Jack Gray Transport, Inc. v. Dept. of State Revenue, 49T10-0002-TA-14.

• Decision Date: 20 February 2001
• Docket Number: No. 49T10-0002-TA-14.,49T10-0002-TA-14.
• Citation: 744 N.E.2d 1071
• Parties: JACK GRAY TRANSPORT, INC. et al., Petitioner, v. DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

744 N.E.2d 1071

JACK GRAY TRANSPORT, INC. et al., Petitioner, v. DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10-0002-TA-14.

Tax Court of Indiana.

February 20, 2001.

Robert W. Loser, II, Patrick M. O'Brien, Michael R. Franceschini, William S. Ayers, Ruth E. Myer, Ayres Carr & Sullivan, P.C., Indianapolis, IN, Attorneys for Petitioner.

Steve Carter, Attorney General of Indiana, David A. Arthur, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

FISHER, J.

The petitioners, Jack Gray Transport, Inc., as well as thirty-eight other similarly situated parties¹ (collectively Jack Gray) appeal the final determination of the Department of State Revenue (Department), whereby the Department declined to apply Indiana's proportional use exemption (Exemption) to the motor fuel and surcharge taxes found at IND.CODE ANN. §§ 6-6-4.1-4(d) and 6-6-4.1-4.5(d) (West 2000) for the second, third and fourth quarters of 1998, as well as for the first two quarters of 1999. In its original tax appeal, Jack Gray raises two issues:

I. Whether the Court should certify a class consisting of Jack Gray and an estimated 1536 other petitioners;² and

II. Whether the Department acted contrary to law when it failed to apply the exemptions to the quarters at issue.

The Department has filed a Motion to Dismiss under Trial Rule 12(B)(6) (Motion) for failure to state a claim upon which relief can be granted.³ For the reasons explained below, the Court will not certify Jack Gray's proposed class. However, the Court finds that the Department acted contrary to law when it failed to grant the exemption for the quarters at issue. Therefore, the Court denies the Department's Motion and instead grants summary judgment in favor of Jack Gray.

FACTS AND PROCEDURAL HISTORY

The material facts are not in dispute. Jack Gray is a motor carrier engaged in the business of commercial trucking both within and outside of Indiana. In 1991, the legislature limited the exemptions provided for in sections 6-6-4.1-4(d) and 6-6-4.1-4.5(d) to only those motor carriers who used power take-off (PTO) equipment in Indiana by adding the words "in Indiana" to each statute. This Court subsequently held in 1998, and again in 1999, that the "in Indiana" limitation violated the Commerce Clause of the U.S. Constitution, art. 1, § 8. Bulkmatic Transport Co. v. Department of State Revenue, 691 N.E.2d 1371, 1379 (Ind. Tax Ct.1998) (Bulkmatic II); Bulkmatic Transp. Co. v. Department of State Revenue, 715 N.E.2d 26, 36 (Ind. Tax Ct.1999) (Bulkmatic III). Following these decisions, the legislature amended the statutes at issue by removing the "in Indiana" requirement in order to obtain a refund for taxes paid on fuel used for non-highway use and by changing the exemptions to a credit. IND.CODE ANN. §§ 6-6-4.1-4(d) and -4.5(d) (West 2000). The case at bar involves the time period between this Court's Bulkmatic II decision on February 13, 1998 and the legislature's most recent amendment of the law, which became effective on July 1, 1999. P.L. 222-1999.

The Department denied Jack Gray's application for the exemptions on February 23, 2000.⁴ The Department filed its Motion on June 5, 2000. Thereafter, on June 30, 2000, the Court held a hearing on the Department's Motion. Additional facts will be supplied where necessary.

ANALYSIS AND OPINION

Standard of Review

The Court reviews findings of the Department de novo and is bound by neither the evidence nor the issues raised at the administrative level. IND.CODE ANN. § 6-8.1-9-1(d) (West 2000). Snyder v. Department of Revenue, 723 N.E.2d 487, 488 (Ind. Tax Ct.2000). Summary judgment is only appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. T.R. 56(C), Roehl Transport, Inc. v. Department of Revenue, 653 N.E.2d 539, 541 (Ind. Tax Ct.1995). Summary judgment is particularly appropriate when the question is one of the application of the law to undisputed facts. Id. When any party has moved for summary judgment, the Court may grant summary judgment for any other party upon the issues raised by the motion although no motion for summary judgment has been filed by such party. T.R. 56(B).

Discussion

Jack Gray first asks the Court to certify a class in which Jack Gray would represent itself, as well as 1536 other similarly situated motor carrier companies. The Department contends that Jack Gray has not met the requirements of T.R. 23(A)(1)⁵ and therefore should not have its class certified. In the alternative, the Department argues that Jack Gray has not satisfied the requirements of T.R. 23(B)(1). Second, Jack Gray argues that it is entitled to the exemptions for the second, third and fourth quarters of 1998, as well as the first two quarters of 1999. In its Motion, the Department contends that this Court's Bulkmatic Transportation decisions authorized it to deny the exemptions at issue. The Court will address each issue in turn.

I. Class Certification

To become certified as a class, the proposed class must meet all four requirements of T.R. 23(A), which are:

1. The class is so numerous that joinder of all members is impracticable;

2. There are questions of law or fact common to the class;

3. The claims or defenses of the representative parties are typical of the claims or defenses of the class; and

4. The representative parties will fairly and adequately protect the interests of the class.

Once this is established, a class must also meet one of the three subsections of T.R. 23(B).⁶ In this case, Jack Gray argues that its class meets the numerosity requirement of T.R. 23(A)(1) as well as satisfies the requirements of T.R. 23(B)(3). The Court notes that the numerosity prerequisite under T.R. 23(A)(1) is not simply a test of numbers. Connerwood Healthcare, Inc. v. Estate of Herron, 683 N.E.2d 1322, 1326 (Ind.Ct.App.1997),distinguished on other grounds by Martin v. Amoco Oil Co., 696 N.E.2d 383, 385 n. 3 (Ind.1998)

. Instead, the Court's inquiry focuses on whether the number of litigants would make joinder impracticable. Id. This inquiry requires the Court to consider both judicial economy and the ability of the class members to institute individual suits. Id. at 1326-27.

At the hearing, Jack Gray stated that it had the ability to join all potential claimants in one petition, rather than in a class action. (Hr'g Tr. at 65) ("We can certainly join in litigation every possible taxpayer if [each] choose[s] to come in.") Thus, judicial economy is best served by having all claimants joined in one action. Connerwood Healthcare, Inc., 683 N.E.2d at 1326-27. In addition, the Department did not challenge the ability of any of the potential 1536 claimants to institute his own individual suit, based on the Department's comments at the hearing. (Hr'g Tr. at 67) ("If that's what it requires under the applicable law, yes, [The Department is] willing to [try 1536 cases].") Considering Jack Gray's expressed ability to join all potential claimants in one action and the Department's willingness to try 1536 cases, the Court concludes that joinder of all potential members is not impracticable under the Indiana joinder rules.⁷ Cf. Connerwood, 683 N.E.2d at 1329

. (finding that class certification was appropriate since elderly nursing home residents could not individually protect their own interests.) The Court holds that Jack Gray has not met the numerosity requirement of T.R. 23(A)(1)⁸ and DENIES Jack Gray's class certification request.

II. Scope of the Bulkmatic Transportation cases

Jack Gray next contends that the Department acted contrary to law when it refused to grant it the exemptions for the second through fourth quarters of 1998, as well as for the first two quarters of 1999. It contends that this Court's 1998 and 1999 Bulkmatic Transportation cases only found the "in Indiana" limitations of sections 6-6-4.1-4(d) and -4.5(d) unconstitutional and not the entire statutes. Therefore, Jack Gray argues, it is entitled to a refund for those quarters. The Department argues that the Bulkmatic Transportation decisions held those statutes completely unconstitutional.

In Bulkmatic II,⁹ this Court ruled that the "in Indiana" language violated the Commerce Clause of the U.S. Constitution, Bulkmatic Transp., 691 N.E.2d at 1379, and that it is unconstitutional to tax "a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the state." Id. at 1376 (quoting Fulton Corp. v. Faulkner, 516 U.S. 325, 331, 116 S.Ct. 848, 854, 133 L.Ed.2d 796 (1996)) (internal quotations omitted). This Court further stated that:

The limitation of the [ ] exemption to only those carriers using PTO equipment in Indiana also forecloses tax neutral decisions. If a motor carrier does not operate PTO equipment in Indiana, that carrier will be charged a higher rate for using the roads. Additionally, the availability of the lower rate will encourage motor carriers to accept more deliveries to Indiana than it otherwise would. This is impermissible discrimination against out-of-state interests.

Id. at 1378. The Court concluded its analysis by saying that the "in Indiana" limitation on Indiana's motor carrier fuel tax exemption discriminates against interstate commerce and forecloses tax neutral decisions, a result which is not allowed under the Commerce Clause. Id. at 1379.

Similarly, in Bulkmatic III, this Court stated that, "The practical effect of the in Indiana limitation is to exact a different price for the use of Indiana roads based on where the motor carrier decides to operate its PTO equipment." Bulkmatic Transp., 715 N.E.2d at 28. The Court further stated, "[T]he basic principle is clear: a state taxation scheme must operate evenhandedly with respect to interstate commerce. The in Indiana limitation on the proportional use exemption violates this basic principle and therefore violates the Commerce Clause." Id. at 29. The Court concluded its...