Title: Bloomingdale's by Mail v. Huddleston
Citation: 848 S.W.2d 52
Docket Number: N/A
State: Tennessee
Issuer: Tennessee Supreme Court
Date: December 21, 1992

848 S.W.2d 52 (1992) BLOOMINGDALE'S BY MAIL LTD., Plaintiff/Appellant, v. Joe B. HUDDLESTON, in his capacity as Commissioner of Revenue of the State of Tennessee and Charles W. Burson in his capacity as Attorney General of the State of Tennessee, Defendants/Appellees. Supreme Court of Tennessee, at Nashville. December 21, 1992. Rehearing Denied February 22, 1993. Joseph W. Gibbs, Patricia Head Moskal, Boult, Cummings, Conners &amp; Berry, Nashville, Maryann B. Gall, Jones, Day, Reavis &amp; Pogue, Columbus, OH, and Timothy B. Dyk and Edward K. Bilich, Jones, Day, Reavis &amp; Pogue, Washington, DC, for plaintiff-appellant. Charles W. Burson, Atty. Gen. &amp; Reporter, John Knox Walkup, Sol. Gen., Charles L. Lewis, Deputy Atty. Gen. and Joe C. Peel, Asst. Atty. Gen., Nashville, for defendants-appellees. PER CURIAM. The parties have agreed that the disposition of this case is controlled by the United States Supreme Court's decision in Quill Corp. v. North Dakota, 504 U.S. ___, 112 S. Ct. 1904, 119 L. Ed. 2d 91 (1992). Therefore the decision of the Chancery Court granting summary judgment in favor of the Defendants is vacated. The revised assessment is set aside in its entirety. The Plaintiff is not obligated to collect or remit Tennessee use tax. *53 The parties do not, however, agree concerning what law governs the award of attorneys' fees. For reasons hereinafter set forth, we hold that the upper limit on attorneys' fees set forth in T.C.A. § 67-1-1803(d) is not controlling in this case. We remand the case to the trial court for a determination of the amount of attorneys' fees to be awarded to the Plaintiff-Appellant in accordance with the following rules. The Defendants-Appellees contend that the award of attorneys' fees is governed by T.C.A. § 67-1-1803(d), which provides as follows: The Appellant, on the other hand, asserts that, since Quill Corp. v. North Dakota, supra, was decided on the basis of a violation of a taxpayer's rights under the United States Constitution, the award of attorneys' fees is controlled by 42 U.S.C. § 1988. This federal statute provides, in pertinent part, as follows: In Quill Corp. v. North Dakota, supra, the U.S. Supreme Court determined that a statute similar to the Tennessee statute involved in this case (T.C.A. § 67-6-102(6)(J)) was unconstitutional because it violated the Commerce Clause of the United States Constitution. The U.S. Supreme Court agreed with the Supreme Court of North Dakota that the statute did not violate the Due Process Clause of the U.S. Constitution. The U.S. Supreme Court stated as follows: The U.S. Supreme Court, in Quill Corporation v. North Dakota, supra, determined that the North Dakota statute violated the "substantial nexus" requirement of the Commerce Clause of the U.S. Constitution because the statute purported to subject to taxation business entities that maintained no property or personnel in the State of North Dakota. In Howlett v. Rose, 496 U.S. 356, 110 S. Ct. 2430, 110 L. Ed. 2d 332, (1990), the plaintiff was proceeding in a state court to enforce his federal constitutional rights pursuant to 42 U.S.C. § 1983. The issue before the U.S. Supreme Court was stated by the Court as follows: *54 The U.S. Supreme Court, in Howlett v. Rose, answered the foregoing question in the negative, stating as follows: In dicta that makes it clear that the U.S. Supreme Court's decision in Howlett v. Rose is not inconsistent with the Tennessee Supreme Court's decision in L.L. Bean, Inc. v. Bracey, 817 S.W.2d 292 (Tenn. 1991), the U.S. Supreme Court stated as follows: The statute relied on by the plaintiff in Howlett v. Rose, 42 U.S.C. § 1983, provides part as follows: In Dennis v. Higgins, 498 U.S. 439, 111 S. Ct. 865, 112 L. Ed. 2d 969 (1991), a taxpayer sought relief in a state court pursuant to 42 U.S.C. § 1983. The taxpayer contended that certain retaliatory taxes and fees imposed by the State of Nebraska on carriers and vehicles such as his, which were registered in other states but operated in Nebraska, constituted a burden that violated his rights under the Commerce Clause of the U.S. Constitution. The U.S. Supreme Court summarized the question presented and its response as follows: The Court in Dennis v. Higgins, further stated as follows: In Rogers v. Saylor, 306 Or. 267, 760 P.2d 232 (1988), the issue before the Supreme Court of Oregon was as follows: The Supreme Court of Oregon concluded that the limitations in the Oregon Claims Tort Act did not apply, stating as follows: *55 In Spain v. Mountanos, 690 F.2d 742 (9th Cir.1982), the Court of Appeals for the 9th Circuit concluded that state officials could not rely on state law to deny or limit an award of attorneys' fees under 42 U.S.C. § 1988. The Court of Appeals for the 9th Circuit stated as follows: The Ninth Circuit Court of Appeals further stated: In Americans United for Separation of Church and State v. School District of the City of Grand Rapids, 835 F.2d 627 (6th Cir.1987), the plaintiffs had prevailed in asserting their rights under the 14th Amendment to the U.S. Constitution and were awarded declaratory and injunctive relief against a school district. The plaintiffs sought an award of attorneys' fees under 42 U.S.C. § 1988, even though they had not specifically mentioned 42 U.S.C. § 1983 or § 1988 in their complaint. The Court of Appeals for the 6th Circuit concluded that attorneys' fees should be awarded under § 1988. The Court then stated: The Court further stated: The Court concluded as follows: In L.K. v. Gregg, 425 N.W.2d 813 (Minn. 1988), the issue before the Supreme Court of Minnesota was as follows: The Supreme Court of Minnesota concluded that attorneys' fees should be *56 awarded under 42 U.S.C. § 1988. The Court stated: The Court concluded by stating: The Appellees in this case rely on this Court's decision in L.L. Bean, Inc. v. Bracey, 817 S.W.2d 292 (Tenn. 1991). However, the Court's decision in that case supports the Appellant, not the Appellees. The issue in L.L. Bean was whether a chancery court had subject matter jurisdiction regarding a claim brought under 42 U.S.C. § 1983. The taxpayer in that case had not received an assessment, nor had it paid any taxes that it contested. This Court concluded that the chancery court should not assume jurisdiction of the case. We stated as follows: Unlike the taxpayer in L.L. Bean, Bloomingdale's By Mail, Ltd. had received an assessment and was properly before the chancery court pursuant to the provisions of T.C.A. §§ 67-1-1801 et. seq. The holding of the Supreme Court in L.L. Bean supports Bloomingdale's By Mail, Ltd. in this case. That holding was stated as follows: Pursuant to the foregoing authority, a state court that has subject matter jurisdiction may not deny a party to such proceeding its federal rights. These Federal rights include rights under the Commerce Clause of the U.S. Constitution. If the party enforcing such rights is successful, that party is entitled to receive an award of attorneys' fees under 42 U.S.C. § 1988, even though that party did not specifically plead or rely on 42 U.S.C. § 1983 in prosecuting its claim. The provision that governs the award of attorneys' fees in this case is 42 U.S.C. § 1988. Under that provision, "the court, in its discretion, may allow the prevailing party other than the United States, a reasonable attorneys' fees as part of the costs." Even though the Federal statute provides that a court had discretion in awarding attorneys' fees under 42 U.S.C. § 1988, the cases interpreting that statute state that the prevailing party should receive an award, unless there are "special circumstances" that would render an award unjust. Blanchard v. Bergeron, 489 U.S. 87, 109 S. Ct. 939, 103 L. Ed. 2d 67 (1989); Monroe v. County Board of Education, 583 F.2d 263 (6th Cir.,1978). To the extent that T.C.A. § 67-1-1803(d) does not conflict with 42 U.S.C. § 1988, the Tennessee statute's provisions should be applicable. Thus, under the state statute, the plaintiff is entitled to an award of reasonable attorneys' fees up to 20% of the amount assessed. If its (reasonable) attorneys' fees are in excess of that amount, then the court should award the full amount of the attorney's fees (unless there are "special circumstances" not present in *57 this case, that would render such an award unjust). The court may not rely on the Tennessee statute to limit the amount of attorneys' fees that would otherwise be awarded under the Federal statute. T.C.A. § 67-6-102(6)(J) is declared null and void because it is in violation of the Commerce Clause of the United States Constitution. Plaintiff-Appellant's Commerce Clause rights were violated by the Commissioner of Revenue's unconstitutional imposition of a duty on the Plaintiff to register as a dealer in Tennessee and collect use tax on its mail order sales. This case is remanded to the Chancery Court with the following directives: (1) The judgment of the Chancery Court is reversed and vacated. The Chancery Court shall issue judgment in favor of the Plaintiff-Appellant in which it declares that the assessment of taxes against the Appellant is invalid and that the Appellant shall not be required to collect or remit Tennessee use taxes. (2) The Chancery Court shall make a determination of the amount of attorneys' fees and expenses of litigation to which the Appellant is entitled, such determination to be made in a manner consistent with the foregoing opinion of this Court. All court costs, including those on appeal, are adjudged against the Defendants. Defendants-Appellees Joe Huddleston, Commissioner of Revenue, and Charles W. Burson, Attorney General of Tennessee have filed a Petition to Rehear in the above styled case. After careful consideration, the Court is of the opinion that the Petition to Rehear is not well taken and the same is denied at the cost of Defendants-Appellees.