptions.
Id., at 20–21. Respondents named the
Commissioner as sole defendant; they did not extend the litigation
to include the LDCs whose tax burden their suit aimed to
increase.[
Footnote 1]
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
requested relief that would “requir[e] Ohio to collect taxes which
its legislature has not seen fit to impose.”
Ibid.
(internal quotation marks omitted). Such relief, the court said,
would draw federal judges into “a particularly inappropriate
involvement in a state’s management of its fiscal operations.”
Ibid. (internal quotation marks omitted). A state court,
the District Court recognized, could extend the exemptions to IMs,
but the TIA proscribed this revenue-reducing relief in federal
court. “Where there would be two possible remedies,” the Court
concluded, a federal court should not “impose its own judgment on
the state legislature mandating which remedy is appropriate.”
Ibid.
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 countermand 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 respondents
“challenge[d] only a few limited exemptions,” and satisfied,
therefore, that “[respondents’] success would not significantly
intrude upon traditional matters of state taxation,” the Sixth
Circuit remanded the case for adjudication of the merits. 554
F. 3d, at 1102.
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. 3d 3 (2009). We granted the
Commissioner’s petition, 558 U. S. ___ (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 continuance 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 on
their respective governments, and it is of the utmost importance to
all of them that the modes adopted to enforce the taxes levied
should be interfered with as little as possible.”
Dows v.
Chicago, 11 Wall. 108, 110 (1871).
“An examination of [our] decisions,” this
Court wrote more than a century ago, “shows 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.”).[
Footnote 2]
Statutes conferring federal jurisdiction, we
have repeatedly cautioned, should be read with sensitivity to
“federal-state relations” and “wise judicial administration.”
Quackenbush v.
Allstate Ins. Co.,
517 U. S. 706, 716
(1996) (internal quotation marks omitted). But by 1937, in state
tax cases, the federal courts had moved in a different direction:
they “had become free and easy with injunctions.”
Fair
Assessment, 454 U. S., at 129 (Brennan, J., concurring in
judgment) (internal quotation marks omitted).[
Footnote 3] Congress passed the TIA to reverse
this trend.
Id., at 109–110 (opinion of the Court).
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 reminded, “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 on to instruct
dismissal in
Great Lakes on comity grounds without
deciding whether the Act reached declaratory judgment actions.
Id., at 299, 301–302.[
Footnote 4]
Decades later, in
Fair Assessment, we
ruled, based on comity concerns, that 42 U. S. C. §1983 does
not permit federal courts to award damages in state taxation cases
when state law provides an adequate remedy. 454 U. S., at 116. We
clarified in
Fair Assessment that “the principle of comity
which predated the Act was not restricted by its passage.”
Id., at 110. And in
National Private Truck Council,
Inc. v.
Oklahoma Tax Comm’n,
515 U. S. 582, 590
(1995), we said, explicitly, that “the [TIA] may be best understood
as but a partial codification of the federal reluctance to
interfere with state taxation.”
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 4–5.
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.
The Director of Arizona’s Department of
Revenue sought to escape suit in federal court by invoking the TIA.
We held that the litigation fell outside the TIA’s governance. Our
prior decisions holding suits blocked by the TIA, we noted, were
tied to the Act’s “state-revenue-protective moorings.”
Id., at 106. The Act, we explained, “restrain[ed] state
taxpayers from instituting federal actions to contest their [own]
liability for state taxes,”
id., at 108, suits that, if
successful, would deplete state coffers. But “third parties” like
the
Hibbs plaintiffs, we concluded, were not impeded by
the TIA “from pursuing constitutional challenges to tax benefits in
a federal forum.”
Ibid. The case, we stressed, was “not
rationally distinguishable” from a procession of pathmarking
civil-rights controversies in which federal courts had entertained
challenges to state tax credits without conceiving of the TIA as a
jurisdictional barrier.
Id., at 93–94, 110–112. See,
e.g., Griffin v.
School Bd. of Prince Edward
Cty.,
377 U. S.
218 (1964) (involving,
inter alia, tax credits for
contributions to private segregated schools).
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 the Sixth Circuit
here to reverse the District Court’s comity-based dismissal. As
earlier set out, see
supra, at 4, 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
complaint about allegedly discriminatory state taxation framed as a
request to increase a competitor’s tax burden. Now squarely
presented with the question, we hold that comity precludes the
exercise of original federal-court jurisdiction in cases of the
kind presented here.
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 heightened scrutiny or
impinge on fundamental rights,[
Footnote 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 matter on which the Constitution is silent.
See
Heckler v.
Mathews,
465 U. S. 728, 740
(1984) (“[W]hen the right invoked is that to equal treatment, the
appropriate remedy is a
mandate of equal treatment, a
result that can be accomplished” in more than one way. (quoting
Iowa-Des Moines Nat. Bank v.
Bennett,
284 U. S. 239, 247
(1931); internal quotation marks omitted)).
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) (plurality opinion).[
Footnote 6] A “State found to have imposed an
impermissibly discriminatory tax retains flexibility in responding
to this determination.”
McKesson Corp. v.
Division of
Alcoholic Beverages and Tobacco, Fla. Dept. of Business
Regulation,
496 U. S. 18, 39–40 (1990). Our remand
leaves the interim solution in state-court hands, subject to
subsequent definitive disposition by the State’s legislature.
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.[
Footnote 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
adjudicate them.[
Footnote
8]
B
Comity considerations, as the
District Court determined, warrant dismissal of respondents’ suit.
Assuming,
arguendo, that respondents could prevail on the
merits of the suit,[
Footnote 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.” 28 U. S. C.
§1341.[
Footnote 10] A more
ambitious solution would reshape the relevant provisions of Ohio’s
tax code. Were a federal court to essay such relief, however, the
court would engage in the very interference in state taxation the
comity doctrine aims to avoid. Cf.
State Railroad Tax
Cases,
92 U. S.
575, 614–615 (1876). Respondents’ requested remedy, an order
invalidating the exemptions enjoyed by LDCs, App. 20–21, may be far
from what the Ohio Legislature would have willed. See
supra, at 11. In short, if the Ohio scheme is indeed
unconstitutional, surely the Ohio courts are better positioned to
determine—unless and until the Ohio Legislature weighs in—how to
comply with the mandate of equal treatment. See
Davis v.
Michigan Dept. of Treasury,
489 U. S. 803, 817–818
(1989).[
Footnote 11]
As earlier noted, our
unelaborated footnote on comity in
Hibbs, see
supra, at 9, 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 allocations to maintain racially
segregated schools. See
Hibbs, 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 as 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 LDCs. But as we just explained, even if
respondents’ Commerce Clause and equal protection claims had merit,
respondents would have no entitlement to their preferred remedy.
See
supra, at 11. In
Hibbs, however, if the
District Court found the Arizona tax credit impermissible under the
Establishment Clause, only one remedy would redress the plaintiffs’
grievance: invalidation of the credit, which inevitably would
increase the State’s tax receipts. Notably, redress in state court
similarly would be limited to an order ending the allegedly
impermissible state support for parochial schools.[
Footnote 12] Because state courts would
have no greater leeway than federal courts to cure the alleged
violation, nothing would be lost in the currency of comity or state
autonomy by permitting the
Hibbs suit to proceed in a
federal forum.
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 violation because they are more
familiar with state legislative preferences and because the TIA
does not constrain their remedial options. Individually, these
considerations may not compel forbearance on the part of federal
district courts; in combination, however, they demand deference to
the state adjudicative process.
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 7, and n. 3. By closing these loopholes,
Congress secured 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).[
Footnote 13]
* * *
For the reasons stated, the Sixth
Circuit’s judgment is reversed, and the case is remanded for
further proceedings consistent with this opinion.
It is so ordered.
Footnote 1
In moving to dismiss the complaint, the
Commissioner urged,
inter alia, that the LDCs were parties
necessary to a just adjudication. See Fed. Rule Civ. Proc. 19.
Ruling for the Commissioner on comity grounds, the District Court
did not reach the question whether the LDCs were indispensable
parties. App. to Pet. for Cert. 21a, 32a–33a.
Footnote 2
Justice Brennan cogently explained, in
practical terms, “the special reasons justifying the policy of
federal noninterference with state tax collection”:
“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 insolvency. 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).
Footnote 3
Two features of federal equity practice
accounted for the courts’ willingness to grant injunctive relief.
First, the Court had held that, although “equity jurisdiction does
not lie where there exists an adequate legal remedy[,] … the
‘adequate legal remedy’ must be one cognizable
in federal
court.”
Fair Assessment, 454 U. S., at 129, n. 15
(Brennan, J., concurring in judgment) (emphasis in original).
Second, federal courts, “construing strictly the requirement that
the remedy available at law be ‘plain, adequate and complete,’ had
frequently concluded that the procedures provided by the State were
not adequate.”
Ibid. (citation omitted).
Footnote 4
We later held that the Act indeed does
proscribe suits for declaratory relief that would thwart state tax
collection.
California v.
Grace Brethren Church,
457 U. S. 393,
411 (1982).
Footnote 5
Cf.,
e.g., Loving v.
Virginia,
388
U. S. 1 (1967);
United States v.
Virginia,
518 U. S. 515
(1996). On the federal courts’ role in safeguarding human rights,
see,
e.g., Zwickler v.
Koota,
389 U. S. 241, 245–248
(1967);
McNeese v.
Board of Ed. for Community Unit
School Dist. 187,
373 U. S. 668, 672–674,
and n. 6 (1963).
Footnote 6
See,
e.g., Harper v.
Virginia Dept. of Taxation,
509 U. S. 86, 100–102
(1993);
McKesson Corp. v.
Division of Alcoholic
Beverages and Tobacco, Fla. Dept. of Business Regulation,
496 U. S. 18, 51–52 (1990);
Davis v.
Michigan Dept. of Treasury,
489 U. S. 803, 818 (1989);
American Trucking Assns., Inc. v.
Scheiner,
483 U. S. 266,
297–298 (1987);
Tyler Pipe Industries, Inc. v.
Washington State Dept. of Revenue,
483 U. S. 232, 252–253
(1987);
Bacchus Imports, Ltd. v.
Dias,
468 U. S. 263, 276–277
(1984);
Exxon Corp. v.
Eagerton,
462 U. S. 176, 196–197
(1983);
Louis K. Liggett Co. v.
Lee,
288 U. S. 517, 540–541
(1933).
Footnote 7
State courts also have greater leeway to
avoid constitutional holdings by adopting “narrowing constructions
that might obviate the constitutional problem and intelligently
mediate federal constitutional concerns and state interests.”
Moore v.
Sims,
442 U. S. 415, 429–430
(1979).
Footnote 8
Any substantial federal question, of course,
“could be reviewed when the case [comes to this Court] through the
hierarchy of state courts.”
McNeese, 373 U. S., at
673.
Footnote 9
But see
General Motors Corp. v.
Tracy,
519
U. S. 278, 279–280 (1997) (determining, at a time IMs could not
compete with LDCs for the Ohio residential “captive” market, that
IMs and LDCs were not “similarly situated”; and rejecting
industrial IM customer’s dormant Commerce Clause and equal
protection challenges to LDCs’ exemption from sales and use
taxes).
Footnote 10
Previous language restricting the district
courts’ “jurisdiction” was removed in the 1948 revision of Title
28. Compare 28 U. S. C. §41(1) (1940 ed.) with §1341, 62 Stat.
932. This Court and others have continued to regard the Act as
jurisdictional. See,
e.g., post, at 1 (Thomas,
J., concurring in judgment).
Footnote 11
Respondents note that “[o]nce the district
court grants the minimal relief requested—to disallow the
exemptions—it will be up to the Ohio General Assembly to balance
its own interests and determine how best to recast the tax laws,
within constitutional restraints.” Brief for Respondents 41. But
the legislature may not be convened on the spot, and the blunt
interim relief respondents ask the District Court to decree “may
[immediately] derange the operations of government, and thereby
cause serious detriment to the public.”
Dows v.
Chicago, 11 Wall. 108, 110 (1871).
Footnote 12
No refund suit (or other taxpayer mechanism)
was open to the plaintiffs in
Hibbs, who were financially
disinterested “third parties”; they did not, therefore, improperly
bypass any state procedure. Respondents here, however, could have
asserted their federal rights by seeking a reduction in their tax
bill in an Ohio refund suit.
Footnote 13
The District Court and Court of Appeals
concluded that our decision in
Hibbs placed the
controversy outside the TIA’s domain. That conclusion, we note,
bears reassessment in light of this opinion’s discussion of the
significant differences between
Hibbs and this case.
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