Saban Rent-A-Car LLC v. Ariz. Dep't of Revenue

• Decision Date: 13 March 2018
• Docket Number: No. 1 CA-TX 16-0007,1 CA-TX 16-0007
• Citation: 418 P.3d 1066
• Parties: SABAN RENT–A–CAR LLC, et al., Plaintiffs/Appellees/Cross–Appellants, v. ARIZONA DEPARTMENT OF REVENUE, Defendant/Appellant/Appellee/Cross–Appellee, Tourism and Sports Authority, Defendant-in-Intervention/ Appellant/Cross–Appellee.
• Court: Arizona Court of Appeals

418 P.3d 1066

SABAN RENT–A–CAR LLC, et al., Plaintiffs/Appellees/Cross–Appellants,

v. ARIZONA DEPARTMENT OF REVENUE, Defendant/Appellant/Appellee/Cross–Appellee,Tourism and Sports Authority, Defendant-in-Intervention/ Appellant/Cross–Appellee.

No. 1 CA-TX 16-0007

Court of Appeals of Arizona, Division 1.

FILED March 13, 2018

Mandel Young, PLC, Phoenix, By Taylor C. Young, Robert A. Mandel, Co–Counsel for Plaintiffs/Appellees/Cross–Appellants Saban et al.

Kickham, Hanley, PLLC, Royal Oak, MI, By Gregory D. Hanley, pro hac vice, Co–Counsel for Plaintiffs/Appellees/Cross–Appellants Saban et al.

Aiken, Schenk, Hawkins & Ricciardi, PC, Phoenix, By Shawn K. Aiken, Co–Counsel for Plaintiffs/Appellees/Cross–Appellants Saban et al.

Arizona Attorney General's Office, Phoenix, By Kimberly J. Cygan, Jerry A. Fries, Co–Counsel for Defendant/Appellant/Appellee/Cross–Appellee ADOR

Osborn Maledon, PA, Phoenix, By Thomas L. Hudson, Eric M. Fraser, Co–Counsel for Defendant/Appellant/Appellee/Cross–Appellee ADOR

Fennemore Craig, PC, Phoenix, By Timothy J. Berg, Theresa Dwyer, Emily Ayn Ward, Co–Counsel for Defendant-in-Intervention/Appellant/Cross–Appellee AzSTA

Dickinson Wright, PLLC, Phoenix, By Scot L. Claus, Vail C. Cloar, Co–Counsel for Defendant-in-Intervention/Appellant/Cross–Appellee AzSTA

Lewis, Roca, Rothgerber, Christie, LLP, Phoenix, By Robert G. Schaffer, Counsel for amici curiae Halikowski and ADOT

Gammage & Burnham, PLC, Phoenix, By Michael R. King, Cameron C. Artigue, Christopher L. Hering, Counsel for amici curiae Convention and Visitors Bureaus

Pima County Attorney's Office, Tucson, By Regina L. Nassen, Counsel for amicus curiae Pima County

Gallagher & Kennedy, PA, Phoenix, By Michael K. Kennedy, Mark C. Dangerfield, Counsel for amicus curiae Arizona Chamber of Commerce

Perkins Coie, LLP, Phoenix, By Paul F. Eckstein, Thomas D. Ryerson, Counsel for amicus curiae City of Phoenix

Judge Diane M. Johnsen delivered the opinion of the Court, in which Presiding Judge Lawrence F. Winthrop and Judge Maria Elena Cruz joined.

OPINION

JOHNSEN, Judge:

¶ 1 A class of car-rental companies sued to invalidate a surcharge enacted to build sports facilities to be owned by the Arizona Tourism and Sports Authority ("AzSTA"). The car-rental companies argued the surcharge is invalid both under Article IX, Section 14 of the Arizona Constitution and under the Dormant Commerce Clause implied by the United States Constitution. The tax court ruled the surcharge was invalid under the Arizona Constitution (but not under the Dormant Commerce Clause) and ordered a refund.

¶ 2 For reasons explained below, we reverse the tax court's order granting summary judgment to the car-rental companies under the Arizona Constitution and direct entry of judgment in favor of the Arizona Department of Revenue ("ADOR") and AzSTA on that claim. We affirm the judgment in favor of ADOR and AzSTA under the Dormant Commerce Clause. Because we conclude the surcharge is not invalid under either constitutional provision, we reverse the tax court's refund order.

FACTS AND PROCEDURAL BACKGROUND

¶ 3 AzSTA is a "corporate and political body" the legislature created in 2000. Ariz. Rev. Stat. ("A.R.S.") § 5–802 (2018).¹ By statute, AzSTA's "boundaries" are those "of any county that has a population of more than two million persons," meaning (then and now) Maricopa County. A.R.S. § 5–802(A). The legislature directed AzSTA to build and operate a "[m]ultipurpose facility"—a stadium/events center—that could accommodate a professional football team, a college bowl game, and "other sporting events and entertainment, cultural, civic, meeting, trade show or convention events [.]" A.R.S. §§ 5–801(4) (2018) (defining "multipurpose facility"), –804(A) (2018), –807 (2018), –815 (2018) (powers of AzSTA). The legislature also granted AzSTA the power to contract to host the Super Bowl and college football national championship and playoff games and to build Major League Baseball spring-training facilities and youth and amateur sports and recreational facilities. A.R.S. §§ 5–808 (2018), –809 (2018).

¶ 4 Although AzSTA may charge for use of its facilities, it cannot levy taxes or assessments to build those facilities. A.R.S. § 5–802(C). Instead, the legislature authorized Maricopa County voters to approve taxes to fund AzSTA's construction projects. See id . Among the taxes the legislature authorized voters to impose is the one challenged here: A surcharge on the gross proceeds of car-rental businesses. See A.R.S. § 5–839(B) (2018). Maricopa County voters approved the car-rental surcharge authorized by § 5–839 in November 2000, just months after the legislature established AzSTA.² As authorized, the surcharge is the greater of 3.25 percent "of the gross proceeds or gross income from the business" or $2.50 per car rental, payable by the car-rental business, not the customer. A.R.S. § 5–839(B)(1). If a customer rents a vehicle as a "temporary replacement" for another vehicle, the surcharge charged the car-rental company is a flat $2.50. See A.R.S. § 5–839(B)(2).³

¶ 5 In August 2009, Saban Rent–A–Car, Inc. sought a refund of amounts it had paid under § 5–839, claiming the surcharge violated Article IX, Section 14 of the Arizona Constitution and the Dormant Commerce Clause implied by the U.S. Constitution. After ADOR denied the refund and that decision was upheld on administrative review, Saban challenged the ruling in the tax court, seeking injunctive relief and a refund on behalf of a class of all similarly situated car-rental companies. The court granted AzSTA leave to intervene as a defendant, then certified a class of all businesses that paid the surcharge from September 2005 through March 2008.

¶ 6 After discovery, the tax court ruled on cross-motions for summary judgment that although the surcharge did not violate the Dormant Commerce Clause, it was invalid under Article IX, Section 14 of the Arizona Constitution. The court ruled that ADOR would have to refund the tax to class members but could recoup the amount of the refund, over time, from AzSTA pursuant to A.R.S. § 42–5029(G) (2018). The court granted ADOR's motion for entry of judgment pursuant to Arizona Rule of Civil Procedure 54(b), leaving the amount of the refund to be determined.

¶ 7 We have jurisdiction of the parties' various appeals and cross-appeal from the Rule 54(b) judgment pursuant to Article VI, Section 9 of the Arizona Constitution and A.R.S. § 12–2101(A)(6) (2018). See Empress Beauty Supply, Inc. v. Price , 116 Ariz. 34, 35, 567 P.2d 350 (App. 1977) ( Rule 54(b) appropriate when "the only question remaining to be resolved is the amount of recovery") (quotations omitted).⁴

DISCUSSION

A. Standard of Review.

¶ 8 We review de novo the grant of a motion for summary judgment. See Tierra Ranchos Homeowners Ass'n v. Kitchukov , 216 Ariz. 195, 199, ¶ 15, 165 P.3d 173 (App. 2007). Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a). Although a party ordinarily may not appeal an order denying summary judgment, see, e.g. , Fleitz v. Van Westrienen , 114 Ariz. 246, 248, 560 P.2d 430 (App. 1977), the court of appeals may review the denial of a motion for summary judgment if the superior court denied the motion on a point of law, Strojnik v. Gen. Ins. Co. of America , 201 Ariz. 430, 433, ¶ 11, 36 P.3d 1200 (App. 2001).

B. Article IX, Section 14 of the Arizona Constitution.

¶ 9 In relevant part, Article IX, Section 14 of the Arizona Constitution states:

No moneys derived from fees, excises, or license taxes relating to registration, operation, or use of vehicles on the public highways or streets or to fuels or any other energy source used for the propulsion of vehicles on the public highways or streets, shall be expended for other than highway and street purposes....

Under this provision, revenues collected from certain "fees, excises, or license taxes" may be spent only for "highway and street purposes." ADOR and AzSTA concede the surcharge authorized by A.R.S. § 5–839 is an excise tax. See also Karbal v. ADOR , 215 Ariz. 114, 116, ¶¶ 9–10, 158 P.3d 243 (App. 2007). Therefore, if the surcharge is a tax "relating to registration, operation, or use of vehicles on the public highways or streets," it violates Section 14 because its proceeds are spent on sports and recreation facilities, not highways and streets.

¶ 10 Relying on dictionary definitions, Saban argues the phrase "relating to" in Section 14 broadly sweeps up any tax "having connection with or reference to the operation or use of vehicles on the public highways." To be sure, the phrase "relating to" is inherently indeterminate. See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. , 514 U.S. 645, 655, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995) ("If ‘relate to’ were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes [its scope] would never run its course, for ‘really, universally, relations stop nowhere.’ " (quoting H. James, Roderick Hudson xli (New York ed., World's Classics 1980) ) (alteration in original omitted) ). For that reason, as Saban conceded at oral argument, without some limiting principle, Section 14 would encompass not only the car-rental surcharge at issue here but also a broad range of taxes that Arizona does not now funnel to highways—including retail sales or business privilege taxes on car sales, tire sales, car leases and car repairs.

¶ 11 Nevertheless, Saban cites Landon v. Indus. Comm'n of Ariz. , 240 Ariz. 21, 375 P.3d 86 (App. 2016), for the proposition that we should look no farther than the dictionary in interpreting the words "relating to" in Section 14. The issue in Landon was whether the discharge of an injured employee fell within a provision of the Workers' Compensation Act concerning workers "terminat[ed] from employment for reasons that are unrelated to the industrial...