Levin v. Commerce Energy, Inc.

560 U.S. 413 (2010)

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Nature of the Case

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Facts

Consumers in Ohio purchased gas from a public utility, known as a local distribution company (LDC), serving their geographic area. LDCs own and operate networks of distribution pipelines to transport and deliver gas to consumers. LDCs offer customers a single, bundled product comprising both gas and delivery. Consumers in Ohio's major metropolitan areas can alternatively contract with an independent marketer (IM) that competes with LDCs for retail sales of natural gas. IMs do not own or operate distribution pipelines. They use LDCs' pipelines. When a customer goes with an IM, she purchases two “unbundled” products: gas (from the IM) and delivery (from the LDC). Ohio treats LDCs and IMs differently for tax purposes. Ohio affords LDCs three tax exemptions that IMs do not receive. The LDCs' natural gas sales are exempt from sales and use taxes. LDCs owe a gross receipts excise tax, which is lower than the sales and use taxes IMs must collect. LDCs are not subject to the commercial activities tax imposed on IMs' taxable gross receipts. Ohio law excludes inter-LDC natural gas sales from the gross receipts tax, which IMs must pay when they purchase gas from LDCs. Ps are IMs that market and sell natural gas to Ohio consumers. Gregory Slone (P) is an Ohio citizen who has purchased natural gas from Interstate Gas Supply since 1999. Alleging discriminatory taxation of IMs and their patrons in violation of the Commerce and Equal Protection Clauses, Ps sued D in the U. S. District Court invoking that court's federal-question jurisdiction under 28 U.S.C. § 1331. The Tax Injunction Act (TIA), prohibits lower federal courts from restraining “the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” D moved to dismiss the complaint. The TIA did not block the suit because Ps, like the plaintiffs in Hibbs, were “third-parties challenging the constitutionality of [another's] tax benefit,” and their requested relief “would not disrupt the flow of tax revenue” to the State. The District Court “declined to exercise jurisdiction” as a matter of comity. Ps requested relief that would “require Ohio to collect taxes which its legislature has not seen fit to impose. Federal judges would be drawn into “a particularly inappropriate involvement in a state's management of its fiscal operations. It held that a federal court should not “impose its own judgment on the state legislature mandating which of two remedies is appropriate.” The court of appeals reversed. It held that the Court “has relied upon 'principles of comity' to preclude original federal-court jurisdiction only when plaintiffs have sought district-court aid in order to arrest or countermand state tax collection. A broad view of the comity cases renders the TIA “effectively superfluous,” and would “sub silentio overrule a series of important cases” presenting challenges to state tax measures. D appealed.