Coors Brewing Co. v. Mendez–torres
| Decision Date | 30 March 2011 |
| Docket Number | Civil No. 06–2150(DRD). |
| Citation | 787 F.Supp.2d 149 |
| Parties | COORS BREWING COMPANY, Plaintiff,v.Juan Carlos MENDEZ–TORRES, Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
OPINION TEXT STARTS HERE
Eric Perez–Ochoa, Katarina Stipec–Rubio, Pedro Jimenez–Rodriguez, Adsuar Muniz Goyco Seda & Perez Ochoa PSC, San Juan, PR, for Plaintiff.Vivian Gonzalez–Mendez, Wandymar Burgos–Vargas, Deputy Secretary of Justice, Litigation Department of Justice of Puerto Rico, San Juan, PR, for Defendant.
OMNIBUS OPINION AND ORDER
The history of the instant case is tumultuous, spanning five years and encompassing a reversal and remand by the First Circuit, and a subsequent abrogation by the Supreme Court of the United States. See Coors Brewing Co. v. Mendez–Torres, 562 F.3d 3 (1st Cir.2009), abrogated by Levin v. Comm. Energy, Inc., ––– U.S. ––––, 130 S.Ct. 2323, 176 L.Ed.2d 1131 (2010) ().
The Court referred this complicated case (Docket No. 160) to Chief Magistrate Judge Justo Arenas for his recommendation. In this most recent Report and Recommendation (Docket No. 167), he set forth a detailed and precise recounting of the lengthy procedural history in the instant case, as well as several related cases of importance to the present action, which the Court hereby ADOPTS and INCORPORATES BY REFERENCE. Thus, in the interests of brevity and readability, the Court begins by recounting only the portions of this turbulent and litigation-fraught procedural history which are necessary for the purposes of the instant opinion.
For decades,1 the Commonwealth of Puerto Rico has implemented an excise tax on beer, distinguishing between brewers who produce more than 31 million gallons annually (“large brewers”) and those who produce less than 31 million gallons annually (“small brewers”) in establishing tax rates. When this distinction between small and large brewers first arose, the United States Brewers Association (“USBA”) 2 filed suit both in state and federal fora. See U.S. Brewers P.R. (“ U.S. Brewers P.R.”), 109 D.P.R. 456, 9 P.R. Offic. Trans. 605 (P.R.1980); see also U.S. Brewers Ass'n v. Cesar–Perez, 455 F.Supp. 1159 (D.P.R.1978), remanded 592 F.2d 1212 (1st Cir.1979) ( “ U.S. Brewers ”), cert. denied 444 U.S. 833, 100 S.Ct. 64, 62 L.Ed.2d 43 (1979), abrogated by Mendez–Torres, 562 F.3d 3, abrogated by Levin, 130 S.Ct. 2323. Eventually, in 1980, the state court suit found itself in the Puerto Rico Supreme Court. See U.S. Brewers P.R., 109 D.P.R. 456, 9 P.R. Offic. Trans. 605. The Puerto Rico Supreme Court reviewed the constitutionality of the tax, as well as its validity under the Federal Relations Act, ultimately determining on the merits of the case that the tax was, in fact constitutional. Id.
The federal suit also proceeded beyond the trial court level to seek appellate review. See U.S. Brewers, 592 F.2d at 1213. Initially the District Court ruled that the Butler Act did not “preclude the enjoinment of a Commonwealth's tax where a clear violation of [the Federal Relations Act] is established, and where there exists no plain, speedy and efficient remedy in the local forums.” 455 F.Supp. at 1162. Upon appeal, the plaintiffs/appellants asserted that the Butler Act 3 did not bar federal jurisdiction to their suit challenging the state beer excise tax as they did not seek to prevent the collection of a tax. 592 F.2d at 1214. The Court of Appeals for the First Circuit disagreed, stating that “it might well be proper to apply the Butler Act beyond its literal terms to encompass [a] suit to enjoin enforcement of a tax exemption.” Id. Ultimately, however, the Court of Appeals based their decision to remand so that the District Court might dismiss for want of jurisdiction upon “considerations which underlie ... the Butler Act, ‘equity practice, ... principles of federalism ... and the imperative need of a State to administer its own fiscal operations.’ ” Id. (citations omitted).
Some time later, in 2002, Puerto Rico enacted Act No. 69, which amended the beer tax, increasing the large brewer tax above the traditional rate, which was never in excess of $0.55 greater than the tax imposed upon small brewers. Under Act No. 69, large brewers paid $4.05 in excise taxes and small brewers paid only $2.15. See P.R. Laws Ann. tit. 13 § 9574. This new law provided for four gradational steps between brewers who produced between 9 million and 31 million gallons of beer annually and included an exemption for companies who brewed more than 9 million gallons, but less than 31 million gallons, allowing them to pay the lowest tax rate for the first 9 million gallons.
After entry of Act 69, the Puerto Rico Association of Beer Importers 4 filed suit in Puerto Rico Superior Court, although shortly thereafter, Coors withdrew its claims without prejudice. Mendez–Torres, 562 F.3d at 6 ().5 Ultimately, the Puerto Rico Superior Court dismissed the action, and this dismissal was upheld by the Puerto Rico Supreme Court. Id.
After it withdrew from the Puerto Rico Superior Court case, Coors then filed a challenge to the beer tax in the U.S. District Court for the District of Columbia. Coors Brewing Co. v. Calderon, 225 F.Supp.2d 22, 23 (D.D.C.2002). The District Court eventually dismissed the action for lack of jurisdiction under the Butler Act, citing the First Circuit's concern in U.S. Brewers with principles of equity and federalism in reaching its determination. Calderon, 225 F.Supp.2d at 25–26 (citing U.S. Brewers, 592 F.2d at 1215). Upon appeal, a settlement was reached under which Coors agreed that the District Court's judgment “determines with finality the Court's lack of jurisdiction but is without prejudice to the substantive claims that the Court lacked jurisdiction to address.” Mendez–Torres, 562 F.3d at 6.
In 2004, the Puerto Rico legislature amended the beer excise tax, again retaining the graduated taxation scheme (“challenged statute” or “special exemption”). Id. at 10. Subsequently, in 2006, Coors Brewing Company (“Coors” or “Plaintiff”) filed the instant action, attacking the validity of the graduated beer tax. Specifically, Coors alleges that the special exemption for small brewers is invalid and unenforceable for violating both the Federal Relations Act and the Commerce Clause of the United States Constitution. 6
The Secretary of the Treasury for the Commonwealth of Puerto Rico (“Secretary” or “Defendant”) subsequently filed a motion to dismiss in which he alleged that this Court lacks subject matter jurisdiction under the Tax Injunction Act 7 and the Butler Act. Further, Defendant alleged that collateral estoppel and/or claim preclusion prevented the Court from deciding the case, as litigation in the state courts was ongoing. Finally, Defendant asserted that the stipulations agreed to in Calderon had a preclusive effect on this Court's jurisdiction. Ultimately, the Court declined to dismiss on res judicata grounds, instead relying upon the Rooker–Feldman doctrine, the Butler Act and the preclusive effect of the Calderon case and related stipulations to dismiss Plaintiff's federal claims with prejudice.
However, upon appeal to the First Circuit, that Court of Appeals disagreed with the District Court's decision, reversing the same and remanding the case. Mendez–Torres, 562 F.3d at 23. The Honorable Chief Magistrate Judge Justo Arenas has provided an extremely thorough and detailed account of the intricacies of that opinion in his Report and Recommendation; accordingly, the Court shall merely outline the First Circuit's decision and highlight the salient points therein.
At the outset of its opinion, the First Circuit determined that the preclusive effect of the Calderon stipulations was correctly “assessed through the lens of issue preclusion[,]” and then found that the 2004 amendment to the tax was “immaterial” and would not “defeat issue preclusion.” Id. at 9–10.
The Court of Appeals subsequently addressed Plaintiff's argument that the Supreme Court's case of Hibbs v. Winn, 542 U.S. 88, 124 S.Ct. 2276, 159 L.Ed.2d 172 (2004), represented an intervening change in controlling law. Mendez–Torres, 562 F.3d at 12. When undertaking its analysis of this argument, the First Circuit expressly overrode its previous ruling in U.S. Brewers, finding that Hibbs resulted in a restricted application of the comity principles underlying the Butler Act and, accordingly, found that neither the Butler Act nor unadorned principles of comity barred the instant suit. Id. at 16–18. Consequently, the First Circuit found no jurisdictional bar and addressed the Calderon stipulations, disagreeing with this Court's opinion that they barred Plaintiff from re-litigating the issue of subject matter jurisdiction in the instant case. Id. at 12–13.
The Court of Appeals then proceeded to address the effect of the Butler Act on the Court's jurisdiction in the instant case, determining that, in light of its reading of Hibbs, the Act did not prevent the Court from exercising subject matter jurisdiction as Plaintiff seeks to invalidate an exemption which would result in taxes being raised rather than eliminated. Id. at 14–16.
The First Circuit subsequently addressed the Defendant's assertion that the principles of comity which the appellate court relied upon in U.S. Brewers would dictate dismissal in the instant case. Id. at 16–18. The Court of Appeals first recognized that, absent the Supreme Court's decision in Hibbs, U.S. Brewers would still control. Id. at 16. However, relying upon its earlier reading of Hibbs as indicating a new, restricted application of comity principles, the appellate court rejected ...
To continue reading
Request your trial
-
Coors Brewing Co. v. Méndez–Torres
...and would not “suffer any manifest injustice from having the summary judgment motion decided first.” Coors Brewing Co. v. Mendez–Torres, 787 F.Supp.2d 149, 186 (D.P.R.2011). The magistrate judge examined the merits of Coors's summary judgment challenge to the excise tax first, and recommend......
-
Normand v. Cox Commc'ns, LLC
...challenge); United States v. Oregon, 2011 U.S. Dist. LEXIS 1107 (D.Or.2011) (Supremacy Clause challenge); Coors Brewing Co. v. Mendez–Torres, 787 F.Supp.2d 149 (D.P.R.2011) (Commerce Clause challenge). Finally, Cox cites two post-Levin cases as examples of federal courts declining to apply ......