RENDER^: DECEMBER 19, 2019

TO BE PUBLISHED

STATE OF OHIO AND

JOSEPH W. TESTA,

TAX COMMISSIONER OF OHIO

2018-SC-000161-TG

APPELLANTS

ON TRANSFER FROM COURT OF APPEALS

V. CASE NO. 2018-CA-000484

GREENUP CIRCUIT COURT NO. 17-CI-00311

HONORABLE ROBERT B. CONLEY, JUDGE

GREAT LAKES MINERALS, LLC APPELLEE

OPINION OF THE COURT BY JUSTICE KELLER

REVERSING AND REMANDING

Appellants, State of Ohio and Joseph W. Testa, Tax Commissioner of

Ohio, appeal an order of the Greenup Circuit Court denying their motion to

dismiss Great Lakes Minerals, LLC’s suit against them. For the following

reasons, we reverse the decision of the Greenup Circuit Court and remand with

instructions to dismiss all claims.
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I. BACKGROUND

Great Lakes Minerals, LLC (hereinafter, Great Lakes) is a mineral

processing company1 that sells minerals to buyers at its Greenup County,

Kentucky plant. Great Lakes maintains that it sells its products in Kentucky;

all transactions, including payment and delivery of goods, occur in Kentucky;

Great Lakes does not have a physical presence in Ohio; and Great Lakes

neither directly nor indirectly delivers its products to the State of Ohio.

Stated very simply, Ohio has created a commercial activity tax (CAT) that

taxes persons who do business and have a substantial nexus to Ohio. O.R.C.2

5751.02(A). Ohio’s Department of Taxation (Department) may issue a CAT

assessment to an out-of-state business for outstanding liability to Ohio arising

from transactions with an Ohio company. Businesses are provided

administrative remedies to protest CAT assessments to the Tax Commissioner

of Ohio, then the Ohio Board of Tax Appeals, and then the Ohio appellate

courts. O.R.C. 5751.09; O.R.C. 5717.02; ORC 5717.04.

Ohio determined that between 2009 and 2016, Great Lakes sold over

$104 million in minerals that were then shipped to Ohio addresses. The

Department issued a CAT assessment against Great Lakes for $325,000. Great

Lakes paid a portion of the assessment but petitioned for reassessment with

the Commissioner, challenging the assessment’s validity. .

1 According to the business records of the Kentucky Secretary of State, Great

Lakes is a limited liability company organized under the laws of Delaware.

2 Ohio Revised Code. '

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One month after protesting to the Commissioner, Great Lakes sued Ohio

and Joseph W. Testa, Ohio’s Tax Commissioner, in his official and individual

capacities, in Greenup Circuit Court. Great Lakes sought: (1) a declaratory

judgment that it is not subject to Ohio’s CAT; (2) monetary relief pursuant to

42 U.S.C.A. § 1983 for the forced collection of taxes not owed, in violation of

the Ohio and United States Constitutions; and (3) a determination pursuant to

CR3 60.03 that it would be inequitable to require Great Lakes to defend an

action in a foreign state. Ohio moved to dismiss Great Lakes’ complaint on

grounds of sovereign immunity, qualified immunity, comity, lack of personal

jurisdiction, and failure to exhaust administrative remedies. The Greenup

Circuit Court denied Ohio’s Motion to Dismiss in a two-sentence order, and

Ohio filed a Notice of Appeal with the Court ofAppeals. Ohio moved to transfer

jurisdiction over that interlocutory appeal to this Court, which this Court

granted. We then abated this case pending the Supreme Court of the United

States’ decision in Franchise Tax Board ofCalifornia v. Hyatt, 139 S.Ct. 1485

(2019) (hereinafter “Hyatt III") Following the rendition of Hyatt III, this Court

granted the Appellants’ motion for leave to file supplemental briefs.

Supplemental briefing by the parties has been completed, and the matter is.

ripe for consideration.

3 Kentucky Rules of Civil Procedure.

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II. ANALYSIS

The State of Ohio argues that it is protected by sovereign immunity

under Hyatt III. Testa argues that he is entitled to the same sovereign immunity

as Ohio in his official capacity and qualified official immunity in his personal

capacity. Great Lakes, on the other hand, argues that sovereign immunity does

not apply to actions for declaratory or injunctive relief and that sovereign

immunity does not apply to the appellants in the capacity in which they were

sued pursuant to 42 U.S.C.A. § 1983. The question of whether a defendant is

protected by sovereign immunity, governmental immunity, or official immunity

is a question of law. Rowan Cty. v. Sloas, 201 S.W.3d 469, 475 (Ky. 2006). This

Court reviews questions of law de novo. Cumberland Valley Contractors, Inc. v.

Bell Cty. Coal Corp., 238 S.W.3d 644, 647 (Ky. 2007).

A. State of Ohio

We will first address whether the State of Ohio is protected by the

doctrine of sovereign immunity. Ohio relies, in large part, on Hyatt HIto argue

that it is entitled to sovereign immunity protection. In that case, Hyatt sued the

Franchise Tax Board of California in Nevada state court for various torts the

Tax Board allegedly committed during a tax audit. Hyatt III, 139 S.Ct. at 1491.

After discussing the United States Constitution at length as well as the intent

of the framers, the United States Supreme Court held that the Tax Board of

California was protected by sovereign immunity and could not be sued in

Nevada state court. Id. at 1492. Great Lakes, however, attempts to distinguish

the case at bar from Hyatt III because Hyatt was seeking a monetary award of

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damages from California. Great Lakes, conversely, is only seeking monetary

damages against Testa in his individual capacity and declaratory, injunctive,

and equitable relief against Ohio and Testa in his official capacity. Great Lakes

argues that the United States Supreme Court’s 2016 decision in Franchise Tax

Board of California v. Hyatt, 136 S.Ct. 1277 (hereinafter “Hyatt II"), is actually

the controlling authority.4

In Hyatt II, the predecessor of Hyatt III, the Supreme Court reversed a

monetary award against the Franchise Tax Board of California, an out-of-state

agency, that was greater than that which Nevada would award in a similar suit

against its own state agency. Id. The Court concluded that in awarding these

higher-than-otherwise-allowed damages, Nevada “applied a special rule of law

that evinces a policy of hostility toward California.” Id. at 1281 (internal

quotation marks omitted). Hyatt III does not control our decision here today.

Hyatt III, however, does control, at least in part, our decision in this case.

The United States Supreme Court in Hyatt IIIheld, unequivocally, that under

4 Great Lakes makes this argument by attempting to cite to Hyatt IlIs summary

of the case’s history. Great Lakes, in its supplemental briefto this Court, includes a

block quote purportedly from Hyatt HI, emphasizing the sentence, “This [United States

Supreme] Court reversed, holding that the Full Faith and Credit Clause required

Nevada courts to grant the Board the same immunity that Nevada agencies enjoy.”

(Internal italics omitted). It does not include a pin cite to the page in the U.S. Supreme

Court decision from which this quote is taken. The reason for this is that the quote is

not actually from the U.S. Supreme Court’s opinion. Rather, it was taken from the

Syllabus ofthe opinion. The Syllabus contains a footnote which says, “The syllabus

constitutes no part ofthe opinion ofthe Court but has been prepared by the Reporter

of Decisions for the convenience ofthe reader.” This Court notes that the Syllabus of

an opinion ofthe U.S. Supreme Court is wholly inappropriate to quote and should

never be cited as controlling authority. Parties should take great care to refrain from

doing so in the future.

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the United States Constitution, “States retain their sovereign immunity from

private suits brought in the courts of other States.” 139 S.Ct. at 1492. Great

Lakes argues that the word “retain” in the above quoted sentence dictates that

this Court look to our general immunity principles as applied to declaratory

and injunctive relief. However, the U.S. Supreme Court went on to say,

“[A]lthough the Constitution assumes that the States retain their sovereign

immunity except as otherwise provided, it also fundamentally adjusts the

States’ relationship with each other and curtails their ability, as sovereigns, to

decline to recognize each other’s immunity.” Id. at 1493. The Court then went

on to say, “Interstate immunity, in other words, is ‘implied as an essential

component of federalism.’” Id. at 1498 (quoting Nevada v. Hall, 440 U.S. 410,

430-31 (1979) (Blackmun, J., dissenting)).

The U.S. Supreme Court in Hyatt III made no distinction between claims

seeking monetary damages and claims seeking other types of relief. “The

Constitution...embeds interstate sovereign immunity within the constitutional

design.” Id. at 1497. Accordingly, the State of Ohio is protected by sovereign

immunity, and Great Lakes’ claims against it should have been dismissed. We,

therefore, reverse the Greenup Circuit Court’s denial of the State of Ohio’s

motion to dismiss.

B. Joseph Testa in his official capacity

We next address whether Joseph Testa is immune from suit in his official

capacity as Tax Commissioner of Ohio. In general,

[o)fficial-capacity suits...represent only another way of pleading an

action against an entity of which an officer is an agent.... As long

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as the government entity receives notice and an opportunity to

respond, an official-capacity suit is, in all respects other than

name, to be treated as a suit against the entity.

Kentucky v. Graham, 473 U.S. 159, 165-66 (1985) (internal citations and

quotations omitted). As such, Testa is entitled to the same sovereign immunity

that protects the state of Ohio, and therefore Great Lakes’ claims against him

in his official capacity should have been dismissed. We, therefore, reverse the

Greenup Circuit Court’s denial of Testa’s motion to dismiss the claims brought

against him in his official capacity as Tax Commissioner of Ohio.

C. Joseph Testa in his personal capacity

Having concluded that both the state of Ohio and Joseph Testa in his

official capacity are immune from suit, we turn to the remaining question

before us, namely, whether immunity protects Joseph Testa in his personal

capacity. “Personal-capacity suits seek to impose personal liability upon a

government official for actions he takes under color of state law.” Id. at 165. As

such, the only claim against Testa in his personal capacity is that for monetary

relief pursuant to 42 U.S.C.A. § 1983 for the alleged forced collection of taxes

not owed, in violation of the Ohio and United States Constitutions.

On the merits, to establish personal liability in a § 1983 action, it

is enough to show that the official, acting under color of state law,

caused the deprivation of a federal right.... When it comes to

defenses to liability, an official in a personal-capacity action may,

depending on his position, be able to assert personal immunity

defenses, such as objectively reasonable reliance on existing law.

Id. at 166-67 (internal citations omitted).

The United States Supreme Court time and again has recognized that §

1983 “was not meant to effect a radical departure from ordinary tort law and

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the common-law immunities applicable in tort suits.” Rehberg v. Paulk, 566

U.S. 356, 361 (2012). Our Court recently reaffirmed this principle when we

stated, “As explained in Rehberg, the scope of immunity available to state

government officials in a federal civil rights action under § 1983 derives from

the state’s common law immunity doctrine.” Martin v. O’Daniel, 507 S.W.3d 1,

5 (Ky. 2016). Thus, to determine whether Testa, in his personal capacity, is

immune from suit, we must turn to the common law doctrine of immunity. Any

immunity determination by this Court would require us not only to evaluate

Testa’s actions but also to interpret Ohio tax law.

Because our decision would ultimately turn on Ohio law, we feel

compelled to consider the doctrine of comity. This doctrine “is one of deference

and respect among tribunals of overlapping jurisdiction; in accordance with

comity, the courts of one state or jurisdiction give effect to the laws and judicial

decisions of another, not as a matter of obligation but out of deference and

respect.” 16 Am. JUR. 2d Conflict ofLaws § 11 (2019). For example,

[i]f Kentucky fails to respect that a cause of action accrues in a

foreign jurisdiction, like New York, although the final event

necessary for the cause of action occurred in New York, Kentucky

shows disrespect for New York’s territoriality in derogation of

comity principles that the Kentucky Supreme Court may value.

Combs v. Int’l Ins. Co., 354 F.3d 568, 591 (6th Cir. 2004).

The Supreme Court of the United States has applied the doctrine of

comity in the context of a § 1983 action for the unlawful administration of a

state’s tax system, ultimately dismissing such claims. For example, in Fair

Assessment in Real Estate Association v. McNary, 454 U.S. 100 (1981), the

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Supreme Court held that “taxpayers are barred by the principle of comity from

asserting § 1983 actions against the validity of state tax systems in federal

courts,” including actions for damages. Id. at 116. In doing so, the McNary

Court explained the reasoning behind federal courts’ deference to state tax

administration by citing with approval a concurring in part and dissenting in

part decision by Justice Brennan:

The special reasons justifying the policy of federal noninterference

with state tax collection are obvious. The procedures for mass

assessment and collection of state taxes and for administration

and adjudication of taxpayers’ disputes with tax officials are

generally complex and necessarily designed to operate according to

established rules. State tax agencies are organized to discharge

their responsibilities in accordance with the state procedures. If

federal declaratory relief were available to test state tax

assessments, state tax administration might be thrown into

disarray, and taxpayers might escape the ordinary procedural

requirements imposed by state law.

Id. at 108, n.6 (quoting Perez v. Ledesma, 401 U,S. 82, 128, n.17 (1971)

(Brennan, J., concurring in part and dissenting in part)).

Though McNary addressed comity between federal and state courts, we

feel compelled to apply similar principles to the case at hand. As noted above,

the question before us—whether Testa may be held personally liable for

violations of § 1983—turns on Ohio law. In essence, then, we are required to

determine whether Testa’s imposition of the CATS assessment on Great Lakes

was consistent with Ohio law. As the McNary Court explained, any declaration

from this Court about the lawfulness of Testa’s application of Ohio law would

be intrusive and could disrupt Ohio’s state tax administration.

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In sum, we believe that Ohio’s state courts are better suited to efficiently

evaluate and apply Ohio law to this issue. Should the case progress further,

Ohio’s courts would also be better suited to evaluate the facts, and to consider

whether Testa caused the deprivation of a constitutional right while acting

under the color of Ohio state law. Accordingly, relying on the principle of

comity, we hereby dismiss Joseph Testa in his personal capacity.

III. CONCLUSION

For the foregoing reasons, we reverse the judgment of the Greenup

Circuit Court and remand to the Greenup Circuit Court for dismissal of the

claims.

Minton, C.J.; Hughes, Keller, Lambert, VanMeter, and Wright, JJ.,

sitting. All concur. Nickell, J., not sitting.

COUNSEL FOR APPELLANTS:

Thomas Edward Madden

Daniel W. Fausey

Assistant Attorneys General

COUNSEL FOR APPELLEE:

Thomas Dulaney Bullock

Robert V. Bullock

James Roscoe Stinetorf

Bullock & Coffman, LLP

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2018-SC-000161-TG

STATE OF OHIO AND JOSEPH W. TESTA, APPELLANTS

TAX COMMISSIONER OF OHIO

ON TRANSFER FROM COURT OF APPEALS

CASE NO. 2018-CA-000484-MR

V. GREENUP CIRCUIT COURT NO. 17-CI-00311

HONORABLE ROBERT B. CONLEY, JUDGE

GREAT LAKES MINERALS, LLC APPELLEE

ORDER DENYING PETITION FOR REHEARING AND MODIFICATION

The Petition for Rehearing and Modification, filed by the Appellee, of the

Opinion of the Court, rendered December 19, 2019, is DENIED.

All sitting. All concur.

ENTERED: April 30, 2020.