ARMOUR v. CITY OF INDIANAPOLIS

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

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No. 11–161

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CHRISTINE ARMOUR, et al., PETITIONERS v. CITY OF INDIANAPOLIS, INDIANA, et al.

on writ of certiorari to the supreme court of indiana

[June 4, 2012]

Justice Breyer delivered the opinion of the Court.

For many years, an Indiana statute, the “Barrett Law,” authorized Indiana’s cities to impose upon benefited lot owners the cost of sewer improvement projects. The Law also permitted those lot owners to pay either immediately in the form of a lump sum or over time in installments. In 2005, the city of Indianapolis (City) adopted a new assessment and payment method, the “STEP” plan, and it forgave any Barrett Law installments that lot owners had not yet paid.

A group of lot owners who had already paid their entire Barrett Law assessment in a lump sum believe that the City should have provided them with equivalent refunds. And we must decide whether the City’s refusal to do so unconstitutionally discriminates against them in violation of the Equal Protection Clause, Amdt. 14, §1. We hold that the City had a rational basis for distinguishing between those lot owners who had already paid their share of project costs and those who had not. And we conclude that there is no equal protection violation.

I A

Beginning in 1889 Indiana’s Barrett Law permitted cities to pay for public improvements, such as sewage projects, by “apportion[ing]” the costs of a project “equally among all abutting lands or lots.” Ind. Code §36–9–39–15(b)(3) (2011); see Town Council of New Harmony v. Parker, 726 N. E. 2d 1217, 1227, n. 13 (Ind. 2000) (project’s beneficiaries pay its costs). When a city built a Barrett Law project, the city’s public works board would create an initial lot-owner assessment by “dividing the estimated total cost of the sewage works by the total number of lots.” §36–9–39–16(a). It might then adjust an individual assessment downward if the lot would benefit less than would others. §36–9–39–17(b). Upon completion of the project, the board would issue a final lot-by-lot assessment.

The Law permitted lot owners to pay the assessment either in a single lump sum or over time in installment payments (with interest). The City would collect installment payments “in the same manner as other taxes.” §36–9–37–6. The Law authorized 10-, 20-, or 30-year installment plans. §36–9–37–8.5(a). Until fully paid, an assessment would constitute a lien against the property, permitting the city to initiate foreclosure proceedings in case of a default. §§36–9–37–9(b), –22.

For several decades, Indianapolis used the Barrett Law system to fund sewer projects. See, e.g., Conley v. Brummit, 92 Ind. App. 620, 621, 176 N. E. 880, 881 (1931) (in banc). But in 2005, the City adopted a new system, called the Septic Tank Elimination Program (STEP), which financed projects in part through bonds, thereby lowering individual lot owners’ sewer-connection costs. By that time, the City had constructed more than 40 Barrett Law projects. App. to Pet. for Cert. 5a. We are told that installment-paying lot owners still owed money in respect to 24 of those projects. See Reply Brief for Petitioners 16–17, n. 3 (citing City’s Response to Plaintiff’s Brief on Damages, Record in Cox v. Indianapolis, No. 1:09–cv–0435 (SD Ind., Doc. 98–1 (Exh. A)). In respect to 21 of the 24, some installment payments had not yet fallen due; in respect to the other 3, those who owed money were in default. Reply Brief for Petitioners 17, n. 3.

B

This case concerns one of the 24 still-open Barrett Law projects, namely the Brisbane/Manning Sanitary Sewers Project. The Brisbane/Manning Project began in 2001. It connected about 180 homes to the City’s sewage system. Construction was completed in 2003. The Indianapolis Board of Public Works held an assessment hearing in June 2004. And in July 2004 the Board sent the 180 affected homeowners a formal notice of their payment obligations.

The notice made clear that each homeowner could pay the entire assessment—$9,278 per property—in a lump sum or in installments, which would include interest at a 3.5% annual rate. Under an installment plan, payments would amount to $77.27 per month for 10 years; $38.66 per month for 20 years; or $25.77 per month for 30 years. In the event, 38 homeowners chose to pay up front; 47 chose the 10-year plan; 27 chose the 20-year plan; and 68 chose the 30-year plan. And in the first year each homeowner paid the amount due ($9,278 upfront; $927.80 under the 10-year plan; $463.90 under the 20-year plan, or $309.27 under the 30-year plan). App. to Pet. for Cert. 48a.

The next year, however, the City decided to abandon the Barrett Law method of financing. It thought that the Barrett Law’s lot-by-lot payments had become too burdensome for many homeowners to pay, discouraging changes from less healthy septic tanks to healthier sewer systems. See id., at 4a–5a. (For example, homes helped by the Brisbane/Manning Project, at a cost of more than $9,000 each, were then valued at $120,000 to $270,000. App. 67.) The City’s new STEP method of financing would charge each connecting lot owner a flat $2,500 fee and make up the difference by floating bonds eventually paid for by all lot owners citywide. See App. to Pet. for Cert. 5a, n. 5.

On October 31, 2005, the City enacted an ordinance implementing its decision. In December, the City’s Board of Public Works enacted a further resolution, Resolution 101, which, as part of the transition, would “forgive all assessment amounts . . . established pursuant to the Barrett Law Funding for Municipal Sewer programs due and owing from the date of November 1, 2005 forward.” App. 72 (emphasis added). In its preamble, the Resolution said that the Barrett Law “may present financial hardships on many middle to lower income participants who most need sanitary sewer service in lieu of failing septic systems”; it pointed out that the City was transitioning to the new STEP method of financing; and it said that the STEP method was based upon a financial model that had “considered the current assessments being made by participants in active Barrett Law projects” as well as future projects. Id., at 71–72. The upshot was that those who still owed Barrett Law assessments would not have to make further payments but those who had already paid their assessments would not receive refunds. This meant that homeowners who had paid the full $9,278 Brisbane/ Manning Project assessment in a lump sum the preceding year would receive no refund, while homeowners who had elected to pay the assessment in installments, and had paid a total of $309.27, $463.90, or $927.80, would be under no obligation to make further payments.

In February 2006, the 38 homeowners who had paid the full Brisbane/Manning Project assessment asked the City for a partial refund (in an amount equal to the smallest forgiven Brisbane/Manning installment debt, apparently $8,062). The City denied the request in part because “[r]efunding payments made in your project area, or any portion of the payments, would establish a precedent of unfair and inequitable treatment to all other property owners who have also paid Barrett Law assessments . . . and while [the November 1, 2005, cutoff date] might seem arbitrary to you, it is essential for the City to establish this date and move forward with the new funding approach.” Id., at 50–51.

C

Thirty-one of the thirty-eight Brisbane/Manning Project lump-sum homeowners brought this lawsuit in Indiana state court seeking a refund of about $8,000 each. They claimed in relevant part that the City’s refusal to provide them with refunds at the same time that the City forgave the outstanding Project debts of other Brisbane/Manning homeowners violated the Federal Constitution’s Equal Protection Clause, Amdt. 14, §1; see also Rev. Stat. §1979, 42 U. S. C. §1983. The trial court granted summary judgment in their favor. The State Court of Appeals affirmed that judgment. 918 N. E. 2d 401 (2009). But the Indiana Supreme Court reversed. 946 N. E. 2d 553 (2011). In its view, the City’s distinction between those who had already paid their Barrett Law assessments and those who had not was “rationally related to its legitimate interests in reducing its administrative costs, providing relief for property owners experiencing financial hardship, establishing a clear transition from [the] Barrett Law to STEP, and preserving its limited resources.” App. to Pet. for Cert. 19a. We granted certiorari to consider the equal protection question. And we now affirm the Indiana Supreme Court.

II A

As long as the City’s distinction has a rational basis, that distinction does not violate the Equal Protection Clause. This Court has long held that “a classification neither involving fundamental rights nor proceeding along suspect lines . . . cannot run afoul of the Equal Protection Clause if there is a rational relationship between the disparity of treatment and some legitimate governmental purpose.” Heller v. Doe, 509 U. S. 312 –320 (1993); cf. Gulf, C. & S. F. R. Co. v. Ellis, 165 U. S. 150 –166 (1897). We have made clear in analogous contexts that, where “ordinary commercial transactions” are at issue, rational basis review requires deference to reasonable underlying legislative judgments. United States v. Carolene Products Co., 304 U. S. 144, 152 (1938) (due process); see also New Orleans v. Dukes, 427 U. S. 297, 303 (1976) (per curiam) (equal protection). And we have repeatedly pointed out that “[l]egislatures have especially broad latitude in creating classifications and distinctions in tax statutes.” Regan v. Taxation With Representation of Wash., 461 U. S. 540, 547 (1983) ; see also Fitzgerald v. Racing Assn. of Central Iowa, 539 U. S. 103 –108 (2003); Nordlinger v. Hahn, 505 U. S. 1, 11 (1992) ; Lehnhausen v. Lake Shore Auto Parts Co., 410 U. S. 356, 359 (1973) ; Madden v. Kentucky, 309 U. S. 83 –88 (1940); Citizens’ Telephone Co. of Grand Rapids v. Fuller, 229 U. S. 322, 329 (1913) .

Indianapolis’ classification involves neither a “fundamental right” nor a “suspect” classification. Its subject matter is local, economic, social, and commercial. It is a tax classification. And no one here claims that Indianapolis has discriminated against out-of-state commerce or new residents. Cf. Hooper v. Bernalillo County Assessor, 472 U. S. 612 (1985) ; Williams v. Vermont, 472 U. S. 14 (1985) ; Metropolitan Life Ins. Co. v. Ward, 470 U. S. 869 (1985) ; Zobel v. Williams, 457 U. S. 55 (1982) . Hence, this case falls directly within the scope of our precedents holding such a law constitutionally valid if “there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.” Nordlinger, supra, at 11 (citations omitted). And it falls within the scope of our precedents holding that there is such a plausible reason if “there is any reasonably conceivable state of facts that could provide a rational basis for the classification.” FCC v. Beach Communications, Inc., 508 U. S. 307, 313 (1993) ; see also Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78 (1911) .

Moreover, analogous precedent warns us that we are not to “pronounc[e]” this classification “unconstitutional unless in the light of the facts made known or generally assumed it is of such a character as to preclude the assumption that it rests upon some rational basis within the knowledge and experience of the legislators.” Carolene Products Co., supra, at 152 (due process claim). Further, because the classification is presumed constitutional, the “ ‘ burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it.’ ” Heller, supra, at 320 (quoting Lehnhausen, supra, at 364).

B

In our view, Indianapolis’ classification has a rational basis. Ordinarily, administrative considerations can justify a tax-related distinction. See, e.g., Carmichael v. Southern Coal & Coke Co., 301 U. S. 495 –512 (1937) (tax exemption for businesses with fewer than eight employees rational in light of the “[a]dministrative convenience and expense” involved); see also Lehnhausen, supra, at 365 (comparing administrative cost of taxing corporations versus individuals); Madden, supra, at 90 (comparing administrative cost of taxing deposits in local banks versus those elsewhere). And the City’s decision to stop collecting outstanding Barrett Law debts finds rational support in related administrative concerns.

The City had decided to switch to the STEP system. After that change, to continue Barrett Law unpaid-debt collection could have proved complex and expensive. It would have meant maintaining an administrative system that for years to come would have had to collect debts arising out of 20-plus different construction projects built over the course of a decade, involving monthly payments as low as $25 per household, with the possible need to maintain credibility by tracking down defaulting debtors and bringing legal action. The City, for example, would have had to maintain its Barrett Law operation within the City Controller’s Office, keep files on old, small, installment-plan debts, and (a City official says) possibly spend hundreds of thousands of dollars keeping computerized debt-tracking systems current. See Brief for International City/County Management Association et al. as Amici Curiae 13, n. 12 (citing Affidavit of Charles White ¶13, Record in Cox, Doc. No. 57–3). Unlike the collection system prior to abandonment, the City would not have added any new Barrett Law installment-plan debtors. And that fact means that it would have had to spread the fixed administrative costs of collection over an ever-declining number of debtors, thereby continuously increasing the per-debtor cost of collection.

Consistent with these facts, the Director of the City’s Department of Public Works later explained that the City decided to forgive outstanding debt in part because “[t]he administrative costs to service and process remaining balances on Barrett Law accounts long past the transition to the STEP program would not benefit the taxpayers” and would defeat the purpose of the transition. App. 76. The four other members of the City’s Board of Public Works have said the same. See Affidavit of Gregory Taylor ¶6, Record in Cox, Doc. No. 57–5; Affidavit of Kipper Tew ¶6, ibid. Doc. No. 57–6; Affidavit of Susan Schalk ¶6, ibid. Doc. No. 57–7; Affidavit of Roger Brown ¶6, ibid. Doc. No. 57–8.

The rationality of the City’s distinction draws further support from the nature of the line-drawing choices that confronted it. To have added refunds to forgiveness would have meant adding yet further administrative costs, namely the cost of processing refunds. At the same time, to have tried to limit the City’s costs and lost revenues by limiting forgiveness (or refund) rules to Brisbane/Manning homeowners alone would have led those involved in other Barrett Law projects to have justifiably complained about unfairness. Yet to have granted refunds (as well as providing forgiveness) to all those involved in all Barrett Law projects (there were more than 40 projects) or in all open projects (there were more than 20) would have involved even greater administrative burden. The City could not just “cut . . . checks,” post, at 4 (Roberts, C. J., dissenting), without taking funding from other programs or finding additional revenue. If, instead, the City had tried to keep the amount of revenue it lost constant (a rational goal) but spread it evenly among the apparently thousands of homeowners involved in any of the Barrett Laws projects, the result would have been yet smaller individual payments, even more likely to have been too small to justify the administrative expense.

Finally, the rationality of the distinction draws support from the fact that the line that the City drew—distinguishing past payments from future obligations—is a line well known to the law. Sometimes such a line takes the form of an amnesty program, involving, say, mortgage payments, taxes, or parking tickets. E.g., 26 U. S. C. §108(a)(1)(E) (2006 ed., Supp. IV) (federal income tax provision allowing homeowners to omit from gross income newly forgiven home mortgage debt); United States v. Martin, 523 F. 3d 281, 284 (CA4 2008) (tax amnesty program whereby State newly forgave penalties and liabilities if taxpayer satisfied debt); Horn v. Chicago, 860 F. 2d 700, 704, n. 9 (CA7 1988) (city parking ticket amnesty program whereby outstanding tickets could be newly settled for a fraction of amount specified). This kind of line is consistent with the distinction that the law often makes between actions previously taken and those yet to come.

C

Petitioners’ contrary arguments are not sufficient to change our conclusion. Petitioners point out that the Indiana Supreme Court also listed a different consideration, namely “financial hardship,” as one of the factors supporting rationality. App. to Pet. for Cert. 19a. They refer to the City’s resolution that said that the Barrett Law “may present financial hardships on many middle to lower income participants who most need sanitary sewer service in lieu of failing septic systems.” App. 71. And they argue that the tax distinction before us would not necessarily favor low-income homeowners.

We need not consider this argument, however, for the administrative considerations we have mentioned are sufficient to show a rational basis for the City’s distinction. The Indiana Supreme Court wrote that the City’s classification was “rationally related” in part “to its legitimate interests in reducing its administrative costs.” App. to Pet. for Cert. 19a (emphasis added). The record of the City’s proceedings is consistent with that determination. See App. 72 (when developing transition, the City “considered the current assessments being made by participants in active Barrett Law projects”). In any event, a legislature need not “actually articulate at any time the purpose or rationale supporting its classification.” Nordlinger, 505 U. S., at 15; see also Fitzgerald, 539 U. S., at 108 (similar). Rather, the “burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it.” Madden, 309 U. S., at 88; see Heller, 509 U. S., at 320 (same); Lehnhausen, 410 U. S., at 364 (same); see also Allied Stores of Ohio, Inc. v. Bowers, 358 U. S. 522, 530 (1959) (upholding state tax classification resting “upon a state of facts that reasonably can be conceived” as creating a rational distinction). Petitioners have not “negative[d]” the Indiana Supreme Court’s first listed justification, namely the administrative concerns we have discussed.

Petitioners go on to propose various other forgiveness systems that would have included refunds for at least some of those who had already paid in full. They argue that those systems are superior to the system that the City chose. We have discussed those, and other possible, systems earlier. Supra, at 8–9. Each has advantages and disadvantages. But even if petitioners have found a superior system, the Constitution does not require the City to draw the perfect line nor even to draw a line superior to some other line it might have drawn. It requires only that the line actually drawn be a rational line. And for the reasons we have set forth in Part II–B, supra, we believe that the line the City drew here is rational.

Petitioners further argue that administrative considerations alone should not justify a tax distinction, lest a city arbitrarily allocate taxes among a few citizens while forgiving many similarly situated citizens on the ground that it is cheaper and easier to collect taxes from a few people than from many. Brief for Petitioners 45. Petitioners are right that administrative considerations could not justify such an unfair system. But that is not because administrative considerations can never justify tax differences (any more than they can always do so). The question is whether reducing those expenses, in the particular circumstances, provides a rational basis justifying the tax difference in question.

In this case, “in the light of the facts made known or generally assumed,” Carolene Products Co., 304 U. S., at 152, it is reasonable to believe that to graft a refund system onto the City’s forgiveness decision could have (for example) imposed an administrative burden of both collecting and paying out small sums (say, $25 per month) for years. As we have said, supra, at 7–9, it is rational for the City to draw a line that avoids that burden. Petitioners, who are the ones “attacking the legislative arrangement,” have the burden of showing that the circumstances are otherwise, i.e., that the administrative burden is too insubstantial to justify the classification. That they have not done.

Finally, petitioners point to precedent that in their view makes it more difficult than we have said for the City to show a “rational basis.” With but one exception, however, the cases to which they refer involve discrimination based on residence or length of residence. E.g., Hooper v. Bernalillo County Assessor, 472 U. S. 612 (state tax preference distinguishing between long-term and short-term resident veterans); Williams v. Vermont, 472 U. S. 14 (state use tax that burdened out-of-state car buyers who moved in-state); Metropolitan Life Ins. Co. v. Ward, 470 U. S. 869 (state law that taxed out-of-state insurance companies at a higher rate than in-state companies); Zobel v. Williams, 457 U. S. 55 (state dividend distribution system that favored long-term residents). But those circumstances are not present here.

The exception consists of Allegheny Pittsburgh Coal Co. v. Commission of Webster Cty., 488 U. S. 336 (1989) . The Court there took into account a state constitution and related laws that required equal valuation of equally valuable property. Id., at 345. It considered the constitutionality of a county tax assessor’s practice (over a period of many years) of determining property values as of the time of the property’s last sale; that practice meant highly unequal valuations for two identical properties that were sold years or decades apart. Id., at 341. The Court first found that the assessor’s practice was not rationally related to the county’s avowed purpose of assessing properties equally at true current value because of the intentional systemic discrepancies the practice created. Id., at 343–344. The Court then noted that, in light of the state constitution and related laws requiring equal valuation, there could be no other rational basis for the practice. Id., at 344–345. Therefore, the Court held, the assessor’s discriminatory policy violated the Federal Constitution’s insistence upon “equal protection of the law.” Id., at 346.

Petitioners argue that the City’s refusal to add refunds to its forgiveness decision is similar, for it constitutes a refusal to apply “equally” an Indiana state law that says that the costs of a Barrett Law project shall be equally “apportioned.” Ind. Code §36–9–39–15(b)(3). In other words, petitioners say that even if the City’s decision might otherwise be related to a rational purpose, state law (as in Allegheny) makes this the rare case where the facts preclude any rational basis for the City’s decision other than to comply with the state mandate of equality.

Allegheny, however, involved a clear state law requirement clearly and dramatically violated. Indeed, we have described Allegheny as “the rare case where the facts precluded” any alternative reading of state law and thus any alternative rational basis. Nordlinger, 505 U. S., at 16. Here, the City followed state law by apportioning the cost of its Barrett Law projects equally. State law says nothing about forgiveness, how to design a forgiveness program, or whether or when rational distinctions in doing so are permitted. To adopt petitioners’ view would risk transforming ordinary violations of ordinary state tax law into violations of the Federal Constitution.

*  *  *

For these reasons, we conclude that the City has not violated the Federal Equal Protection Clause. And the Indiana Supreme Court’s similar determination is

Affirmed.

SUPREME COURT OF THE UNITED STATES

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No. 11–161

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CHRISTINE ARMOUR, et al., PETITIONERS v. CITY OF INDIANAPOLIS, INDIANA, et al.

on writ of certiorari to the supreme court of indiana

[June 4, 2012]

Chief Justice Roberts, with whom Justice Scalia and Justice Alito join, dissenting.

Twenty-three years ago, we released a succinct and unanimous opinion striking down a property tax scheme in West Virginia on the ground that it clearly violated the Equal Protection Clause. Allegheny Pittsburgh Coal Co. v. Commission of Webster Cty., 488 U. S. 336 (1989) . In Allegheny Pittsburgh, we held that a county failed to comport with equal protection requirements when it assessed property taxes primarily on the basis of purchase price, with no appropriate adjustments over time. The result was that new property owners were assessed at “roughly 8 to 35 times” the rate of those who had owned their property longer. Id., at 344. We found such a “gross disparit[y]” in tax levels could not be justified in a state system that demanded that “taxation . . . be equal and uniform.” Id., at 338; W. Va. Const., Art. X, §1. The case affirmed the common-sense proposition that the Equal Protection Clause is violated by state action that deprives a citizen of even “rough equality in tax treatment,” when state law itself specifically provides that all the affected taxpayers are in the same category for tax purposes. 488 U. S., at 343; see Hillsborough v. Cromwell, 326 U. S. 620, 623 (1946) (“The equal protection clause . . . protects the individual from state action which selects him out for discriminatory treatment by subjecting him to taxes not imposed on others of the same class”).

In this case, the Brisbane/Manning Sanitary Sewers Project allowed 180 property owners to have their homes hooked up to the City of Indianapolis’s sewer system under the State’s Barrett Law. That law requires sewer costs to “be primarily apportioned equally among all abutting lands or lots.” Ind. Code §36–9–39–15(b)(3) (2011). In the case of Brisbane/Manning, the cost came to $9,278 for each property owner. Some of the property owners—petitioners here—paid the full $9,278 up front. Others elected the option of paying in installments. Shortly after hook-up, the City switched to a new financing system and decided to forgive the hook-up debts of those paying on an installment plan. The City refused, however, to refund any portion of the payments made by their identically situated neighbors who had already paid the full amount due. The result was that while petitioners each paid the City $9,278 for their hook-ups, more than half their neighbors paid less than $500 for the same improvement—some as little as $309.27. Another quarter paid less than $1,000. Petitioners thus paid between 10 and 30 times as much for their sewer hook-ups as their neighbors.

In seeking to justify this gross disparity, the City explained that it was presented with three choices: First, it could have continued to collect the installment plan payments of those who had not yet settled their debts under the old system. Second, it could have forgiven all those debts and given equivalent refunds to those who had made lump sum payments up front. Or third, it could have forgiven the future payments and not refunded payments that had already been made. The first two choices had the benefit of complying with state law, treating all of Indianapolis’s citizens equally, and comporting with the Constitution. The City chose the third option.

And what did the City believe was sufficient to justify a system that would effectively charge petitioners 30 times more than their neighbors for the same service—when state law promised equal treatment? Two things: the desire to avoid administrative hassle and the “fiscal[ ] challeng[e]” of giving back money it wanted to keep. Brief for Respondents 35–36. I cannot agree that those reasons pass constitutional muster, even under rational basis review.

The City argues that either of the other options for transitioning away from the Barrett Law would have been “immensely difficult from an administrative standpoint.” Id., at 36. The Court accepts this rationale, observing that “[o]rdinarily, administrative considerations can justify a tax-related distinction.” Ante, at 7. The cases the Court cites, however, stand only for the proposition that a legislature crafting a tax scheme may take administrative concerns into consideration when creating classes of taxable entities that may be taxed differently. See, e.g., Lehnhausen v. Lake Shore Auto Parts Co., 410 U. S. 356, 359 (1973) (a State may “draw lines that treat one class of individuals or entities differently from the others”); Madden v. Kentucky, 309 U. S. 83, 87 (1940) (referring to the “broad discretion as to classification possessed by a legislature”); Carmichael v. Southern Coal & Coke Co., 301 U. S. 495 –511 (1937) (discussing permissible considerations for the legislature in establishing a tax scheme).

Here, however, Indiana’s tax scheme explicitly provides that costs will “be primarily apportioned equally among all abutting lands or lots.” Ind. Code §36–9–39–15(b)(3) (emphasis added). The legislature has therefore decreed that all abutting landowners are within the same class. We have never before held that administrative burdens justify grossly disparate tax treatment of those the State has provided should be treated alike. Indeed, in Allegheny Pittsburgh the County argued that its unequal assessments were based on “[a]dministrative cost[ ]” concerns, to no avail. Brief for Respondent, O. T. 1988, No. 87–1303, p. 22. The reason we have rejected this argument is obvious: The Equal Protection Clause does not provide that no State shall “deny to any person within its jurisdiction the equal protection of the laws, unless it’s too much of a bother.”

Even if the Court were inclined to decide that administrative burdens alone may sometimes justify grossly disparate treatment of members of the same class, this would hardly be the case to do that. The City claims it cannot issue refunds because the process would be too difficult, requiring that it pore over records of old projects to determine which homeowners had overpaid and by how much. Brief for Respondents 36. But holding that the City must refund petitioners’ overpayments would not mean that it has to refund overpayments in every Barrett Law project. The Equal Protection Clause is concerned with “gross” disparity in taxing. Because the Brisbane/Manning project was initiated shortly before the Barrett Law transition, the disparity between what petitioners paid in comparison to their installment plan neighbors was dramatic. Not so with respect to, for example, a project initiated 10 years earlier, because for those projects even installment plan payers will have largely satisfied their debts, resulting in far less significant disparities.

To the extent a ruling for petitioners would require issuing refunds to others who overpaid under the Barrett Law, I think the city workers are up to the task. The City has in fact already produced records showing exactly how much each lump-sum payer overpaid in every active Barrett Law Project—to the penny. Record in Cox v. Indianapolis, No. 1:09–cv–0435 (SD Ind.), Doc. 98–1 (Exh. A). What the city employees would need to do, therefore, is cut the checks and mail them out.

Certainly the job need not involve the complicated procedure the Court describes in an attempt to bolster its administrative convenience argument. Under the Court’s view the City would apparently continue to accept monthly payments from installment plan homeowners in order to gradually repay the money it owes to those who paid in a lump sum. Ante, at 9, 12. But this approach was never dreamt of by the City itself. See Brief for Respondents 18 (setting out City’s “three basic [transition] options,” none of which involved the Court’s gradual refund scheme).

The Court suggests that the City’s administrative convenience argument is one with which the law is comfortable. The Court compares the City’s decision to forgive the installment balances to the sort of parking ticket and mortgage payment amnesty programs that currently abound. Ante, at 9. This analogy is misplaced: Amnesty programs are designed to entice those who are unlikely ever to pay their debts to come forward and pay at least a portion of what they owe. It is not administrative convenience alone that justifies such schemes. In a sense, these schemes help remedy payment inequities by prompting those who would pay nothing to pay at least some of their fair share. The same cannot be said of the City’s system.

The Court is willing to concede that “administrative considerations could not justify . . . an unfair system” in which “a city arbitrarily allocate[s] taxes among a few citizens while forgiving many others on the ground that it is cheaper and easier to collect taxes from a few people than from many.” Ante, at 11. Cold comfort, that. If the quoted language does not accurately describe this case, I am not sure what it would reach.

The Court wisely does not embrace the City’s alternative argument that the unequal tax burden is justified because “it would have been fiscally challenging to issue refunds.” Brief for Respondents 35. “Fiscally challenging” gives euphemism a bad name. The City’s claim that it has already spent petitioners’ money is hardly worth a response, and the City recognizes as much when it admits it could provide refunds to petitioners by “arrang[ing] for payments from non-Barrett Law sources.” Id., at 36. One cannot evade returning money to its rightful owner by the simple expedient of spending it. The “fiscal challenge” justification seems particularly inappropriate in this case, as the City—with an annual budget of approximately $900 million—admits that the cost of refunding all of petitioners’ money would be approximately $300,000. Adopted 2012 Budget for the Consolidated City of Indianapolis, Marion County (Oct. 17, 2011), p. 7; Tr. of Oral Arg. 17, 58.

Equally unconvincing is the Court’s attempt to distinguish Allegheny Pittsburgh. The Court claims that case was different because it involved “a clear state law requirement clearly and dramatically violated.” Ante, at 14. Nothing less is at stake here. Indiana law requires that the costs of sewer projects be “apportioned equally among all abutting lands.” Ind. Code §36–9–39–15(b)(3). The City has instead apportioned the costs of the Brisbane/ Manning project such that petitioners paid between 10 and 30 times as much as their neighbors. Worse still, it has done so in order to avoid administrative hassle and save a bit of money. To paraphrase A Man for All Seasons: “It profits a city nothing to give up treating its citizens equally for the whole world . . . but for $300,000?” See R. Bolt, A Man for All Seasons, act II, p. 158 (1st Vintage Int’l ed. 1990).

Our precedents do not ask for much from government in this area—only “rough equality in tax treatment.” Allegheny Pittsburgh, 488 U. S., at 343. The Court reminds us that Allegheny Pittsburgh is a “rare case.” Ante, at 14. It is and should be; we give great leeway to taxing authorities in this area, for good and sufficient reasons. But every generation or so a case comes along when this Court needs to say enough is enough, if the Equal Protection Clause is to retain any force in this context. Allegheny Pittsburgh was such a case; so is this one. Indiana law promised neighboring homeowners that they would be treated equally when it came to paying for sewer hook-ups. The City then ended up charging some homeowners 30 times what it charged their neighbors for the same hook-ups. The equal protection violation is plain. I would accordingly reverse the decision of the Indiana Supreme Court, and respectfully dissent from the Court’s decision to do otherwise.

Print this transcript Transcript: 

ORAL ARGUMENT OF MARK T. STANCIL ON BEHALF OF THE PETITIONERS

Chief Justice John G. Roberts: We will hear argument this morning in case 11-161, Armour v. City of Indianapolis.

Mr. Stancil.

Mr. Stancil: Mr. Chief Justice, and may it please the Court:

The city chose a method for abandoning its sewer funding mechanism that left Petitioners paying 30 times more than their next door neighbors to connect to their neighborhood sewer project simply because Petitioners had paid their tax bills in full.

Mere timing of payment does not render similarly situated taxpayers into similar groups.

And that is particularly true here where the taxpayers are a discreetly defined group of homeowners sharing equally in a common specific benefit and State law specifically defines them as similarly situated.

The city's principal contention is that jettisoning the Barrett Law, they waived a fundity of initial taxation, was itself an end for this justification and itself justified the gross disparity imposed on Petitioner -- on Petitioners.

That does not.

The fact that an arbitrary classification may yield a desirable result does not render it any less arbitrary.

The city must have a reason for drawing the distinction; but paying ones taxes in good faith does not equal treatment.

Indeed State law here makes clear that delaying payment by choosing an installment plan does not put a taxpayer on special footing.

For example, the Barrett Law declares that installment payments

"shall be collected in the same manner as other taxes. "

and installment payments are automatically secured by a lien against the property.

Taxpayers who select the installment plan, which they may do for any reason or no reason whatsoever; and in fact, if they make no choice, they default into the installment plan.

They are required, if the city asks as it did here, to sign an agreement, agreeing to pay the installments in full with interest and not to contest the validity of the underlying assessment.

Justice Sonia Sotomayor: Counsel, I understand your arguments.

Your adversary raises a point that concerns me, which is what happens to all other amnesty programs like parking ticket amnesties?

And if you take your logic to an extreme, how about something that doesn't involve money but immigration status amnesty, illegal aliens who can apply for citizenship and be forgiven their illegal entry?

Doesn't the logic of your theory basically mean that there are no circumstances in which the government could treat people differently?

Mr. Stancil: No, Your Honor, for several reasons.

For starters, this Court's equal protection and rational bases cases in particular make clear context is key.

So forgiving a penalty imposed on a speeder, for example, who has an overdue ticket or parking ticket is qualitatively different judgment than forgiving the underlying tax liability broad--

Justice Sonia Sotomayor: Every time a police officer stops me for a traffic violation, I get angry when he lets somebody else go.

So you are suggesting that there is a difference between that and this case where the government is basically saying, you owe me something and I'm going to forgive you what you owe me?

Mr. Stancil: --Yes, Your Honor.

The Chief Justice's opinion in Engquist took that specific example on, not with you in mind presumably, but took that example on specifically and it said: This is the kind of action itself that is inherently a subjective individualized determination.

It's not irrational to pull over one traffic violator and not another because that's the nature of the enforcement action.

That is qualitatively different from a tax imposed on 181 homeowners who live next door to each other, and then 12 months later saying, you know, 31 of you are going to pay 30 times as much in reality as the other 150, even though--

Justice Stephen G. Breyer: I thought there were a lot more than 20 different lots.

20 different -- I mean, what's your view of how the cutoff should work?

Do they have to refund all the money, everybody who, in fact, ever paid a Barrett Law assessment?

Mr. Stancil: --No, Your Honor, and State law on this is quite clear.

Justice Stephen G. Breyer: I don't care what the State says; I'm saying a matter as a constitutional law.

Mr. Stancil: Well, constitutional law looks to State law.

That's what we took out of Allegheny Pittsburgh v. Nordlinger.

Justice Stephen G. Breyer: Okay.

Mr. Stancil: But I will back up.

I'll do it both ways, Your Honor.

State law says the following taxpayers are similarly situated, your project specific to your neighborhood because those are the people to whom you are guaranteed -- with whom you are guaranteed equal treatment.

It is not that you are entitled to a certain price for a sewer connection under this law.

It's--

Justice Stephen G. Breyer: Well, why in the State, when they have let's say, 10,000 people who have already paid their assessments -- well, why doesn't it have to give them back their money, on your theory?

That's my simple question.

Mr. Stancil: --Because they are not similarly situated.

Because--

Justice Stephen G. Breyer: Why aren't they?

Mr. Stancil: --Because your -- the States have flexibility to define at the outset who is similarly situated.

Justice Stephen G. Breyer: Okay.

Fine.

They define here who is similarly situated, and the people who aren't are the ones who are on the installment plan.

Mr. Stancil: No, Your Honor, but they have a basis for stating that.

They don't just--

Justice Stephen G. Breyer: They do.

They do.

The reason is because they think it's unfair to give the people -- they think it's unfair -- they don't want to bother collecting it from those people who haven't paid yet.

Okay?

That's why.

And they don't see a way, if you -- so if we are going to free them, we don't want to go back into history and then suddenly give back all the people whoever paid their assessment.

I mean, so we draw the line somewhere.

Mr. Stancil: --Your Honor--

Justice Stephen G. Breyer: This is where are we drawing it.

That's the State law.

What's wrong with that?

Mr. Stancil: --That's not what this Court's cases say.

It's not the fact that you need to draw a line somewhere.

I will take the case that Respondents rely on heavily FCC v. Beach--

Justice Stephen G. Breyer: I mean -- My point, I'm not making it clear.

My point is that what is less rational about saying, if you paid, too bad.

We are having an amnesty for the future.

What's less rational about that than saying some of the people who paid in full will get their money back and some will not.

Which is the line you want to draw.

Mr. Stancil: --No, Your Honor.

I'll back up again.

So, we do have a specific definition of who is and who is not entitled to equal treatment or roughly equal treatment.

So that's under State law.

So they already committed to who is and who is not similarly situated.

All you need to decide in this case and this is broad as in homeowners on these people who are promised you will pay the very same as your next neighbor that you will pay the same amount for the this pipe that you will flush your toilet into.

Are they going to change their mind and say you are going to pay 30 times as much?

Justice Ruth Bader Ginsburg: Mr. Stancil, who are these people?

We have plaintiffs in this suit and there was a judgment in the court of first instance in the appellate court, for a dollar amount, but we're told there are many more of these Barrett Law projects, and that they all operate the same way.

So the result is a lot more money than these plaintiffs are claiming, is that not so?

If your position under the law is right?

Mr. Stancil: If we are correct, the city will end up paying a little more than in our specific case but I would like to explain why and how much because it's an important distinction.

There are about 21 Barrett Law projects that still have balances outstanding many of them are almost paid off.

So there are only three that have the 30-year option.

The rest have of the 10-year option.

Anything from 2001 prior.

So in fact I can give you specific numbers.

There are 7 projects that are less than -- that are half paid off or less than half paid off.

Because of the equal protection violation is only triggered by gross disparity between similarly situated taxpayers the city may or may not have to refund in each project down the line.

If you are nine out of ten.

Justice Elena Kagan: That counts as a gross disparity?

Mr. Stancil: I don't think that counts as a gross disparity.

Justice Elena Kagan: Well, what does is my question.

How -- how do you separate a gross disparity from a non-gross disparity.

Mr. Stancil: Well, start with this case, which is easy.

It's 10 to 1 and 30 to 1.

It's the same numbers in Allegheny Pittsburgh.

But even if you drew 4 to 1 or 5 to 1 as a line, as the Court has done, say, in punitive damages cases where it suggested outer limits, that -- I think those are easy lines to draw, and certainly lines that the lower courts could draw.

Justice Antonin Scalia: If -- if you win, does -- does the city just have to give you enough to bring it down to 5 to 1 so it's no longer a gross disparity?

Mr. Stancil: I don't think so, Your Honor.

I think triggering -- the gross disparity triggers the violation.

And the question is, well, what's the remedy for a violation?

I think they'd have to have a reason for saying we're going to with -- it would be the very definition of arbitrary to say well, even though you are entitled to equal treatment as a matter of law, you know, and even though we're not -- it's not -- liability isn't triggered except for gross disparities, I think they would have to give us that -- that figure.

And, Your Honor, if I could, I'd like to get back, Justice Ginsburg, to your question about how these other projects -- there's a suggestion by Respondents that there's a terrible line drawing problem in how do we calculate these benefits.

It's simply not the case.

We have this Federal class action in the Cox case, which is every other Barrett Law project that's active except ours.

We opted out.

The damages question was before that Court, because -- because the Court ruled in favor of the position that this is an equal protection violation.

The city put together a damages pleading, and it -- and it produced to the dollar a calculation of every overpayment in every Barrett Law project.

Justice Stephen G. Breyer: But that isn't the administrative -- the administrative -- well, maybe that's one.

The administrative problem is, I thought, the following: Imagine that you are the city mayor.

All right?

And suppose the mayor does what you want.

The mayor says I'll give all these people in their project back their money.

The next day in my office, there show up 15 people who say, last month, we happened to be in project 2, and we paid all our money.

Why don't you give us back our money?

You just gave it to the people in project 1.

Give it to us.

And the next day after that, there are 14 people from project 3 and from project 4.

What is your answer to those angry taxpayers who have said: We don't understand why you refunded the money from project 1 but not for us.

What's your answer?

Mr. Stancil: Two reasons.

One, you are not promised equal treatment under State law to those other projects; you were promised equal treatment with the people you live next door.

Two, you use a different pipe.

These pipes cost different amounts of money to put in different places, and they're done over time.

Your Honor's hypothetical -- actually, if I could tweak it a little bit -- it -- the question is not who comes in for somebody -- who comes in from a project last month.

The burning question is who comes in from a project 11 or more years ago, because those are the only ones that'll still be in repayment.

The Cox -- if we win -- well, there's a repayment plan.

That's the only thing that creates this -- this asymmetry.

The only people who are going to come in and say well, you refunded some people on my project but not me are people in repayment, so it's only going to be from a project '95 and forward.

Justice Sonia Sotomayor: You see, the problem that I have is that you're trying to lop off half of the project, which is was what was the Barrett project -- without looking at what the new project is.

And that goes to what Justice Breyer's point was.

Moving forward, every old project and every new project is going to pay more money than they did under the Barrett Law, because I think, if I understand correctly, the city is raising a -- essentially not a flat fee, but a fee -- assessing a flat fee across all taxpayers so that these sewer lines can be built.

Am I correct about that?

Mr. Stancil: No, Your Honor.

For future sewer projects that they start, each person who connects to that new pipe pays a $2,500 flat fee.

Every resident citywide who uses the municipal sewer -- new, old, or whatever -- pays an extra about $10 a month under the new system.

So what they did is they decided this program, the Barrett Law, is politically very unpopular; we would like to get rid of it.

Fair enough.

But they chose a way to do it.

They said well, we're going to be completely ignorant of--

Justice Sonia Sotomayor: But it -- but it says that new people are going to pay a flat fee.

Old people are going to pay $10 more a month that they didn't have to pay.

Mr. Stancil: --Right.

Justice Sonia Sotomayor: And so why can't they come in, and why don't they come in and say exactly what Justice Breyer said: You forgave the payments of taxes for hooking up to the sewer system of these new people coming in.

You're treating me differently.

Mr. Stancil: They should -- there's nobody who will pay more under the new system than my clients, because the new people pay $2,500 and the same monthly fees that now every Indiana resident pays.

Justice Sonia Sotomayor: Well, so everybody else says I want to pay $2,500.

You're still not dealing with the fact that this was one decision tied to others.

It was a package deal.

And so that the rationality of this package deal has to be seen in context.

You want to lop it off and say, all I'm looking at is how much these taxpayers paid for this old system, not what the new system is creating.

Mr. Stancil: But that's because under this Court's equal protection cases, they have to have a reason for this particular line.

They can't say we have a general objective and it doesn't matter if we pursue it--

Justice Stephen G. Breyer: I might have missed a fact which -- which I'd like to know.

Let's call your project, project 1, all right?

And all the others are 2 through 20.

Are there any people in projects 2 through 20 who still have money outstanding, or are they all paid off?

Mr. Stancil: --Yes.

They have -- they're in various states of repayment.

Justice Stephen G. Breyer: They're in various states.

Okay.

What happened to the taxpayers who still owe money in projects 2 through 20?

Mr. Stancil: They all got refunds -- or their balances were completely forgiven.

Justice Stephen G. Breyer: Okay.

So it's the same.

So now, the people for the angry taxpayers in projects 2 through 20 show up at the mayor and say, mayor, you're not only -- you only -- you're not only -- under your system, you not only gave the all-paid-up people back, if you win, but you also forgave the future people in 2 through 20, and you're not giving us our money back.

Mr. Stancil: Look -- let me make clear, 2 through 20 are--

Justice Stephen G. Breyer: Am I arguing the facts?

Mr. Stancil: --I'm not sure.

I want to make sure I understand that -- that fact.

2 through 20 are actually older projects--

Justice Stephen G. Breyer: Yes.

Older projects.

Mr. Stancil: --So they owe less money.

And -- and they come into the mayor and they say: Where's my money?

I paid in full.

I paid my--

Justice Stephen G. Breyer: Right.

Mr. Stancil: --9,000, but Joe over here got his last $1,000 forgiven.

Here's what the mayor says.

Justice Stephen G. Breyer: Yes.

Mr. Stancil: The mayor says, I talked to my lawyers.

If it's a grossly disproportionate burden.

So, if you end up paying grossly disproportionately to your next-door neighbor, because that's what Allegheny Pittsburgh and Nordlinger and all the Court's cases say, then I'm entitled -- I have to give you a refund.

But, if you end up paying 10 percent more than the other person to connect to this pipe, that's just not an--

Justice Antonin Scalia: I think -- I think that Justice Breyer is suggesting that if you treat unconstitutionally a whole lot of people, you can get away with it.

[Laughter]

Justice Stephen G. Breyer: Oddly enough, I was not suggesting that.

[Laughter]

Chief Justice John G. Roberts: Counsel, some -- some time ago, I thought you were just about to tell us how much money the city says will be at stake if you prevail.

Mr. Stancil: --In my case, there's $273,391.63.

In the Cox case, $2,783,702.59, on the assumption that all of those people are grossly disproportionately burdened.

Chief Justice John G. Roberts: And -- the city says that's the total amount that's at issue if you prevail, if the taxpayers prevail on this claim.

Mr. Stancil: That's -- that's what it said in Cox.

Yes, Your Honor.

Justice Samuel Alito: Could the city cure the problem by rescinding the forgiveness for those who paid under the installment plan?

Mr. Stancil: No, Your Honor.

Justice Samuel Alito: Why not?

Mr. Stancil: This was specifically addressed in Allegheny Pittsburgh.

That's exactly what the West Virginia Supreme Court said.

They said, well, if you have any remedies -- only to raise the taxes on other people.

And this Court specifically rejected that.

Justice Antonin Scalia: You wouldn't have any incentive to bring a lawsuit if that were the remedy, would you?

Mr. Stancil: Right.

I'm already unpopular--

Justice Antonin Scalia: So effectively--

Mr. Stancil: --I'm unpopular in Indianapolis as it is.

If I went back and just raised everybody's taxes, I'll -- I'll never get to go home.

[Laughter]

But, again, this -- and that's just the practical reality.

Justice Ruth Bader Ginsburg: Why isn't that a choice for the legislature?

Because everybody could be treated equally by getting their money back, or nobody gets out from under the old system.

So why shouldn't that be -- the decision is you can't treat these two groups of people differently, so I think the Court has said in a number of cases you can equalize up or down as a legislative choice.

Mr. Stancil: It was a legislative choice, Justice Ginsburg.

But having now made a choice that inflicts a constitutional violation, this Court's cases are clear.

The correct and the default rule is refunds, because -- for exactly the reason Justice Scalia raised.

Even if it's possible to go back and do that, which -- it isn't always the case -- but even if it's possible, that just means the equal protection cases and tax cases don't get brought, because the most you can hope to get is--

Justice Elena Kagan: Mr. Stancil, if that's right, and let's take a case which is different from the one that -- that you're saying.

Let's take a case where there are many, many, many more open projects, involving much, much more costs than you are saying is true here.

And the mayor looks at this and says, you know what, unless I can just draw the line here, I'm not going to be able to change this financing system.

Either -- unless I can draw the line here, or unless I can say nobody gets any money.

What's a mayor to do?

Mr. Stancil: --Well, again, I agree with Justice Scalia that making a big mess isn't a justification for arbitrarily ending it.

Justice Elena Kagan: Well, but I -- I guess what I'm asking is, we have this terrible program; everybody hates it; it's not fulfilling its intended purposes; the mayor and everybody else wants to change it.

How is the mayor going to change this program now.

Mr. Stancil: There are two ways he could have changed this program.

One, he could have offered us refunds.

Two--

Justice Elena Kagan: I'm suggesting--

Mr. Stancil: --I know--

Justice Elena Kagan: --that that is financially prohibitive.

Mr. Stancil: --I will pay for it then, because he can go and he could -- he could have done two things here.

They could have -- and I'm using the mayor loosely; it's actually the board of public works and the city-county council.

But he could have increased that monthly fee under the new program.

There actually -- these sewer projects still cost the same.

Justice Antonin Scalia: --Have we ever decided an equal protection case on the basis that the -- the State who had violated the -- the Constitution can't afford to pay for it?

Is there any case that supports that?

Mr. Stancil: No, Your Honor.

Justice Antonin Scalia: It's just too expensive?

Mr. Stancil: No.

Justice Antonin Scalia: And, therefore, we have to deny equal protection?

Mr. Stancil: No, Your Honor.

And I--

Justice Elena Kagan: Well, isn't that what you are saying, Mr. Stancil?

Is what you are saying that when cities create tax policy, they can't think about the budget implications of that tax policy?

Mr. Stancil: --No.

Your Honor.

What I'm saying is when they want to change tax policy, having already said these taxpayers are the same and entitled under law to equal treatment, they can't just say it would be too expensive on us to treat them equally when unwinding that program.

This Court in Plyler has said resources are not sufficient.

And any tax case could be justified.

If the -- if the city says, well, you know, we want to have -- we want to refund X dollars to our taxpayers, but we only have enough to refund to -- to the blonde people and not to brunettes, that's arbitrary, even if they couldn't afford to do it other ways -- another way.

So they can't just pick a method that sort of where the math works out or is convenient, and just say well, that's the way we could have done it.

I would, if I could, just return to the practical ways they could have done this.

And I think that highlights just how arbitrary this line was.

They could have increased those monthly fees under STEP, the new program.

I mean, that's how they paid for the rest of these projects.

They are paying off the bonds of the old projects by charging everybody in Indianapolis $10 more a month.

They could have just collected -- in our project, they could have collected for 2 more years.

They could have said you will be forgiven -- I think it's about 27 months.

We are going to forgive your balances as of, you know, whatever that would be -- June of 2010, whatever it would be.

Or 2007 -- collected that money, and then they would have had the cash to refund to the people who had paid an inequal amount that they were forgiving to the others.

So I think -- I think that's sort of, it's a red herring to say gosh, we had no other way, or we only had these options A, B, and C.

I'd like to -- I really want just to drill down on an illustration of just how crazy I think this is.

Suppose if the United States decides tomorrow to go to a national sales tax instead of the Federal income tax.

It's February 29th; millions of people have paid their taxes for 2011; many, many -- most of us have not yet paid.

Could the IRS come in and say, well if you have already filed and paid your taxes for 2011, too bad.

But lucky you, if you are a late filer, you are going to get your entire tax bill forgiven?

I don't think that is remotely close.

I think that is arbitrary, and I will give you a couple of reasons.

One, absolutely no notice.

So the timing of payment, the method of payment that was selected, gives those taxpayers absolutely no notice as to some constitutional significance that attaches to it.

And I don't think -- and I can tell you from talking to my clients, they don't -- they didn't think that by paying upfront in full that they had -- they were somehow sacrificing their chance to equal treatment.

Or that the city might some day wipe out 97 percent of their neighbors' tax obligations.

Justice Sonia Sotomayor: That is the park -- parking amnesty example that you have said wasn't the same.

Because if an individual taxpayer has filed late, it's like the parking guy who didn't file his ticket, either.

Mr. Stancil: Well--

Justice Sonia Sotomayor: So you really are saying that amnesty programs are out of the question if the risk is imposed equally on everyone.

Mr. Stancil: --No, Your Honor.

In the parking ticket example, forgiving a penalty for late payment is a qualitatively different -- to borrow from Engquist again, "a subjectively individualized determination" designed to achieve another goal, a legitimate goal in itself.

Pay your parking ticket, and we will let the penalty go.

That is different.

So if my clients were here saying, well, you're not charging me--

Justice Sonia Sotomayor: No, but you are saying if you forgive the parking ticket, that's an equal protection violation.

Mr. Stancil: --No, Your -- I mean, I would not, Your Honor.

Again, it's context-driven.

The parking--

Justice Stephen G. Breyer: The goal here is very simple.

They say we have hundreds or dozens or 20 different programs anyway, and once we start getting into the business of distinguishing among people who are already paid up, it's going to be a nightmare.

And so the only clear line we draw is between the people who are already paid up and the people who haven't paid.

And we don't want those people who haven't paid to have to pay, because that's going to be another 20 years of administrating $33 a month.

Okay.

That's their rationale.

Now that may not be perfect, but it sounds reasonable, doesn't it?

What's wrong with it?

Mr. Stancil: --It's not, Your Honor.

And I will say--

Justice Stephen G. Breyer: It's not their rationale, or it's not perfect?

Mr. Stancil: --It's not reasonable, Your Honor.

It rests on the faulty premise that this is some administratively--

Justice Stephen G. Breyer: It's not impossible.

They don't say it's impossible.

Say, try looking through the U.S. tax code.

It has thousands of pages.

There is not one human being alive who understands every provision.

All we have to do is start comparing the provision on page 1 with page 3 with page 7 and page 9, and we will discover irrationality forever.

So I don't -- I mean, you may have this fairly simple case but I foresee, if you win, the -- don't ask me what will happen, but I have a suspicion it's not going to be too good.

Mr. Stancil: --Your Honor, I mean -- there's one -- there's somebody not here in this case that I think belies this notion--

Justice Stephen G. Breyer: Right.

Mr. Stancil: --That this is going against the tax code broadly or amnesty forgiveness decisions generally.

If -- if -- I think if people really thought that this case was going to foul up the tax code of forgiveness, I think the IRS would be here or the United States would be here saying, this is very similar to what we do on a daily basis in compromising debt--

Chief Justice John G. Roberts: Is there an easier thing to administer than the system that was struck down in Allegheny Pittsburgh?

Mr. Stancil: --No, Your Honor.

Chief Justice John G. Roberts: When you paid, that's what your assessment was.

And they argued well, this is easy; that's enough.

And this Court said no; it's an equal protection violation.

Mr. Stancil: Correct, Your Honor, and again, the administrative burden there was actually quite significant.

Justice Antonin Scalia: You don't believe in the administrative nightmare exception to the Equal Protection Clause?

[Laughter]

Mr. Stancil: Not when it takes only three pages.

Justice Anthony Kennedy: Can you tell me -- I'm curious to know, if other States have provisions like the Barrett Law and they are concerned about this, can they provide in the initial documents a -- a promise that there will be no forgiveness, so that there would be a contract clause sort of argument against what happened here?

In other words -- and if we could explore that for just a minute, I'm going to ask what it is that you thought constituted a promise in this case?

Mr. Stancil: Well, there are four--

Justice Anthony Kennedy: And maybe not a promise in the contract sense.

Mr. Stancil: --Yes.

Four separate provisions of the Barrett Law -- just -- I will rattle them off for you.

First, it says installment payments shall be collected in the same manner as other taxes.

It actually says "shall collect" two other times.

Requires a lien.

It says that municipal officials who don't collect installment payments can actually be held personally liable and removed from office for failing to discharge their duties.

That's on pages 2a to 3a of the appendix to the blue brief.

So I don't think there is any sensible way to read the Barrett Law as saying it doesn't require payment, and none of the State court judges who have looked at this have suggested that.

And--

Justice Anthony Kennedy: On the other aspect of my case, do you think other States could provide protection against this, in the event that you do not prevail here, and -- and put in the documents that -- that it is understood that a condition for your approving of this -- these sewers, will be that there will be no forgiveness?

Mr. Stancil: --I suppose they could, Your Honor.

I, again I'd argue that--

Justice Anthony Kennedy: Would that then be enforceable under the Contract Clause, do you think?

Mr. Stancil: --I'm not sure it would be under -- under the Contract Clause.

But could I flip it and suggest that if a State wanted to preserve its right to forgive willy-nilly, they could include a provision in their law that says by the way, if you choose an installment plan and we change our policy, there shall be -- you are not entitled to equal treatment with people who pay upfront.

Justice Anthony Kennedy: Give you a warning?

Mr. Stancil: Right.

And let's -- we will see who pays upfront under that system.

[Laughter]

If I can, Your Honor, again, I would like to reserve the remainder of my time.

Chief Justice John G. Roberts: Thank you, Mr. Stancil.

Mr. Clement.

ORAL ARGUMENT OF PAUL D. CLEMENT ON BEHALF OF THE RESPONDENTS

Mr. Clement: Thank you, Mr. Chief Justice, and may it please the Court:

In 2005, the City of -- the City of Indianapolis decided that it wanted to abandon its reliance on the Barrett Law, a program that had proved unpopular for financing public improvements.

In doing, so they decided to make a clean break and forgive the outstanding balances that were due under the Barrett Law program.

The alternative of maintaining those accounts and maintaining the tax liens associated with those accounts for nearly 3 decades was particularly unattractive.

Now the Petitioners--

Justice Samuel Alito: I think you've put your finger on the reason for this, which is that the city calculated that what it did would be more politically acceptable than treating the people who paid upfront equally on an economic basis with the people who paid in installment plans.

Now if that's the reason for this, is that rational?

Mr. Clement: --Well, Justice Alito, it -- it might well be rational.

I mean, sometimes things that make policy sense that the public likes also make good government sense; and in this context, what they wanted to do is they wanted to get out of the Barrett Law business.

That's the exact words--

Justice Samuel Alito: But what does that mean, they wanted to get out of the Barrett Law business?

Mr. Clement: --That -- can I put it very concretely?

I mean, before this -- you know, when they used to have the Barrett Law and used it on an ongoing basis, within the controller's office, they had a Barrett Law office.

They wanted to get rid of the Barrett Law office.

How do you get rid of the Barrett Law office?

You get of the obligation to continue to collect these payments for 30 years; you get rid of the obligations to keep all these files together and see whether you are in a position to enforce a tax lien.

Justice Samuel Alito: That really doesn't seem very complicated to collect payments that people have agreed to pay.

And if they didn't want to do it anymore, I bet they could have contracted that out for a very modest fee to any number of private entities that would have done it for them.

Mr. Clement: Well, Justice Alito, of course they could have continued to collect.

I think that's common ground here, which I think ultimately shows why this is a very curious equal protection theory, because if the city would have continued to collect these, added, you know, for 30 years then they agree, there is no equal protection clause problem at all.

Now, I think it's Justice Kagan was suggesting, if you now create a rule that says when they do forgive, they actually have to provide refunds and face equal protection clause violations, then in the future nobody is going to ever forgive.

What they are going to do in the future is, even though they are trying to move away from this policy, even though they are trying to get out of the Barrett Law business, they are going to be stuck.

Justice Anthony Kennedy: And so, I think maybe if you prevail in this opinion, we should say the principle we are adopting in this case is: Don't trust the government.

Mr. Clement: No, Justice Kennedy, I don't think that that's right.

But the fact that that's your reaction I think shows that this is not really an equal protection claim, and it's not really like Allegheny Pittsburgh.

Because as your colloquy with Mr. Stancil suggested, they would admit that af the government said, as part of the Barrett Law, look, we reserve the right to abandon the Barrett Law, and if we do so, we, you know, we may forgive installment payments.

If they said that, the equal protection claim would go away in their view.

Chief Justice John G. Roberts: Well, that's simply because, as we said in Allegheny Pittsburgh, the basis for considering the equal protection claim is the rights that you're given under State law.

In Allegheny Pittsburgh it says you have the right to be treated equally with respect to assessments.

And you weren't.

Here the law says you have the right to be treated equally, or whatever it is, the apportionment, and they weren't.

All that you're saying there is that State law gets to set the base.

And if the State law says, we don't treat people the same in extending sewer hook-ups, then that takes away your equal protection clause.

But it just sets the base.

Mr. Clement: Two differences, Mr. Chief Justice.

First of all, you know, there is no -- there is no real analog to Allegheny Pittsburgh, because Allegheny Pittsburgh is a one time in time case.

There the problem was that statute was very different.

It was facially neutral.

And it was being applied in an unequal way.

Nothing, not one word in Allegheny Pittsburgh suggests that if the State of West Virginia wanted to change its policy and adopt proposition 13 as the law of West Virginia, that it couldn't do so.

And that's the anomaly here.

This equal -- this equal treatment requirement they get, they get it from the Barrett Law.

That's the exact law that--

Chief Justice John G. Roberts: The change in policy -- the change in policy is from treating people equally to treating people unequally.

I don't see how the fact that they are changing that policy addresses the issue at all.

They're going from a system where everybody was subject to the same assessment to a system where some paid something and other people paid 30 times that.

Yes, it's a change, but it's the change that presents the problem.

Mr. Clement: --No, I -- with respect, I think it's the change that makes this case different from Allegheny Pittsburgh.

It's the change that makes this government action rational.

This would be a different case if they didn't change the Barrett Law program.

They just stuck by it and said, you know, we are going to forgive some people.

But here they decide they are going to -- they're going to abandon the very law that imposes, supposedly -- I'm going to talk about what State law really does.

It supposedly imposes this equal protection requirement.

That's the very law they want to move away from.

And this idea that--

Justice Samuel Alito: Other than political expediency and administrative convenience, I still don't understand what rational basis you claim there was for the distinction that was drawn.

Now maybe one of those is sufficient, but other than those two possible bases, I don't see another one.

Mr. Clement: --Well, you know, I count five, Justice Alito.

If you want to hear -- I mean, I'll go through them.

One is what I call making a clean break, having not to deal with the vestiges of the old program.

You may call it political expedience.

I don't think it is.

I think that's, you know, a good government concern.

The second is avoiding the administrative burdens of particularly the refund process.

And I think it's worth recognizing that -- you know, they say look, well, what could be simpler; just cut a check.

But to whom and for what amount?

I mean, if you are going to go back to close accounts, the first thing you are going to have to confront is what do we do with the people that have sold their house.

Well, I mean, you know, we have to figure out where they are now.

We have to figure out, I mean, do we--

Justice Samuel Alito: There is lots of reasons for not giving refunds, but what are the reasons for forgiving the debt that people agreed to?

Mr. Clement: --Well, okay.

But, if I could, they don't challenge the forgiveness.

So the reason that I'm trying to explain that there are rational bases for not giving refunds is because the challenge that is really brought here is to Resolution 101 and it's -- it's forgiveness without refunds.

Justice Anthony Kennedy: You don't dispute that the city would have that option if we rule against you.

Mr. Clement: Have the option what, Mr. Justice Kennedy?

Justice Anthony Kennedy: Not to forgive the unpaid balances.

The city has the option, I assume.

Mr. Clement: They certainly have the option in the future.

I think it's a dispute between the parties whether they have the option as a part of the remedy.

I would say, not to get ahead of myself, but to address the remedy, this is very different from Allegheny Pittsburgh.

And it has to be that one option is to simply invalidate Resolution 101.

I am not aware of any other area of the law where you can have a statute or an ordinance that draws an invalid distinction, and one remedial option is not to invalid -- invalidate the statute or the ordinance.

And that's the position.

Their position is, you know, if you would have put something in there that said we are not going to do anything, you'd be fine.

But having given forgiveness, and said we are not going to give refunds, you're stuck not only with the forgiveness but also with giving refunds.

Justice Anthony Kennedy: That's a big difference.

In one case there is an expectation and in the other case there isn't.

Mr. Clement: No, Mr. Justice Kennedy, because the expectation here is at the time of Resolution 101.

At the time of Resolution 101, I think it's common ground.

The city was under no obligation to provide forgiveness.

So if in 101, by providing forgiveness without refunds, they violated the Equal Protection Clause, why isn't the logical remedy for that to simply invalidate Resolution 101?

You receive forgiveness and everybody gets equal treatment.

Justice Antonin Scalia: Because you would eliminate all litigation on equal protection clause grounds if all that the Plaintiff is going to achieve is not any benefit to him but harming somebody else.

That's -- the classic case is the sex discrimination case, where a State had a drinking law which said that men could drink at the age of 18 but women at the age of 21.

And what happened in the lawsuit?

Did the court say, well, I guess -- I guess men won't be able to drink at 18.

No, that's--

Mr. Clement: No, I think what they said--

Justice Antonin Scalia: --They said that men would have to drink at 18, not that women will have to wait until 21.

Mr. Clement: --No, I think they said that was with respect--

Justice Ruth Bader Ginsburg: It could go either way.

Mr. Clement: --Exactly.

Justice Ruth Bader Ginsburg: It was up to the Oklahoma legislature.

They could make it 21 for everyone and 18 for everyone.

Chief Justice John G. Roberts: And the city retains that option in this case going forward.

The problem with your reality is you are dealing with a situation, you are saying well, here's a violation and the law can -- and what does the law do?

The truth is this is exactly 180 degrees away.

There is no violation and the law creates the violation.

Mr. Clement: Right.

The thing is--

Chief Justice John G. Roberts: I think you are dealing with an entirely different case.

Mr. Clement: --If the law that created the violation is Resolution 101, than the remedy in every other area of constitutional law, including sex discrimination, is clearly that the State has the option.

They can level up or they can level down.

The only case that's different is Allegheny Pittsburgh and the assessment cases it relies on.

But there is an important difference.

Justice Stephen G. Breyer: Then you are saying that the difference between the two classes is that if you continue to have the tax apply to the people who haven't paid it yet, there is a large administrative expense.

And if you -- an expense that does not exist in respect to the class that has already paid.

So the question, I would have thought in, our Court is whether that's a rational distinction.

And I think contrary to what was suggested, administrative expenses, of course, make a difference where the Equal Protection Clause is concerned, because they differentiate between the two classes, and trying to avoid an administrative expense is a rational reason, normally, for making the distinction.

Now, I mention that because I know -- what can -- does that bring to mind any authority which would be helpful, because there was a question that there is no such authority.

It makes sense to me, but is there some authority for that?

Mr. Clement: Sure, there is, Your Honor.

I mean, if you look to a number of places.

I would look to Carmichael v. Southern Coal where, you know, this Court is confronting a case where the State says, you know, we are not going to tax employers -- employers who are smaller than 8, because, you now, the game is not worth the candle.

And in a similar way here, they say we want to get out of the Barrett Law business.

We want to make a clean break, and they say, you know, we don't want to keep this office in the comptroller's office.

Justice Antonin Scalia: But here the State has defined the class.

That's the difference.

I mean, to say employers with less than 8 is a separate class, that's fine.

But -- but here, the State said, we're creating this class of -- of people who have to pay for sewer assessments.

And we're going to treat them equally.

That's what the law required.

Mr. Clement: I would have thought, Justice Scalia, that this was an equal protection case, not a contracts case, not a Winstar case, not an estoppel case.

If this was an equal protection case, the relevant time period would be the time period of the ordinance that's challenged, Resolution 101.

At that time, there is a difference already in real world fact between those who have paid in full and those who have outstanding balance and they are going to keep the city in the Barrett Law business for three decades.

Justice Antonin Scalia: So you are saying that any future law which -- which disregards an equal classification that a prior law established is okay?

So long as it's a future law that does it.

Mr. Clement: It--

Justice Antonin Scalia: There will always be a future law that does it.

Mr. Clement: --No, it -- it could be.

There still has to be a rational basis for it.

Justice Antonin Scalia: Yes.

That's what we are questioning.

Mr. Clement: Right.

But a rational basis is void.

You know, we have two sets of accounts.

Half of these accounts are going to be a nightmare to maintain.

We have an estimate from our comptroller, this is in the Cox litigation, but it's cited in one of the amicus briefs, we have an estimate from a comptroller that is going to cost $200,000 to upgrade and maintain this system.

We really don't want to spend that.

Now, if that $200,000 associated--

Chief Justice John G. Roberts: Excuse me.

I don't see the answer to Justice Scalia's question.

You are saying this would be a rational system going forward, but you also promised the people that they would be treated equally over a certain period.

When you start out it's not equal, because somebody pays $400 and somebody else pays 10,000, and -- but over the 30-year period, it's the same.

That's why it's equal in the beginning, even though somebody pays 400 and somebody pays 10,000, because they are going to pay the same over the period.

Then you lop off the period.

So you are not treating them equally, when you started.

You can no longer say, don't worry about the inequality, it will sort out in 30 years.

Now you can't -- you have no way of telling them why it's not unequal.

Mr. Clement: --With all due respect, Mr. Chief Justice, you are making this sound like it's an estoppel case, like it's a Winstar case.

It's not a broken promise case.

This is an equal protection case.

And the reason there is a rational difference at the time Resolution 101 is, is because that point time has passed and they are in an different position.

But I also do want to make clear that you will look in vain in the Barrett Law for this stern promise that no matter what happens, we will eventually collect the same amount from everybody.

What there is, is there is a requirement for equal assessment in the first instance -- nobody says that was violated -- and then, if you elected four installments, there is a provision that says you shall collect.

The irony of their position is they say it's perfectly okay for the city to break that promise.

It's perfectly okay to give forgiveness.

They don't have a quorum -- a quarrel with forgiveness.

They want forgiveness.

They just want to get some refunds, too, as a result.

Justice Samuel Alito: Well, they want forgiveness, but you outline correctly in your brief the fact that the city had three options.

One of the options was to hold everybody to what they understood when they signed up under the Barrett Law.

And I -- I do not understand how your administrative convenience argument fits in with the decision to forgive the debt of the people who agreed to pay on the installment plan.

When the city was collecting those payments was that a net loss, were the administrative costs of making those collections more than the amount of money that was brought in?

If not, then I don't see how administrative convenience justifies a rejection of that option.

Mr. Clement: Justice Alito, as I hear you, you have switched from rational basis to, it has to be, you know, a net -- unless we can show a net loss, we lose.

Why can't we make a rational judgment that there's a unique $200,000 cost associated with maintaining this program?

We don't want to maintain the program.

It's tremendously politically unpopular.

We have moved away from it.

We don't want to -- I mean, can you imagine the city--

Justice Samuel Alito: It's rational for a city to say that it costs us $100,000 to collect this money, and if we do collect it, we are going to bring in $500,000, so we don't want to pay the $100,000, so we are going to get rid of the program?

That's rational?

Mr. Clement: --It is rational, Justice Alito, because they have to maintain an office to do it.

That -- you know, think about the city, do you really think--

Justice Samuel Alito: If the net -- if the net cost -- if it's a net gain, what is the rationality of abandoning it?

Mr. Clement: --Because they want to get rid of the office; they want to get out of the business; they want to make a clean break.

Can you imagine the city 27 years from now trying to take somebody's home by imposing and then trying to enforce a tax lien based on a program that they walked away from 27 years earlier?

They would get laughed at.

They couldn't do that.

And if they can make that judgment in -- another way of thinking about it 10 years from now.

Okay?

They collected everything from the 10-year payers.

All they have got left are the 20-year payers, the 30-year payers.

They say, you know, this is ridiculous, it's still -- we are still taking in more money than it would cost, but it's ridiculous.

We want to get out of this business.

We have told the people--

Justice Samuel Alito: You put your finger on it.

They want to get out of the business.

What they have done is shift the cost of the sewers from a -- from a small group, a small interest group that is able to presumably exert some political power to -- to everybody.

They spread the cost around to everybody.

And everybody -- the ordinary person who has to pay a little bit more every month doesn't get all fired up about it.

That's what this -- that's what this is about, isn't it?

Mr. Clement: --No, it's not what it's about, the way you're describing it.

Maybe there's a takings claim for somebody to bring, but it's not an equal protection claim.

What you articulated would be exactly the same if there were a provision in the Barrett Law that said, by the way, if we ever get rid of the Barrett Law all bets are off, we might not collect--

Chief Justice John G. Roberts: There is a provision -- you said I would search in vein for this provision in the Barrett Law.

Mr. Clement: --Yes.

Chief Justice John G. Roberts: Well, I went and searched and 15--

[Laughter]

--15(b)(3) says: The costs shall be primarily apportioned equally among all abutting lands or lots.

Mr. Clement: Yes, that's the -- I -- I -- that's the provision I already mentioned about appraisals.

That's talking about the costs--

Chief Justice John G. Roberts: It says costs.

Mr. Clement: --The cost of the project when they are doing the appraisal.

When they are coming up with the cost for how much it's going to cost to stick the pipes in the ground, they have a law that it has to be divided equally among the lots.

That's an assessment, there is a specific provision.

You had can challenge the assessment if you don't like it.

Once you don't challenge it it's final.

There is two provisions in the Barrett Law that you won't search in vein for that talk about the interest of finality, which is yet another reason that justifies the differential treatment here between people who paid have in full, their accounts are closed and people who have ongoing outstanding balances.

Chief Justice John G. Roberts: Where -- where do I look to find that when they say the costs shall be apportioned equally, they are not referring to the costs, but they were referring to the assessments?

Mr. Clement: They are referring to the costs of the project, the improvement.

That will then be reflected--

Chief Justice John G. Roberts: The costs of the project are funded by the -- the sewer hook-ups, and some people pay 400 and some people paid 10,000.

Mr. Clement: --But it's the costs that are then reflected in the assessment on each lot.

And there's then a process for challenging that assessment on the assumption that the costs are allocated equally to each lot, and then when that's done, the finality provisions kick in.

And nobody says there was anything wrong.

Justice Anthony Kennedy: That just -- that just underscores the promise of the State or the city that all owners will be treated equally.

That just underscores the point that that was the understanding and the commitment.

Mr. Clement: With respect, that's not.

The -- the original idea is -- sure, you know, we are going to assess the costs of the project equally among everybody whose benefiting from the project.

And then we're going to have an assessment, and if the Barrett Law doesn't change, the assumption is everybody's going to pay the same amount.

I'm not here to tell you otherwise, but the point is, the Barrett Law, like most laws, doesn't have a clause that plans for its own demise.

It doesn't say, well, you know, if -- if we get rid of this law, we either will or will not enforce the installments.

And I think the question here is at a different point in time when they have made a different judgment.

We don't like the Barrett Law.

It's proven unpopular.

It's proven unwieldy.

It's not just popularity or political, it's that, you know, they were facing lots of low-income subdivisions with septic tanks, and, you know, they are forcing the prospect of trying to get people to pay $10,000 to improve a -- the sewer on a house that is worth $50,000.

They realize that's a non-starter.

We have got to get out of this business.

Chief Justice John G. Roberts: You just said it's not popularity.

In page 1 of your brief you say the Barrett Law method eventually proved to be politically unpopular.

Sounds like it's popularity to me.

Mr. Clement: It's just popularity.

You know, every once in a while the people have a point.

And it's not just they don't like something, it's the right to not like it.

And they are very much right to not like the law that says you have a $50,000 house and we are going to make you pay for a $10,000 sewer hook-up.

They were right to get out of the business.

Having done that I don't understand why they are saddled with a provision of law that exists in the old law that they are trying to get away from.

And just to be clear -- I mean, if you want to look at a case that I think shows you why the State law is not as equality ueber alles, as they are presenting.

Take a look at the old Indiana case called Allendorf, 176 N.E. 240.

That's a case where somebody in the project challenged the -- the assessment, said that's unfair, it's too much.

Other people paid in full.

The people who challenged it went to court.

They eventually settled with the city for a reduced amount.

Then later on the people who had paid in full went into court and said we are entitled to pay no more than those guys.

You know what the Indiana appellate court said?

No dice.

That doesn't work.

You basically -- you either waived your right and express waiver or if you paid in full, it's -- you know, too late, it's too late.

So the -- and this is -- with respect I think part of the problem with the Allegheny Pittsburgh, in particularly this extension of it, you are putting so much weight on the State law, and it gets you in this business of flyspecking the Barrett Law.

I mean -- you know, this -- I mean, Justice Thomas made this point very well in the Nordlinger case that there is an anomaly here, which is you looking -- supposed to be looking at Federal law and the violation seems to be tied to potentially a violation of State law.

If I could focus on that for a minute, because this is another really important difference between Allegheny Pittsburgh and this case, which speaks right to the remedy.

In Allegheny Pittsburgh, it's a facially neutral statute.

And so it would be an anomaly there to say that when there's a facially neutral statute, you're going to invalidate the -- the statute.

The statute's fine.

The problem is, you've been assessed at 100 percent, everybody else has been assessed at 50 percent.

The Court in that unique context says, you know, there's no obligation to go and sort of mandamus the assessor, to bring everybody else up.

You get to sort of go back to that level.

This is very different.

The challenge here, like in Nordlinger, is a challenge to a distinction drawn in a law.

Resolution 101, unlike the law in Allegheny Pittsburgh, is not facially neutral.

It draws a distinction.

So the relevant question is the rationality of that distinction.

Is it rational?

We submit there are multiple reasons why it is rational.

But if you disagree with me, the obvious remedy is to strike down the statute, or at least remand to the State court with express instructions that they have the option, which is exactly what happened in the sex discrimination cases.

And Justice Scalia, if you're worried about incentives and standing, look at Heckler v. Mathews.

Another sex discrimination case.

This exact issue came up.

And what the Court said is standing is based on your right to guarantee equal treatment.

Whether or not it's a pocketbook injury, you have standing if you're denied equal treatment.

Now, these guys may have been denied equal treatment on the assumption they're right.

But they can get equal treatment restored just as easily by Resolution 101 being invalidated in full as they can by getting an additional windfall by getting a refund.

And as Justice Alito--

Justice Anthony Kennedy: Well, why -- why is that -- why is that a big deal for us?

That's the law, you get your -- your choice.

Mr. Clement: --Okay.

But, I mean, that's a big difference, because that's different from what they're saying.

They're saying there's no remedial option.

They're saying we are stuck now.

We -- we have to give refunds.

That's the only permissible constitutional remedy.

And obviously, the city would prefer to get out of the Barrett Law business and to provide these forgiveness, but it would certainly be a lot better for the city if they would at least -- as the Court made clear, they had the option of levelling up or levelling down.

I do think, though, that gets to Justice Kagan's--

Chief Justice John G. Roberts: You -- you mentioned Heckler v. Mathews.

In Heckler v. Mathews, the Court said, quote:

"Ordinarily, extension of the withheld benefit rather than nullification is the proper course. "

Mr. Clement: --Yes.

Chief Justice John G. Roberts: So while it is true that you can cure a violation by levelling up or levelling down, ordinarily, extension of the benefit is the proper course.

And that's for the reason Justice Scalia gave, because otherwise, there would be no equal protection case brought.

Mr. Clement: If that were the rule, Heckler v. Mathews would have come out the other way.

The Court was -- you know, the Court--

Chief Justice John G. Roberts: Well, what wrong -- what did the Court mean when they said

"ordinarily, extension is the proper course? "

Mr. Clement: --Well, they were talking about a specific situation and a Federal law.

So I don't know why the rule would be the same.

And the sex discrimination cases are much more on point for purposes of this.

But they're also talking about a very specific context where you have a limitation on a benefit.

And the idea is, if you strike down the limitation, the default option is everybody gets the benefit.

This is different.

I mean, you know, really what Heckler is talking about is severability concerns.

There's no severability that works here.

Resolution 101, if you look at it, it doesn't say anything about refunds.

It simply says we're going to forgive the balances on the outstanding accounts.

If that's somehow impermissible, then the law goes.

There's nothing to sever.

There's nothing -- there's not one word in the statute about refunds, and that's different from the context where you have a general extension of benefits and you have similar limitations than a bank would have--

Justice Stephen G. Breyer: What -- what do you think would happen if the city says -- if it came out that way -- we really want to give refunds.

Or cut the loss.

We want to stop collecting the money, period.

Then to make it fair on this hypothesis, the city would have to go back and refund money.

To whom?

And how many?

Mr. Clement: --And -- and in what amount?

Justice Stephen G. Breyer: And you heard your -- your -- your friend try to -- make a distinction between this project, and you wouldn't have to give the money, he said, to every other person -- whoever back in 1850 or 1890 or whenever it was -- began to make Barrett Law payments.

But you would with this one.

Now, what -- I'd like a little comment on that.

Mr. Clement: Well, you're absolutely right.

I talked about the--

Justice Stephen G. Breyer: Right, because it's a question.

Mr. Clement: --Okay.

Then the answer is, it would be an administrative nightmare.

If I understand the question--

Justice Antonin Scalia: I don't understand that why.

I mean, people paid the lump sum.

Mr. Clement: --With respect to--

Justice Antonin Scalia: --if people come forward and say I'm one of the ones who paid the lump sum, I want a refund; and if somebody doesn't come and present such a claim, the city doesn't pay.

If someone does--

Justice Stephen G. Breyer: That's right.

Justice Antonin Scalia: --Surely the city has records.

Justice Stephen G. Breyer: Let me try to get my question, which is, I'm not -- I'm thinking this is project 1.

So certainly on the hypothesis, you have to pay back the people who already paid up for project 1.

But in your brief, you say there's project 2 through 20.

And is there in your opinion a basis for distinguishing all those people who have paid up in those projects, or would you have to give them their money back, too?

Now, you heard your friend's statement -- explanation of why you wouldn't have to give them the money back, and I want to get your response to that.

Mr. Clement: --Well, with respect, what I heard him say is we probably would.

And I think we certainly would as to most of the projects.

There might be a couple of the projects where the differences are so small that he would say there's no gross inequality there.

But as to most of the other projects, there's still substantial differences--

Justice Stephen G. Breyer: How many people does that involve, about?

Mr. Clement: --It involves -- I don't know -- I know the number of projects.

It's like 20 projects.

So I'm guessing it's at least 1,000 people.

And then of course, somebody's going to come in if we do that, as you suggested, and say wait a second--

Justice Sonia Sotomayor: Was his figure of $2 million accurate?

The stakes in the other case.

Mr. Clement: --The -- the stakes in the other case without interest I think are $2.7 million.

So, you know, I think the -- the ballpark figures are right.

Chief Justice John G. Roberts: When -- when you say "the other case", do you mean every other project?

Because that's what, a class action; right?

Mr. Clement: It -- it's a class action that tops the Federal litigation.

But still, that's not a -- that's not an insubstantial amount.

Of course, the relevant question is not, you know, are the damages a set figure after you've had litigation in Federal court.

The question is: what is the city administrator, at the time he has to decide whether he has a refund obligation, to do?

And, Justice Scalia, you said well, it's clear as mud.

I mean, did you listen to the answer about gross inequality?

What, are they supposed to run it through the gross inequality calculator that tells them well, you know, it's close, but it's not really -- there's not a discrete obligation?

I don't know -- I would not know how to advise them, as to which of the other 212 projects they owed a refund to, and which they didn't.

I would be at a complete loss.

And the reason--

Chief Justice John G. Roberts: Well, if everybody -- if everybody entitled to a refund came forward, it would cost you $2.7 million.

Mr. Clement: --No, actually it would -- plus this one.

So it would be a little over 3.

Chief Justice John G. Roberts: Okay.

3, $3 million.

And you say the real problem is the huge administrative costs in trying to figure out who you owe it to.

If it's that huge, all they do is -- who somebody comes forward, asks for a refund, verify that they are a -- you know, were a homeowner on the project, give them the refund.

Mr. Clement: Well, I mean--

Chief Justice John G. Roberts: The most it's going to cost is $3 million.

Mr. Clement: --Yes, in this case.

And the -- and the law you develop is not going to be limited to this case; it's going to apply in other contexts as well.

Heaven knows where it stops.

As I said, Allegheny Pittsburgh, it was at least limited to a particular context.

Now, I mean, I don't know why any city ever -- I mean, maybe this is the limiting principle -- that no city ever again will provide amnesty or forgiveness under any circumstances.

Chief Justice John G. Roberts: Amnesty -- I don't get -- amnesty is entirely different.

Amnesty is for people who did something wrong.

Nobody did something wrong here; it wasn't wrong to pay with installments.

So the amnesty -- don't apply.

Mr. Clement: But Mr. Chief Justice, it's -- it's the same principle.

I mean, I could certainly see some -- you know, suppose the city elects a laissez faire mayor, and says you know what, parking tickets, it's not worth the hassle; we are going to getting out of the parking ticket enforcement business, and we are going to forgive everybody their parking tickets.

If I had just paid my parking tickets I would be hacked off.

But I wouldn't feel like I had a Federal constitutional right to get my money back.

And that's the difference--

Justice Anthony Kennedy: What can you do with the hypothetical about the income tax and the sales tax?

So you don't pay any income tax if the sales tax had gone into effect.

Mr. Clement: --I think if they really got rid of the -- the Federal tax forever, I don't think there wouldn't be an equal protection violation.

I think there might be a different constitutional violation.

If you listen to him, the first thing he ticked off about why that would be so horrible, is there was no notice.

Well, that sounds like a due process concern to me, not an equal protection concern.

And that's really what's happening here.

When they transport Allegheny Pittsburgh from the context it arose in to this very different context, they are converting it from an equal protection case to something more like a Contract Clause case, or to a Winstar case, or something like that.

And not one word in that opinion suggests that once a State adopts a certain policy, that it's trapped.

It can't make a reasonable and rational transition away from that policy to a policy that better serves the citizenry.

And if it doesn't--

Justice Samuel Alito: Is there some identified or identifiable demographic difference between the two groups that either justifies or could on -- on a remand justify the different treatment?

Mr. Clement: --Well, I think the one -- I don't think there is a demographic difference.

I think the one concrete difference that really is a difference is from the city's perspective, they are looking at two groups all of whom are going to have to pay a new higher monthly fee; and I think they can a rational decision that says look, you know, one of these groups has to make two monthly payments to the city for sewer and water.

That seems a little crazy.

So why are we -- what we will do is we will just make everybody in the city in terms of or their ongoing payments to the city for sewer and water, we will treat them all exactly the same.

One fee.

Thank you.

Chief Justice John G. Roberts: Thank you, counsel.

Mr. Stancil, you have 4 minutes remaining.

REBUTTAL ARGUMENT OF MARK T. STANCIL ON BEHALF OF THE PETITIONERS

Mr. Stancil: Justice Alito, I want to just pick up right there.

What they are actually saying on these two monthly payments idea is that it's rational for somebody who's just who just paid $300, and now everybody pays an extra $10 a month, we don't want them to have to make their $30 a month Barrett Law payment having paid $300, and the extra 10.

My clients still have to pay the extra $10 a month, but we are out of pocket $9,300.

I think that is -- I think that is patently irrational, to say that -- that we are trying to help people who are out 300 bucks from having to pay an extra 30 bucks going forward.

Justice Elena Kagan: Mr. Stancil, here is what worries me about this case.

To me, this is a case about transition rules.

All legislation creates classes of citizens and some are -- and puts them all in a group, and says you are going to be treated in the same way as long as this legislation exists.

And then a legislature comes along and changes that piece of legislation, and different people are affected differently by it.

And to me what you are suggesting is that when that break is made and when that transition occurs, the -- I don't know how you would apply the rule that you were suggesting, which is that everybody in the former class has to be treated the same as a matter of transition policy.

Mr. Stancil: If you've promised equal treatment -- and we're talking about a -- this is a -- a specific case.

A specific commonly shared benefit among people who are indistinguishable on any rational basis.

They live next to door to each other; they flush into the same pipes; and they paid and were promised equal payments.

In that instance you -- then there has to be a rational method.

You have to treat them equally when you transition.

So there may be times where the city has promised and committed and there is no independent rational basis for distinguishing.

It's not that if we want to go forward and we want to tax blondes instead of brunettes, well, the fact that we are going to start doing that prospectively doesn't make that okay.

And moreover, this isn't prospective.

We are talking about an assessment historically imposed on the very same -- for the very same.

Justice Samuel Alito: Well, time is usually a rational reason for doing it.

If -- suppose everybody paid on the installment plan.

The city could say as of a certain date we're -- no more installment payments.

Then the people who paid up previously, would -- would they be -- would they have an equal protection claim?

Mr. Stancil: If we -- I'm sorry.

I thought--

Justice Samuel Alito: Suppose that there had never been the option of making the lump sum payment.

Everybody paid on installment plans over a 10-year period, and then the city decided January 1, 2012, no more installment plans; everything that is still due is forgiven.

That would be rational, wouldn't it?

Mr. Stancil: --Right.

Because we would all be treated equally.

Could I quickly get to the administrative nightmare?

In -- if you go to the Cox litigation and go on Pacer, and you pull up document number 98, you will find the city's filing in the Cox case, in which they give the name and address and amount of owed to every taxpayer under any of these 20 other Barrett Law projects.

This is -- I think it's -- I think it's ludicrous to say there is some Gordian knot that would have to be cut to issue refunds.

But more generally, I think this is part of the city's argument.

They say well, perfection may be difficult to achieve.

Well, so be it.

It always is; but that does not justify gross disparities and "anything goes".

You may want to make a clean break and go to a new system, fine.

But you have to do it in a way that treats the -- the same.

Justice Stephen G. Breyer: The argument isn't that it's expensive to administer as much as it is, there are 1,000 people in all these projects who are already paid up.

We don't have enough money to pay them all back.

That's why we don't want to pay them back.

At the same time, we don't want to collect the money for 30 years from these other people who aren't fully paid yet.

Mr. Stancil: Well, if that's the case--

Justice Stephen G. Breyer: The question is, I guess, is, is that rational.

Mr. Stancil: --No, Your Honor.

Simply sending in your tax bill -- again, if you sent in your taxes yesterday, are you "too bad, so sad"?

I don't think that is rational.

And I want to get back to reliance interest because -- I can't.

Chief Justice John G. Roberts: Thank you, counsel.

The case is submitted.

Print this transcript Transcript: 

Chief Justice John G. Roberts: Justice Breyer has our opinion this morning in Case 11-161, Armour versus City of Indianapolis.

Justice Stephen G. Breyer: The case concerns payments for sewers.

Before 2005, the City of Indianapolis typically and in this particular case paid for new sewer lines by assessing the cost against the individual property owner whom the new lines benefited.

Some paid the entire assessment upfront, others paid in installments.

Soon after completing the project now before us, the City changed its sewer financing system to one based on bonds, a change that spread the responsibility to pay for individual projects more widely throughout the City.

In the process, the City forgave all those old system sewer assessment debts that had not yet been paid, including all the installments not yet due, but the City did not refund any money to those who would already paid their assessments.

The petitioners in the present case are homeowners who had paid their sewer project assessments in full.

They point out that the City's forgiveness decision means that each of them will have paid about $9000 for a new sewer connection while identical homeowners, who chose installment plan payments, would have paid close to nothing.

This, they say, is basically unfair to the point where it violates a Federal Constitution's promise of equal protection of the laws.

We don't agree with that point.

In cases such as this one, essentially involving tax classifications, the Equal Protection Clause grants States broad leeway to draw lines that make distinctions.

The line satisfies the Clause as long as there is “any reasonably conceivable state of facts that could provide a rational basis for the classification”.

And there is such a reasonably conceivable state of facts here.

The City has created a kind of amnesty program.

Any such amnesty program requires line drawing among roughly similar groups of individuals.

And the City says that the line it has drawn in part reflects administrative considerations.

The line reflects the fact that after the financing system switch, it would be too expensive to maintain an administrative system for collecting and processing old debts not still outstanding while it cost nothing at all simply to keep the funds already paid, i.e., not grant a refund.

Indeed, to administer a refund program would simply increase administrative cost.

The weight to give these reasonably conceivable facts is a matter primarily for the City to determine.

We, in this Court, need only decide whether the resulting determination is rational and we find that line drawing, based upon these administrative considerations, is rational here.

Basically, for these reasons, as elaborated in our opinion and for others that we set forth, we conclude that the City's forgiveness program does not violate the Federal Equal Protection Clause and we affirm the similar conclusion of the Supreme Court of Indiana.

The Chief Justice has filed a dissenting opinion, in which he is joined by Justices Scalia and Alito.