PENNSYLVANIA v. NEW JERSEY

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Argument of Lawrence Silver

Chief Justice Warren E. Burger: We will hear arguments next in 68original, Commonwealth of Pennsylvania v. State of New Jersey.

Mr. Silver, you may proceed whenever you are ready.

Mr. Lawrence Silver: Mr. Chief Justice and may it please the court.

Chief Justice Warren E. Burger: A motion for leave to file a complaint.

Mr. Lawrence Silver: I am aware of that, Your Honor, but I think in order to fully understand the issues relating to that, some explanation has to be made of the underlying Tax statute that would be brief as to that.

Chief Justice Warren E. Burger: The statute was raised from Austin v. New Hampshire?

Mr. Lawrence Silver: The statute similar to the one declaring constitutional in Austin v. New Hampshire.

Chief Justice Warren E. Burger: There is a familiarity with that.

Mr. Lawrence Silver: Of course, the Pennsylvania in 1971 passed the Domestic Income Tax and, in response to that, New Jersey passed its Commuter’s Tax known as the Transportation Benefits Tax Act.

It taxes both Pennsylvania citizens who cross over to New Jersey and New Jersey citizens who cross to Pennsylvania, but immediately exempts those persons and, in fact, even does not require the filing of a return.

The issue, therefore, is whether or not that statute falls squarely within the holding in Austin, and we think it does.

The issue before the court raised by New Jersey’s motion, our position, is whether Pennsylvania, as a state, has standing to sue first for declaration that that statute is unconstitutional and the injunctive relief which should follow and, the second issue, whether or not has standing to seek the retroactive application of such determination and an accounting and repayment for the funds collected by New Jersey.

Justice William H. Rehnquist: Your case, then is different from Maine in Massachusetts that, in your case, it has not been established that the New Jersey tax is unconstitutional.

Mr. Lawrence Silver: There is no court declaration as to that.

We have two aspects.

We have a first hurdle to get over.

They already have the Austin case, which we do not.

In the first instance, we would ask the Court first to take jurisdiction to determine whether or not the statute is or is not constitutional.

I might add that I hope to explore the issue to be so clear as to really require summary disposition of that matter by the Court.

Justice William H. Rehnquist: What standing does Pennsylvania have to challenge the New Jersey tax insofar as it bears on Pennsylvania citizens?

In Austin, the challenge was by individual taxpayers claiming violation of privileges and immunity.

Mr. Lawrence Silver: Mr. Justice Rehnquist, we assert several issues standing as to our first count.

The first issue and I think the most important one is that, perhaps with the exception of the Commerce Clause, what keeps the nation together is the Privileges and the Immunities Clause, and it is our contention that Pennsylvania as a state suffers a trespass against it when its citizens’ privileges and immunities are violated.

The support for that proposition, first, I think is in Ward v. Maryland.

Also, in footnote 5, Mr. Justice Marshall’s opinion in Austin where James Madison requested information on what is to prevent the trespassers of one state against another state.

The answer was the Privileges and Immunities Clause, that Pennsylvania has been independently harmed by the fact that there is a violation of the privileges and immunities of its citizens and I might add, in support of that proposition, this Court’s opinion in Travers v. Towne and Yale Manufacturing Company, there, there was a corporation whose act was nothing more than withholding the money of its employees.

This Court permitted that corporation to assert the privileges and immunities of its employees.

Now, Pennsylvania, I would like to add--

Justice William H. Rehnquist: It was acting as a withholder and as a conduit of the money at least.

Mr. Lawrence Silver: Yes, but it did not allege that its privilege and immunities were being violated but that its employees’ privileges and immunities were violated, and their standing to raise that was sustained by this Court.

I would add also, I think the answer is contained in Mr. Justice Marshall’s opinion at 6-62 in which it is said that the issue that privileges and immunities, in terms of maintaining peace between the states that the constitution seeks to establish is such an important issue that it has a high degree of judicial inquiry.

That is language that I believe to be the converse in terms of the required level of standing.

Now, Pennsylvania also asserts its interest parens patriae to represent its citizens, stand in the shoes of its citizens to seek a declaration that a statute of a sister state is unconstitutional.

Justice William H. Rehnquist: Can you do that in the case where the other defendant is a state under the Eleventh Amendment?

Mr. Lawrence Silver: I think so, Your Honor, because in Pennsylvania v. West Virginia, West Virginia passed a statute which said that before you export natural gas to any other state, you must ensure that the demands of West Virginia are first satisfied.

Pennsylvania, by its self as well as in behalf of its citizens’ parens patriae together with Ohio, commenced original actions in this Court seeking a declaration that the statute was a violation of the Commerce Clause and this Court permitted Pennsylvania in that case to seek a declaration that a sister state statute was unconstitutional.

The question that you raise in addition to the one that I think I have tried to answer is the other aspect and that is the Eleventh Amendment.

The Eleventh Amendment only precludes, as I understand it, money judgments as against a sister state except the area under the exceptions of ex parte Young but that only--

Justice William H. Rehnquist: Ex parte Young does not involve any judgments of any kind against the state.

It is an injunction against state officials.

Mr. Lawrence Silver: An injunction, but I would assert, first of all, that the Eleventh Amendment does not only preclude suits against states but only suits by individuals against states.

Justice William H. Rehnquist: Would it not preclude a suit where the state is really not suing in the classical boundary sense or water diversion sense but, instead, really on behalf of its own citizens in a parens patriae capacity?

Mr. Lawrence Silver: Your Honor, I think that first of all, as I have said, that the trespass of the Privileges and Immunities Clause as to its citizens is an independent and separate trespass in Pennsylvania, as I think the opinion in Austin supports that proposition.

Justice William H. Rehnquist: It certainly does not say so.

Mr. Lawrence Silver: I agree, not in a clear language but I think that the history of the Privileges and Immunities Clause in this Court’s treatment of it would certainly support that proposition.

In addition, I do not think that the Eleventh Amendment comes up in the New Hampshire v. Louisiana where the state is really not acting in its sovereign capacity but seeks an avoidance of the Eleventh Amendment and there cannot be an assertion that Pennsylvania is trying to walk around the Eleventh Amendment by some act of an assignment of bond claims as there was in New Hampshire v. Louisiana.

Justice William H. Rehnquist: But, nonetheless, it is perfectly clear that a group of citizens of Pennsylvania could not get together and sue New Jersey in the Federal Court.

Mr. Lawrence Silver: For two reasons, first of all, they may be able to sue an officer.

Justice William H. Rehnquist: Right.

Mr. Lawrence Silver: But that is an Eleventh Amendment problem.

Justice William H. Rehnquist: For New Jersey.

Mr. Lawrence Silver: That resolves the Eleventh Amendment problems, Mr. Justice Rehnquist.

It does not resolve the problem created for those people under 28 USC 1341, the Anti-Tax Injunction Statute, which precludes a citizen from utilizing the Federal Courts to enjoin a tax in Federal Courts unless there is a plain speedy remedy.

Justice William H. Rehnquist: But those are two reasons where citizens of Pennsylvania cannot sue the State of New Jersey.

Mr. Lawrence Silver: That is correct.

Justice William H. Rehnquist: We certainly should not, under our regular jurisdiction, simply allow that to be circumvented in a dressed-up original action here.

Mr. Lawrence Silver: Your Honor, I do not think it is a dressed-up original action in a sense that 28 USC 1341 specifically limits its operations to the District Courts implying, I think, the congressional intent that where there is a dispute between the states, that the state may clearly go to this Court, that to suggest that it is an Enron to stand the jurisdiction of this Courts on its head and that this is the perfectly proper place to go because Pennsylvania, as I intend to demonstrate in the argument, has suffered an injury in addition to the injury suffered by its citizens.

Unknown Speaker: Mr. Silver, somewhere in your argument, would you refer to Massachusetts against Missouri?

This is heavily relied upon by New Jersey and not cited in your brief.

I want to be sure, I know your answer to that.

It does not have to be now.

Whenever you get to it.

Mr. Lawrence Silver: Okay, I would assert also that I think that as to the merits of the case, in terms of once the court reaches the issue, New Jersey has conceded with one exception, that their statute is precisely similar to the statute declared by this court to be unconstitutional in Austin, except with one aspect and that aspect is that the use of the money is to go to transportation purposes.

This Court in a long line of opinions has said that there are really two aspects to any tax.

The first aspect is the imposition.

The second aspect is the use.

And, the Court has often said that whatever the use is, if the use is improper, we would enjoin the use but an improper use will not declare unconstitutional, a proper tax and, likewise, I would assert that the only assertion by New Jersey to distinguish their act is one that is really relevant.

Going back to the issue of the original jurisdiction of this Court in terms of the retroactive relief that we seek, the Pennsylvania gave a tax credit, it does give a tax credit, to all of its citizens who pay income tax to another state, I might add that every state which surrounds Pennsylvania, has domestic income tax with the exception of New Jersey.

This is a tax credit, Your Honor.

Now, we do provide for a tax credit as to all states.

I think that Pennsylvania has within its constitutional powers, as was stated by Justice Marshall in Austin, has the power and the authority to grant such a tax credit.

The fact that its tax credit also creates harm for it does not preclude it from complaining for one retroactive relief and the money judgment in this court.

Yes, Mr. Justice Powell?

Justice Lewis F. Powell: But certainly, it would not require to grant the tax credit, would it?

Mr. Lawrence Silver: No, Your Honor, it does not.

Justice Lewis F. Powell: So it was voluntary political action on the part of Pennsylvania.

Mr. Lawrence Silver: That is correct.

Justice Lewis F. Powell: Can a controversy within the meaning of the constitution between states arise or a state voluntarily not under any constitutional compulsion brings abode now what you call is a controversy?

Mr. Lawrence Silver: I think so, Your Honor.

If a state has the power to do something, it need not release that right and power to accommodate the unconstitutional acts of a sister state.

If Pennsylvania has the right to act properly in this way and does act within its power, and by the exercise of its proper power, is harmed by the constitutional acts of another state, I think that it does create a controversy.

Pennsylvania need not accommodate or surrender its proper right to accommodate the unconstitutional acts of a sister state.

Now, the alternative that Pennsylvania could do, Pennsylvania could amend its statute and say “we will give you a tax credit for every state except New Jersey because we think their statute is unconstitutional.”

That is the very type of conduct that the Privileges and Immunities Clause was designed to prohibit retaliatory actions by one state against another state and, in fact, I would even suggest there is a possibility that if we passed such a tax exemption exempting only New Jersey citizens, that Pennsylvania would also be in violation of the Privileges and Immunities Clause, if not of the Equal Protection Clause by singling out New Jersey but until New Jersey statute is declared unconstitutional, Pennsylvania has of course the right to give such a tax credit.

That it may be harmed as a consequence does give it the right to complain in a Court.

Now, the reasons for the retroactive application are set forth in our brief, but New Jersey was unnoticed certainly at the time of the passage of the Act, certainly at the time of the filing of the Austin case, and certainly at the time, this Court issued its Austin decision and it is a constitutional tort feaser.

It should not be permitted to maintain the benefit that it has achieved by reason of its unconstitutional acts and, therefore, we would assert that it is not only within the power but the proper power of this Court to say to New Jersey “you have unconstitutionally collected a tax and you may not be able to keep that tax.”

To do otherwise were to basically encourage states to come so close to violating the Privileges and Immunities Clause that if they are wrong, they get to keep the bounty which, in Pennsylvania’s case at this point, is approximately $29 million.

I would say that—

Unknown Speaker: Part of the individual taxpayer is entitled to eat into that bounty?

Can they get it back?

Mr. Lawrence Silver: Your Honor, they took a tax credit in Pennsylvania for which they were relieved of tax liability in Pennsylvania.

Unknown Speaker: If they kept their tax back in New Jersey, is that not tax come in Pennsylvania when they get it back.

Mr. Lawrence Silver: Whether it is a taxable income is not an easy question, but we would assert that it would require an amendment of the prior return because the prior return would show a tax credit.

Unknown Speaker: There will be the Statute of Limitations all over that.

Mr. Lawrence Silver: We should hope not, Your Honor.

I believe it is a three-year Statute of limitations.

Justice William H. Rehnquist: If Pennsylvania should succeed in its efforts in this Court to get the money back, could New Jersey plead the judgment of this Court in an action by individual taxpayers of Pennsylvania seeking to recover moneys as were done by the individual taxpayers in Austin?

Mr. Lawrence Silver: I should think so, Your Honor.

Justice William H. Rehnquist: Why?

Mr. Lawrence Silver: Because first of all, the judgment of this court, if we would get all the relief that we request, would first have to determine Pennsylvania’s prior right to the tax moneys.

Justice William H. Rehnquist: Right.

Mr. Lawrence Silver: And that judgment, therefore--

Justice William H. Rehnquist: But then you want money too, do you not?

Mr. Lawrence Silver: Certainly.

Justice William H. Rehnquist: And you want money not to go back to the individuals who paid the New Jersey tax but you want money to go into the coffers of the Pennsylvania State Treasury.

Mr. Lawrence Silver: That is correct, Your Honor, because it is the coffers of the Pennsylvania State Treasury which effectively has been diverted to New Jersey.

Justice William H. Rehnquist: But then, why when the individual taxpayer comes and sues the State of New Jersey and says “your tax was unconstitutional,” and New Jersey says “we have already paid money into the general fund of Pennsylvania,” why should he not be able to answer and says “fine, that is great for the State of Pennsylvania but this came out of my pocket and I got to get it right to get it back in my pocket”?

Mr. Lawrence Silver: As I said, I think the judgment of this Court would determine that Pennsylvania has, since the funds were diverted from it and the judgment of this Court would have to make that determination in order for us to be successful, that that judgment could be pleaded that the individual taxpayers do not have the right following a judgment of this Court.

Justice William H. Rehnquist: How could we foreclose individual taxpayers who were not parties to this action?

Mr. Lawrence Silver: I guess this is the notion of I think collateral estoppel, Your Honor.

Justice William H. Rehnquist: Well, it is a rather unique version of collateral estoppel.

Justice Byron R. White: I am not sure it would be that.

I admit that they would not state a cause of action.

Mr. Lawrence Silver: That is right.

I am sorry.

I think you are right.

It is not collateral estoppel.

I think you are right, Mr. Justice White, and that is that they do not have the right to the money and that this Court would determine that Pennsylvania’s right for security.

Unknown Speaker: That the money would never end up in their pocket.

It would either end up in New Jersey’s or Pennsylvania’s pockets.

Mr. Lawrence Silver: That is right.

Unknown Speaker: You do not pay the tax to one or the other jurisdiction.

Mr. Lawrence Silver: That is correct.

That was the point of Mr. Justice Blackmun’s dissent in Austin.

Justice William H. Rehnquist: Even though in Austin the individual taxpayers got the money back?

Mr. Lawrence Silver: That remains to be seen, Your Honor.

I am not sure that that did occur.

I will allow--

Unknown Speaker: At any event, even if you cannot get the money you want to stay in court and have the law invalidated.

Mr. Lawrence Silver: Certainly.

We certainly want, first, the prospective relief to enjoin the statute, and I just might add that if this court would grant leave at least as to what I consider to be the easier issue as to the declaratory and injunctive relief, we would file then a motion for preliminary injunction to enjoin possible retroactive question after January 1 of this year because, at that time, again the returns will start being filed for the tax year of 1974.

In order to avoid a much more difficult collection problem that already exists, I would file at that time a motion for preliminary injunction.

Now, I think the question, although I really have not addressed that Mr. Justice Blackmun in those terms in your request that I address myself to Massachusetts v. Missouri has really been answered in the dialog between Mr. Justice Rehnquist, Mr. Justice White, and myself in that the question in Massachusetts v. Missouri was the mutual exclusiveness of the claims and what I think we have been talking about is whether or not the claims of the taxpayers and the claims of Pennsylvania are mutually exclusive.

We claim that they are, that since the moneys were diverted from the Treasury of Pennsylvania and, in fact, if the court is going to have retroactive relief in terms that the Pennsylvania taxpayers just the administrative problem of returning it to 60,000 Pennsylvania taxpayers over a period of three years, would be much easier to serve than Pennsylvania’s attempt to collect that money, if the money went to the pocket from which it was taken, and that is Pennsylvania Treasury.

And really, what the issue involved in Massachusetts v. Missouri is an issue relating to mutual exclusiveness, and what I think the Court’s decision in that case was that the issue between the states could not be resolved by this Court because both Courts, although could come up with inconsistent judgments, those inconsistent judgments were not necessarily mutually exclusive.

The only other question that is raised, I believe, by New Jersey’s brief that I wish to deal with is the issue as to whether or not this Court can give a money judgment, and I think that it has in the case of Virginia v. West Virginia which is not cited in our brief but it is at 38-202 and has ordered the judicial sale for the purpose of satisfying a possible judgment in South Dakota v. North Carolina at 192-286.

Also, I think this Court has always been troubled I believe over its ability to execute judgments in original actions and I think, I would refer to this Court’s opinion in Griffin v. Thompson which Mr. Justice Daniels said at 43 US 244 that there is an inherent power in every Court to exercise and execute upon its judgments and, frankly, I think he says without this power, Courts would be wholly impotent and useless and that this Court has the power under its original jurisdiction to establish whatever necessary common law requirements are to effectuate the judgment, and I think the assertion that there is an ability to effectuate this Court’s judgment is a red herring case.

Let us get the judgment I think and then worry about how to execute it.

I think there is an argument that New Jersey’s public officials who have to obey the constitutional laws of the United States would have to, under their oath, obey the judgment of this Court.

I would reserve any remaining time for rebuttal.

Chief Justice Warren E. Burger: Mr. Skillman?

Argument of Stephen Skillman

Mr. Stephen Skillman: Mr. Chief Justice and may it please the court.

This matter is before the Court on a motion for leave to file an original action.

The sole issue properly before the Court, therefore, is whether the Court has original jurisdiction over this matter.

It is the position of New Jersey briefly stated that this matter does not lie within the original jurisdiction of the Court because the State of Pennsylvania has no cause of action against New Jersey.

Its brief, in support of the motion for leave to file, relies exclusively upon the Equal Protection Clause of the Fourteenth Amendment and Article 4 Section 2 of the Constitution.

It is clear that these clauses offer protection only to individuals, in this case individual taxpayers, and not the states.

If anyone’s rights under these clauses have been violated, it is the Pennsylvania residents who have paid the New Jersey commuter benefits tax and not the Commonwealth of Pennsylvania nor may the Commonwealth pursue this matter on behalf of its citizens as parens patriae.

It has been suggested by counsel for Pennsylvania that if there has been some type of violation of the constitutional rights of the citizens of the Pennsylvania that there has, therefore, been a trespass of some sort upon the Commonwealth of Pennsylvania.

No cases are cited for this proposition and its consequences would be rather breathtaking.

This court has had hundreds upon hundreds of interstate tax cases coming forth through the years not only under the Privileges and Immunities Clause, but under the Equal Protection Clause and of course, most frequently in the business context, under the Commerce Clause.

If this case comes within the original jurisdiction of the Court because there has been a violation of the constitutional rights of the citizens of Pennsylvania and, therefore, a trespass upon the Commonwealth of Pennsylvania, it would be difficult to see how all the rest of the interstate tax cases involving not just the Privileges and Immunities Clause but also the Protection Clause and Commerce Clause would not also come within the Court’s original jurisdiction and greatly expand that jurisdiction.

Now, there also is a significant Eleventh Amendment aspect to the attempt by the Commonwealth of Pennsylvania to bring this case as an original action insofar as they seek a judgment for money damages against the State of New Jersey.

It is clear that, under the Eleventh Amendment, the individual Pennsylvania taxpayers could not bring suit in Federal District Court for the collection of any retroactive tax benefits.

It, therefore, should be equally clear that the Commonwealth of Pennsylvania cannot dress this matter up as an original action and circumvent the bar of the Eleventh Amendment and seek a money judgment against the State of New Jersey.

It was essentially for these reasons.

Unknown Speaker: Your brother cited to us a couple of cases which he says are cases of original jurisdiction of this Court I think, one in 238 US and another in 192 US, in which he says the Court has entered money judgments against the state, but I suppose the plaintiff in that case was the state suing on its own behalf and not on behalf of its citizens.

Mr. Stephen Skillman: That is correct.

The main precedent on that particular point is the case of Virginia v. West Virginia where, at the time, the State of West Virginia was established.

There was an allocation between the two states of the then existing bonded indebtedness of the State of Virginia.

Clearly, a cause of action of the State of Virginia and the Court did recognize that a money judgment might be entered under those extraordinary circumstances.

Here, however --

Unknown Speaker: That is in 238 US, is it?

Mr. Stephen Skillman: I believe that is the latter of the two cases in 238.

The other case is the South Dakota v. North Carolina case where I believe over a sharp dissent, South Dakota was permitted to take an assignment by way of gift of a bonded indebtedness between certain of its citizens and the State of North Carolina and to sue under that but, again, it was at the point that the completed gift was made it was an obligation between the state and the other state.

Here, on the other hand, it is clear that the obligation, if any, is an obligation that would run between the taxpayers of the Commonwealth of Pennsylvania and the State of New Jersey.

So, that extraordinary form of relief is not available here.

New Jersey relies very heavily, as indicated in its brief, upon Massachusetts v. Missouri where the Court found that the interstate tax conflict involved there did not fall within its original jurisdiction.

The Court specifically held that no justiciable controversy was presented by Massachusetts’ contention that the Missouri Taxing Authorities had improperly refused to exempt the assets of the estate of a Massachusetts domiciliary from the Missouri taxes, a very similar situation to the one we have here where the Commonwealth of Pennsylvania is claiming that notwithstanding the credit provisions of its own laws that the State of New Jersey should not have enacted a statute which would bring those credit provisions in to play.

Justice William H. Rehnquist: But the underlying hypothesis, as I understand it, in Massachusetts v. Missouri was that each of the states could tax the particular estate consistently with the constitution.

Here, I take it, Pennsylvania takes the position that New Jersey cannot consistently with the constitution impose this tax on citizens of Pennsylvania.

Mr. Stephen Skillman: I do not think there is any question under the Travers and Chaffer case that two states could impose a tax upon the same income, and I think what the Court was referring to there in terms of legal mutual exclusivity was one where the constitution bars double taxation.

Here, we have not constitutional bar against double taxation.

We have an argument that there may be a violation of the Privileges and Immunities clause by virtue of the imposition of New Jersey’s tax because of the particular tax structure of New Jersey but no inherent or intrinsic constitutional bar against double taxation, and I think that that is the main response to it.

Unknown Speaker: Do you think Massachusetts v. Missouri then turned on the concept of the bar of double taxation or the claim that those two states could not tax the same estate?

Mr. Stephen Skillman: I think partly on that, and also I think that the opinion also should be read partly as an attempt to explain what the Court had held only a few months before in Texas v. Florida where they had entertained an original action in a case involving five different states seeking to tax the estate of a single dissident, and I think that the mutual exclusivity also was meant to deal with that problem and to try and limit the parameters of that rather unusual case which Justice Frankfurter in dissenting had expressed fear might greatly expand the number of original actions being brought before the --

Unknown Speaker: It was the Hetty Brown Estate or something.

Hetty-somebody, was it not?

Hetty Green?

Mr. Stephen Skillman: Green, I think is the name.

It is the name that comes to mind.

Unknown Speaker: But nevertheless, the claim here is that the constitution prevents New Jersey from imposing the tax in this case.

Mr. Stephen Skillman: That is certainly Pennsylvania’s claim, yes.

It is true and recognized that the constitutional claims which Pennsylvania seeks to advance on behalf of its citizens would, if sustained by this Court, result in an increase in the tax revenues of the Commonwealth of Pennsylvania but this would be equally true in almost any case in which a state taxation provision were declared invalid because credits and deductions for taxes paid to other taxing authorities are so common place in the taxing schemes of all states that this would be a very frequently consequence of any declaration of unconstitutionality of a tax.

So, again, if this is a foundation for the Commonwealth of Pennsylvania proceeding directly against the State of New Jersey, the same jurisdictional principle would extend to the great majority of interstate tax disputes that come before the Court, that have come before the Court, through the years and with a few unusual exceptions of Massachusetts v. Missouri and Texas v. Florida have been brought by the individual taxpayers who claim that their individual constitutional rights had been violated.

Now, while Pennsylvania’s proposed complaint only mentions the Equal Protection and Privileges and Immunities Clauses, their supporting brief refers to the water diversion and escheat cases where the Court has fashioned what is called a federal common law in its role as arbitrar of interstate disputes.

The short answer to Pennsylvania’s reliance upon those cases, I think I have already given, and that is that neither Austin v. New Hampshire nor any other state tax case with a possible exception of Texas v. Florida has been decided on that type of a basis.

However, if the Court were to conclude that these cases were the appropriate jurisdictional framework for resolving this matter, we would ask that the mater on its merits also be treated as an interstate dispute to be resolved in accordance with principles of federal common law.

In other words—

Chief Justice Warren E. Burger: We will resume there at 1:00.

You may continue.

Mr. Stephen Skillman: Mr. Chief Justice and may it please the Court.

I would like to comment briefly if I may upon the presentation and argument of the Commonwealth of Pennsylvania.

I think that the most salient feature of that presentation is that the Commonwealth relies upon the water diversion, escheat cases and other cases in which the Court has fashioned a general federal common law in its role as arbitrar between the states in the federal system.

However, having established, as they conceive it, the jurisdiction of the Court under these cases they then abandon them and on the merits instead of relying upon principles comparable to those in the water diversion cases or asking the Court to fashion principles similar to those in the water diversion or escheat cases.

On the merits, they then turn around and ask the Court to consider this case as one involving denial of constitutional rights of individual taxpayers of the Commonwealth.

The State of New Jersey would have no objection to the Court entertaining under its original jurisdiction, this matter under principles comparable to those that have been fashioned in the water diversion or escheat case.

It would require rewriting of a good deal of constitutional history since these cases have previously, with one or two exceptions, been considered under the Privileges and Immunities and Equal Protection and Commerce Clause as applicable to taxpayers, but New Jersey would have no objection to this area of interstate tax disputes being reconsidered under those principles and under the original jurisdiction of the Court.

Justice William H. Rehnquist: Do you mean that it kind of transfered all disputes about the authority of the states to levy taxes under interstate commerce from other Courts to this Court under its original jurisdiction?

Mr. Stephen Skillman: At least to the extent that those cases properly may be viewed as involving a fight between the states as distinguished from essentially fights between taxpayers which, again, goes back to the merits of the case.

Justice William H. Rehnquist: But if this can be viewed as a fight between states, what interstate commerce taxation problem cannot be?

Mr. Stephen Skillman: I think that that is the problem that the Commonwealth has and it is seeking to proceed in that fashion.

All we are saying at this point is that we are asking them to be consistent.

If they are asking the Court to entertain original jurisdiction under the analogy of these other cases, then we would ask that the merits also be considered under the analogy of those cases and we would urge that if the case were so considered, and I am stating this in a hypothetical really Justices, that if the case were considered, the State of New Jersey would have a very persuasive case.

There is a tremendous outflow of money from New Jersey residents to the States of New York and Pennsylvania in a very small inflow of money under the statutes that are under the statute that is involved in this case and in the comparable statute that is applicable to the State of New York.

Unknown Speaker: Well, then we presumably would have not just New Jersey against Pennsylvania but we would have to join New York and Delaware and Maryland so that everybody could be heard from.

Mr. Stephen Skillman: There are no such taxes comparable to those involved here applicable to Delaware and Maryland.

There is a comparable tax under a different tax statute applicable to the State of New York.

So, it would be a case involving certainly the States of Pennsylvania and New York.

Unknown Speaker: Suppose that we had granted originally the motion for leave to file, could you not be making much the same argument to support a motion to dismiss or a motion for judgment on the pleadings, if you had made one?

Mr. Stephen Skillman: On the jurisdictional point?

Unknown Speaker: No, just for judgment in your favor on the grounds that maybe they have got standing but they are just not entitled to the judgment.

Mr. Stephen Skillman: That this plaintiff does not have a cause of action?

Unknown Speaker: Yes.

Mr. Stephen Skillman: Yes, I definitely we would be making --

Unknown Speaker: That it is a cause of action.

Mr. Stephen Skillman: Yes, we would be making the same argument.

Unknown Speaker: And I suppose if your paper, whatever you filed, you would not objectively construe to include a motion for judgment on the pleadings.

It is a motion to dismiss really.

Mr. Stephen Skillman: It is a brief in opposition to their motion for leave to file, but I do not think—

Unknown Speaker: You have not filed an answer.

Mr. Stephen Skillman: We have not filed an answer.

Unknown Speaker: Because there has not been a complaint file.

Mr. Stephen Skillman: That is right.

The motion for leave to file has not been acted upon.

Unknown Speaker: While counting, Mr. Skillman, if we were to disagree with you and we were to grant the motion for leave to file, what follows in this case?

What kind of an answer can you give us that you have not already given us in resisting the motion for leave to file?

Mr. Stephen Skillman: That would certainly depend on what the Court said as to Pennsylvania’s status.

Unknown Speaker: The bottom line is the motion is granted.

Let us say that is the only line.

That is all we do.

Chief Justice Warren E. Burger: Just an order.

Unknown Speaker: Just an order, then what happens?

Mr. Stephen Skillman: Well, I think that we would give a series of responses in the disjunctive.

I think that the first response we would give would be comparable to the one that we have already have given.

Unknown Speaker: You have motion to dismiss and you said precisely what you are now saying.

Mr. Stephen Skillman: Pennsylvania has no cause of action.

I think that we would have to, in order to cover ourselves if I may put it that way, also argue on the merits and distinguish the New Jersey situation from the New Hampshire situation involved in Austin just on the contingency that the Court might—

Unknown Speaker: At least with all the arguments below, would there be any role for a master to play, for example, in a case like this?

Mr. Stephen Skillman: Yes.

Unknown Speaker: You would?

Mr. Stephen Skillman: I think that once the court recognize that Pennsylvania has standing to raise the constitutional contentions of its taxpayers or, if I put it in a different way, if this case were brought in what we could conceive to be the proper forum that there are a number of factual issues that would need development.

Unknown Speaker: Can you suggest what they are?

Mr. Stephen Skillman: One is how New Jersey goes about funding the interstate transportation projects that it does fund with the revenues derived from this tax.

The Court recognized in Toomer versus Witsell that differential tax burden upon residents and non-residents in a given tax is not per se intrinsically, automatically unconstitutional, rather if there is some reasonable basis for it, some reasonable basis for it, some reasonable justification for the disparity, it may be upheld.

Unknown Speaker: I do not think there is any area in the between denying motion for leave to file and a full blown trial of the merits.

Do you think there is any room for holding that they have never seen a cause of action?

Mr. Stephen Skillman: I do think there is room for that.

I understood the inquiry to be what our response would be if the Court were to grant leave to file and ask us to address the merits but not indicate any ruling on the standing question.

Unknown Speaker: To dismiss the case?

Mr. Stephen Skillman: As long as we were able to reserve the right to speak to the merits should that motion be denied.

Unknown Speaker: You might file an answer and that is the decision of the Court.

Mr. Stephen Skillman: Yes but, as I say, I think we would cover that in the disjunctive, first of all, as to Pennsylvania’s claim of its own which I think would be saying essentially the same things we are saying now but--

Unknown Speaker: And it would be only if you lost out on all those motions, after all the pleadings and then we get to the point where we have to decide what point of action.

Mr. Stephen Skillman: And we would have a number of factual issues.

First of all, as to the allocation of the revenues.

Unknown Speaker: New Jersey still does not have an income tax, does it?

Mr. Stephen Skillman: No, it is still trying.

Unknown Speaker: It is trying awfully hard, but rather unsuccessful.

Mr. Stephen Skillman: That they may eventually come and it would be a very—

Unknown Speaker: I do not suppose you can say what New Jersey would do if Pennsylvania decided that it would not give a credit.

Mr. Stephen Skillman: I think New Jersey would certainly have to reconsider its position on this tax very substantially.

Unknown Speaker: I suppose you could say there is one thing it would not do, and that is to tax everybody or would a possibility?

You would just quit exempting New Jersey-ites so that Pennsylvania would then give the credit?

Mr. Stephen Skillman: New Jersey has been striving for the enactment of an income tax for a long time, so it would be highly speculative as to what the consequence of that would be.

As to Pennsylvania’s granting of the credit in this situation, and I do not want to go into the merits further than I really should but I should just note, that this was not something that New Jersey conjured up in the middle of night and did without consultation with Pennsylvania before this tax was enacted, and it was enacted right on the same time that Pennsylvania enacted its income tax.

There were discussions in a conference between the governors of the respective states, their personal counsel, and the attorney generals of those states.

So this is not, at least it was not initially, the type of conflict or attempt by the State of New Jersey to raid Pennsylvania tax revenues that might have been portrayed and, again, that would be another area that factually would have to be explored if the court were to reject our contention that Pennsylvania does not have standing to pursue this matter on behalf of its taxpayers.

Thank you.

Chief Justice Warren E. Burger: Mr. Silver?

Rebuttal of Lawrence Silver

Mr. Lawrence Silver: Your Honor, just very briefly I, during lunch or recess, would like to further amplify my answer to Mr. Justice Rehnquist’s remark or questions to me.

There is no doubt that New Jersey did consult with Pennsylvania and extended certain courtesies, but I think this Court should know that, first of all, their tax is almost a mirror image of ours.

In fact, some of our embarrassment, the same typographical and grammatical errors that appear on our Act also appears in New Jersey’s Act.

I think it is essential and important to know that every single time, we have changed the rate, which has only been two times that initially it was 2.3% and New Jersey had it at 2.3% and when we changed it to 2% New Jersey immediately changed theirs too and that I think, in answer to your question Mr. Justice Rehnquist, the target here has been Pennsylvania and not its citizens and truly, in support of this position, I would rely on Mr. Justice Blackmun’s dissenting opinion.

One of the reasons, one might ask is why has not a citizen attacked it?

Because, if he attacks the statute and he is successful, he pays the same amount of money in Pennsylvania by reason of what New Jersey has done in terms of retaliation and it is Pennsylvania’s Treasury that is being harmed by this statute.

Unknown Speaker: Are you being animus against Pennsylvania as a sovereign entity rather than just to decide to collect as much money as possible?

Mr. Lawrence Silver: Well, Your Honor, this statute does not tax all non-residents and that is a point that I think should be emphasized.

This tax statute says the Commissioner of Transportation shall select a border state which has a critical transportation problem and, under this statute, they did not pick Delaware or New York.

They only picked Pennsylvania and the rate is the exact same rate as Pennsylvania’s rate.

It is, and it was enacted right after our tax was acted.

So, it is a rate by New Jersey, a courtesy, I agree but nonetheless a rate upon the Treasury.

A courteous rate, but nonetheless an unconstitutional one.

And although we might have gotten into intellectual discussions about parens patriae, etcetera, the primary argument which I had in my brief and relied on it on perhaps more academic arguments but I think arguments that are meritorious, but I think the easier argument is Pennsylvania is the real party harmed.

Unknown Speaker: With the argument the taxpayer’s suit raising the Equal Protection point that you seem to be hinting at?

Mr. Lawrence Silver: Well, it might be, but New Jersey’s Courts could very easily adapt Mr. Justice Blackmun’s position in his dissent and say “you have no standing because you have no injury, because if you win, you lose because you pay the money.”

Unknown Speaker: This was a constitutional decision.

We could always take care of that, could we not?

Mr. Lawrence Silver: Yes, Your Honor, in three years or so when the retroactive relief we would be seeking would be many more millions of dollars than it is already, and I might add, we have waited three years and I think the answer is really contained in Mr. Justice Brennan’s statement, there has been substantial efforts to get New Jersey to pass an income tax, and I concede that if they tax their citizens the same way they are taxing our citizens, we would not have the same constitutional underpinnings for this argument.

It became abundantly clear in July, Mr. Justice Brennan, that New Jersey was not going to pass an income tax, and in August we filed our action.

And, Mr. Justice Rehnquist, if I just may say one more point, this is not a subtle attempt to utilize the original jurisdiction of this Court to vindicate what is essentially a private right.

This is not an attempt like in New Hampshire v. Louisiana to take an assignment of bonds but it is an attempt to rectify and to protect Pennsylvania’s fisc.

It is a direct interference with Pennsylvania’s interest.

Now, to do that, they must assert its unconstitutionality and, upon that, must be the infringement to its citizens or the infringement, as I have suggested, to itself.

Unknown Speaker: But, of course, Pennsylvania has had within its own power at all times to prevent that injury.

How about the old common law maxim of volenti non fit injuria that if you have it within your own power to prevent the harm, you cannot come to court and complain about it?

Mr. Lawrence Silver: I think that the kind of harm we could prevent is in the nature I think of the last clear chance rather than if you have the constitutional power to do something properly and you would exercise that power within your right to avoid the unconstitutional acts of another.

I think that New Jersey has relied on what is a floodgates argument, that if the Court opens itself up to this case there will be a floodgate problem.

I think not, if you grant all of the relief that we request and even if you grant part of the relief, but I think the issue that we have said is that what must be prevented is for a state to enact a statute which so clearly comes close to constitutional violations, that all we ask is that if a state does violate the constitution that it pay back the money that it has improperly got, that is not a penalty but that is a substantial deterrent that states should and I ensure you will consider in the enactment of legislation in the future, and by granting that relief states will steer clear of the kind of constitutional violations that have been suffered in this case.

I would just respond to one matter that came up in argument before lunch.

I think that the matter that their brief in opposition can be treated as a motion to dismiss and I think that the arguments can be resolved on the merits at the present posture on the legal issues.

Certainly, regardless of what New Jersey would do in terms of an answer, we would file a motion for file for summary judgment or an alternative judgment on the pleadings of waiting their answer, but the issue as to the constitutionality of a tax is a legal question.

This Court can look at the statutes without any reference to any facts.

The statue is clearly there.

The only argument I just would, not reiterate but just, remind that I made is the fact that New Jersey may use this tax for transportation purposes does, if the taking is wrongful to begin with, the use does not save it even if the use were as a donation to the fisc of Pennsylvania, as meritorious as Pennsylvania would find that to be, we would still say that such a meritorious use, a donation to our Treasury would not save the unconstitutional taking.

Thank you.

Chief Justice Warren E. Burger: Thank you, Gentlemen.

The case is submitted.

Print this transcript Transcript: 

Argument of Joseph E. Brennan

Chief Justice Warren E. Burger: We will hear arguments next in 69 Original, states of Maine and Vermont and the Commonwealth of Massachusetts against New Hampshire.

General Brennan you have the benefit of the arguments that has just been completed and of course we have had the benefit of them, and so, we take it that you will pick up where they left off and give us something that you haven’t heard this morning and this afternoon.

Mr. Joseph E. Brennan: Well Mr. Justices may I please the court.

I will certainly try to and much of our thunder, frankly has been stolen in many respects.

The facts in this case really are not in dispute.

The action of the plaintiff states is in the Sovereign and Proprietary Capacities to recover funds diverted by the unconstitutional New Hampshire income tax.

This tax was imposed in 1970.

It was challenged in 1971 by Maine's citizens, with strong support from the State of Maine.

It was held unconstitutional in March.

It is violative of the Privileges and Immunities Clause.

As we see it, the essential ultimate question is, “Whether or not New Hampshire should benefit from such unconstitutional conduct with this unconstitutional tax scheme, by retaining the proceeds of that scheme which amount to some $13.5 million which were diverted from the plaintiffs’ treasuries.

We say that the plaintiffs are the appropriate parties.

We say they were hurt, as was intended by the State of New Hampshire.

For the individual tax payers to bring this action, or to bring an action, assuming they can get over standing issue, assuming they can show some injury would be as has been said earlier “repetitious or be costly.”

Any damages that were awarded would have to be turned over to the plaintiff states so there would be absolutely no Incentive for them to do it.

Chief Justice Warren E. Burger: What if I sanctioned, it will go to them?

Mr. Joseph E. Brennan: I think a class action might be available, but again they would run into the same problem withstanding that class wouldn’t be hurt.

The party that is hurt is Massachusetts, Maine and Vermont.

They bore the burden.

Their treasuries did not receive money, they would otherwise have received had it been not for this unconstitutional tax.

Chief Justice Warren E. Burger: Any way they could have avoided that a long the lines that Mr. Justice Rehnquist suggested in a question?

Mr. Joseph E. Brennan: Well, in reference to the possibility of retaliation, the cases of this Court have emphasized, several times and as recently as Austin against the Policy of Retaliation.

Chief Justice Warren E. Burger: Well, other than retaliation?

Mr. Joseph E. Brennan: There is no other way that I am aware of Mr. Chief Justice.

Unknown Speaker: Could you not change your law?

Mr. Joseph E. Brennan: Well, if we were to change our law that would mean, to amend the law, and not to give the tax credit.

That in effect could be Retaliation against our residents who work in New Hampshire and we then would not be retaliating against our residents who may have worked in 39 other states where we give tax credits.

Chief Justice Warren E. Burger: But if you did not have your law in the first place, you would not be here today?

Mr. Joseph E. Brennan: I am sure --

Unknown Speaker: I am just arguing my dissent and I was alone so [Laughter] do not be concerned about it.

Mr. Joseph E. Brennan: We submit that the states here are not stand-ins for the individual tax payers, that they are suing in their own right, that under Article III, Section 2 of the Constitution, that the Supreme Court is the proper forum, that this Section contemplated that one state should not be compelled to go into the jurisdiction of another state to seek a solution.

Therefore, the New Hampshire courts or administrative agencies are not the appropriate forum and in reference to that retaliation, we feel that the decisions are clear, that the policy is against it, that the State of Maine should not try to visit -- double sense on its own tax payers just to retaliate for what was apparently gonna be a short lived illegal tax scheme.

This Court -- the plaintiff states again did not -- the fact that they did not retaliate, it is suggested by New Hampshire that we should be barred.

We submit that type of argument really does not wash.

In Texas versus Florida, 306 U.S.

where one state threatens to deprive the other of its lawful taxes, this creates an appropriate basis for action by this Court.

In essence we are saying that, again and much of it is just reiterating what has been said before, we are the real party and interest, we have been hurt.

The individual tax payers really would not hurt to any major degree and if they did recover, they would have to turn the money over to us.

And again, this is an action between states.

This is the appropriate forum.

Any recovery the individuals got would be a nullity.

The plaintiff states could not have avoided it without risking violating the Privileges and Immunities Clause themselves or the Equal Protection Class.

And to --

Justice William H. Rehnquist: Why would any of recovery the individuals got the nullity?

Mr. Joseph E. Brennan: Well, then their tax returns would have to be amended to reflect that there was no payment to another state.

So then the payment would have to made to Maine, Massachusetts and Vermont.

Justice William H. Rehnquist: Is all that as quite as clear as you make it sound?

Mr. Joseph E. Brennan: I believe it is, Mr. Justice.

To refuse to allow us --

Justice Byron R. White: Do you need an injunction?

Mr. Joseph E. Brennan: Well, we need an injunction to get an accounting.

We need an injunction because --

Justice Byron R. White: Do you need an injunction to force New Hampshire not to enforce its tax?

Mr. Joseph E. Brennan: Well, they could do it on their own, but at present they sent out a notice right after this --

Unknown Speaker: What was the result of Austin?

Mr. Joseph E. Brennan: The result of Austin was, they instructed their employers and their states to stop withholding taxes after March 19.

However, they instructed those people to continue to make payments for money that was collected prior to March 19.

Justice Byron R. White: But as far as the future is concerned the harm to Maine will not occur again?

Mr. Joseph E. Brennan: Just to the extent that the money that was collected prior to Austin, they are going to requite returns to be made next year as I understand it, on moneys that are characterized already as unconstitutionally taken from our citizens.

Unknown Speaker: Well I gather that would be as to earnings up to March 19?

Mr. Joseph E. Brennan: Correct, Mr. Justice.

To refuse to allow us to file a complaint based on these facts would encourage petty retaliatory action in the future.

It will encourage states to adapt tax laws of dubious legality in the knowledge that they may be able to return their ill-gotten gains.

On the other hand to accept this complaint would further the policies of non-retaliation long articulated by this Court.

It will would place the states on notice that they must develop their taxing schemes with great care.

Finally, the court should not adapt the rule which might encourage some states beset by immediate physical crisis to give less than careful care in adopting tax laws which may be unconstitutional.

So we will urge you very respectfully to permit the plaintiff states to file a complaint.

Mr. Scotch from Vermont has the other 15 minutes.

Thank you.

Chief Justice Warren E. Burger: Mr. Scotch?

Argument of Benson D. Scotch

Mr. Benson D. Scotch: Mr. Chief Justice and may it please the Court.

I come here to talk about the seriousness and the dignity of the complaint of the three plaintiff states against the State of New Hampshire.

I originally had planned before hearing the earlier argument to dwell principally on the question of retroactivity, for I think no other question raises the equities between the plaintiff states and New Hampshire better than the question of retroactivity.

In approaching this particular equities question, it seems to be we fall back immediately on this Court's own declarations in retroactivity cases.

I think it is important to note that at the time New Hampshire adapted its commuter's income tax case, tax, Ward against Maryland had been decided by some 90 years previous.

Some 56 years ago in this very room, Travis was argued. Since that time -

Justice William H. Rehnquist: This room has only been here for about 40 years.[Laughter]

Mr. Benson D. Scotch: In this building, Your Honor.

Justice William H. Rehnquist: You know, the building has only been here for about --[Laughter]

Mr. Benson D. Scotch: The point is that as far as the [Laughter] as far as the case is concerned, certainly New Hampshire knew what they were doing.

The books have not changed, the buildings may have.

There has been virtually nothing since Travis and the date of the adoption of the commuter's income tax, that would have given any suggestion to New Hampshire that that tax could have have been constitutional.

I think this is very vital.

In the second Lemon against Kutrzman case, this court raised the question of whether decisions of the Court that are first impression that declare new principles of laws should be retroactively applied.

I submit that at the time the commuter's income tax was adapted certainly no case of first impression or any impression had been decided by this Court or even submitted to this Court that would have given them any comfort in the adaption of their commuter's income tax case.

Very important in the question of retroactivity and in the question of equities is the subject of reliance.

I think it is inherent in the number of the questions that the Justices have presented both in the earlier argument and this argument.

In the normal reliance situation, when in Lemon against Kutrzman in the second decision, the Court speaks of the hard facts upon which people rely.

People must rely, making their decisions. Obviously the Court is speaking of two classes of people.

One class is the law giver, the other class is the reliance’s interest and in each of the cases that the Court has decided in the retroactivity area, there has been a separation or bifurcation of the law giving interest, either the legislators and the courts on the one hand and upon those who are rely on the other hand, thus for example in Lemon against Kutrzman, it was the non-public schools that were reliance interest.

Certainly they did not create the laws in which they had to make their decisions.

Same thing in Chevron (ph) against Houston or in the frequent criminal retroactivity cases that come before this Court, most recently in the Peltier case, obviously the considerations that apply were those who are forced to rely to make their day-to-day judgments, cannot make them on the basis of shaping their own law, they are put in a bind.

Essentially, the retroactivity cases in my way of thinking, allocated, divide among two interest parties, both of which are essentially innocent insofar as being able to frame and shape the law.

In the case of New Hampshire adapting a commuter's income tax case, we have a very, very different situation.

As will appear in the record and I would not repeat what is already in the record, at the time and prior to the time that New Hampshire adapted this tax, they were very on very good notice from task force prepared for the Governor that they were grave questions about the constitutionality of the commuter's income tax case.

Mr. Hemp's (ph) opinion which is also in the record, points out how cleverly the Bill was drafted.

It separates those who might complain, but will be unable to complain because they have no standing from those who are the real targets, namely the states.

I would submit to this Court that it appears clear from the legislative history of this Act, that if the three surrounding states did not have tax credits, the commuter's income tax of New Hampshire never would have been adapted.

The most important retroactivity-equities question that I think the Court ought to consider and that I want to address is the preposition raised by this Court in Linkletter.

Will the rule whose retroactive application is sought tend to further or retard the effectiveness of the rule and I would submit in this case, the Court essentially is balancing the legitimate interest and we conceive they are legitimate interests on the part of the states to experiment with new types taxation that fit new social and political and economic conditions within the country.

Balance that interest on the one hand with what I think is an equally serious interest to deter what we refer to in our brief is taxable predatory taxation or tax adventurism or the like.

It is very, very important we feel to consider those interests as being very equal interest, to try to develop policies that will mediate between those interests.

I would submit that if a state acts with full knowledge of the consequences and with full knowledge of the potential impediments in a statute and if that state later is not compelled to face the consequences of what it has done, then I would see no reason why any state should not adapt borderline legislation or perhaps legislation that goes well over the border.

There are no sanctions.

It takes three or possibly five years for these cases to wind their way though the courts.

There would be no sanction or whatsoever.

Chief Justice Warren E. Burger: But do you think the law consist that it takes three to five years before they could get here?

Mr. Benson D. Scotch: No, Your Honor.

Chief Justice Warren E. Burger: Is it a very good reason for our taking an original -- exercising original jurisdiction?

Mr. Benson D. Scotch: In our case, it is distinguished from the previous case to be heard today, Your Honor.

This tax already has been declared invalid by this Court.

This is not the situation that I think Pennsylvania point they allude to, their argument try to suggest would develop, if the Court took jurisdiction of this case.

It is not a very common situation where a legislative history has developed, reflecting a direct intent to act against the treasury of a sister state and where indeed the legislative history indicates that unless the tax laws of the second state were not susceptible to this treatment, the tax would not be adapted at all.

I think this would not be a large case finding decision in that sense.

Justice William H. Rehnquist: But that is a part of presumably the law of the Interstate Commerce Clause, that and you say you have got a strong case here under that because of that fact, but if we start taking these cases, we are going to have to entertain arguments that are presumably a good deal less persuasive than yours, once we let the cases in the Court?

Mr. Benson D. Scotch: I would simply urge, Mr. Justice Rehnquist that in the case of the three plaintiff states here represented, we did not come directly to the Court.

We bided our time in Austin against New Hampshire and it was a long time and costly time.

Justice William H. Rehnquist: Did you put an answer in any of that litigation?

Mr. Benson D. Scotch: We appeared as an -- as an amicus curiae and yes we did, we participated directly.

We felt that was the proper route to go, not alone in terms of the limited original jurisdiction of this Court, but in terms of giving New Hampshire the opportunity through their court system or through their legislators to recant and they did not do so.

We feel at this point that the tax having been declared unconstitutional, this is not a case finding decision.

This is a very unusual set of circumstances and we feel that we have gone to court in the right order, starting with the state where we ought to have started and in that sense it is not comparable at all to the condition of the suit by Pennsylvania against New Jersey.

Not to cast any suggestion about the merits of their original action, but we felt differently at the time and we so conducted ourselves.

I want to address myself to a point that has been raised in several connections by the justices and that is what I call “the so-called litigation question.”

Why should not the states repeal their credits?

I wanna draw a clear distinction between cases like Massachusetts against Missouri or Texas against Florida, where we are dealing with death taxes.

The income tax credit is not only a fact of life today, virtually throughout the country, but in this particular instance our failure to grant the credit would have meant effective double taxation to our own citizens and I would simply urge that in economic realities of an income tax, particularly in today’s economic conditions where wages in our particular part of the country are not high, doubling the income tax of our own citizens in order to re-dress the wrong committed by New Hampshire did not come to us as a really viable alternative.

Mr. Justice Rehnquist --

Unknown Speaker: Mr. Scotch, I do not follow you on the doubling of the tax.

I thought New Hampshire had a credit for that, am I in error?

Mr. Benson D. Scotch: I believe they have a credit for their own citizens, but I believe the outcome is as conceded earlier in arguments where New Hampshire -- where -- I am sorry, where Pennsylvania made reference to the possible double taxation suggests and together with New Hampshire’s own brief in this matter suggest that there would be no falling away of the New Hampshire tax in the event that we dropped our credits.

All that would fall away is that entirely hypothetical tax that was imposed upon citizens of New Hampshire who worked in Vermont and the other two states, that never could be applied because of the way it was drafted.

But it is my understanding that our dropping of our tax credit would directly involve double taxation unless of course as suggested by the Court in the oral argument, unless of course New Hampshire chose at that point to drop it is commuter's income tax, that is a completely speculative matter.

Justice William H. Rehnquist: Really, your distinction between death taxes double and income tax double is really boils down to nothing more than the idea that dead people cannot vote, does it not?

Mr. Benson D. Scotch: No, your honor.

Even in the area of death taxes, we found out in Texas against Florida, where the viable claims are mutually exclusive, this Court will take jurisdiction.

All I am suggesting is that -

Unknown Speaker: Well, what is the real reason in Texas against Florida that the combined asserted tax by all of the states exceeded the --

Mr. Benson D. Scotch: That is right.

They were mutually --

Unknown Speaker: --timely -- timely this Court took jurisdiction?

Mr. Benson D. Scotch: Yes, Your Honor, that is correct.

What I am suggesting is --

Unknown Speaker: It is a long, slow road, even there?

Mr. Benson D. Scotch: Yes it was, Your Honor.

What I am suggesting in answer to the argument volenti non fit injuria, is that we as a state need to consider the injuria, what or what kind of injury are we visiting upon our citizens.

Must we be compelled to take the corrective steps, where there has been harm, deliberate harm as will appear on the statutory history of this Act, I think talking of old common law doctrine, that it was clear common law doctrine, that mitigation of damages need not be taken where the mitigation itself would be unreasonable or would cause undue harm to others.

In fact, I think our old common law case is going back to the 17th Century make clear the right for example, of the Lord of the matter, the defendant servant, I would suggest an equal preposition in our case that the states have not only the right to defend their citizens and the ability of the citizens to continue to work, but probably a duty to do so, I would submit it would have been a number of years before New Hampshire could have practically considered the repeal of its commuter's income tax.

Talking of our own proprietary interest, I think it would be demonstrable from masters appointed in this case to show that the incomes of many of our commuters are at such a level that the doubling of their income taxation would make it economically inconsequential for them to continue working.

Many of our people --

Unknown Speaker: I guess my problem and I would not repeat it anymore, I fail to see the doubling of the tax and it is certainly was not true in Austin against New Hampshire?

Mr. Benson D. Scotch: Well, that is what we are -- I believe and of course this is a matter we can submit further, written document, I believe the tax is written in such a way that the benefit of our -- the benefits uphold of our dropping of our credit, our credit would not accrue to our own citizens.

Well, that is a technical matter.

I believe we are right on it and we will leave it to New Hampshire, perhaps to declare whether that is correct or not.

Unknown Speaker: Again my difficulty basically is to see -- to conclude that New Hampshire was such a rascal always?

Mr. Benson D. Scotch: Well, we -- we in Vermont of course have our own very strong views on New Hampshire (Voice Overlap)

Unknown Speaker: (Voice Overlap)

Mr. Benson D. Scotch: I would like finally if I may to address a remark or two about Massachusetts against Missouri.

I find there is a very expanse if it not a profligate reliance upon Massachusetts against Missouri.

That was a very simple case as I read the case.

All the Court is saying in Massachusetts against Missouri is that Massachusetts has not stated a cause of action.

This was a case of rival, but mutually, allegedly mutually exclusive claims.

Now, it turned out not to be mutually exclusive.

There was no allegation in Massachusetts' papers in Massachusetts against Missouri, that the Missouri tax was discriminatory or that in any way the tax violated any precepts of the United States Constitution in their papers before this Court.

In fact, the sole allegation that Attorney General Deaver (ph) really is able to level in Massachusetts against Missouri that the courts of Missouri will not hear Massachusetts’ claim against the trustees of trust.

The Attorney General of Missouri was able to give that vitali by stating in open court that of course the courts of Missouri would hear a claim by Massachusetts against the trustees and that is all that Massachusetts against Missouri decides.

We are not claiming mutual exclusivity.

We are claiming in effect a direct harm to the interest of our State, a calculated harm and if you will, harm that in terms in common law analogies, it is very similar to a direct common law tort, although we have not so alleged and perhaps that states the case a little strongly.

There is nothing that we can find in Commonwealth of Massachusetts against Missouri that would lend to the general preposition that tax cases that are otherwise justiciable may not come before this Court in original jurisdiction.

It seems to me, if we make out a claim that the three plaintiff states were in fact the targets, perhaps some of this questions go to fact finding that could occur after a master is appointed, but we feel, frankly they are adequately stated on the record submitted with our papers.

We feel very strongly that on that type of theory and not a mutually exclusive theory, there is no reason why this Court, what not to on general principles of equity and common law take original jurisdiction of this case in the manner in which water diversion cases or pollution cases are taken.

For in that sense when we consider direct injury, there really is a very little distinction between those classes of cases.

Chief Justice Warren E. Burger: Mr. Scotch it may not become relevant, but if this case proceeded as you would like to have it proceed and a special master were appointed and a jury were requested as was fairly common a hundred and seventy five years from whence would the jurors be drawn?

Mr. Benson D. Scotch: Well, Your Honor --

Chief Justice Warren E. Burger: Perhaps we do not need to dwell on it, I trust you may have a ready answer for that?

Mr. Benson D. Scotch: Our answer would be, we would hope of --

Chief Justice Warren E. Burger: Not from --

Mr. Benson D. Scotch: Not from the State of New Hampshire [Laughter] we would certainly so argue.

We would also of course rely upon the ability of the Court as demonstrated in -- as demonstrated time and again to exercise what is inherently is equity jurisdiction and of course we would argue that as an equitable matter, a jury would be an appropriate.

Justice William H. Rehnquist: Well, you read Curtis against Lozer, two years ago where we said that if you are going to award damages, you must have a jury in the federal system?

Mr. Benson D. Scotch: Our answer in that question Mr. Justice Rehnquist would be that I believe where a jury is called, the question of liability is at issue.

What we would argue and reply to that is that the question of liability, the question of the constitutionality of the tax at any rate is the question which already has been disposed of by this Court.

All that is left to do is to add up a bill.

How much in fact has New Hampshire diverted, assuming arguendo that our diversion argument will prevail, I would submit to this Court that on the narrow question of adding up the tally and perhaps adding up the interest which we hope also would be added, that is not only an appropriate to require a jury, but that is a jury with essentially --

Justice William H. Rehnquist: But, that is not traditional damage, that is more of an accounting type?

Mr. Benson D. Scotch: That is exactly and that again Mr. Justice Rehnquist reinforces the fact that essentially we are invoking your equity jurisdiction.

The basic question of liability in our view already has been determined by this Court in a prior proceeding and the proceeding which from our point view was the proper one that have brought and in which we participated.

I would like if I might in my remaining time to refer to an issue that raised in the other argument that is not explicitly raised by New Hampshire, but I think as a penumbra matter it may certain be brought up in connection with our case and that is the question of whether the individuals would be necessary parties if this Court would take jurisdiction.

I would like to suggest an answer to that that all three states have maintained their rights against their individual tax payers and if following our successful prosecution of this case in original jurisdiction, any tax payer of the State of Vermont would have appeared in New Hampshire court, claiming the same types of damages, our answer would be and although it would be inappropriate for us to appear as parties, we certainly would apply to appear as amicus.

Our approach would be in that case to suggest to the trial court of New Hampshire that no claim remains.

Any recovery that might be garnered by a citizen of Vermont in a court of New Hampshire would be matched by a contrary claim by Vermont against that citizen based upon a revocation of the credit.

Of course that is a moot issue if we have already received that credit money directly back from New Hampshire.

I guess in short the answer would be no claim remains after our successful prosecution of this case in this Court.

Justice William H. Rehnquist: Even though under your submission, a Vermont commuter into New Hampshire was unconstitutionally required to pay taxes by New Hampshire?

Mr. Benson D. Scotch: That would be Your Honor, damnum absque injuria.

There has been no harm, but the --

Justice William H. Rehnquist: Well, he sure thinks there is harm I would imagine?

Mr. Benson D. Scotch: Not if he has been given full credit by the state of Vermont made in Massachusetts.

He may have been harmed initially, but certainly any money that he would recover would be double recovery for him.

He has been granted a credit.

If he gets another payment from New Hampshire he has been doubly been enriched.

We certainly would not tolerate that and we would state in Court that we would appear in New Hampshire in some appropriate forum to bar that claim.

We just do not think that is a viable possibility in the courts of New Hampshire.

In conclusion, I simply would say that, although we recognize the fierce independent spirit that seems to be apparent today, particularly in our region of the country, that spirit ought to be guided under the mantle of the Constitution and not contrary to it or around it.

That the main point I would like to leave with the Court is that if this is not an appropriate case, to look at the intention of the legislature, to see if any intentional wrong and intentional harm was meant at the time they adapted their statute and in fact effectuated, then I can imagine any such case ever being brought to this Court.

Thank you very much.

Chief Justice Warren E. Burger: Thank you Mr. Scotch.

Mr. Cleaveland, I am sure you will agree that you would not need to repeat any of the arguments that your friend from New Jersey made on behalf of State of New Jersey?

Argument of Charles G. Cleaveland

Mr. Charles G. Cleaveland: Mr. Chief Justice may it please the Court.

I would have to confess that with the arguments that have gone before me, I am certainly in a position of being last, I hope I shall not to be found to be least, but to pass up any discussion whatsoever of the facts of the case, the way that case arose, I think is very familiar to the Court.

I had intended to do to outline the fundamental basis of our objection to this motion for leave to file which is that this Court must in any such case a find a basis upon an actual controversy in order to obtain or to allow the original jurisdiction of this Court to be invoked.

We insist that there is no such controversy presented upon the complaint sought to be filed.

The basis upon which we say that is the case is that in the cases of Texas v. Florida and Massachusetts v. Missouri, a standard was set out in which the plaintiff seeking -- a plaintiff state seeking to invoke this original jurisdiction must have suffered wrong through the action of the defendant state furnishing ground for judicial redress or that plaintiff must be asserting a right against a defendant state of susceptible of enforcement.

The facts alleged in this complaint, demonstrate neither in either an injury in fact to the plaintiff sovereign states, nor that the circumstance which they assign as an injury is in any way caused by an action by the State of New Hampshire, if I may illustrate.

If the injury assigned is the lost of tax revenue, the complaint failed to show that New Hampshire is the cause of it since the immediate cause of the plaintiff’s failure to collect the funds is in their own credit provisions and by which waive the collection of those funds voluntarily and within their own unfetted discretion.

The first requirement of a justiciable controversy between the states namely that of an injury caused by the plaintiff state was applied in the case of Massachusetts v. Missouri and the court held there that since the plaintiff had full constitutional power to tax, the subject matter, no intransigence of the defendant state Missouri whether in the form of improper legislation or capricious administration of proper legislation would result in an injury to the plaintiff.

And simply put, the Court said, look Missouri has a statute on the books which Massachusetts thinks ought to be construed so as to allow Massachusetts the unfettered right to tax.

The Court said, okay, if that is what Massachusetts thinks let them go into Missouri and challenge the State of Missouri to prove that to its court.

The problem there was that Missouri seem to be inclined to administer its statute in a way which Massachusetts did not agree with.

The problem there was that this Court found that either state could proceed in an exhaustive manner to assert and collect the tax that it felt to be due under it is own statute.

That is still a situation in this case.

If the plaintiff states think they are entitled to the money, they have unfetted power to collect it and they have had that power since the beginning of the cause in question.

Justice Byron R. White: What would be the case under New Hampshire statute if Maine did not give a credit for the New Hampshire tax?

Would under your present law you continue to collect the ax from people working in New Hampshire, but who are residents of Maine?

Mr. Charles G. Cleaveland: I believe sir your addressing the question that came up before and that is if during the existence of the New Hampshire tax, Maine had dissolved the credit, would New Hampshire still assert the tax (Voice Overlap)

Justice Byron R. White: Well I do not know (Voice Overlap).

That is not my question.

Under the law as it was written, would have -- it had been collected?

Mr. Charles G. Cleaveland: As the law was written, Your Honor, yes that is correct.

We did not have entirely a so called “sponge tax.”

It was not self destructing in the sense that the credit (Voice Overlap).

Justice Byron R. White: (Voice Overlap) It may be that -- it may be that if Maine eliminated the credit maybe New Hampshire would change its law, but under the law as it was written, the tax would still be payable?

Mr. Charles G. Cleaveland: That is correct, Your Honor and the significance of that I think is this.

Although it may be said that that would constitute a ground for either the Austin case to have proceeded or this case to proceed, I think the -- in the context of an equity consideration of this case, what to show is that the only thing that the plaintiff states had to do in order to really throw New Hampshire’s case into a cold tab (ph) back in 1970, was to repeal that credit.

Now --

Justice Byron R. White: Why would that have done that?

Mr. Charles G. Cleaveland: Keep in mind, sir, that the New Hampshire court rendered its decision upon a finding of no substantial injury in fact.

That was the only thing they decided.

They did accept jurisdiction of the case on the theory that they would allow standing to any tax payer to raise just about any question at all, but they find that they were not entitled really to raise a constitutional issue because they were not injured.

Justice Byron R. White: How about -- repealing the credit would not have knocked the New Hampshire tax into a cold tab (ph)?

Mr. Charles G. Cleaveland: Well, I think it would Your Honor, in the Court.

What I am saying is that as the case would have appeared in the New Hampshire Supreme Court --

Justice Byron R. White: Yes, as far as New Hampshire that you are just saying it would have been declared illegal?

Mr. Charles G. Cleaveland: I am saying -- the possibility is very real, Your Honor.

I think it is something which has to be considered.

Justice Byron R. White: But New Hampshire did not recognize that fact by any provision in this law that said that their tax is contingent upon another state granting a credit?

Mr. Charles G. Cleaveland: That is correct, Your Honor.

I think the effect is one which has to be considered and to some extent they are hypothetical, but I think it is a very certain hypothetical and given the way that New Hampshire Supreme Court decided the case.

In summing up my discussion of Massachusetts v. Missouri, I think it is very easy to read that case as being dispositive of this case simply because the analogy is direct.

Here the plaintiffs have the full power to tax irrespective of the validity of any New Hampshire statute and the rules were entirely the product of their own forbearance in the form of this tax credit.

Now, this court held in Austin that devoidity of the New Hampshire statute may not turn upon the configuration of the statutes of another state, namely Maine.

Well, just so the power of the plaintiff states to have wholly prevented their losses and to recoup those losses now for that matter, in no way depend upon the configuration of New Hampshire statutes.

Justice Thurgood Marshall: You are saying that Maine and the other states have the right to put a double tax?

Mr. Charles G. Cleaveland: That is correct, Your Honor.

Curry v. McCanless, Travis --

Justice Thurgood Marshall: Yeah, but you sort of put right in quotes, do you not?

Mr. Charles G. Cleaveland: The right, well, in the sense that -- yes I have, I would say they have the power, that they have the right, I think it is in a legal sense the same thing whether it would be --

Justice William H. Rehnquist: Not to be double taxation, is it not automatic indication of unconstitutional (Voice Overlap)

Mr. Charles G. Cleaveland: Correct, Your Honor.

What I am saying is, in the sense of an equitable consideration of the plaintiffs’ rights now to come back against New Hampshire to recover the money, the fact that they could have taken action in 1970, which would have literally blown our statute out of the water, constitutionally, is now should be held against them with respect to their right to claim.

Justice Byron R. White: (Voice Overlap) say that double taxation is perfectly illegal and then say that if Maine had repealed its credit in 1970 it would have blown your tax out of the water constitutionally?

Mr. Charles G. Cleaveland: From the standpoint of Maine alone, I am assuming now that the -- let us assume for instance the shape of the Carter case.

Two states have broad-base income taxes and one of them reaches non-residence, the other does not.

The one in which the non-residents are reached is sued on the theory that that is unconstitutional.

The holding of course is that it is not even though it results in double taxation and even though the state in which they reside does not grant a credit.

Justice Byron R. White: Oh, I do not know that -- I thought you said a while ago New Hampshire will certainly be entitled the tax income earned in -- within the state even if Maine tax it also?

That is what --

Mr. Charles G. Cleaveland: If both states have constitutional provisions Your Honor, double taxation does not present any automatic constitutional conflict.

The point I am trying to make is that if Maine has repealed it is tax credit originally or for that matter administratively denied it to persons earning an income in New Hampshire on the theory that the New Hampshire tax is not a valid tax, therefore, it does not exist, therefore no credit.

Either of those two theories, that would have enhanced, excuse me --

Justice Thurgood Marshall: (Inaudible) New Hampshire Supreme Court, would it not?

Mr. Charles G. Cleaveland: That was -- if you want to characterize them as tender mercies Your Honor, yes, it is true, they would be in --

Justice Thurgood Marshall: I say that, you have raised the second point, how does that prevent them from maintaining their action here?

Mr. Charles G. Cleaveland: The thing that prevents them from maintaining the action here is --

Justice Thurgood Marshall: Because when I read the constitution, it says that the State of Maine does not have to go to the Supreme Court of New Hampshire, if it has got an argument with the State of New Hampshire?

Mr. Charles G. Cleaveland: The question is whether it actually has an argument with the State of New Hampshire, Your Honor.

The State of Maine was never a tax payer to New Hampshire.

The New Hampshire statute never had any application whatsoever to the State of Maine as a sovereign.

It created no rights in behalf of the State of Maine, Massachusetts, or Vermont and created no liabilities upon them.

They simply ignored them.

Chief Justice Warren E. Burger: Is that the entire position of the state?

Mr. Charles G. Cleaveland: In a way it is Your Honor.

Chief Justice Warren E. Burger: Do you need any better way if you are right on that?

Mr. Charles G. Cleaveland: I think it is sufficient.

That is why I said I think given only that finding alone I think Massachusetts v. Missouri is dispositive of this case.

I think the --

Mr. Justice Blackmun’s dissent really comes home in an analysis of this case simply because any injury that the three states who are now plaintiffs and have sustained is caused as a matter of congeniality is entirely attributable to to the existence of those tax credits which they were no ways required constitutionally to maintain.

I think in terms of an equitable analysis of the case, they should have been involved in this case from the beginning.

I notice my brother argued that they felt that the proper procedure was to remain in the wings, but to ask them to take part and aid the Austin plaintiffs in raising their constitutional question.

If that so then where were they in the context of raising their arguments with respect to recovery of funds then.

I see a considerable element of the Equitable Doctrine of Laches applying here.

A court of equity which this Court has held itself to be when considering original actions is very reluctant and should be very reluctant to award damages to a plaintiff to allow a recovery against a defendant when the plaintiff has an effect side on his hands and allow the injury to magnify many fold.

That is the essence of my argument in saying that if they had simply taken the action in 1970 and had the courage of their convictions to do so, this case would have had an entirely different configuration in a New Hampshire Supreme Court and the analysis and the theory upon which the New Hampshire Supreme Court held the tax to be valid could not have been made because it is simply was not true.

As a matter of fact, New Hampshire Supreme Court held that there was no substantial injury in fact.

If Maine had repealed the tax credit, they are clearly would have been, there would have been double taxation.

I admitted this much in my argument before this Court in Austin last spring.

Simply put, we think the claims here are not mutually exclusive in the sense of Texas v. Florida.

They are rather precisely analogous to that in Mass. v. Missouri.

The second basis upon which a controversy can be maintained here is that there is a right susceptible of judicial enforcement.

Assuming for the sake of argument, that the Austin decision create a right in someone to a money judgment on the theory that taxes have been collected improperly, that supposed right does not tenure to the plaintiffs sovereign states.

Now, these states were of course not tax payers to New Hampshire.

As I said before they were in -- the statute in New Hampshire had nothing to do with the three plaintiff states here.

Now, the principles upon which the Austin case turn, that is the Privileges and Immunities Clause, did not operate to the benefit of sovereign states.

Since there not persons within the meaning of that provision.

Now, if the right asserted here inheres in anyone it inheres in the former tax payers to New Hampshire who are citizens of the three plaintiff states.

Now, if the state may not hold forth in this Court in such bulk litigation of private claims is settled beyond question.

In New Hampshire v. Louisiana, Illinois v. Michigan, a long line of cases, this Court has denied a state the right to litigate claims on behalf of private citizens in particular.

In Oklahoma v. Cook, Court held that a state is barred from litigating claims on behalf of citizens where the interest of the states arises solely as a result of a statute of the plaintiff state.

Simply put that means that the Court was saying that a state may not legislate its way into the original jurisdiction of this Court, that we submitted is what the three plaintiff states have done in affect with their tax credit provisions.

Now, the plaintiff’s attempted reliance upon the Missouri v. Illinois and Arizona v. California lines of cases is misplaced we suggest.

Firstly, these are uniformly instances in which the remedy of injunction was appropriate to halt the action or activity of the defendant state.

That remedy is simply inappropriate here since the tax was effectively halted by Austin case which arose through conventional appellate channels.

Furthermore, the notion of enjoining state action that -- state taxation excuse me, by application to the Federal Judiciary is the evil redress and eliminated by the Federal Anti-tax injunction Statute.

Any resort to this Court on the theory of Missouri v. Illinois for an injunction is clearly in contravention of the -- at least the spirit of that statute is not the substance of it.

Now, I would mention in reply to a contention that the action taken by New Hampshire was directed at the treasuries of the three states and not a good faith effort to -- if you will experiment in valid state taxation, I think that is a first placed question that comes upon the merits of case which is not before the bar now.

Secondly, it is in large measure an issue of fact which would, if the cases allowed to be filed, require reference to a Master.

And third, it simply does not hold water.

As Mr. Justice Blackmun said, he has trouble seeing the State of New Hampshire as being rascal in this situation.

Quite obviously so do I.

I think the merits of the case of are something which need not be considered now and more appropriately should not be considered now because when the question is one of jurisdiction, a lack of jurisdiction is fatal to a case no matter how strong the case may be on the merits.

The third point, I would like to raise is that the former tax payers of New Hampshire are necessary parties to this action.

This issue had been raised in the prior case and discussed.

I would like to amplify it only to the point of saying that the complaint in this case assumes a very credible element and that is that in the chain between a recovery against New Hampshire by a tax payer, assuming he has the right on the merits to that recovery, from there to that tax payers’ obligation to return that money to his own state on the theory that a credit was improperly allowed, there is an assumption that there is a direct equation there.

There is nothing in this complaint which goes to prove that assumption is correct.

It assumes that the tax payers who are also citizens of those three plaintiff states have no right whatsoever to interpose between a recovery from New Hampshire, assuming the tax payers were the ones to recover and the obligation to return it to their own states.

If the theory of the plaintiffs advanced in this complaint is true, that result would be reached without their interest being represented, without any opportunity for those plaintiffs to even present such a claim, if you will, or set off or however you want to characterize it.

There are certain retroactive problems which may arise in this connection.

The point is that this assumption is made in the compliant.

There was no opportunity for the tax payers themselves to be heard on that matter if the case proceeds on the original jurisdiction of this Court.

If on the other hand one considers “Alright let us bring those plaintiffs in,” then on the holding of California v. Southern Pacific Company in 157 U.S., the original jurisdiction of this Court is defeated, ousted if you will, because the presence of citizens of the plaintiff states is beyond the jurisdiction of this Court.

If they are necessary parties, they are also fatal parties.

I submit that this equation which is the basis of this complaint and is precisely that watershed point upon which the plaintiff states assert their right to the money is something which cannot be assumed over the backs of the tax payers themselves who are the only ones that ever had anything to do with the State of New Hampshire.

Now, this Court applies in consideration of original actions, the accepted doctrines of common law and equity, system of jurisprudence as much as held in Texas v. Florida.

Again to simplify with respect to the application of the Doctrine of Laches, the plaintiffs assert that the State of New Hampshire was in bad faith when it enacted the commuter's income tax.

We say to the extent the plaintiffs claim that New Hampshire should have known that the tax scheme was unconstitutional, so too the plaintiffs are also bound to have analyzed and known that law and should have responded from the beginning in a matter consistent with their convictions.

I think it is patently obvious that the great part, if not all of the injury which they have now sustained are claimed to have sustained could have been obviated by action taken in the original configuration of the cases that came before the New Hampshire Supreme Court.

It is also more likely the case that that same action can still be taken.

I would point out that this case -- that this Court in Austin remanded the Austin case to the New Hampshire Supreme Court for further proceedings consistent with the opinion of this Court.

At last check that case was still before the New Hampshire Supreme Court and there has been no action taken one way or the other.

There has been no request for any action to be taken by the new Hampshire Supreme Court, but it is still an open case in that regard.

Any comment by me would be obviously speculation as to what the plaintiffs might want to do if they were compelled to go into the New Hampshire Supreme Court, but I certainly see no constitutional bar from -- to them doing so.

I think the New Hampshire Supreme Court is an available forum.

I think a class action is certainly an available remedy.

All of this seems to add up to one simple point.

The entire claim that these three states bring is based upon this connection between their own tax payers and their right to the funds.

That was entirely within their control and I think they should be now barred from this Court for a number of reasons, some of which are purely jurisdiction, some of which are equitable, but they all come down to the same point.

It is not too late to come back and try to unwind the situation which could have been avoided with continuities.

Thank you very much.

Chief Justice Warren E. Burger: Thank you gentleman.

The case is submitted.