The equitable Anti-Injunction Act.

Author:Hawley, Erin Morrow
Position:III. The Anti-Injunction Act C. Context 4. Oft-Relied upon Precedent through Conclusion, with footnotes, p. 107-133
 
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  1. Oft-Relied Upon Precedent

    Precedent is irreconcilable with the notion that the Supreme Court has long considered the AIA to be a jurisdictional statute. What then of the supposed "long line" of uniform precedent holding the AIA jurisdictional? (193) It turns out to be difficult to pinpoint even a single case which clearly holds that the AIA is jurisdictional.

    Three early cases--Snyder v. Marks, (194) Brushaber v. Union Pacific Railroad Co., (195) and Homthall v. Collector (196)--are often cited as proof that the early Supreme Court viewed the AIA as jurisdictional. (197)

    Snyder comes the closest. In that case, the taxpayer argued that the AIA did not apply to an allegedly "illegal tax." (198) The government asserted that the AIA barred the suit and that the Supreme Court lacked equitable jurisdiction. (199) The Court held that the AIA applied "to all assessments of taxes, made under color of their offices, by internal revenue officers charged with general jurisdiction." (200) And since Congress had provided an alternative and exclusive refund remedy, a suit to restrain collection of the tax was forbidden under the AIA. (201)

    The Snyder Court's reliance on the AIA as grounds for its dismissal is inconclusive. The case did not use the jurisdictional label and is consistent with the view that the AIA imposes a mandatory (but not jurisdictional) requirement and also with the view that the AIA simply codified traditional equitable rules. Since the government raised and pressed the AIA defense, the Snyder Court was not confronted with the question whether the AIA was truly jurisdictional, i.e., whether it always barred suit, or rather whether it was a mandatory condition that might be waived or forfeited. Further, equity jurisdiction plainly was absent because Congress had provided an adequate alternative remedy. In view of other cases decided near the same time, early commentators and litigants argued that the Snyder dismissal was best explained on equitable grounds. (202)

    Brushaber also falls short. (203) In Brushaber, the Supreme Court "put out of the way a question of jurisdiction" and held that shareholders could challenge the voluntary payment of a corporate tax notwithstanding the AIA where they alleged the "absence of all means of redress." (204) To permit such a suit "did not violate the prohibitions of [the AIA], against enjoining the enforcement of taxes." (205) Indeed, any jurisdictional argument to the contrary was "without merit." (206)

    As for Homthall, the case is, by definition, a drive-by jurisdictional ruling. (207) In Homthall, the government argued that the Court should dismiss for two reasons: "(1) Because the parties to the suit are citizens of the same State," and "(2) [b]ecause the Circuit Court has no power to afford a remedy by injunction for such a grievance." (208) The government's latter argument could just as easily have referred to the general equitable rule that a federal court will not enjoin a tax as to the AIA. But even if the second point refers to the AIA, the Court did not spend

    much time on that issue: "[I]t will not be necessary to examine the second proposition with much particularity, as the first is clearly correct and must prevail." (209) While Homthall noted the existence of the AIA, any application of the statute was unnecessary as diversity jurisdiction did not exist. (210)

    On occasion, other early cases are offered as evidence of a long line of Supreme Court precedent holding the AIA to be jurisdictional. In Bob Jones University v. Simon, for example, the Supreme Court offered up a handful of cases from the first half century of the AIA's existence as evidence that the Court previously had given the AIA "literal force." (211) Yet when one considers those five cases, no conclusion of jurisdictional import may be drawn. The first two cases, the State Railroad Tax Cases (212) and Pacific Steam Whaling Co. v. United States, (213) are state tax cases to which the AIA does not apply; they are, at most, "drive-by jurisdictional rulings." (214) More importantly, both of those cases advance a view of the ALA as governing the equity jurisdiction of the federal courts, not jurisdiction per se. (215) As discussed above, Snyder is fully consistent with either a mandatory or an equitable reading of the ALA. (216) The last two cases, Dodge v. Osborn and Bailey v. George, are inconsistent with the conclusion that the AIA is a jurisdictional statute because they bless equitable exceptions. (217) With the possible exception of Snyder, then, no early case supports a long line of Supreme Court precedent and practice holding the ALA to be jurisdictional.

    More recent cases said to support a jurisdictional reading of the ALA fare no better. Two cases in particular, Enochs v. Williams Packing & Navigation Co. (218) and Bob Jones University v. Simon, (219) are often cited for the proposition that the Supreme Court has held the ALA to be jurisdictional. In contrast to the older decisions discussed above, those cases do refer to the AIA as jurisdictional. In Williams Packing, the Supreme Court wrote, "[t]he object of [section] 7421 (a) is to withdraw jurisdiction from the state and federal courts to entertain suits seeking injunctions prohibiting the collection of federal taxes." (220) And in Bob Jones University, the Court concluded that "the Court of Appeals did not err in holding that [section] 7421 (a) deprived the District Court of jurisdiction to issue the injunctive relief petitioner sought." (221) But these two cases were decided during the height of the Supreme Court's overinclusive use of the term jurisdiction. As the Court's recent jurisdictional cases teach, loose use of the term jurisdiction is not precedential. (222) The substance of the two cases--specifically, their recognition of an equitable exception-- makes clear that Williams Packing and Bob Jones University do not support a jurisdictional AIA. (223)

    In sum, neither the text nor the structure nor the history of the AIA indicates that the statute is jurisdictional. As for the oft-relied upon "long line" of precedent, that precedent points in the opposite direction--allowing waiver and equitable exceptions--demonstrating that the AIA cannot possibly be jurisdictional.

    If the AIA is not a jurisdictional statute, what is it? This question is of critical importance to the exercise of Congress's taxing power and to the ability of taxpayers to challenge such exercises. The next Part will argue that the AIA governs the equitable jurisdiction of the federal courts.

    1. THE EQUITABLE ANTI-INJUNCTION ACT

      Contrary to conventional wisdom, the Anti-Injunction Act of 1867 is not a jurisdictional statute: it is an equitable one. A close analysis of the Supreme Court's AIA jurisprudence reveals a surprisingly consistent line of cases interpreting the AIA in harmony with the equitable jurisdiction of the federal courts. The AIA was enacted during the height of the canon that statutes in derogation of the common law must be construed narrowly, and the courts first tasked with interpreting the AIA applied a similar canon to equity: they read the statute in light of the rule that equity ordinarily will not enjoin a tax. This equitable rule explains the Supreme Court's seemingly meandering jurisprudence--the repeated acceptance of the government's waiver of the AIA, its endorsement of general equitable exceptions, and Standard Nut's conclusion that the AIA is merely declaratory of general equitable principles.

      That the AIA governs equity jurisdiction is of considerable practical importance. The consequences that attach to jurisdictional statutes are dramatically different from those that attach to statutes that govern equity jurisdiction. Because the AIA addresses equity, the jurisdictional bar is not absolute. Because equity jurisdiction does not govern the very authority of the court to hear the case, it may be waived or forfeited. And because equity jurisdiction exists when the remedy at law is inadequate, federal courts may hear tax injunction suits in extraordinary circumstances notwithstanding the AIA. (224)

      The equitable rules that governed tax suits prior to the AIA and the caselaw that applied those same rules to suits after the ALA's enactment reveal a consistent set of circumstances in which strict compliance with the AIA is not required. This Part will identify those circumstances and sketch out how they might apply to present-day tax litigation.

      1. Equity and Taxes

        Equity never has had much to do with taxes. Because the government depends upon the prompt collection of tax revenues, and because the public has every reason to delay and dispute taxation, the First Congress, and every Congress since, has enforced taxes "by summary and stringent means." (225) Instead of ordinary judicial review, (226) taxpayers are provided an administrative appeal. In addition, they may file a refund claim in federal court, but only after paying the disputed tax. (227)

        This legal remedy meant that tax cases generally were outside the equitable jurisdiction of the federal courts. (228) In the routine tax case, the Supreme Court explained, "the party of whom an illegal tax is collected has ordinarily ample remedy" (229)--the plaintiff protesting against its enforcement might pay the tax and sue to recover back the money, making it difficult "to suggest any ground of equitable jurisdiction." (230) Because Congress had provided an alternate remedy, equity jurisdiction did not obtain in the garden-variety tax dispute. (231)

        Yet there was no absolute limitation on the powers of a court sitting in equity to enjoin the collection of an illegal tax. (232) Equitable relief was available in "special circumstances": where the remedy at law was inadequate and where the case fell "under some recognized head of equity jurisdiction." (233)

      2. Equity and the AIA

        The federal courts' familiarity with equity rules and expansion of the derogation canon to...

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