417 F.Supp. 795 (S.D.N.Y. 1976), 72 Civ. 3438, United States Steel Corp. v. Multistate Tax Commission

Docket Nº:72 Civ. 3438 (CLB).
Citation:417 F.Supp. 795
Party Name:UNITED STATES STEEL CORPORATION et al., Plaintiffs, and Bristol-Myers Co. et al., Intervenors-Plaintiffs, v. MULTISTATE TAX COMMISSION et al., Defendants.
Case Date:July 08, 1976
Court:United States District Courts, 2nd Circuit

Page 795

417 F.Supp. 795 (S.D.N.Y. 1976)



Bristol-Myers Co. et al., Intervenors-Plaintiffs,



No. 72 Civ. 3438 (CLB).

United States District Court, D. New York

July 8, 1976

Page 796

White & Case, by Thomas McGanney, Richard A. Hoppe, Todd B. Sollis, New

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York City, for plaintiffs and intervenors-plaintiffs.

Shearman & Sterling, by Richard P. Lasko, New York City, for plaintiff Eltra Corp.

William D. Dexter, General Counsel, Multistate Tax Comm., Olympia, Wash., for defendant.

Eaton, Van Winkle & Greenspoon, by Samuel Greenspoon, New York City, for Multistate Tax Commission.

John D. MacFarlane, Atty. Gen., Denver, Colo., for State of Colorado.

Robert L. Shevin, Atty. Gen., Tallahassee, Fla., for State of Florida.

Ronald Y. Amemiya, Atty. Gen., Honolulu, Hawaii, for State of Hawaii.

Wayne L. Kidwell, Atty. Gen., Boise, Idaho, for State of Idaho.

Theodore L. Sendak, Atty. Gen., Indianapolis, Ind., for State of Indiana.

Frank J. Kelley, Atty. Gen., Lansing, Mich., for State of Michigan.

Robert L. Woodahl, Atty. Gen., Helena, Mont., for State of Montana.

Paul L. Douglas, Atty. Gen., Lincoln, Neb., for State of Nebraska.

Robert F. List, Atty. Gen., Carson City, Nev., for State of Nevada.

Antonio Anaya, Atty. Gen., Santa Fe, N. M., for State of New Mexico.

Allen I. Olson, Atty. Gen., Bismarck, N. D., A. R. Hausauer, Special Asst. Atty. Gen., Bismarck, N. D., for State of North Dakota.

Lee Johnson, Atty. Gen., Oregon Dept. of Justice, Salem, Ore., Theodore De Looze, Chief Tax Counsel, Salem, Ore., for State of Oregon.

John L. Hill, Atty. Gen., Austin, Tex., for State of Texas.

Vernon B. Romney, Atty. Gen., Salt Lake City, Utah, Robert B. Hansen, Utah Deputy Atty. Gen., Salt Lake City, Utah, G. Blaine Davis, Utah Asst. Atty. Gen., Salt Lake City, Utah, for State of Utah.

Slade Gorton, Atty. Gen., Olympia, Wash., Richard H. Holmquist, Chief Counsel, Seattle, Wash., for State of Washington.


Before MESKILL, Circuit Judge, WEINFELD and BRIEANT, District Judges.

BRIEANT, District Judge.

The plaintiff corporations, on behalf of themselves and all multistate taxpayers who have been or may be threatened with interstate audits by the defendant Multistate Tax Commission, seek a declaratory judgment that the Multistate Tax Compact (Prentice Hall State & Local Tax Service (All States Unit) P 6310, et seq.) is invalid under the United States Constitution, and a permanent injunction barring its operation and enforcement. Subject matter jurisdiction exists pursuant to 28 U.S.C. ss 1331, 1332 and 1343(3).

Defendants moved, pursuant to Rule 56, F.R.Civ.P., for summary judgment, which motion was heard before this statutory court convened pursuant to 28 U.S.C. s 2281.

Familiarity with the decision of Judge Tenney of this Court, denying defendants' motion to dismiss the complaint, is assumed. 367 F.Supp. 107 (S.D.N.Y.1973). By a memorandum and order dated February 5, 1974, Judge Tenney granted a motion by various multistate corporations for leave to intervene as plaintiffs, pursuant to Rule 24(b), F.R.Civ.P. 1 The Court further ordered that this suit proceed as a class action with plaintiffs and intervenor-plaintiffs as class representatives. 2

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Plaintiffs contend initially, that upon this record, summary judgment would be inappropriate. They claim that genuine issues exist as to material facts, and assert that their constitutional objections are addressed not only to the Compact itself, but to its operative effects as well. Plaintiffs argue that there must be further discovery before adjudication of these issues. Alternatively, they assert that if summary judgment is appropriate, it should be granted in their favor.

No contention is made that the compact is being administered other than according to its terms, except as to particulars governed by the substantive tax law of the respective party states. The constitutional issues posed by this complaint reduce themselves to questions of law.

Certain of the issues of fact which plaintiffs would seek to raise are purely hypothetical and speculative. As to these issues, plaintiffs have not "set forth specific facts showing that there is a genuine issue for trial." Rule 56(e), F.R.Civ.P. Certain other claimed issues of fact are plainly not material to the determination of the merits of the constitutional arguments raised here, although they may be of academic interest to the various states in determining whether to join or continue membership in the Compact.

This litigation commenced with filing of a complaint on August 11, 1972. In October 1973, plaintiffs served their first voluminous set of interrogatories. Since that time, the parties have litigated their respective discovery rights and evidentiary objections. Plaintiffs served a second voluminous set of interrogatories and again the defendants objected. Related cases in various state courts have been stayed pending determination of the issues raised in this suit. Also, there are three related actions pending in other federal district courts. The Judicial Panel on Multidistrict Litigation, by order filed on February 5, 1976, deferred consideration of consolidation and transfer of these cases, pursuant to 28 U.S.C. s 1407, pending disposition of this motion.

The amended complaint seeks declaratory and injunctive relief. Rule 57, F.R.Civ.P., provides that "(t)he court may order a speedy hearing of an action for a declaratory judgment and may advance it on the calendar." Members of the plaintiffs' class and defendants appear to be prejudiced by the continued operation of the Commission amidst these charges of illegality and constitutional invalidity. For these reasons, and the already prolonged period of time since issue was joined, additional delay for further discovery is unwarranted. Since we find no genuine issues of material fact, summary judgment is appropriate here.

When the amended complaint was filed on January 10, 1973, twenty-one states were signatories to this Compact. 3 The individual defendants in this action are the Executive Director of the Commission and the tax administrators of the twenty-one

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respective states, who then served as members of the Commission.

The stated purposes of the Compact are to:

"1. Facilitate proper determination of State and local tax liability of multistate taxpayers, including the equitable apportionment of tax bases and settlement of apportionment disputes.

2. Promote uniformity or compatibility in significant components of tax systems.

3. Facilitate taxpayer convenience and compliance in the filing of tax returns and in other phases of tax administration.

4. Avoid duplicative taxation."

Article III, s 1 permits multistate taxpayers to elect to apportion and allocate their income in accordance with the provisions of the Uniform Division of Income for Tax Purposes Act ("UDITPA"), 4 as embodied in Article IV of the Compact or in accordance with otherwise applicable state law. Article III, s 2 requires each party state which imposes an income tax to allow smaller taxpayers meeting certain requirements to file a short form return and compute the income tax due based upon the percentage of their gross sales within the taxing state.

Article V grants purchasers a tax credit for use taxes, in the amount of sales and use taxes previously paid to other states and their subdivisions. This article also recognizes the validity of exemption certificates issued by other states and their subdivisions.

Article VI establishes the Commission and provides for its membership, voting rights, officers, committees and finances. Article VI, s 1(g) authorizes the Executive Director of the Commission to appoint and discharge personnel "(i) rrespective of the civil service, personnel or other merit system laws of any party state;" and s 1(h) authorizes the Commission to "borrow, accept or contract for the services of personnel from any . . . governmental entity." Section 3 empowers the Commission, in addition to powers conferred elsewhere in the Compact, to:

"(a) Study state and local tax systems and particular types of state and local taxes.

(b) Develop and recommend proposals for an increase in uniformity or compatibility of state and local tax laws with a view toward encouraging the simplification and improvement of state and local tax law and administration.

(c) Compile and publish information as in its judgment would assist the party states in implementation of the compact and taxpayers in complying with state and local tax laws.

(d) Do all things necessary and incidental to the administration of its functions pursuant to this compact."

Article VII provides that where two or more party states or their subdivisions have "uniform or similar" tax laws, the Commission may adopt uniform regulations and forms for their administration. Upon adoption by the Commission, the regulations are to be submitted to the appropriate officials of each state or subdivision for...

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