American Trucking Associations, Inc. v. Goldstein

ELDRIDGE, Judge. We must decide whether, under the circumstances of this case, the circuit court erred in refusing to enjoin the enforcement of a Maryland tax statute that, according to both the circuit court and the State, violates the Commerce Clause of the United States Constitution, Art. I, § 8, cl. 3. ⁵⁸⁶ I. The pertinent facts are as follows. Under Maryland’s Road Tax on Motor Carriers Act, Code (1957, 1980 Repl. Yol., 1987 Cum.Supp.), Art. 81, §§ 412-429, all motor carriers 1 operating commercial motor vehicles 2 in Maryland must pay certain taxes and fees to support the State’s highway system.

One provision of the Act, § 423(a), requires that, for fuel tax reporting purposes, motor carriers must register their vehicles on an annual basis with the State Comptroller. For each vehicle thus registered, carriers obtain an “identification marker,” which must be displayed on the vehicle in accordance with the Comptroller’s regulations. Carriers must purchase a marker for each motor vehicle which they wish to operate in Maryland between January 1 and December 31 of any given year. As a result, the vast majority of markers are purchased in the several months preceding the beginning of the new year; however, carriers might also have to obtain markers during the course of the calendar year if, for example, they purchase new motor vehicles or begin operating in Maryland for the first time.

The annual fee for an identification marker is $25.00 per vehicle. 3 This flat fee applies to all vehicles using Maryland ⁵⁸⁷ roads. Thus, § 423(a) takes no account of the actual mileage that any particular vehicle travels in the State. 4 The plaintiff American Trucking Associations, Inc. (A.T. A.), is a national organization of motor carriers. Along with two individual trucking companies, A.T.A. was certified by the circuit court as the class representative of “all non-Maryland interstate motor carriers” that are subject to the marker tax established by § 423(a). On behalf of this class, A.T.A. maintains that, as applied to such carriers, § 423(a) violates the Commerce Clause.

The original defendants in this case are the state officials who are charged with the duty of collecting and administering the marker tax. In addition, because of their interest in receiving a percentage of the fees generated by § 423(a), 17 counties and Baltimore City have intervened as parties defendant. 5 In 1984, in an action substantially identical to the instant case, this Court rejected A.T.A.’s argument that § 423(a) unconstitutionally discriminates against interstate commerce. American Trucking Ass’ns v. Goldstein, 301 Md. ⁵⁸⁸ 372, 483 A.2d 47 (1984) (Goldstein I). In reaching that decision, we reasoned that § 423(a) applies equally to all carriers, regardless of whether their vehicles are registered in Maryland or elsewhere and regardless of whether they are engaged in interstate or intrastate commerce, Goldstein I, supra, 301 Md. at 386 , 483 A.2d at 54 .

Moreover, we remarked (ibid.)'. “The purpose of § 423(a) is not to protect local carriers against foreign competition; the purpose is to spread evenly among all commercial users the tax burden of supporting Maryland’s highway system.” A.T.A. had argued that § 423(a)’s “practical effect” is to discriminate against interstate carriers, who might tend to travel fewer miles in Maryland and thus pay a higher per-mile price for an identification marker than would intrastate carriers. In declining to accept this argument, we relied on a line of Supreme Court cases holding that flat taxes similar to § 423(a) do not violate the Commerce Clause. See Capitol Greyhound Lines v. Brice, 339 U.S. 542 , 70 S.Ct. 806 , 94 L.Ed. 1053 (1950); Aero Mayflower Transit Co. v. Board of Railroad Comm’rs, 332 U.S. 495 , 68 S.Ct. 167 , 92 L.Ed. 99 (1947); Aero Mayflower Transit Co. v. Georgia Public Service Comm’n, 295 U.S. 285 , 55 S.Ct. 709 , 79 L.Ed. 1439 (1935). On June 23, 1987, however, the Supreme Court overruled the above-cited flat tax cases and held that a Pennsylvania marker tax, which was somewhat similar to § 423(a), unconstitutionally discriminated against interstate commerce.

American Trucking Ass’ns, Inc. v. Scheiner, 483 U.S.-, 107 S.Ct. 2829 , 97 L.Ed.2d 226 (1987). In light of the Supreme Court’s Scheiner decision, A.T.A. filed this action in the Circuit Court for Baltimore City on July 1, 1987. A.T.A. sought a declaration that § 423(a) is unconstitutional, an injunction against future exaction of the marker fee, and refunds for identification markers purchased both before and after the date of Scheiner . A.T.A. has since relinquished any claim for fees paid before the date of Scheiner . ⁵⁸⁹ The defendants conceded that § 423(a) is unconstitutional.

Nonetheless, they pointed out to the circuit court that, in reliance on Goldstein I, the State had calculated its budget for fiscal year 1988 with the expectation of receiving $12,-000,000 in marker fees. Consequently, they argued that, in order to avoid imposing substantial hardships on the State and its political subdivisions, the circuit court should not enjoin enforcement of § 423(a) until the beginning of fiscal year 1989. On October 22, 1987, the court declared § 423(a) unconstitutional. In addition, however, the court accepted the defendants’ claims of detrimental reliance on prior law.

Consequently, the court permitted the defendants to continue collecting the marker tax through June 30, 1988, which was the last day of the fiscal year 1988. As a result of the circuit court’s decision, the defendants have been able to impose the $25.00 flat fee for all markers that were purchased for calendar year 1987, even if the tax was not paid until after Scheiner , and for the vast majority of identification markers that were purchased for calendar year 1988. A.T.A. appealed to the Court of Special Appeals, and, before further proceedings in that court, both parties petitioned this Court for a writ of certiorari. Because of the important issue presented, we granted the parties’ petitions.

II

As previously indicated, the defendants do not dispute that, in light of Scheiner , § 423(a) unconstitutionally discriminates against interstate commerce. This Court, however, would not hold a statute unconstitutional simply on the basis of a litigant’s concession. Nevertheless, under the Scheiner majority’s analysis of flat-rate highway taxes, it would seem clear that § 423(a) is inconsistent with the Commerce Clause. Although paying the marker tax affords both interstate and intrastate carriers the same privilege of operating to an unlimited extent on Maryland’s ⁵⁹⁰ highways, the Scheiner Court viewed this privilege as “several times more valuable to” intrastate carriers than to interstate carriers. 107 S.Ct. at 2847 .

Moreover, the Supreme Court made it clear that the $25 “unapportioned” marker fee is invalid {ibid.), and the Court overruled (id. at 2845-2847) the flat tax cases upon which Goldstein I had relied. See also Scheiner, supra, 107 S.Ct. at 2841 n. 17. 6 Therefore, as recognized by the defendant state officials, Scheiner had the effect of invalidating § 423(a). As previously pointed out, A.T.A. has abandoned any refund claim for marker fees paid before the date of the Scheiner decision. Furthermore, the defendants agree that, if the circuit court erred in refusing to grant an immediate injunction against enforcement of § 423(a), the plaintiffs are entitled to refunds for all marker fees collected after the date of the Scheiner decision.

Consequently, this case turns on the question of whether the circuit court acted correctly in delaying the effective date of its decision that § 423(a) was unconstitutional.

III

In support of the circuit court’s action, the defendants assert that A.T.A. seeks retroactive application of Scheiner ⁵⁹¹ and that the circuit court correctly applied the applicable legal standards in concluding that Scheiner should receive only prospective effect. In our opinion, however, the defendants’ argument evidences a fundamental misunderstanding of the principles governing the prospective or retrospective effect of judicial decisions. In the overwhelming majority of cases, a judicial decision sets forth and applies the rule of law that existed both before and after the date of the decision. In this usual situation, “where a decision has applied settled precedent to new and different factual situations, the decision always applies retroactively.” Potts v. State, 300 Md. 567, 577 , 479 A.2d 1335 (1984).

Thus, in the ordinary case, no issue of a “prospective only” application arises. See, e.g., Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 496 , 88 S.Ct. 2224, 2233 , 20 L.Ed.2d 1231 (1968); Houghton v. County Com’rs of Kent Co., 307 Md. 216, 220-221 , 513 A.2d 291 (1986), and cases there cited. When, however, a court overrules a prior interpretation of a constitutional or statutory provision, and renders a new interpretation of the provision, the question arises as to whether the new ruling is to operate retroactively or prospectively only.

Generally, in determining whether a new interpretation of a federal constitutional provision is to operate retrospectively, a court must assess the various factors set forth in Linkletter v. Walker, 381 U.S. 618 , 85 S.Ct. 1731 , 14 L.Ed.2d 601 (1965), and its progeny. See the discussions in Wiggins v. State, 275 Md. 689, 698-716 (majority opinion), 732-741 (dissenting opinion), 344 A.2d 80 (1975). See also L. Tribe, American Constitutional Law § 3-3, at 30-31 & n. 26 (2d ed. 1988). We have essentially followed the teaching of Linkletter v. Walker, supra, in deciding whether a new interpretation of a Maryland constitutional provision, statute, or rule, should receive retrospective effect.

See, e.g., State v. Hicks, 285 Md. 310, 336-338 , 403 A.2d 356, 370-371 (1979). ⁵⁹² Of course, when, under Linkletter v. Walker, supra, Wiggins v. State, supra, and State v. Hicks, supra, a new interpretation of a constitutional or legislative provision is to be given only prospective effect, a question arises as to what is meant by “prospective.” Generally, in these cases, a “prospective application” of a new interpretation of a constitutional provision, statute, or rule, has included the case before us and all other pending cases where the relevant question has been preserved for appellate review. See, e.g., McClain v. State, 288 Md. 456, 470 , 419 A.2d 369, 375 (1980). See also Potts v. State, supra, 300 Md. at 576-583 , 479 A.2d at 1340-1343 ; State v. Hicks, supra, 285 Md. at 338 , 403 A.2d at 371 . 7 But, regardless of what is meant by “prospective” and “retroactive” in the context of applying a judicial decision to events occurring before the decision, it is clear that, when a decision governs only operative events occurring after the date of the decision, the decision is being applied prospectively only. For purposes of a decision invalidating a tax statute, the operative event is not the formulation of a plan to spend future tax dollars; rather it is the actual imposition of tax liability.

See, e.g., Southern Pacific Co. v. Cochise County, 92 Ariz. 395, 406-407 , 377 P.2d 770, 778-779 (1963); Deltona Corporation v. Bailey, 336 So.2d 1163, 1165-1167 (Fla.1976); Perkins v. County of Albemarle, 214 Va. 416 , 200 S.E.2d 566 (1973); National Can Corp. v. Dept. of ⁵⁹³ Revenue, 109 Wash.2d 878 , 749 P.2d 1286, 1287 (1988); Ashland Oil, Inc. v. Rose, 350 S.E.2d 531, 536-537 (W.Va. 1986), appeal dismissed, 481 U.S.--, 107 S.Ct. 1949 , 95 L.Ed.2d 522 (1987). Therefore, in determining whether A.T.A. in fact seeks retrospective application of Scheiner , it is irrelevant that state officials prepared the fiscal 1988 budget with the expectation that the State would receive future revenues under § 423(a). Instead, the relevant factor is that the tax liability imposed on the plaintiffs generally did not arise until approximately January 1, 1988, more than six months after the Scheiner decision. Consequently, in requesting an injunction against such future enforcement of the marker fee statute, the plaintiffs clearly did not seek retrospective relief in any recognized sense of that term.

Nonetheless, the defendants rely on Lemon v. Kurtzman, 411 U.S. 192 , 93 S.Ct. 1463 , 36 L.Ed.2d 151 (1973) (Lemon II). In that case, the Supreme Court decided not to apply retrospectively a prior decision in which it had invalidated a state statute authorizing reimbursements to private sectarian schools which provided secular educational services. See Lemon v. Kurtzman, 403 U.S. 602 , 91 S.Ct. 2105 , 29 L.Ed.2d 745 (1971) (Lemon I). As a result of Lemon II, the state could reimburse the schools for secular services rendered before the date of the decision in Lemon I, even if the reimbursements were not actually made until after the date of that decision.

Invoking Lemon II, the defendants in the case at bar argue (brief p. 30 n. 28): “Just as the schools in Lemon I performed services, with the expectation of payment, ... the State and its political subdivisions planned their budgets and programs, with the expectation that revenues would be received from Article 81, § 423(a), prior to the Supreme Court’s decision in Scheiner . As the district court in Lemon II ordered that the schools receive their compensation for those services rendered before the Supreme Court struck down the statute in Lemon I, the circuit court below similarly ordered that the State be permitted to collect the tax ⁵⁹⁴ revenues previously anticipated before Scheiner was decided.” The defendants’ emphasis on “expected” or “anticipated” payments is misplaced. In Lemon II, the expected payments were for obligations arising before Lemon I, based on services performed before Lemon I. In the instant case, however, the obligation to pay arose after the Scheiner decision. Mere “expectations” alone cannot be the decisive factor as to whether a judicial decision operates retrospectively.

Otherwise, a state could continue to collect a tax for years after it had been declared unconstitutional if the state had previously planned on receiving revenues from that tax over the course of several subsequent years. 8 The Supreme Court in Lemon II simply chose not to apply its prior decision to destroy obligations—the schools’ claims for reimbursement—that had accrued before the date of that decision. By contrast, a bar to the enforcement of § 423(a) after the date of Scheiner obviously does not threaten to destroy any tax obligations that accrued before the date of Scheiner . To reiterate, the obligation in this case did not occur until after the date of Scheiner . Consequently, Lemon II provides no support for the defendants’ ⁵⁹⁵ position. 9 Rather, the defendants’ reliance on that case would have been justified only if the Supreme Court had permitted the state to continue to reimburse private, sectarian schools for services provided after the date of Lemon I. Similarly, the defendants’ reliance upon Ashland Oil Co. v. Rose, supra, 350 S.E.2d 531 , is misplaced.

While the West Virginia court in that case did order the payment of taxes after the United States Supreme Court had declared the relevant statute to be unconstitutional, the taxes at issue had been assessed before the Supreme Court’s decision. Thus, as in Lemon II, the Ashland Oil court simply ruled that the statute’s invalidity should not relate back to destroy obligations that arose before the Supreme Court had acted. As we have pointed out, however, A.T.A. does not now seek to avoid any obligation that predates Schemer.

IV

Having failed to show that A.T.A. seeks retrospective relief, the defendants also argue that a number of courts have delayed the effective date of a decision when administrative difficulties or fiscal hardship would follow from giving the ruling immediate prospective effect. See, e.g., Northern Pipeline Co. v. Marathon Pipe Line Co., 458 U.S. 50, 88 , 102 S.Ct. 2858, 2880 , 73 L.Ed.2d 598 (1982); Buckley v. Valeo, 424 U.S. 1, 143 , 96 S.Ct. 612, 693 , 46 L.Ed.2d 659 (1976); Brown v. Board of Educ., 349 U.S. 294, 300-301 , 75 S.Ct. 753, 756 , 99 L.Ed. 1083 (1955) (Brown II). See also Salorio v. Glaser, 93 N.J. 447, 467-468 , 461 A.2d 1100, 1111 , cert. denied, 464 U.S. 993 , 104 S.Ct. 486 , 78 L.Ed.2d 682 (1983); Hellerstein v. Assessor of Town of ⁵⁹⁶ Islip, 37 N.Y.2d 1, 14 , 332 N.E.2d 279, 287 , 371 N.Y.S.2d 388, 399 (1975),