Mapco, Inc. v. Grunder
| Decision Date | 21 March 1979 |
| Docket Number | No. C78-295.,C78-295. |
| Citation | 470 F. Supp. 401 |
| Parties | MAPCO, INC., Plaintiff, v. Jack GRUNDER, District Director Ohio Department of Taxation, Department of Taxation of the State of Ohio, Edgar Lindley, Tax Commissioner of the State of Ohio, Defendants. |
| Court | U.S. District Court — Northern District of Ohio |
Kenneth G. Weinberg, James M. Friedman, Michael L. Hardy, Stanley M. Fisher, Guren, Merritt, Sogg & Cohen, Cleveland Ohio, Donald H. Hauser, CEI, Cleveland, Ohio, Frederic Dorwart, Holliman, Langholz, Runnels & Dorwart, Tulsa, Okl., for Mapco, Inc.
J. Elaine Bialczak, Asst. Atty. Gen., Columbus, Ohio, for defendants.
Plaintiff Mapco, Inc. has brought this action under 28 U.S.C. § 13311 to challenge the validity of the Coal Use Tax of Ohio (the act), O.R.C. §§ 5751.01-.99, under the commerce clause of the United States Constitution, Article I, § 8(3).2 Mapco seeks a declaratory judgment under 28 U.S.C. §§ 2201 and 2202 that the Coal Use Tax is unconstitutional and a permanent injunction against the enforcement of the act by the defendant Ohio Department of Taxation, its district director (Mr. Jack Grunder), and Ohio's Tax Commissioner (Mr. Edgar Lindley). The defendants are also herein referred to as the Ohio Taxation Agencies.
The act which has been challenged3 imposes a tax upon the storage, use or other consumption of coal. The "excise" tax is assessed against consumers who use coal in excess of two hundred tons per year for the direct generation of either steam or electric power. Electric utilities are the primary users of coal affected by the tax.
O.R.C. § 5751.02(A) recites that the Coal Use Tax was enacted to pay the expenses of the Ohio Department of Energy and to finance coal related research projects designed to develop coal as a substitute for other fuels and "for removal of . . . sulfur before the products of sulfur are emitted or discharged."4
The rate of the tax is dependent upon the sulfur content of the consumer's coal according to the following table:
Percent of
Tax per ton sulfur content
40 cents Less than 0.5%
35 cents 0.5% to 1.0%
30 cents 1.0% to 1.5%
15 cents 1.5% or more
The facts are not in dispute and the parties have each moved for summary judgment. These cross motions for summary judgment are considered upon the complaint, briefs, and supporting materials submitted to the court.
In a memorandum and order of August 10, 1978, this court overruled the defendants' motion to dismiss as to Mapco. However, the issue of Mapco's standing to maintain this action was not there considered. During the submission of the present motions, this court, by letter, requested the parties to address the question of standing. Each counsel has done so by supplemental brief. The question of standing is now considered assuming the truth of the allegations of the complaint.5
In Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975), the Court thus summarized the question of standing:
In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. This inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise. E. g., Barrows v. Jackson, 346 U.S. 249, 255-256, 73 S.Ct. 1031, 1034-1035, 97 L.Ed. 1586 (1953).
The Court in Barrows v. Jackson, 346 U.S. 249, 73 S.Ct. 1031, 97 L.Ed. 1586 (1953), thus sought to draw the often indistinguishable line between the constitutional and prudential limitations that compose standing:
The requirement of standing is often used to describe the constitutional limitation on the jurisdiction of this Court to "cases" and "controversies" . . . Apart from the jurisdictional requirement, this Court has developed a complementary rule of self-restraint for its own governance (not always clearly distinguished from the constitutional limitation) which ordinarily precludes a person from challenging the constitutionality of state action by invoking the rights of others . . . The common thread underlying both requirements is that a person cannot challenge the constitutionality of a statute unless he shows that he himself is injured by its operation.
Barrows, at 255, 73 S.Ct. at 1034.
Under Article III's "cases" and "controversies" limitation, this court's jurisdiction may only be invoked when it is alleged that the "challenged action has caused the plaintiff injury in fact," Data Processing Service v. Camp, 397 U.S. 150, 152, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970), broadened in Linda R.S. v. Richard D., 410 U.S. 614, 617, 93 S.Ct. 1146, 1148, 35 L.Ed.2d 536 (1973) to an allegation of "some threatened or actual injury resulting from the putatively illegal action . . .."
The challenged tax statute operates directly upon the use of Mapco's product — low-sulfur coal. Mapco has alleged in paragraph three that it sells low-sulfur coal to the Cleveland Electric Illuminating Company (CEI), "and others" who are subject to the tax. The use tax placed upon Mapco's Ohio steam generating utility customers is higher than it would be were these consumers to purchase high-sulfur coal. Construing the complaint most favorably to Mapco, the tax therefore effectively increases the price of Mapco's coal that competes for sales with high-sulfur coal in Ohio. The economic disadvantage placed upon Mapco's coal is a "threatened or actual injury resulting from the putatively illegal" Coal Use Tax. Linda R.S. v. Richard D., supra, at 617, 93 S.Ct. at 1148.
The Ohio Taxation Agencies have correctly pointed out that Mapco has not alleged any actual diminution of sales of its low-sulfur coal in Ohio. The defendants conclude that Mapco has therefore suffered no "injury in fact." But "trade being a sensitive plant, a direct tax upon it to some extent at least deters trade even if its effect is not precisely calculable," declared Justice Frankfurter in Freeman v. Hewit, 329 U.S. 249, 256-57, 67 S.Ct. 274, 279, 91 L.Ed. 265 (1946).6
It is "interference by a State with the freedom of interstate commerce" that makes invalid "an exaction by a State from interstate commerce" and not "a proven increase in the cost of the product," Freeman v. Hewit, 329 U.S. 249, 256-57, 67 S.Ct. 274, 279, 91 L.Ed. 265. Thus, an unconstitutional interference with the freedom of interstate commerce does not require a showing that the cost of the imported low-sulfur coal has been increased by the exaction of the Ohio Coal Use Tax — although this result seems reasonably likely.7 The same interference with Mapco's sale of coal to its Ohio customers constitutes an injury to its interstate business without an actual showing that the exaction of the tax on the use of its coal in Ohio has caused Mapco's Ohio business to dwindle.
Based on the complaint, it may be concluded that the tax will likely cause an adverse effect upon Mapco's economic competitiveness. This provides Mapco's "personal stake in the outcome of the controversy," Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962).
Moreover, the direct adversary relationship between Mapco and the Ohio Taxation Agencies is provided by the inferrable purpose of the Ohio Coal Use Tax to prefer and favor the sale of Ohio high-sulfur coal and to reduce and discourage the sale of out-of-state low-sulfur coal, the product which Mapco mines and sells in interstate commerce. Thus, in the words of Flast v. Cohen, 392 U.S. 83, 101, 88 S.Ct. 1942, 1953, 20 L.Ed.2d 947 (1968), there is satisfaction of the Article III requirement that the "dispute sought to be adjudicated will be presented in an adversary context." In addition, the dispute is "capable of judicial resolution." The defendants are responsible for enforcing the Coal Use Tax. Upon an adjudication of illegality of the tax, they may be enjoined from further assessment of the Coal Use Tax, and the controversy would thereby be resolved.
To satisfy the prudential limitations upon the exercise of this court's jurisdiction, the allegations of Mapco's complaint must establish that it seeks to assert its own rights in this forum.
As seen in the discussion, the economic handicap imposed upon Mapco's coal is an injury. This handicap is one that is suffered by vendors of low-sulfur coal; hence it is not "a `generalized grievance' shared in substantially equal measure by all or a large class of citizens." Warth v. Seldin, supra, 422 U.S. at 499, 95 S.Ct. at 2205.
Mapco is asserting its constitutional right to sell coal in interstate commerce free of burdens violative of the commerce clause. This right is no less the right of Mapco because the act exacts a tax from Mapco's customers rather than from Mapco itself.8 Low-sulfur coal is being brought to the Ohio market by Mapco and low-sulfur coal is the commodity which is being taxed by the Coal Use Tax Act. Thus, Mapco is "arguably within the zone of interests to be protected . . . by the . . . constitutional guarantee in question." Data Processing Service v. Camp, supra, 397 at 153, 90 S.Ct. at 830.
Paragraph 8 of the complaint states, among other things, that:
. . . Since virtually all low-sulphur coal is produced outside the State of Ohio and only insignificant amounts of low-sulphur coal are produced within the State of Ohio, the Coal Use Tax curtails, burdens and penalizes the inter-state movements of low-sulphur coal to the direct commercial advantage of coal produced in Ohio. Such a discriminatory tax upon interstate commerce violates the Commerce Clause of the United States Constitution, Article I, Section 8(3).
In paragraph 5 of their answer, defendants "deny the allegations of paragraph 8 of the Complaint that the Ohio Coal Use Tax is discriminatory or that it burdens or penalizes interstate...
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