U.S. Brewers Ass'n, Inc. v. Perez, 78-1393

Decision Date21 February 1979
Docket NumberNo. 78-1393,78-1393
Citation592 F.2d 1212
PartiesUNITED STATES BREWERS ASSOCIATION, INC., et al., Plaintiffs, Appellants, v. Julio Cesar PEREZ, etc., et al., Defendants, Appellees.
CourtU.S. Court of Appeals — First Circuit

Stanley L. Feldstein, Old San Juan, P. R., with whom Gustavo A. Gelpi, Feldstein, Gelpi, Hernandez & Castillo, Old San Juan, P. R., and Federico A. Cordero, Carolina, P. R., were on brief, for plaintiffs, appellants.

Federico Cedo Alzamora, Asst. Sol. Gen., Dept. of Justice, San Juan, P. R., with whom Hector A. Colon Cruz, Sol. Gen., San Juan, P. R., was on brief, for defendants, appellees.

Before COFFIN, Chief Judge, CAMPBELL and BOWNES, Circuit Judges.

COFFIN, Chief Judge.

This is an action for declaratory and injunctive relief, brought by five United States mainland beer producers and a trade association representing the producers of 95 per cent of the beer sold in the United States, to restrain Puerto Rican officials from collecting an increase in the internal revenue tax on beer imposed by Act 37 of July 13, 1978. In the alternative, as set forth in the amended complaint, the plaintiffs sought to enjoin defendants from applying that Act's exemption of "beer produced by persons whose total production during its most recent year has not exceeded thirty-one million (31,000,000) wine gallons". Plaintiff-appellants contend that the law was intended to and does protect, via its exemption, two local beer producers, thus curtailing competition with beer produced outside of Puerto Rico in violation of 48 U.S.C. § 741a. That provision prohibits Puerto Rico from discriminating by way of its taxing power between articles imported from the United States and other foreign countries and similar articles manufactured in Puerto Rico. Various constitutional infringements are alleged as well.

While describing the taxing statute as Prima facie in violation of 48 U.S.C. § 741a, the district court held that the suit was controlled by the Butler Act, 48 U.S.C. § 872, which provides that:

"No suit for the purpose of restraining the assessment or collection of any tax imposed by the laws of Puerto Rico shall be maintained in the District Court of the United States for Puerto Rico."

Although the Butler Act constitutes a flat prohibition of such suits, the court adopted a more flexible approach akin to 28 U.S.C. § 1341 1 and held that "the Butler Act cannot preclude the enjoinment of a Commonwealth's tax where a clear violation of 48 U.S.C. § 741a is established, and where there exists no plain, speedy and efficient remedy in the local forums." 2 Expressing uncertainty about the availability and adequacy of local remedies, the court retained jurisdiction but directed the plaintiffs to seek "a decision of the Commonwealth Courts as to the issues raised in this case, and particularly, concerning the existence of an adequate right of action." Plaintiffs did so, and the Superior Court of Puerto Rico has issued a ruling, declaring Act 37 of July 13, 1978 constitutional and otherwise valid and dismissing the complaint. United States Brewers Association v. Perez, Civ.No. PE-78-1137 (Dec. 12, 1978). At oral argument appellants, appropriately, conceded that the availability of a local remedy thus has been demonstrated. Therefore, the only issue before us on appeal is whether the Butler Act should be applied to this suit to bar jurisdiction.

Appellants argue that neither the language nor the legislative history of the Butler Act supports its application to the relief sought in their amended complaint, namely, that the court declare invalid those portions of the Act exempting smaller producers from the heightened tax and enjoin defendants from collecting a lower tax from local producers than that collected from beer producing plaintiffs outside of Puerto Rico. They maintain that the concern which prompted passage of the Butler Act and 28 U.S.C. § 1341, that the fiscal operations of a state would be crippled if a taxpayer could refuse to pay his taxes and then commence federal litigation, See Tully v. Griffin, 429 U.S. 68, 73, 97 S.Ct. 219, 50 L.Ed.2d 227 (1976); Matthews v. Rodgers, 284 U.S. 521, 525-26, 52 S.Ct. 217, 76 L.Ed. 447 (1932); United States v. State Tax Commission, 481 F.2d 963, 973 (1st Cir. 1973); Sancho v. National City Bank of New York, 112 F.2d 998, 998-99 (1st Cir. 1940), is not implicated where, as here, a party asks that a state be required to equalize its taxing scheme by collecting a greater rather than a lesser amount of taxes then it has legislated. In sum, they conclude that the district court erred by failing to distinguish between restraining payment of a tax and restraining application of an exemption from a tax.

We disagree. Contrary to appellants' narrow view of the statute, it might well be proper to apply the Butler Act beyond its literal terms to encompass their suit to enjoin enforcement of a tax exemption. We base our decision instead, however, on the considerations which underlie 28 U.S.C. § 1341 and the Butler Act, See Great Lakes v. Huffman, 319 U.S. 293, 299, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943), "equity practice, . . . principles of federalism . . . and the imperative need of a State to administer its own fiscal operations." Tully v. Griffin, 429 U.S. 68, 73, 97 S.Ct. 219, 222, 50 L.Ed.2d 227 (1976); See Paul Smith Construction v. Buscaglia, 140 F.2d 900, 901-02 (1st Cir. 1944).

Those considerations would be ill served by the technical distinction urged by appellants in this case. The requested injunction, restraining the Commonwealth from collecting a lower tax from those exempted from Act 37, could be framed in two ways, either by ordering the state not to collect the tax increase or by requiring the state to levy the tax hike on exempt as well as nonexempt parties. As appellants apparently recognized when they amended their complaint, the first clearly constitutes relief proscribed by the Butler Act, as it would "restrain the assessment or collection of any tax", 48 U.S.C. § 872. The second, we believe, would...

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  • Schneider v. Colegio de Abogados de Puerto Rico
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    • 13 September 1982
    ...Act. 28 U.S.C. § 1341. United States Brewers Assoc. Inc. v. César Pérez, 455 F.Supp. 1159 (D.C.P.R.1978), rem. on other grounds, 592 F.2d 1212 (C.A. 1, 1978), cert. den., 444 U.S. 833, 100 S.Ct. 64, 62 L.Ed.2d 43 It has been held that a determination of what is a "tax" under the Tax Injunct......
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    ...[federal law] is established, and where there exists no plain, speedy and efficient remedy in the local forums.” U.S. Brewers Ass'n v. Perez , 592 F.2d 1212, 1213 (1st Cir.1979) ; see also Coors Brewing Co. v. Mendez – Torres , 678 F.3d 15, 18–19 (1st Cir.2012). The parties agree that the a......
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