Archer Daniels Midland Co. v. State, 83SA23

Decision Date20 August 1984
Docket NumberNo. 83SA23,83SA23
Citation690 P.2d 177
PartiesARCHER DANIELS MIDLAND COMPANY, a Delaware corporation, Plaintiff-Appellant, v. STATE of Colorado; Colorado Department of Revenue; Richard D. Lamm, in his official capacity as Governor of Colorado; and Alan N. Charnes, in his official capacity as Executive Director of the Colorado Department of Revenue, Defendants-Appellees.
CourtColorado Supreme Court

Davis, Graham & Stubbs, Alan M. Loeb, Margaret Leavitt, Denver, for plaintiff-appellant.

Duane Woodard, Atty. Gen., Charles B. Howe, Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Denver, for defendants-appellees.

DUBOFSKY, Justice.

Archer Daniels Midland Company, the plaintiff, appeals a Denver District Court ruling upholding the constitutionality of section 39-27-102(1)(a)(III), 16B C.R.S. (1982), which provides for a five cent per gallon sales tax reduction on certain gasohol containing at least ten percent alcohol derived from agricultural and forest products. 1 1 The tax reduction is limited to gasohol "produced from no more than three million gallons of alcohol annually from each facility having a design production capacity of seventeen million gallons or less per year of such alcohol." Section 39-27-102(1)(a)(III), 16B C.R.S. (1982). We affirm the ruling of the district court and hold that the statute does not violate the Commerce Clause, art. I, § 8, cl. 3, or the Equal Protection Clause, amend. XIV, § 1, of the United States Constitution.

The parties stipulated to the facts relevant to the disposition of this case. In 1978, the General Assembly adopted a five cent reduction in gasoline tax for gasohol containing at least ten percent alcohol "manufactured in Colorado" and derived from agricultural and forest products. 2 Ch. 118, sec. 1, § 39-27-102, 1978 Colo.Sess.Laws 516, 516-17. At that time there were no Colorado producers of fuel-grade alcohol. In 1979, the plaintiff began selling fuel-grade alcohol to Colorado gasohol producers. 3 In March 1981, the plaintiff filed its initial complaint in this action, seeking a declaration that the version of section 39-27-102 then in effect was unconstitutional. In July 1981, the first Colorado-produced fuel-grade alcohol became available for blending with gasoline. Gasohol blended with Colorado alcohol was eligible for the nickel tax break under section 39-27-102 while gasoline blended with alcohol produced by the plaintiff was not. Because gasohol is nine parts gasoline for every one part of alcohol, one gallon of qualifying alcohol mixed with nine gallons of gasoline results in a fifty-cent tax savings. Thus, all other things being equal, nonqualifying fuel-grade alcohol must be priced fifty cents less per gallon than qualifying alcohol to be price-competitive. Since Colorado-produced alcohol became available, the plaintiff--which sold 29,000 gallons of fuel-grade alcohol to Colorado gasohol producers in 1979, 337,918 gallons in 1980, and 210,958 gallons in the first half of 1981--has made only two Colorado sales, totalling 40,701 gallons.

In February 1982, the Minnesota Supreme Court held that a statute similar to the 1978 version of section 39-27-102 violated the Commerce Clause of the United States Constitution because a state may not constitutionally discriminate against out-of-state producers of fuel-grade alcohol. Archer Daniels Midland Co. v. State, 315 N.W.2d 597 (Minn.1982). In April 1982, the General Assembly amended section 39-27-102, striking the requirement that fuel eligible for the nickel tax break be made from Colorado-produced alcohol and substituting a provision that the first 3,000,000 gallons of gasohol made from alcohol produced in facilities with a 17,000,000 gallon per year capacity or less are eligible for the tax break. Ch. 155, sec. 1, § 39-27-102, 1982 Colo.Sess.Laws 573, 573-74, codified at section 39-27-102(1)(a)(III), 16B C.R.S. (1982). 4 All of the facilities owned by the plaintiff have a capacity greater than 17,000,000 gallons per year, therefore none of the alcohol which the plaintiff produces may be used to make gasohol eligible for the tax break.

In April 1982, the plaintiff filed a supplemental complaint alleging that section 39-27-102(1)(a)(III), 16B C.R.S. (1982) violates the Commerce and Equal Protection Clauses of the United States Constitution. Several months earlier, on January 26, 1982, the district court denied the state defendants' motion to dismiss which asserted that the plaintiff did not have standing to challenge the gasohol tax reduction statute. On November 17, 1982, the district court upheld the constitutionality of section 39-27-102(1)(a)(III), 16B C.R.S. (1982).

I.

Before reaching the constitutional issues in this case, we must determine whether the plaintiff has standing to challenge section 39-27-102(1)(a)(III) under the Commerce and Equal Protection Clauses of the United States Constitution. The state argues that the plaintiff does not have standing to pursue this action, citing Wimberly v. Ettenberg, 194 Colo. 163, 570 P.2d 535 (1977). To demonstrate standing under Wimberly, a litigant must prove that it has suffered "injury in fact to a legally protected interest as contemplated by statutory or constitutional provisions." 570 P.2d at 539. See generally Cloverleaf Kennel Club, Inc. v. Colorado Racing Commission, 620 P.2d 1051 (Colo.1980).

The state asserts that the plaintiff failed to present evidence at trial sufficient to prove the requisite injury in fact. Conceding that the gasohol tax reduction statute places the plaintiff's alcohol at a fifty-cent-per-gallon competitive disadvantage, the state contends that the plaintiff has failed to prove that it would be able to sell its alcohol in Colorado but for this fifty-cent differential. The state suggests that the plaintiff's failure to sell fuel-grade alcohol in Colorado is due to high freight charges and generally high prices charged by the plaintiff. However, given the unpredictability of competitive markets in general, and the gasohol market in particular, there is no requirement that the plaintiff prove exactly how much alcohol it could sell but for the challenged statute. See Cloverleaf Kennel Club, Inc. v. Colorado Racing Commission, 620 P.2d at 1058 (The injury in fact conferring standing may be intangible and exist solely by virtue of statutes creating legal rights.); Boston Stock Exchange v. State Tax Commission, 429 U.S. 318, 334 n. 13, 97 S.Ct. 599, 609 A. 13, 50 L.Ed.2d 514 (1977) (Even if a discriminatory state tax "is not now the sole cause of New York residents' refusal to trade on out-of-state exchanges, at the very least it reinforces their choice of an in-state exchange and is an inhibiting force to selling out of State; that inhibition is an unconstitutional barrier to the free flow of commerce."). Since the statute puts the plaintiff at a competitive disadvantage, the plaintiff has suffered an injury to its economic interest; the question is whether that injury is to a legally protected interest within the meaning of Wimberly.

In Boston Stock Exchange v. State Tax Commission, 429 U.S. at 320 n.3, 97 S.Ct. at 602 n.3, the United States Supreme Court held that the right of a business to engage in interstate commerce free of discriminatory taxes is "within the zone of interests" protected by the Commerce Clause. See also Bacchus Imports v. Dias, 468 U.S. 263, 104 S.Ct. 3049, 81 L.Ed.2d --- (1984). However, we have distinguished the Wimberly legally-protected-interest test from the federal arguably-within-the-zone-of interest standing test. Cloverleaf Kennel Club, Inc. v. Colorado Racing Commission, 620 P.2d 1051 (Colo.1980). The question before us is not whether the plaintiff's interest is arguably within a zone of protection, but whether that interest is entitled, as a matter of law, to legal protection. Id. It could be argued that the legally-protected-interest test requires that this court determine whether the framers of the Commerce Clause intended to protect individual interstate businesses or to grant such businesses a "roving commission" to protect interstate commerce. See id. at 1058-1059. However, given repeated United States Supreme Court vindication of the rights of businesses to obtain relief under the Commerce Clause, e.g., Bacchus Imports v. Dias, 104 S.Ct. 3049 (1984); Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970); Dean Milk Co. v. City of Madison, 340 U.S. 349, 71 S.Ct. 295, 95 L.Ed. 329 (1951); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032 (1935), we decline to engage in an independent evaluation of the framers' intent. 5 Whatever the intent of the framers, the Commerce Clause now creates a legally protected interest on the part of individual businesses to be free of state taxes and regulations which discriminate against interstate commerce.

The question of the plaintiff's standing under the Equal Protection Clause is more straightforward. Individual corporations qualify as "persons" granted a legal interest in equal protection of state laws by the Fourteenth Amendment. Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394, 6 S.Ct. 1132, 30 L.Ed. 118 (1886); Hudson Valley Freedom Theater, Inc. v. Heimbach, 671 F.2d 702 (2d Cir.) cert. denied, 459 U.S. 857, 103 S.Ct. 127, 74 L.Ed.2d 110 (1982). The state urges the significance of the fact that the plaintiff is not taxed directly by the challenged statute, since the distributor first receiving gasoline in Colorado is primarily liable for the tax. Section 39-27-102(1)(a)(I), 16B C.R.S. (1982). However, for purposes of standing, this court will not distinguish between direct and indirect violence to constitutionally protected rights. See Conrad v. City & County of Denver, 656 P.2d 662 (Colo.1982) (upholding standing based, in part, on...

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