DaimlerChrysler Corp. v. Cuno
Encyclopedia
DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (2006) was a decision by the Supreme Court of the United States
involving the standing of taxpayers to challenge state tax laws in federal court. The Court unanimously ruled that state taxpayers did not have standing
under Article III of the United States Constitution to challenge state tax or spending decisions simply by virtue of their status as taxpayers. Chief Justice
John Roberts
delivered the majority opinion (his fifth on the Court), which was joined by all of the justices except for Ruth Bader Ginsburg
, who concurred
separately.
entered into a development agreement with auto manufacturer DaimlerChrysler
, for it to construct a new Jeep
assembly plant near its existing facility in exchange for various tax incentives. DaimlerChrysler was to receive approximately $280,000,000 in tax benefits, in the form of a ten-year exemption
from certain property taxes and a credit
applied against its state corporate franchise tax for certain investments. The Toledo Public and Washington Local
school districts, in which the facilities were located, consented to the exemption.
Eighteen taxpayers subsequently filed suit in Lucas County
Court of Common Pleas
against DaimlerChrysler, the city and school districts, and other State of Ohio
defendants, claiming that the state statutes that permitted the property tax exemption and the investment tax credit violated the Commerce Clause
in Article One of the United States Constitution
and provisions of the Ohio Constitution
by granting preferential treatment to in-state investment and activity. The plaintiffs claimed that their personal injury resulted from the tax breaks diminishing the funds available to the city and State, which imposed a "disproportionate burden" on the plaintiffs.
to the U.S. District Court for the Northern District of Ohio by the defendants on the basis of the federal question raised by the Commerce Clause claims. The plaintiffs filed a motion to remand the case back to state court, in part because of concerns that they could not meet the standing
requirements of federal court. The District Court denied the motion, finding that at a minimum the taxpayer plaintiffs could proceed under the "municipal
taxpayer standing" rule articulated in Massachusetts v. Mellon, 262 U.S. 447 (1923).
The District Court then granted the defendants' motions to dismiss. The claims against the State defendants were barred by their Eleventh Amendment
immunity
, but were dismissed without prejudice
so the plaintiffs could refile the claims in state court. The District Court ruled that the remaining claims all failed to establish that the tax statutes violated either the Ohio or U.S. Constitutions, and were accordingly dismissed with prejudice.
On appeal to the United States Court of Appeals for the Sixth Circuit
, the dismissal was affirmed in part, and reversed as to the claims regarding the investment tax credit. The court ruled that the tax credit violated the Commerce Clause and enjoined
its enforcement, because it coerced businesses that were already subject to Ohio's franchise tax to expand locally rather than out-of-state, at the expense of interstate commerce.
to review the Sixth Circuit's decision, and additionally directed the parties to brief
and argue
on the issue of whether the plaintiff had the standing
to challenge the investment tax credit in federal court. The Court unanimously vacated the Sixth Circuit in part, ruling that it had improperly reached the merits of the case without first determining the issue of standing. In a decision delivered by Chief Justice
John Roberts
and joined by seven justices, the Court held that the status of an individual as a state taxpayer does not establish the standing required by Article III of the United States Constitution for a challenge to state tax laws to be heard in federal court. Justice Ruth Bader Ginsburg
filed a separate concurring opinion
.
was limited by the requirement that the case be an actual case or controversy
under Article III. "If a dispute is not a proper case or controversy, the courts have no business deciding it, or expounding the law in the course of doing so." Despite the plaintiffs' previous position regarding standing and the propriety of the federal court forum for their case, the Court furthermore stated that because the plaintiffs were now asserting standing, the burden was on them to establish it.
taxpayers, alleging that the investment tax credit injured them by "deplet[ing] the funds of the State of Ohio to which the Plaintiffs contribute through their tax payments" and thus "diminish[ing] the total funds available for lawful uses and impos[ing] disproportionate burdens on" them. The Court had in several prior cases denied federal taxpayers standing under Article III to object to a particular expenditure of federal funds simply because they are taxpayers. The Court believed that the rationales for rejecting federal taxpayer standing applied with equal force to state taxpayers, as a prior case had indicated. The municipal
taxpayer standing established by Mellon was not available in claims that did not involve municipal action, where the plaintiffs challenged a state law and state tax credit.
The Court also observed that there was no standing where the alleged injury was not "concrete and particularized," but was instead suffered "in some indefinite way in common with people generally." In addition, there is also no standing where the injury is not "actual or imminent," but is instead "conjectural or hypothetical." The court believed that the plaintiffs' alleged injury was "conjectural or hypothetical," because it required speculation that state legislators would respond to a reduction in revenue caused by the credit (a consequence the Court also found speculative, and unlikely) by increasing the plaintiffs' taxes. Establishing that this injury is redressable would furthermore require speculation that legislators would pass along the increase in revenue resulting from the abolition of the tax credit in the form of tax reductions to the plaintiffs. "Neither sort of speculation suffices to support standing."
, 392 U.S. 83 (1968), because both constitutional clauses operate as a specific limit on the Taxing and Spending Clause
. The Court explained that the right not to contribute money for the support of a religious establishment was "fundamentally unlike" whatever rights the plaintiffs may have under the Commerce Clause, and the comparison the plaintiffs attempted was "at such a high level of generality that almost any constitutional constraint on government power would 'specifically limit' a State's taxing and spending power for Flast purposes." The injury alleged in Flast was instead the specific extraction of money from the plaintiff to spend in aid of a religion, an injury that could be redressed by an injunction, in contrast to that alleged in this case.
filed a separate concurring opinion
, in which she concurred in the Court's judgment, which she believed to be based on longstanding precedent, and in the balance of its opinion. However, she wrote separately to express a "large reservation" to the further limitations on standing that the Court had adopted in decisions dating from the late 1970s through the early 1990s, which she believed were not necessary to support the Court's ruling.
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
involving the standing of taxpayers to challenge state tax laws in federal court. The Court unanimously ruled that state taxpayers did not have standing
Standing (law)
In law, standing or locus standi is the term for the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged to support that party's participation in the case...
under Article III of the United States Constitution to challenge state tax or spending decisions simply by virtue of their status as taxpayers. Chief Justice
Chief Justice of the United States
The Chief Justice of the United States is the head of the United States federal court system and the chief judge of the Supreme Court of the United States. The Chief Justice is one of nine Supreme Court justices; the other eight are the Associate Justices of the Supreme Court of the United States...
John Roberts
John Roberts
John Glover Roberts, Jr. is the 17th and current Chief Justice of the United States. He has served since 2005, having been nominated by President George W. Bush after the death of Chief Justice William Rehnquist...
delivered the majority opinion (his fifth on the Court), which was joined by all of the justices except for Ruth Bader Ginsburg
Ruth Bader Ginsburg
Ruth Joan Bader Ginsburg is an Associate Justice of the Supreme Court of the United States. Ginsburg was appointed by President Bill Clinton and took the oath of office on August 10, 1993. She is the second female justice and the first Jewish female justice.She is generally viewed as belonging to...
, who concurred
Concurring opinion
In law, a concurring opinion is a written opinion by one or more judges of a court which agrees with the decision made by the majority of the court, but states different reasons as the basis for his or her decision...
separately.
Tax incentives and taxpayer lawsuit
On November 12, 1998, the city of Toledo, OhioToledo, Ohio
Toledo is the fourth most populous city in the U.S. state of Ohio and is the county seat of Lucas County. Toledo is in northwest Ohio, on the western end of Lake Erie, and borders the State of Michigan...
entered into a development agreement with auto manufacturer DaimlerChrysler
DaimlerChrysler
Daimler AG is a German car corporation. By unit sales, it is the thirteenth-largest car manufacturer and second-largest truck manufacturer in the world. In addition to automobiles, Daimler manufactures buses and provides financial services through its Daimler Financial Services arm...
, for it to construct a new Jeep
Jeep
Jeep is an automobile marque of Chrysler . The first Willys Jeeps were produced in 1941 with the first civilian models in 1945, making it the oldest off-road vehicle and sport utility vehicle brand. It inspired a number of other light utility vehicles, such as the Land Rover which is the second...
assembly plant near its existing facility in exchange for various tax incentives. DaimlerChrysler was to receive approximately $280,000,000 in tax benefits, in the form of a ten-year exemption
Tax exemption
Various tax systems grant a tax exemption to certain organizations, persons, income, property or other items taxable under the system. Tax exemption may also refer to a personal allowance or specific monetary exemption which may be claimed by an individual to reduce taxable income under some...
from certain property taxes and a credit
Tax credit
A tax credit is a sum deducted from the total amount a taxpayer owes to the state. A tax credit may be granted for various types of taxes, such as an income tax, property tax, or VAT. It may be granted in recognition of taxes already paid, as a subsidy, or to encourage investment or other behaviors...
applied against its state corporate franchise tax for certain investments. The Toledo Public and Washington Local
Washington Local School District (Lucas County)
Washington Local School District is a school district in Northwest Ohio. The school district serves students who live in a former township called Washington Township in Lucas County. Washington Local Schools is located in Toledo, Ohio, and students who attend must be residents living within the...
school districts, in which the facilities were located, consented to the exemption.
Eighteen taxpayers subsequently filed suit in Lucas County
Lucas County, Ohio
----...
Court of Common Pleas
Ohio Courts of Common Pleas
The Ohio Courts of Common Pleas are the trial courts of the state court system of Ohio.The courts of common pleas are the trial courts of general jurisdiction in the state. They are the only trial courts created by the Ohio Constitution . The duties of the courts are outlined in Article IV, Section...
against DaimlerChrysler, the city and school districts, and other State of Ohio
Ohio
Ohio is a Midwestern state in the United States. The 34th largest state by area in the U.S.,it is the 7th‑most populous with over 11.5 million residents, containing several major American cities and seven metropolitan areas with populations of 500,000 or more.The state's capital is Columbus...
defendants, claiming that the state statutes that permitted the property tax exemption and the investment tax credit violated the Commerce Clause
Commerce Clause
The Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...
in Article One of the United States Constitution
Article One of the United States Constitution
Article One of the United States Constitution describes the powers of Congress, the legislative branch of the federal government. The Article establishes the powers of and limitations on the Congress, consisting of a House of Representatives composed of Representatives, with each state gaining or...
and provisions of the Ohio Constitution
Ohio Constitution
The Ohio Constitution is the basic governing document of the State of Ohio, which in 1803 became the 17th state to join the United States of America. Ohio has had two constitutions since statehood was granted....
by granting preferential treatment to in-state investment and activity. The plaintiffs claimed that their personal injury resulted from the tax breaks diminishing the funds available to the city and State, which imposed a "disproportionate burden" on the plaintiffs.
Federal court proceedings
The case was then removedRemoval jurisdiction
In the United States, removal jurisdiction refers to the right of a defendant to move a lawsuit filed in state court to the federal district court for the federal judicial district in which the state court sits. This is a general exception to the usual American rule giving the plaintiff the right...
to the U.S. District Court for the Northern District of Ohio by the defendants on the basis of the federal question raised by the Commerce Clause claims. The plaintiffs filed a motion to remand the case back to state court, in part because of concerns that they could not meet the standing
Standing (law)
In law, standing or locus standi is the term for the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged to support that party's participation in the case...
requirements of federal court. The District Court denied the motion, finding that at a minimum the taxpayer plaintiffs could proceed under the "municipal
Municipality
A municipality is essentially an urban administrative division having corporate status and usually powers of self-government. It can also be used to mean the governing body of a municipality. A municipality is a general-purpose administrative subdivision, as opposed to a special-purpose district...
taxpayer standing" rule articulated in Massachusetts v. Mellon, 262 U.S. 447 (1923).
The District Court then granted the defendants' motions to dismiss. The claims against the State defendants were barred by their Eleventh Amendment
Eleventh Amendment to the United States Constitution
The Eleventh Amendment to the United States Constitution, which was passed by the Congress on March 4, 1794, and was ratified on February 7, 1795, deals with each state's sovereign immunity. This amendment was adopted in order to overrule the U.S. Supreme Court's decision in Chisholm v...
immunity
Sovereign immunity in the United States
Sovereign immunity in the United States is the legal privilege by which the American federal, state, and tribal governments cannot be sued. Local governments in most jurisdictions enjoy immunity from some forms of suit, particularly in tort...
, but were dismissed without prejudice
Prejudice (law)
There are two meanings for "prejudice" in legal proceedings; civil and criminal.-Civil procedure:Within legal civil procedure, prejudice is a loss or injury, and refers specifically to a formal determination against a claimed legal right or cause of action. Thus, in a civil case, dismissal without...
so the plaintiffs could refile the claims in state court. The District Court ruled that the remaining claims all failed to establish that the tax statutes violated either the Ohio or U.S. Constitutions, and were accordingly dismissed with prejudice.
On appeal to the United States Court of Appeals for the Sixth Circuit
United States Court of Appeals for the Sixth Circuit
The United States Court of Appeals for the Sixth Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* Eastern District of Kentucky* Western District of Kentucky...
, the dismissal was affirmed in part, and reversed as to the claims regarding the investment tax credit. The court ruled that the tax credit violated the Commerce Clause and enjoined
Injunction
An injunction is an equitable remedy in the form of a court order that requires a party to do or refrain from doing certain acts. A party that fails to comply with an injunction faces criminal or civil penalties and may have to pay damages or accept sanctions...
its enforcement, because it coerced businesses that were already subject to Ohio's franchise tax to expand locally rather than out-of-state, at the expense of interstate commerce.
The court's decision
The Supreme Court granted certiorariCertiorari
Certiorari is a type of writ seeking judicial review, recognized in U.S., Roman, English, Philippine, and other law. Certiorari is the present passive infinitive of the Latin certiorare...
to review the Sixth Circuit's decision, and additionally directed the parties to brief
Brief (law)
A brief is a written legal document used in various legal adversarial systems that is presented to a court arguing why the party to the case should prevail....
and argue
Oral argument
Oral arguments are spoken presentations to a judge or appellate court by a lawyer of the legal reasons why they should prevail. Oral argument at the appellate level accompanies written briefs, which also advance the argument of each party in the legal dispute...
on the issue of whether the plaintiff had the standing
Standing (law)
In law, standing or locus standi is the term for the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged to support that party's participation in the case...
to challenge the investment tax credit in federal court. The Court unanimously vacated the Sixth Circuit in part, ruling that it had improperly reached the merits of the case without first determining the issue of standing. In a decision delivered by Chief Justice
Chief Justice of the United States
The Chief Justice of the United States is the head of the United States federal court system and the chief judge of the Supreme Court of the United States. The Chief Justice is one of nine Supreme Court justices; the other eight are the Associate Justices of the Supreme Court of the United States...
John Roberts
John Roberts
John Glover Roberts, Jr. is the 17th and current Chief Justice of the United States. He has served since 2005, having been nominated by President George W. Bush after the death of Chief Justice William Rehnquist...
and joined by seven justices, the Court held that the status of an individual as a state taxpayer does not establish the standing required by Article III of the United States Constitution for a challenge to state tax laws to be heard in federal court. Justice Ruth Bader Ginsburg
Ruth Bader Ginsburg
Ruth Joan Bader Ginsburg is an Associate Justice of the Supreme Court of the United States. Ginsburg was appointed by President Bill Clinton and took the oath of office on August 10, 1993. She is the second female justice and the first Jewish female justice.She is generally viewed as belonging to...
filed a separate concurring opinion
Concurring opinion
In law, a concurring opinion is a written opinion by one or more judges of a court which agrees with the decision made by the majority of the court, but states different reasons as the basis for his or her decision...
.
Roberts' majority opinion
The Court stated that the power of federal courts to engage in judicial reviewJudicial review
Judicial review is the doctrine under which legislative and executive actions are subject to review by the judiciary. Specific courts with judicial review power must annul the acts of the state when it finds them incompatible with a higher authority...
was limited by the requirement that the case be an actual case or controversy
Case or controversy
The Case or Controversy Clause of Article III of the United States Constitution has been deemed to impose a requirement that United States federal courts are not permitted to hear cases that do not pose an actual controversy — that is, an actual dispute between adverse parties which is capable of...
under Article III. "If a dispute is not a proper case or controversy, the courts have no business deciding it, or expounding the law in the course of doing so." Despite the plaintiffs' previous position regarding standing and the propriety of the federal court forum for their case, the Court furthermore stated that because the plaintiffs were now asserting standing, the burden was on them to establish it.
Injury as taxpayers
The plaintiffs had principally claimed that they had standing by virtue of their status as OhioOhio
Ohio is a Midwestern state in the United States. The 34th largest state by area in the U.S.,it is the 7th‑most populous with over 11.5 million residents, containing several major American cities and seven metropolitan areas with populations of 500,000 or more.The state's capital is Columbus...
taxpayers, alleging that the investment tax credit injured them by "deplet[ing] the funds of the State of Ohio to which the Plaintiffs contribute through their tax payments" and thus "diminish[ing] the total funds available for lawful uses and impos[ing] disproportionate burdens on" them. The Court had in several prior cases denied federal taxpayers standing under Article III to object to a particular expenditure of federal funds simply because they are taxpayers. The Court believed that the rationales for rejecting federal taxpayer standing applied with equal force to state taxpayers, as a prior case had indicated. The municipal
Municipality
A municipality is essentially an urban administrative division having corporate status and usually powers of self-government. It can also be used to mean the governing body of a municipality. A municipality is a general-purpose administrative subdivision, as opposed to a special-purpose district...
taxpayer standing established by Mellon was not available in claims that did not involve municipal action, where the plaintiffs challenged a state law and state tax credit.
The Court also observed that there was no standing where the alleged injury was not "concrete and particularized," but was instead suffered "in some indefinite way in common with people generally." In addition, there is also no standing where the injury is not "actual or imminent," but is instead "conjectural or hypothetical." The court believed that the plaintiffs' alleged injury was "conjectural or hypothetical," because it required speculation that state legislators would respond to a reduction in revenue caused by the credit (a consequence the Court also found speculative, and unlikely) by increasing the plaintiffs' taxes. Establishing that this injury is redressable would furthermore require speculation that legislators would pass along the increase in revenue resulting from the abolition of the tax credit in the form of tax reductions to the plaintiffs. "Neither sort of speculation suffices to support standing."
Analogy to Establishment Clause challenges
The Court rejected the argument that an exception for Commerce Clause challenges to state tax or spending decisions should exist, as an analogy to the Establishment Clause taxation challenge the Court had permitted in Flast v. CohenFlast v. Cohen
Flast v. Cohen, 392 U.S. 83 , was a United States Supreme Court case holding that a taxpayer has standing to sue the government to prevent an unconstitutional use of taxpayer funds....
, 392 U.S. 83 (1968), because both constitutional clauses operate as a specific limit on the Taxing and Spending Clause
Taxing and Spending Clause
Article I, Section 8, Clause 1 of the United States Constitution, is known as the Taxing and Spending Clause. It is the clause that gives the federal government of the United States its power of taxation...
. The Court explained that the right not to contribute money for the support of a religious establishment was "fundamentally unlike" whatever rights the plaintiffs may have under the Commerce Clause, and the comparison the plaintiffs attempted was "at such a high level of generality that almost any constitutional constraint on government power would 'specifically limit' a State's taxing and spending power for Flast purposes." The injury alleged in Flast was instead the specific extraction of money from the plaintiff to spend in aid of a religion, an injury that could be redressed by an injunction, in contrast to that alleged in this case.
Ginsburg's concurrence
Justice Ruth Bader GinsburgRuth Bader Ginsburg
Ruth Joan Bader Ginsburg is an Associate Justice of the Supreme Court of the United States. Ginsburg was appointed by President Bill Clinton and took the oath of office on August 10, 1993. She is the second female justice and the first Jewish female justice.She is generally viewed as belonging to...
filed a separate concurring opinion
Concurring opinion
In law, a concurring opinion is a written opinion by one or more judges of a court which agrees with the decision made by the majority of the court, but states different reasons as the basis for his or her decision...
, in which she concurred in the Court's judgment, which she believed to be based on longstanding precedent, and in the balance of its opinion. However, she wrote separately to express a "large reservation" to the further limitations on standing that the Court had adopted in decisions dating from the late 1970s through the early 1990s, which she believed were not necessary to support the Court's ruling.