US v. Clintwood Elkhorn Mining Company
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Authorship: This page is written and maintained by Stanford Law Student Alan Bakowski.
Disclosure: The law firm Akin Gump, which sponsors SCOTUSblog, represents the respondents in this case. Alan Bakowski is in no way affiliated with Akin, and he was not involved in this case.
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[edit] Briefs and Documents
REVERSED in an opinion by Chief Justice Roberts.
Docket: 07-308
Issue: Whether a coal company that did not meet the Tucker Act statute of limitations may seek a tax refund (with interest) directly under the Export Clause of the Constitution. (Disclosure: Akin Gump represents the respondent.)
- Opinion below (Federal Circuit)
- Petition for certiorari
- Brief in opposition
- Petitioner's reply
Merits briefs (via ABA)
- Brief for Petitioner United States of America
- Brief for Respondent Clintwood Elkhorn Mining Company, et al.
- Reply Brief for Petitioner United States of America
Amicus briefs
- Brief for Alliance Coal, LLC in Support of Respondent
- Brief for National Federation of Independent Business Legal Foundation in Support of Respondent
[edit] Argument Preview
[edit] Background
This case involves three companies’ efforts to obtain a refund of taxes they paid on coal exports after it was determined that the export tax was unconstitutional. The question presented is whether the companies may file their refund claims directly in federal court under the Tucker Act or whether they must follow statutory procedures with the IRS that provide a more limited remedy.
Respondents Clintwood Elkhorn Mining Company, Gatliff Coal Company, and Premier Elkhorn Coal Company paid excise taxes on coal exports until 2000, when the IRS acquiesced to a federal court ruling declaring the excise tax to be unconstitutional under the Constitution’s Export Clause, art. I, § 9, cl. 5. Barred by a three-year statute of limitations from seeking refunds for taxes paid before 1997, the companies applied to the IRS for a refund (with interest) of taxes paid from 1997-99. The companies also filed suit under the Tucker Act, claiming damages resulting from a violation of the Constitution. Because the Tucker Act has a six-year statute of limitations, the companies sought a refund (with interest) of taxes paid all the way back to 1994.
The Court of Federal Claims, relying on the Federal Circuit’s 2000 decision in Cyprus Amax Coal Co. v. United States, held that a violation of the Export Clause did create a cause of action under the Tucker Act. The court agreed that the companies were owed refunds, but it refused to award interest because it construed the statute allowing interest for tax refunds, 28 U.S.C. § 2411, as applying only to claims brought under the standard administrative refund scheme. The Federal Circuit affirmed in part and reversed in part, reaffirming its view that jurisdiction is available under the Tucker Act for Export Clause violations and interpreting the interest-award statute as applying to any claim for a tax refund. The Supreme Court granted certiorari to review these issues on December 3, 2007.
[edit] Merits Briefs
The United States as petitioner argues that the tax code establishes specific procedures for obtaining a tax refund; when, as in this case, a taxpayer fails to follow those procedures, he may not bring claims such as these under the Tucker Act. The government contends that the standard administrative refund scheme is so comprehensive and detailed that it was intended to cover any claim for repayment of unlawful tax, regardless of whether it could be brought “independently” under the Tucker Act or some other statute. This detailed remedial scheme, the government argues, displaces any more general remedy that might be found elsewhere.
The government principally relies on § 7422 of the Internal Revenue Code, which states in pertinent part: “No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected . . . until a claim for refund or credit has been duly filed with the [IRS].” That filing requirement, in conjunction with specific statutes of limitation and time periods for resolving refund claims, demonstrates that Congress intended to create an exclusive set of procedures for tax refund claims. The government cites two cases from last Term, EC Term of Years Trust v. United States and Hinck v. United States for the proposition that, when a detailed remedial scheme provides specific relief for a plaintiff, the plaintiff cannot use the Tucker Act’s more general provisions to obtain a more favorable outcome. The Tucker Act’s six-year statute of limitations should therefore be viewed as merely an “outside limit,” not an expansion of time to file a claim that would be time-barred if brought under another federal statute. In any event, the government asks the Court to resolve any ambiguity in its favor because waivers of sovereign immunity are to be construed strictly.
The government further argues that, in light of the statutory remedy in the Internal Revenue Code, there is no reason to imply a self-executing remedy under the Export Clause. The Court does not automatically imply freestanding damages remedies for every constitutional violation, particularly when other remedies are available and (unlike a Bivens action) no individual officer’s conduct would be deterred by the remedy. Because Congress may legitimately impose a statute of limitations on constitutional claims, the administrative refund scheme is an adequate remedy for Export Clause violations, and no independent cause of action should be implied.
Finally, the government argues that the Federal Circuit erred by allowing interest to be awarded on taxes refunded through the Tucker Act because the interest provision is part of the administrative tax refund scheme. The government thus contends that there is no clear statement that Congress intended to waive sovereign immunity with respect to interest paid for damages sought under the Tucker Act.
Respondents contend in their brief that this case is not an ordinary challenge to the misuse of Congress’s taxing power which can be remedied through the IRS’s tax refund scheme. Rather, it is a challenge to the imposition of an unconstitutional tax, and the Tucker Act specifically provides a remedy for constitutional violations. Respondents argue that the Tucker Act provides a better remedy for Export Clause violations, and there is no evidence that Congress intended to subject claims under the Export Clause to the burdensome delays and restrictions in the normal administrative tax refund scheme.
Respondents argue that the Tucker Act provides remedies for “money-mandating” constitutional violations, and the Export Clause mandates monetary compensation for its violation. They describe the Export Clause as “a unique and uniquely comprehensive preclusion of congressional tax power,” which by its historic design requires violations to be compensated. Respondents rely on United States v. U.S. Shoe Corp., a 1998 case in which the Court sustained jurisdiction in the Court of International Trade on the basis of an Export Clause claim, to show that the Export Clause gives rise to an action for relief. Respondents also compare the Export Clause to the Judicial Compensation and Takings Clauses, noting that they all protect purely pecuniary interests and can be remedied only through actions for damages. That independent cause of action cannot be eliminated by Congress.
Respondents further argue that the Tucker Act remedy has not been withdrawn by Congress. The administrative refund scheme does not displace the Tucker Act remedy, they contend, because it applies to “general” tax-refund claims and is not designed to handle the sui generis claim that taxes are facially unconstitutional under the Export Clause. Requiring respondents to adhere to the administrative refund scheme would allow Congress to impose significant restrictions on their rights to be free from unconstitutional taxes on exports. For example, the statutory remedy would only permit exporters to recover the amount of taxes unconstitutionally exacted; it would not allow claims for other damages resulting from imposition of an unconstitutional export tax. Moreover, the text of the normal statutory remedial scheme does not clearly apply to claims for refunds under the Export Clause.
Finally, respondents argue that the interest statute does properly apply to claims for refunds brought under the Tucker Act. The statute’s language allowing interest on “any judgment of any court for any overpayment in respect of internal revenue tax” clearly applies to respondents’ claim. Respondents argue that the interest provision is not an integral part of the statutory scheme such that it can only be applied to tax refund claims filed with the IRS. Rather, it makes sense to apply the interest statute to remedy the fundamental violation of the Export Clause that occurred here.
In its reply, the United States returns to the plain text of § 7422, arguing that a claim under the Export Clause for unconstitutionally exacted taxes is a claim that the tax was “erroneously or legally assessed” and therefore falls within the administrative tax refund scheme. The government points to the fact that the respondents filed claims with the IRS for the three years for which recovery was allowed and argues that their failure to file claims for the other years shows that they are trying to evade the statutory requirements. The government argues that those provisions apply equally to constitutional claims, and the Export Clause is no different.
Two amicus briefs were filed in the case in support of respondents. Alliance Coal, LLC, argues that the procedural requirements applicable to respondents’ claims arise from the source of their right to recover, the Export Clause, rather than from the IRS tax refund scheme. Alliance argues that the Tucker Act has long provided jurisdiction for alternative rights to recover unconstitutional taxes, and Congress could not impliedly repeal that jurisdiction by creating an administrative refund scheme. The National Federation of Independent Business Legal Foundation also filed a brief arguing that the Export Clause is self-executing and that the IRS refund scheme is not intended to reach constitutional challenges to taxation.
The case is scheduled for argument on Monday, March 24, 2008. Assistant to the Solicitor General William M. Jay will be arguing for petitioner United States, and Patricia Millett of Akin Gump will be arguing for respondents.
[edit] Oral Argument Recap
Arguing for the United States as petitioner, Assistant to the Solicitor General William M. Jay began by emphasizing that the respondents sought and obtained a refund for the most recent three years of taxes they paid on coal exports. He then spent several minutes clarifying the government’s position that any recovery for additional years (whether for interest or principal) was foreclosed by the administrative refund scheme. When asked why a purely constitutional claim should be brought directly to the IRS, Mr. Jay answered that the unconstitutionality of the tax may hinge on factual findings about the status of the goods in the stream of export, and so the IRS should be allowed to resolve those factual issues in the first instance.
The Justices pressed Mr. Jay on the scope of the government’s proposed rule, asking if there is any limit to the extent to which Congress may restrict the right to recover refunds for unconstitutional exactions. Mr. Jay noted that before the Tucker Act, taxpayers had to pay their taxes under protest to preserve their right to a refund, and that was effectively a statute of limitations of zero days. Similarly, inverse condemnation actions under the Fifth Amendment were previously handled in Congress by private bills rather than by causes of actions in federal court. Therefore, Mr. Jay argued, the administrative refund scheme is an adequate remedy for Export Clause violations.
Arguing for respondents, Patricia Millett began by stating that the government must assert a plausible basis for tax liability in order to invoke the special protections of the administrative refund scheme. That, Ms. Millett argued, is how the Court had previously interpreted the tax code in Enochs v. Williams Packing. Because the government did not defend its export tax on the merits, it could not limit respondents to the more restrictive administrative remedy. The reason respondents did not challenge such an obviously unconstitutional tax until decades after its enactment, Ms. Millett explained, was that respondents are unsophisticated businesses with no in-house counsel.
The Justices seemed concerned about extending the “plausible basis” rule under Enochs. When Justice Scalia asked why the Export Clause should be “any more sacrosanct” than other tax refund claims, Ms. Millett argued that respondents’ claims are different because no administrative process is necessary to determine the unlawfulness of the tax. Ms. Millett then spent several minutes explaining to the Court why the interest provision applies to any tax refund claim and not just those filed with the IRS. She concluded by emphasizing that Congress had implicitly ratified the Court’s decision in Enochs, which should allow respondents to prevail.
Before Mr. Jay could begin his rebuttal, Justice Ginsburg asked him to respond to the argument that Enochs controlled this case. Mr. Jay first argued that Enochs—which interpreted the tax code’s injunctive relief provision—should not be applied to claims for refunds. But he went on to argue that even if Enochs applied, it would not allow respondents to prevail because the coal excise tax was facially constitutional and the government had a plausible basis for defending it until 1997, when a federal court invalidated the tax and the IRS chose not to appeal. Therefore, the excise taxes on coal were not exactions “in the guise of a tax” which the Court addressed in Enochs. After Justice Breyer asked a few more questions about the statutory scheme, the Justices had no further questions and the case was submitted.
[edit] Opinion Analysis
The Supreme Court opened its session on tax-filing day with Chief Justice John G. Roberts, Jr., saying two rulings in tax cases would be announced. The decisions came in MeadWestvaco Corp. v. Illinois Department of Revenue (06-1413), limiting the power of states to tax a share of the money that a company based in another state earns when it sells off an investment in a division involved in a separate line of business, and in U.S. v. Clintwood Elkhorn Mining Co. (07-308), deciding that a taxpayer seeking a refund for an invalid tax under the Export Clause of the Constitution must first seek a refund from the government before bringing a lawsuit.
Chief Justice Roberts’ opinion in the Clintwood Elkhorn Mining case was unanimous. The ruling reversed a decision of the Court of Appeals-Federal Circuit that coal companies that had paid taxes on coal exports — a tax later struck down under the Export Clause — could pursue their refund claim in the Court of Federal Claims.
The dispute involves $1,065,936 in coal export taxes paid in the years 1994, 1995 and 1996 by Clintwood Elkhorn Mining Co., Gatliff Coal Co. and Premier Elkhorn Coal Co. While those companies had asked the Internal Revenue Service for refunds, and obtained them, for the years 1997, 1998 and 1999, they did not make a similar administrative claim for the earlier years.
