Briefs Recently Filed
In Direct Marketing Association v. Brohl the Supreme Court will decide whether a federal court is barred from deciding a constitutional challenge to a Colorado law that requires remote sellers who don’t collect state sales tax to comply with notice and reporting requirements.
Per the Supreme Court’s 1992 decision in Quill Corp. v. North Dakota states cannot require retailers with no in-state physical presence to collect state sales tax. To improve tax collection, in 2010 the Colorado legislature began requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue.
The Tax Injunction Act (TIA) states that federal courts may not “enjoin, suspend or restrain the assessment, levy or collection of any tax under State law” where a remedy is available in state court. Regardless, Direct Marketing Association (DMA) challenged the constitutionality of Colorado’s law in federal court. DMA argued that the TIA does not apply in this case because DMA isn’t a taxpayer and Colorado “neither imposes a tax, nor requires the collection of a tax, but serves only as a secondary aspect of state tax administration.” The Tenth Circuit disagreed and dismissed DMA’s lawsuit.
The State and Local Legal Center’s (SLLC) amicus brief, filed in support of Colorado, points out that state and local governments are losing an estimated $23 billion in annual tax revenue to remote sales. DMA is seeking to invalidate third-party reporting requirements, which are an effective method of collecting such taxes. The SLLC’s brief argues that DMA’s lawsuit falls within the TIA’s bar because DMA seeks to prevent the “assessment” and “collection” of a state tax and precedent indicates that it does not matter that DMA isn’t a taxpayer.
Until Congress passes the Marketplace Fairness Act, which would authorize states to require remote vendors to collect sales tax, states will continue to experiment with methods to collect sales tax owed but not paid. According to NCSL, at least three other states (Oklahoma, South Dakota, and Vermont) have recently enacted reporting requirements on remote sellers.
Ron Parsons of Johnson, Heidepriem & Abdallah in Sioux Falls, South Dakota, wrote the SLLC’s brief which was joined by all of the Big Seven and the Government Finance Officers Association.
In Perez v. Mortgage Bankers Association the Court will decide whether a federal agency must engage in notice-and-comment rulemaking pursuant to the Administrative Procedure Act (APA) before it can significantly alter an interpretive rule that interprets an agency regulation.
In 2006 the Department of Labor (DOL) issued an opinion letter stating that mortgage loan officers who work more than 40 hours a week were exempt from overtime under the Fair Labor Standards Act. In 2010 DOL withdrew the opinion letter in an “Administrator’s Interpretation” that reached the opposite conclusion. Since 1997 the D.C. Circuit’s rule has been that if an interpretive rule is definitive and an agency makes a significant change to it, the agency must first conduct notice-and-comment rulemaking. The D.C. Circuit reasoned that significantly changing an interpretation of a regulation amounts to effectively changing the regulation, which requires notice-and-comment.
State and local governments often regulate in the same space as federal agencies and are often regulated by federal agencies. The SLLC’s amicus brief argues that requiring notice-and-comment for significant changes to interpretations of regulations will maintain the balance between agency discretion and reliance interests the APA was designed to protect. It also argues that allowing state and local governments to weigh in on problematic interpretations is far more efficient than state and local governments challenging them through litigation. And allowing greater state and local participation in the process will avoid or at least limit the risk to federalism posed by ever-expanding agency authority.
James Ho, Ashley Johnson, Kirsten Galler, and Lauren Blas of Gibson, Dunn & Crutcher wrote the SLLC’s brief which was joined by the National League of Cities, the National Association of Counties, the International City/County Management Association, the United States Conference of Mayors, the International Municipal Lawyers Association, Government Finance Officers Association, National School Boards Association, National Public Employer Labor Relations Association, and the International Public Management Association for Human Resources.
Does a state discriminate against rail carriers in violation of federal law even when rail carriers pay less in total state taxes than motor carriers? No, argues a State and Local Legal Center (SLLC) Supreme Court amicus brief in Alabama Department of Revenue v. CSX Transportation. Forty-two states exempt motor carriers from sales tax on diesel fuel.
Rail carriers (railroads) in Alabama pay a four percent sales tax on diesel fuel. Motor carriers (trucks) pay an excise tax of 19-cents per gallon and no sales tax. The Railroad Revitalization and Regulatory Reform Act (4-R) prohibits state and local governments from imposing taxes that discriminate against railroads. Since CSX filed its complaint, railroads paid less in sales tax than trucks paid in excise tax. But, the Eleventh Circuit refused to compare the total taxation of railroads and trucks to avoid the “Sisyphean burden of evaluating the fairness of the State's overall tax structure.” Instead it concluded Alabama’s sales tax on railroads violates 4-R because Alabama’s competitors don’t pay it.
The SLLC brief argues that given state’s traditional power to tax the Court should interpret 4-R narrowly. The brief suggests the Court could take three approaches to rule in favor of Alabama. First, it could compare the tax treatment of rail carriers to all commercial and industrial taxpayers in the state (who all pay sales tax) instead of only railroad competitors. Second, the Court could ignore the labels of sales and excise tax and compare the amount railroads and their competitors pay in total taxes. Third, the Court could note the relevant differences between railroads and their competitors. For example, water carriers traditionally have been exempt from all taxes on diesel fuel because of constitutional concerns about taxing vessels in navigable waters.
Finally the SLLC brief points out that “[r]uling in favor of CSX would threaten States’ ability to take in tax revenue, an ability already impeded by current economic conditions. This Court must not allow 4-R to shield CSX—a $12 billion nationwide corporation—and other rail carriers from paying millions of dollars in taxes that fund vital public services. Congress did not intend for 4-R to enrich large corporations by impoverishing the States.”
All of the Big Seven joined the SLLC brief along with SLLC associate members the International City/County Management Association and the Government Finance Officers Association. Sarah Shalf of the Emory Law School Supreme Court Advocacy Project wrote the SLLC brief.
In T-Mobile South v. City of Roswell the Supreme Court will decide whether a letter denying a cell tower construction application that doesn’t explain the reasons for the denial meets the Telecommunications Act of 1996 (TCA) “in writing” requirement.
T-Mobile applied to construct a 108-foot cell tower in an area zoned single-family residential. The City of Roswell’s ordinance only allowed “alternative tower structures” in such a zone that were compatible with “the natural setting and surrounding structures.” T-Mobile proposed an “alternative tower structure” in the shape of a man-made tree that would be about 25-feet taller than the pine trees surrounding it.
After a hearing, where city councilmembers stated various reasons for why they were going to vote against the application, Roswell sent T-Mobile a brief letter saying the application was denied and that T-Mobile could obtain hearing minutes from the city clerk.
The TCA requires that a state or local government's decision denying a cell tower construction permit be “in writing.” The district court and other circuit courts have held that the TCA requires a written decision and a written record that explain why the city council’s majority rejected the application. The district court granted T-Mobile’s application.
The Eleventh Circuit disagreed relying on a plain reading of the statute. The TCA doesn’t say that “the decision [must] be ‘in a separate writing’ or in a ‘writing separate from the transcript of the hearing and the minutes of the meeting in which the hearing was held’ or ‘in a single writing that itself contains all of the grounds and explanations for the decision.’”
The State and Local Legal Center (SLLC) amicus brief takes the position that the “in writing” requirement is met when a local government issues a written denial letter and the reasons for its decision can be gleaned from written minutes or a transcript. The brief argues that T-Mobile’s interpretation of “in writing” to mean local governments must issue a separate written decision with formal findings and conclusions “is not supported by the plain text of the statute, by its legislative history, by the weight of precedent, or by considerations of public policy.” The brief also points out the practical effect of T-Mobile’s position would be to impose “substantial new costs and burdens on local governments, without providing any benefit in terms of facilitating the granting of meritorious wireless siting applications.”
Tim Lay, Jessica Bell, and Katharine Mapes of Spiegel & McDiarmid in Washington, D.C., wrote the SLLC’s brief which was joined by the National League of Cities, the United States Conference of Mayors, the National Association of Counties, the International City/County Management Association, and the International Municipal Lawyers Association.
In Comptroller v. Wynne the Court will determine whether the U.S. Constitution requires states to give a credit for taxes paid on income earned out-of-state.
Forty-three states and nearly 5,000 local governments tax residents’ income. Many of these jurisdictions do not provide a dollar-for-dollar tax credit for income taxes paid to other states on income earned out-of-state. A decision against Maryland’s Comptroller in this case will limit state and local government taxing authority nationwide.
The Wynnes of Howard County, Maryland, received S-corporation income that was generated and taxed in numerous states. Maryland’s Tax Code includes a county tax. While Maryland law allowed the Wynnes to receive a tax credit against their Maryland state taxes for income taxes paid to other states, it did not allow them to claim a credit against their Maryland county taxes.
Maryland’s highest state court held that Maryland’s failure to grant a credit against Maryland’s county tax violated the U.S. Constitution’s dormant Commerce Clause, which denies states the power to unjustifiably discriminate against or burden interstate commerce. Among other things, the Maryland Court of Appeals noted that if every state imposed a county tax without a credit, interstate commerce would be disadvantaged. Taxpayers who earn income out of state would be “systematically taxed at higher rates relative to taxpayers who earn income entirely within their home state.”
The State and Local Legal Center (SLLC)/International Municipal Lawyers Association (IMLA) amicus brief points out that state and local governments must make complex policy choices and tradeoffs when devising a taxing system. If Maryland was required to provide a dollar-for-dollar tax credit, a neighbor with substantial out-of-state income would contribute significantly less to pay for local services than a neighbor earning the same income in-state, even though both take equal advantage of local services. And to counterbalance a dollar-for-dollar tax credit, a county would need to raise some other tax, which would fall disproportionately on some other neighbor and often be more regressive. The brief argues that Maryland’s policy choice to avoid these results “does not cross any constitutional line.”
Paul Clement and Zack Tripp of Bancroft wrote the SLLC/IMLA brief. The National Conference of State Legislatures, the National League of Cities, the National Association of Counties, the International City/County Management Association, the United States Conference of Mayors, and the Government Finance Officers Association joined the brief.
Must hourly employees be paid for time spent in security screenings under the Fair Labor Standards Act (FLSA)? The Court will decide this seemingly simple question in Integrity Staffing Solutions v. Busk. State and local government employees who work in courthouses, correctional institutions, and warehouses routinely go through security screening at the beginning and/or end of the workday.
Jesse Busk and Laurie Castro worked at warehouses filling Amazon.com orders. They claimed that they should have been paid for the time they spent waiting and going through security screenings to prevent theft at the end of each shift.
The FLSA requires that “non-exempt” employees be paid for “preliminary” and “postliminary” activities if they are “integral and indispensable” to an employee’s principal activities. The Ninth Circuit concluded time spent in security screening is compensable because security checks must be done at work, are necessary to employees’ primary work as warehouse employees, and are done for the employer’s benefit.
The SLLC’s amicus brief argues that the Ninth Circuit improperly excluded “integral” from the “integral and indispensable” test. “There is nothing about removing personal belongings from one’s pockets and walking through a metal detector that can be characterized as ‘organically joined or linked’ to retrieving items from inventory and filling customers’ online orders.” If the Supreme Court agrees with the Ninth Circuit, the SLLC’s brief warns that commuting to and from work could be compensable. Finally, the SLLC’s brief points out that as the nation’s largest employer, state and local government can ill-afford higher payroll costs.
James Ho, Ashley Johnson, and Andrew LeGrand, of Gibson, Dunn & Crutcher, Dallas, Texas wrote the SLLC’s brief which was joined by the National League of Cities, the National Association of Counties, the International City/County Management Association, the United States Conference of Mayors, the International Municipal Lawyers Association, Government Finance Officers Association, National Public Employer Labor Relations Association, and the International Public Management Association for Human Resources.
The Court will decide in North Carolina State Board of Dental Examiners v. FTC whether state boards with members who are market participants elected by their peers must be “actively supervised” to be exempt from federal antitrust law.
The North Carolina State Board of Dental Examiners is a state agency primarily made up of dentists elected by other dentists. The Board, which has the power to enjoin the unlicensed practice of dentistry, successfully expelled non-dentist providers from the North Carolina teeth-whitening market. The Federal Trade Commission found that the Board engaged in unfair competition in violation of federal antitrust law.
The state action doctrine exempts states from federal antitrust law. It applies to private parties if they are acting pursuant to a clear state policy of anti-competition and are being actively supervised by the state; substate actors only have to be acting pursuant to a clear state policy. The Board argued that it does not need to be actively supervised because it is a state agency. The lower court disagreed concluding that when the majority of a state agency is made up of market participants who are chosen and accountable to fellow market participants, active supervision is required. The court reasoned that a state agency may not “foster anti-competitive practices for the benefit of its members.”
The SLLC’s brief points out that states typically have hundreds of boards and commissions that are prohibited by state law from engaging in self-interested decision making, meaning active supervision is unnecessary. The SLLC’s brief also argues that precedent and the practical difficulty of actively supervising hundreds of boards and commissions indicate active supervision should not be required.
Seth P. Waxman, Thomas G. Sprankling, and Alan Schoenfeld of WilmerHale wrote the SLLC’s brief. The National Governors Association, the National Conference of State Legislatures, and the Council of State Governments joined the brief.