Mobil Oil Corp. v. Tully
| Decision Date | 19 September 1980 |
| Docket Number | No. 80-CV-543,80-CV-544,80-CV-570.,80-CV-543 |
| Parties | MOBIL OIL CORPORATION, Atlantic Richfield Company, United Refining Company, Inc. and Gulf Oil Company, Plaintiffs, v. James H. TULLY, Jr., Thomas H. Lynch, and Francis Koenig, Constituting the New York State Tax Commission; Robert Abrams, Attorney General of the State of New York; and James L. LaRocca, Commissioner of the New York State Energy Office, Defendants. NEW ENGLAND PETROLEUM CORPORATION, Plaintiff, v. James H. TULLY, Jr., Commissioner of Taxation and Finance of the State of New York, and Robert Abrams, Attorney General, State of New York, Defendants. AMERADA HESS CORPORATION, Plaintiff, v. James H. TULLY, Jr., Thomas H. Lynch, and Francis Koenig, Constituting the New York State Tax Commission; Robert Abrams, Attorney General of the State of New York; and James L. LaRocca, Commissioner of the New York State Energy Office, Defendants. |
| Court | U.S. District Court — Northern District of New York |
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Donovan, Leisure, Newton & Irvine, New York City, Bond, Schoeneck & King, Syracuse, N. Y., for plaintiffs Mobil Oil Corp., Atlantic Richfield and United Refining Co.; Thomas R. Trowbridge, III, New York City, John M. Freyer, Syracuse, N. Y., of counsel.
Edward F. Gerber, Syracuse, N. Y., Arthur L. Vangeli and Sydney M. Avent, Philadelphia, Pa., for Gulf Oil Corp.
Cleary, Gottlieb, Steen & Hamilton, New York City, Bouck, Holloway & Kiernan, Albany, N. Y., for plaintiff New England Petroleum; James C. Blair, New York City, Warner Bouck, Albany, N. Y., of counsel.
Kaye, Scholer, Fierman, Hays & Handler, New York City, Hancock, Estabrook, Ryan, Shove & Hust, Syracuse, N. Y., for plaintiff Amerada Hess Corp.; Stanley D. Robinson, New York City, William L. Allen, Jr., Syracuse, N. Y., of counsel.
Robert Abrams, Atty. Gen., State of New York, Albany, N. Y., pro se and for defendant LaRocca; Shirley Siegel, Sol. Gen., Albany, N. Y., of counsel.
Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendants Tully, Lynch and Koenig, constituting the New York State Tax Commission; Edward Costikyan, Simon H. Rifkind, New York City, of counsel.
Defendants have moved for an order dismissing these three actions for lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1341. Plaintiffs in each action have moved for an order granting summary judgment in their favor. The Court has concluded after full hearing and after consideration of the arguments of counsel on both motions, the memoranda submitted therewith, both in support and opposition, and the exhibits attached thereto, that the defendants' motion to dismiss should be denied and that plaintiffs' motions for summary judgment should be granted and has further concluded that in the interests of judicial economy and in fairness to the litigants, this Order should be issued forthwith with a Memorandum-Decision containing the Court's findings of fact and conclusions of law to follow, as to avoid the need for the hearing scheduled for September 10, 1980, on plaintiff New England Petroleum Corporation's application for a preliminary injunction with a consolidated hearing on the merits. It is therefore
ORDERED, ADJUDGED AND DECREED that:
1. The defendants' motion to dismiss the plaintiffs' complaints in these three actions is denied;
2. The plaintiffs' motions for summary judgment (a) declaring the anti-pass through provision of section 182(12)(a) of the New York Tax Law as added by L.1980 ch. 271, § 4, ch. 272, § 1, and ch. 272, § 2, invalid as pre-empted by the Emergency Petroleum Allocation Act, 15 U.S.C. §§ 751-760h and the Mandatory Petroleum Price Regulations, 10 C.F.R. Part 212, promulgated thereunder and thus void under the Supremacy Clause of the United States Constitution and (b) enjoining defendants, their delegates and successors in office from enforcing the anti-pass through provision against plaintiffs in these actions, are granted;
3. Entry of judgment in these actions is hereby stayed until September 17, 1980, and in the event that a Memorandum-Decision has not been issued by the Court by that time, the Court shall, upon notice to the parties, extend the stay until such time as a decision is issued and the defendants have had a reasonable time to seek a further stay from the United States Court of Appeals for the Second Circuit.
IT IS SO ORDERED.
Plaintiffs in these actions seek (a) a declaration that section 182(12) of the New York Tax Law, as added by L.1980, ch. 271 § 4 and ch. 272 § 2, which prohibits the pass-through of the State's recently enacted two (2%) percent gross receipts tax on certain oil companies is unconstitutional and thus invalid and (b) a permanent injunction enjoining the defendants from enforcing the anti-pass through provision. Relief is sought on the grounds that the anti-pass through provision (1) establishes a state price control rule which conflicts with the Federal Emergency Petroleum Allocation Act of 1973, §§ 1-19, 15 U.S.C. § 751-760h as amended, (EPAA), and the Federal Mandatory Petroleum Price Regulations, 10 C.F.R. Part 212 (Price Regulations) promulgated thereunder, and is thus void under the Supremacy Clause of the United States Constitution (U.S.Const. Art. VI, cl. 2); (2) impermissibly burdens interstate commerce and thus is void under the Commerce Clause of the United States Constitution (U.S.Const. Art. I, § 8, cl. 3); and (3) contravenes the Due Process Clause of the Fourteenth Amendment to the United States Constitution. (U.S.Const. Amend. XIV, § 1).
Plaintiffs in all three actions assert jurisdiction under 28 U.S.C. §§ 1331 and 1337. In addition, plaintiffs in the Mobil Oil and Amerada Hess actions claim that exclusive original jurisdiction is vested in this Court by § 211 of the Economic Stabilization Act of 1970 (12 U.S.C. § 1904 note), as expressly incorporated by reference in § 5(a) of the EPAA (15 U.S.C. § 754(a), and section 502(b) of the Department of Energy Organization Act, 42 U.S.C. § 7192(b).1
The three actions are presently before the Court on the defendants' motion to dismiss pursuant to the Tax Injunction Act, 28 U.S.C. § 1341 and the plaintiffs' motions for summary judgment under Rule 56 of the Fed.R.Civ.P. on their respective pre-emption claims.2
On June 18, 1980, the Governor of New York State signed into law two bills which impose an annual tax "upon every oil company equal to two per centum of its gross receipts from all sources, or the portion thereof allocated within the State as hereinafter provided ...." (L.1980, ch. 271, § 4).3 The tax is imposed on each company "for the privilege of exercising its corporate franchise, or of doing business, or of employing capital, or of owning or leasing property in this state in a corporate or organized capacity or of maintaining an office in this state, for all or any part of its taxable years." Id. Pursuant to the statute the term gross receipts covers all receipts with the exception of "receipts received by reason of any sale of fuel oil (excluding diesel motor fuel) used for residential purposes" and "receipts from any sale for resale to a purchaser which is an oil company subject to tax under this section." Id.
Revenue collected through the imposition of this new tax is earmarked to go into the "regional transportation operating and capital assistance fund", created by the legislation (L.1980, ch. 271 §§ 2, 11), and is to be used to provide operating and capital assistance to New York State's mass transportation system.
An additional provision of the State's new revenue raising plan prohibits the pass-through of the tax in the prices charged to consumers for products sold by the oil companies in New York State. The anti-pass through provision, which is set forth in subsection 12(a) of the new section 182 of the New York Tax Law, provides that:
The tax imposed by this section and any penalty which may be assessed under this subdivision shall be a liability of the oil company, shall be paid by such company and shall not be included, directly or indirectly, in the sales price of its products sold in this state.
Under the new law, each oil company subject to the tax is required to file an annual report with the Commission of Taxation and Finance "certifying, under oath, that it has not included, directly or indirectly, in the sales price of its products sold in this state the tax imposed by this section." L.1980, ch. 271, § 4. Companies which are found to have passed on the cost of the new tax through increased product costs or who are found to have filed false reports in violation of the certification requirement are subject to a penalty equal to one hundred (100%) percent of the tax imposed for the year in which the violation occurs. L.1980, ch. 271, § 4(12)(b)(2).
The plaintiffs in these actions are oil companies within the meaning of the legislation involved in this litigation and are, therefore, subject to the gross receipts tax. Each, in the normal course of business, would generally pass on the cost of the new tax through increased petroleum product prices to customers in the taxing jurisdiction.
None of the plaintiffs challenges the imposition of the gross receipts tax itself. Rather, they challenge only the anti-pass through provision of § 182(12)(a), which is now in effect. As previously indicated, the plaintiffs' motions for summary judgment which are before the Court are limited to the pre-emption claims.
Analysis of the pre-emption claims shall necessitate a careful examination of the Federal EPAA and the Mandatory Price Regulations promulgated thereunder. However, since the need for a determination on the preemption issue would disappear should the Court grant the defendants' motion to dismiss, that motion should be addressed and disposed of first.
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