Riech v. Collins

Decision Date06 December 1994
Docket Number93908
Citation115 S.Ct. 547,513 U.S. 106,130 L.Ed.2d 454
PartiesCharles J. REICH, Petitioner, v. Marcus E. COLLINS, Revenue Commissioner of Georgia, et al
CourtU.S. Supreme Court
Syllabus *

Georgia taxed retirement benefits paid by the Federal Government, but exempted those paid by the State, until this Court held, in 1989, that such a scheme violates the Federal Constitution. Georgia then repealed its state retiree tax exemption, but did not offer federal retirees refunds for the unconstitutional taxes they had paid before the Court's 1989 decision. Petitioner Reich, a federal retiree, sought redress under a Georgia statute requiring refunds of "illegally assessed" taxes. In affirming the state trial court's denial of such relief, the State Supreme Court held that the refund statute does not apply where the law under which the taxes were assessed and collected was itself subsequently declared to be invalid. It then denied Reich's petition seeking reconsideration under McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of Business Regulation, 496 U.S. 18, 110 S.Ct. 2238, 110 L.Ed.2d 17, and similar cases, which establish that due process requires a "clear and certain" remedy for taxes collected in violation of federal law, and that a State may provide that remedy before the disputed taxes are paid (predeprivation), after they are paid (postdeprivation), or both. Reich petitioned for certiorari, and this Court remanded for further consideration in light of Harper v. Virginia Dept. of Taxation, 509 U.S. ----, 113 S.Ct. 2510, 125 L.Ed.2d 74 which had relied on McKesson in circumstances similar to this case. In again denying Reich's refund claim, the State Supreme Court reviewed Georgia's predeprivation remedies and found those remedies to be "ample."

Held: The Georgia Supreme Court erred in relying on Georgia's predeprivation remedies to deny relief. Although due process, under McKesson, allows a State to maintain a remedial scheme that is exclusively predeprivation, exclusively postdeprivation, or a hybrid, and to reconfigure its scheme over time to fit changing needs, it may not do what Georgia did here: "bait and switch" by reconfiguring, unfairly, in midcourse. Specifically, Georgia held out what plainly appeared to be a "clear and certain" postdeprivation remedy, its tax refund statute, and then declared, only after Reich and others had paid the disputed taxes, that no such remedy exists. In this regard, the State Supreme Court's reliance on predeprivation procedures was entirely beside the point (and thus error), because even assuming the constitutional adequacy of those procedures—an issue not here addressed—no reasonable taxpayer would have thought that they represented, in light of the apparent applicability of the refund statute, the exclusive remedy for unlawful taxes. Cf. NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 78 S.Ct. 1163, 2 L.Ed.2d 1488. The case is remanded for the provision of meaningful backward-looking relief consistent with due process and the McKesson line of cases. Pp. __.

263 Ga. 602, 437 S.E.2d 320, reversed and remanded.

O'CONNOR, J., delivered the opinion for a unanimous Court.

Carlton M. Henson, Atlanta, GA, for petitioner.

Warren R. Calvert, Atlanta, GA, for respondent.

Justice O'CONNOR delivered the opinion of the Court.

In a long line of cases, this Court has established that due process requires a "clear and certain" remedy for taxes collected in violation of federal law. Atchison, T. & S.F.R. Co. v. O'Connor, 223 U.S. 280, 285, 32 S.Ct. 216, 217, 56 L.Ed. 436 (1912) (Holmes, J.). A State has the flexibility to provide that remedy before the disputed taxes are paid (predeprivation), after they are paid (postdeprivation), or both. But what it may not do, and what Georgia did here, is hold out what plainly appears to be a "clear and certain" postdeprivation remedy and then declare, only after the disputed taxes have been paid, that no such remedy exists.

I

For many years, numerous States, including Georgia, exempted from state personal income tax retirement benefits paid by the State, but not retirement benefits paid by the Federal Government (or any other employer). In March 1989, this Court held that such a tax scheme violates the constitutional intergovernmental tax immunity doctrine, which dates back to McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579 (1819), and has been generally codified at 4 U.S.C. § 111. See Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989).

In the aftermath of Davis, most of these States, Georgia included, repealed their special tax exemptions for state retirees, but few offered federal retirees any refunds for the unconstitutional taxes they had paid in the years before Davis was decided. Not surprisingly, a great deal of litigation ensued in an effort to force States to provide refunds. The instant suit is part of that litigation.

In April 1990, Reich, a retired federal military officer, sued Georgia in Georgia state court, seeking a refund for the tax years 1980 and after. The principal legal basis for Reich's lawsuit was Georgia's tax refund statute, which provides: "A taxpayer shall be refunded any and all taxes or fees which are determined to have been erroneously or illegally assessed and collected from him under the laws of this state, whether paid voluntarily or involuntarily. . . ." Ga.Code Ann. § 48-2-35(a) (Supp.1994).

The Georgia trial court first decided that, because of § 48-2-35's statute of limitations, Reich's refund request was limited to the tax years 1985 and after. Even as to these later tax years, however, the trial court refused to grant a refund, and the Georgia Supreme Court affirmed. See Reich v. Collins, 262 Ga. 625, 422 S.E.2d 846 (1992) (Reich I). The Georgia high court explained that it was construing the refund statute not to apply to "the situation where the law under which the taxes are assessed and collected is itself subsequently declared to be unconstitutional or otherwise invalid." Id., at 628-629, 422 S.E.2d, at 849.

Reich then petitioned the Georgia Supreme Court for reconsideration of its decision on the grounds that even if the Georgia tax refund statute does not require a refund, federal due process does—due process, that is, as interpreted by McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of Business Regulation, 496 U.S. 18, 110 S.Ct. 2238, 110 L.Ed.2d 17 (1990), and the long line of cases upon which McKesson depends. See id., at 32-36, 110 S.Ct., at 2247-2250, citing Iowa-Des Moines Nat. Bank v. Bennett, 284 U.S. 239, 52 S.Ct. 133, 76 L.Ed. 265 (1931); Montana Nat. Bank of Billings v. Yellowstone County, 276 U.S. 499, 48 S.Ct. 331, 72 L.Ed. 673 (1928); Carpenter v. Shaw, 280 U.S. 363, 50 S.Ct. 121, 74 L.Ed. 478 (1930); Ward v. Board of County Commr's of Love County, 253 U.S. 17, 40 S.Ct. 419, 64 L.Ed. 751 (1920); Atchison, T. & S.F.R. Co. v. O'Connor, 223 U.S. 280, 32 S.Ct. 216, 56 L.Ed. 436 (1912); see generally Fallon & Meltzer, New Law, Non-Retroactivity, and Constitutional Remedies, 104 Harv.L.Rev. 1733, 1824-1830 (1991). As we said, these cases stand for the proposition that "a denial by a state court of a recovery of taxes exacted in violation of the laws or Constitution of the United States by compulsion is itself in contravention of the Fourteenth Amendment," Carpenter, supra, 280 U.S., at 369, 50 S.Ct. at 123, the sovereign immunity States traditionally enjoy in their own courts notwithstanding. (We should note that the sovereign immunity States enjoy in federal court, under the Eleventh Amendment, does generally bar tax refund claims from being brought in that forum. See Ford Motor Co. v. Department of Treasury of Ind., 323 U.S. 459, 65 S.Ct. 347, 89 L.Ed. 389 (1945).)

Reich's petition for reconsideration in light of McKesson was denied. He then petitioned for certiorari. While the petition was pending, we decided Harper v. Virginia Dept. of Taxation, 509 U.S. ----, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993), which relied on McKesson in circumstances similar to this case. Accordingly, we remanded Reich's case to the Georgia Supreme Court for further consideration in light of Harper. See Reich v. Collins, 509 U.S. ----, 113 S.Ct. 3028, 125 L.Ed.2d 717 (1993).

On remand, the Georgia Supreme Court focused on the portion of Harper explaining that, under McKesson, a State is free to provide its "clear and certain" remedy in an exclusively predeprivation manner. "[A] meaningful opportunity for taxpayers to withhold contested tax assessments and to challenge their validity in a predeprivation hearing," we said, is " 'a procedural safeguard [against unlawful deprivations] sufficient by itself to satisfy the Due Process Clause.' " See Harper, 509 U.S., at ---- - ----, 113 S.Ct. at 2519, quoting McKesson, 496 U.S., at 38, n. 21. The court then reviewed Georgia's predeprivation procedures, found them "ample," and denied Reich's refund claim. Reich v. Collins, 263 Ga. 602, 604, 437 S.E.2d 320, 322 (1993) (Reich II).

Reich again petitioned for certiorari, and we granted the writ, 510 U.S. ----, 114 S.Ct. 1048, 127 L.Ed.2d 370 (1994), to consider whether it was proper for the Georgia Supreme Court to deny Reich relief on the basis of Georgia's predeprivation remedies.

II

The Georgia Supreme Court is no doubt right that, under McKesson, Georgia has the flexibility to maintain an exclusively predeprivation remedial scheme, so long as that scheme is "clear and certain." Due process, we should add, also allows the State to maintain an exclusively postdeprivation regime, see, e.g., Bob Jones Univ. v. Simon, 416 U.S. 725, 746-748, 94 S.Ct. 2038, 2050-2052, 40 L.Ed.2d 496 (1974), or a hybrid regime. A State is free as well to reconfigure its remedial scheme over time, to fit its changing needs. Such choices are generally a matter only of state law.

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