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US Supreme Court Decisions On-Line> Volume 440 > MONTANA V. UNITED STATES, 440 U. S. 147 (1979)
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Southern Pacific R. Co. v. United States, 168 U. S. 1, 168 U. S. 48-49 -- are similarly implicated when nonparties assume control over litigation in which they have a direct financial or proprietary interest chanrobles.com-red
MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J.,and BRENNAN, STEWART, BLACKMUN, POWELL, REHNQUIST, and STEVENS, JJ., joined. REHNQUIST, J., filed a concurring statement, post, p. 440 U. S. 164. WHITE, J., filed a dissenting opinion, post, p. 440 U. S. 164. chanrobles.com-red
The State of Montana imposes a one percent gross receipts tax upon contractors of public, but not private, construction chanrobles.com-red
projects. Mont. Rev.Codes Ann. § 84-3505 (Supp. 1977). [Footnote 1] A public contractor may credit against the gross receipts tax its payments of personal property, corporate income, and individual income taxes. [Footnote 2] Any remaining gross receipts liability is customarily passed on in the form of increased construction costs to the governmental unit financing the project. [Footnote 3] At issue in this appeal is whether a prior judgment by the Montana Supreme Court upholding the tax precludes the United States from contesting its constitutionality and if chanrobles.com-red
After the decision in Kiewit II, a three-judge District Court heard the instant case on the merits. In a divided opinion, the court concluded that the United States was not bound chanrobles.com-red
We noted probable jurisdiction. 436 U.S. 916 (1978). Because we find that the constitutional question presented by chanrobles.com-red
Southern Pacific R. Co. v. United States, 168 U. S. 1, 168 U. S. 48-49 (1897). Under res judicata, a final judgment on the merits bars further claims by parties or their privies based on the same cause of action. Cromwell v. County of Sac, 94 U. S. 351, 94 U. S. 352 (1877); Lawlor v. National Screen Service Corp., 349 U. S. 322, 349 U. S. 326 (1955); 1B J. Moore, Federal Practice ¦ 0.405[1], pp. 621-624 (2d ed.1974) (hereinafter 1B Moore); Restatement (Second) of Judgments § 47 (Tent. Draft No. 1, Mar. 28, 1973) (merger); id. § 48 (bar). Under collateral estoppel, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation. Parklane Hosiery Co. v. Shore, 439 U. S. 322, 439 U. S. 326 n. 5 (1979); Scott, Collateral Estoppel by Judgment, 56 Harv.L.Rev. 1, 2-3 (1942); Restatement (Second) of Judgments § 68 (Tent.Draft No. 4, Apr. 15, 1977) (issue preclusion). Application of both doctrines is central to the purpose for which civil courts have been established, the conclusive resolution of disputes within their jurisdictions. Southern Pacific R. Co., supra at 168 U. S. 49; Hart Steel Co. v. Railroad Supply Co., 244 U. S. 294, 244 U. S. 299 (1917). To preclude parties from contesting matters that they have had a full and fair opportunity to litigate protects their adversaries from the expense and vexation attending multiple lawsuits, conserves judicial resources, chanrobles.com-red
See Schnell v. Peter Eckrich & Sons, Inc., 365 U. S. 260, 365 U. S. 262 n. 4 (1961); cf. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100, 395 U. S. 111 (1969). Preclusion of such nonparties falls under the rubric of collateral estoppel, rather than res judicata, because the latter doctrine presupposes identity between causes of action. And the cause of action which a nonparty has vicariously asserted differs by definition from that which he subsequently seeks to litigate in his own right. See G. & C. Merriam Co. v. Saalfield, 241 U. S. 22, 241 U. S. 29 (1916); Restatement (Second) of Judgments 83, Comment b, p. 51 (Tent. Draft chanrobles.com-red
No. 2, Apr. 15, 1975); 1B Moore ¦ 0.411[6], pp. 1553-1554; Note, Developments in the Law -- Res Judicata, 65 Harv.L.Rev. 818, 862 (1952).
To determine the appropriate application of collateral estoppel in the instant case necessitates three further inquiries: first, whether the issues presented by this litigation are, in substance, the same as those resolved against the United States in Kiewit I; second, whether controlling facts or legal principles have changed significantly since the state court judgment; and finally, whether other special circumstances warrant an exception to the normal rules of preclusion. chanrobles.com-red
Thus, the "question expressly and definitely presented in this suit is the same as that definitely and actually litigated and adjudged" adversely to the Government in state court. United States v. Moser, 266 U. S. 236, 266 U. S. 242 (1924). Absent significant changes in controlling facts or legal principles chanrobles.com-red
Under its contract with the Army Corps of Engineers, Kiewit was unable to take advantage of the credit provisions of the gross receipts tax. [Footnote 6] In 1971, however, the United States altered its policy, and has since required Montana contractors to seek all available refunds and credits. See 437 F.Supp. at 358; App. 91. As the Government reads the Kiewit I decision, the Montana Supreme Court proceeded on the assumption that, if Kiewit had been able to avail itself of the offsetting income and property tax credits, there might have been a "total washout" of its gross receipts tax liability. 161 Mont. at 145, 505 P.2d at 106. Thus, according to the Government, the holding of Kiewit I was that the Montana statute did not discriminate against the United States under circumstances where, but for the Federal Government's own contractual arrangement, the tax might have had no financial impact. Brief for United States 336. Because the uncontroverted evidence in this case establishes that, after taking chanrobles.com-red
We disagree. [Footnote 7] It is, of course, true that changes in facts essential to a judgment will render collateral estoppel inapplicable in a subsequent action raising the same issues. See, e.g., United States v. Certain Land at Irvin Place & 16th Street, 415 F.2d 265, 269 (CA2 1969); Metcalf v. Commissioner, 343 F.2d 66, 67-68 (CA1 1965); Alexander v. Commissioner, 224 F.2d 788, 792-793 (CA5 1955); 1B Moore ¦ 0.448, pp. 4232-4233, ¦ 0.422[4], pp. 3412-3413. But we do not construe the opinion in Kiewit I as predicated on the factual assumption that the gross receipts tax would cancel out if public contractors took all available refunds and credits.
The Montana Supreme Court adverted to the washout possibility when discussing the origin of the gross receipts tax as a revenue-enforcing, rather than revenue-generating, measure. Prior to the enactment of the statute, certain public contractors had evaded assessment of local property taxes by shifting equipment from one construction site to another, and by filing corporate or personal income tax returns that did not fairly reflect the amount of profit attributable to construction projects within the State. 161 Mont. at 143-145, 505 P.2d chanrobles.com-red
Our conclusion that the washout potential of the tax was not of controlling significance in Kiewit I is further reinforced by the Montana Supreme Court's holding in Kiewit II. There, the contractor alleged that its gross receipts tax liability had exceeded its property and income tax credits, and argued that "the only basis" for the decision in Kiewit I was that, "if the Act were properly enforced, it would result in a washout.'" Kiewit II, 166 Mont. at 262, 531 P.2d at 1328. The Montana Supreme Court rejected that reading of Kiewit I as "much too narro[w]." 166 Mont. at 263, 531 P.2d at 1329. That the offset possibility had not materialized for Kiewit was, in the court's view, a fact too "inconsequential" to warrant relitigation of the statute's constitutionality. Id. chanrobles.com-red
Ibid. (citations omitted) . No such considerations obtain here. The Government does not contend, and the District Court did not find, that a change in controlling legal principles had occurred between Kiewit I and the instant suit. That the Government's amended complaint in this action replicates in substance the legal argument advanced by the contractor's complaint in Kiewit I further chanrobles.com-red
Ibid. (emphasis added). Thus, when issues of law arise in successive actions involving unrelated subject matter, preclusion may be inappropriate. See Restatement (Second) of Judgments § 68.1, Reporter's Note, pp. 43-44 (Tent.Draft No. 4, Apr. 15, 1977); 1B Moore ¦ 0.448, p. 4235; Scott, 56 Harv.L.Rev. at 10. This exception chanrobles.com-red
Finally, the Government has not alleged unfairness or inadequacy in the state procedures to which it voluntarily chanrobles.com-red
Although the term "privies" has been used on occasion to denominate nonparties who control litigation, see, e.g., G. & C. Merriam Co. v. Saalfield, 241 U. S. 22, 241 U. S. 27 (1916); Restatement of Judgments § 83, Comment a (1942), this usage has been criticized as conclusory and analytically unsound. 1B Moore ¦ 0.411[6], p. 1553; cf. Note, 65 Harv.L.Rev. at 856. The nomenclature has been abandoned in the applicable section of the Second Edition of the Restatement. See Restatement (Second) of Judgments § 83 (Tent.Draft No. 2, Apr. 15, 1975).
I disagree that the Government was estopped from litigating its claim in federal court by virtue of the earlier action in the courts of Montana. And, on the merits, I think the Montana gross receipts tax is constitutionally infirm. Thus, I would affirm the decision below. chanrobles.com-red
At the outset of its discussion in Kiewit I, the Montana Supreme Court labored to demonstrate that the gross receipts tax in issue was a tax-enforcing measure, in that funds collected pursuant thereto would be applied, or credited, against taxes otherwise due. The court understood that the tax had not, in practice, resulted in a total washout of gross receipts payments, but it attributed this to the Federal Government's policy prohibiting certain contractor -- such as the Kiewit Co. chanrobles.com-red
Moreover, the Court's reliance on Kiewit II to demonstrate the immateriality of the "washout" nature of the tax to the decision in Kiewit I is misplaced. I recognize that the Montana Supreme Court regarded Kiewit's second attack -- launched after the contractual credit restrictions were removed by the Government -- as foreclosed by the judgment in the first suit. But, in addressing Kiewit's objection to the application of the tax in a manner to raise revenue, the court acknowledged that "it may be that Kiewit would be entitled to a refund or some other administrative remedy." Peter Kiewit Sons' Co. v. Department of Revenue, 166 Mont. 260, 262, 531 P.2d 1327, 1328 (1975). The statute, of course, contemplates no such remedy, nor did the court affirmatively construe it to authorize one. [Footnote 2/1] Yet the court's remark leaves chanrobles.com-red
In Fresno, we stressed the requirement that the state tax be "imposed equally on the other similarly situated constituents of the State." 429 U.S. at 429 U. S. 462. Such concern for discriminatory chanrobles.com-red
The Montana Supreme Court in the Kiewit litigation defended the classification for equal protection purposes by submitting that the public's stake in the safety of building chanrobles.com-red
Appellants contend, nonetheless, that it is enough that the tax reaches contractors dealing with all public entities -- state or federal. Appellants root their contention in this Court's statement in Phillips Chemical Co. v. Dumas Independent School Dist., supra at 361 U. S. 385, that a State must "treat those who deal with the Government as well as it treats those with whom it deals itself." (Emphasis added.) But Phillips furnishes no support for appellants' position. There, the Court held unconstitutional a state tax scheme that treated lessees chanrobles.com-red
There is good reason to insist that a state tax be "imposed equally" on all "similarly situated constituents of the State," United States v. County of Fresno, 429 U.S. at 429 U. S. 462, whether connected with the public sector or private. Broad application of a tax is necessary to guarantee an efficacious "political check" on potentially abusive taxation. The Montana gross receipts tax, limited as it is to public sector contractors, provides little such assurance. Taxation of contractors dealing directly with the State or state agencies affords no safeguard against discriminatory treatment of federal contracting agencies and the contractors with whom they deal. Any tax chanrobles.com-red
Municipalities and local districts, it is true, do not enjoy the same advantage, and they may resist tax increases that would, if successfully enforced, burden them and the Federal Government alike. But, at least potentially, local subdivisions may secure offsetting state assistance by indirection, [Footnote 2/4] and that may diminish their incentive to oppose tax hikes. Even assuming, however, that local public bodies share an interest with the Federal Government in restraining taxes, it escapes me why the Government must acquiesce in the limited protection they provide when an enhanced political check would ensue from extension of the tax to other similarly situated state constituents. As I have indicated, there is no support for such a notion in the decisions of this Court. McCulloch itself condoned state taxation of private interests in federal property "in common with other property of the same description throughout the State." 17 U. S. 436 (1819) (emphasis added). And, in Fresno,@ we observed that escalation of a state tax so as to destroy or impair a federal function might be forestalled by imposition of the tax "on the income and property interests of all other residents and voters of the State." 429 U.S. at 429 U. S. 463 n. 11. These decisions counsel against nice determinations regarding the political leverage of this group or that and establish the simple but fundamental proposition that the Federal Government is entitled to the full measure of protection chanrobles.com-red