Int'l Bus. Machs. Corp. v. Dep't of Treasury

• Decision Date: 21 July 2016
• Docket Number: Docket No. 327359.
• Citation: 316 Mich.App. 346,891 N.W.2d 880
• Parties: INTERNATIONAL BUSINESS MACHINES CORPORATION v. DEPARTMENT OF TREASURY.
• Court: Court of Appeal of Michigan — District of US

316 Mich.App. 346

891 N.W.2d 880

INTERNATIONAL BUSINESS MACHINES CORPORATION

v.DEPARTMENT OF TREASURY.

Docket No. 327359.

Court of Appeals of Michigan.

Submitted July 12, 2016, at Detroit.

Decided July 21, 2016, at 9:00 a.m.

Miller, Canfield, Paddock & Stone, PLC (by Clifford W. Taylor, Lansing, Gregory A. Nowak, Michael P. Coakley, Detroit, and Maria Baldysz ), for International Business Machines Corporation.

Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, Matthew Schneider, Chief Legal Counsel, and Zachary C. Larsen, Assistant Attorney General, for the Department of Treasury.

Before: WILDER, P.J., and MURPHY and O'CONNELL, JJ.

PER CURIAM.

Plaintiff, International Business Machines Corporation (IBM), appeals as of right a Court of Claims order granting, on reconsideration, summary disposition in favor of defendant, Department of Treasury (the Department). We reverse and remand for entry of judgment in favor of IBM consistently with our Supreme Court's directive in this case in Int'l Business Machines Corp. v. Dep't of Treasury, 496 Mich. 642, 852 N.W.2d 865 (2014).

In Int'l Business Machines, id. at 644–645, 852 N.W.2d 865, the Supreme Court opened its opinion by alluding to the issue presented, describing the nature of the case, and setting forth its holding:

In this case, we must determine whether ... IBM[ ] could elect to use the three-factor apportionment formula under the Multistate Tax Compact (the Compact)[, MCL 205.581 et seq., ] for its 2008 Michigan taxes, or whether it was required to use the sales-factor apportionment formula under the Michigan Business Tax Act (BTA)[, MCL 208.1101 et seq. ]. The Department ... rejected IBM's attempt to use the Compact's apportionment formula and, instead, required IBM to apportion its income using the BTA's sales-factor formula.

We conclude that IBM was entitled to use the Compact's three-factor apportionment formula for its 2008 Michigan taxes and that the Court of Appeals erred by holding otherwise on the basis of its erroneous conclusion that the Legislature had repealed the Compact's election provision by implication when it enacted the BTA. We further hold that IBM could use the Compact's apportionment formula for that portion of its tax base subject to the modified gross receipts tax of the BTA.

Accordingly, we reverse the Court of Appeals' judgment in favor of the Department, reverse the Court of Claims' order granting summary disposition in favor of the Department, and remand to the Court of Claims for entry of an order granting summary disposition in favor of IBM. [Emphasis added.]

The Department filed a motion for rehearing, and before the Supreme Court rendered a decision on the motion, the Legislature enacted 2014 PA 282, amending the BTA, retroactively rescinding Michigan's membership in the Compact, effective January 1, 2008, and precluding foreign corporations such as IBM from using the three-factor apportionment formula that had been available under the Compact. The Department filed supplemental authority in support of its pending motion for rehearing, alerting our Supreme Court to the statutory amendment. Subsequently, the Supreme Court denied the motion for rehearing absent any explanation or elaboration. Int'l Business Machines Corp. v. Dep't of Treasury, 497 Mich. 894, 855 N.W.2d 512 (2014). On remand, the Court of Claims initially entered judgment in favor of IBM as directed by the Supreme Court. However, the Court of Claims later granted the Department's motion for reconsideration, determining that 2014 PA 282 represented an intervening change of law, thereby excepting application of the law-of-the-case doctrine.

"When an appellate court remands a case with specific instructions, it is improper for a lower court to exceed the scope of the order." People v. Russell, 297 Mich.App. 707, 714, 825 N.W.2d 623 (2012) ; see also Glenn v. TPI Petroleum, Inc., 305 Mich.App. 698, 706, 854 N.W.2d 509 (2014) ("The trial court erred by failing to comply on remand with the very specific directives of this Court."); K & K Constr., Inc. v. Dep't of Environmental Quality, 267 Mich.App. 523, 544, 705 N.W.2d 365 (2005) (clear instructions in a remand order must be followed); Rodriguez v. Gen. Motors Corp. (On Remand), 204 Mich.App. 509, 514, 516 N.W.2d 105 (1994) ("It is the duty of the lower court or tribunal, on remand, to comply strictly with the mandate of the appellate court."). In this case, the Court of Claims did not have any discretion or authority to rule in favor of the Department. The Court of Claims was specifically instructed to enter an order granting summary disposition in favor of IBM, and it erred by ultimately failing to do so.

The procedural posture of this case resulted in arguments regarding the applicability of the law-of- the-case doctrine, which doctrine is subject to an exception when there is an intervening change of law. See People v. Olear, 495 Mich. 939, 843 N.W.2d 480 (2014) ; Grace v. Grace, 253 Mich.App. 357, 363, 655 N.W.2d 595 (2002). In Grievance Administrator v. Lopatin, 462 Mich. 235, 259–260, 612 N.W.2d 120 (2000), our Supreme Court explained the nature of the law-of-the-case doctrine:

Under the law of the case doctrine, if an appellate court has passed on a legal question and remanded the case for further proceedings, the legal questions thus determined by the appellate court will not be differently determined on a subsequent appeal in the same case where the facts remain materially the same. The appellate court's decision likewise binds lower tribunals because the tribunal may not take action on remand that is inconsistent with the judgment of the appellate court. Thus, as a general rule, an appellate court's determination of an issue in a case binds lower tribunals on remand and the appellate court in subsequent appeals. [Citations and quotation marks omitted.]

The Department maintains that the law-of-the-case doctrine is not controlling because the legal question concerning the effect of 2014 PA 282 on IBM's 2008 taxes was not passed on by the Supreme Court in its opinion nor, expressly, in its order denying the Department's motion for rehearing and because 2014 PA 282 represented an intervening change of law, assuming that the doctrine was initially implicated. We conclude that the analysis in this case is not governed by the law-of-the-case doctrine; however, contrary to the Department's view, this does not mean that the Court of Claims was free to try anew under 2014 PA 282 the issue regarding the apportionment formula applicable to IBM's 2008 taxes. Rather than apply the law-of-the-case doctrine, we hold that the principle alluded to earlier—that a lower court cannot exceed the scope of a remand order—controls and is distinguishable from the law-of-the-case doctrine. We find instructive a recent decision by the United States Court of Appeals for the Ninth Circuit in Stacy v. Colvin, 825 F.3d 563, 567–568 (C.A.9, 2016), wherein the federal court, distinguishing the law-of-the-case doctrine from what it coined the "rule of mandate," observed:

The rule of mandate is similar to, but broader than, the law of the case doctrine. The rule provides that any district court that has received the mandate of an appellate court cannot vary or examine that mandate for any purpose other than executing it. The district court may, however, decide anything not foreclosed by the mandate. But the district court commits "jurisdictional error" if it takes actions that contradict the mandate. [Citations and quotation marks omitted.] ^{[1 ]}

Although the terminology "rule of mandate" has apparently not been used in Michigan caselaw, it quite plainly embodies the well-accepted principle in our jurisprudence that a lower court must strictly comply with, and may not exceed the scope of, a remand order. Glenn, 305 Mich.App. at 706, 854 N.W.2d 509 ; Russell, 297 Mich.App. at 714, 825 N.W.2d 623 ; K & K Constr., 267 Mich.App. at 544, 705 N.W.2d 365 ; Rodriguez, 204 Mich.App. at 514, 516 N.W.2d 105. In this case, the Supreme Court mandated ministerial entry of judgment in favor of IBM, the mandate foreclosed all other possibilities and any renewed litigation over IBM's 2008 business taxes, and the Court of Claims erred by taking an action that contradicted the mandate, effectively exceeding the remand's jurisdictional scope. The distinction we recognize today between the law-of-the-case doctrine and the rule of mandate, as implicated by the Supreme Court's explicit directive in Int'l Business Machines, 496 Mich. at 645, 852 N.W.2d 865, is further buttressed by the principles of the law-of-the-case doctrine, which is a discretionary doctrine that expresses the general practice of the courts and is not a limit on the power of the courts. Locricchio v. Evening News Ass'n, 438 Mich. 84, 109, 109 n. 13, 476 N.W.2d 112 (1991) ; Grace, 253 Mich.App. at 363, 655 N.W.2d 595. The plain and unambiguous remand directive cannot be construed as having provided any room for the exercise of discretion by the Court of Claims, and the directive most certainly placed a strict limit on the power of the Court of Claims on remand, which limit was exceeded. For all intents and purposes, the case was over once it left the jurisdiction of...