Opinion ID: 2291486
Heading Depth: 3
Heading Rank: 2

Heading: Due Process Requirement of Remedy for Constitutional Violation

Text: Plaintiffs argue that the Fourteenth Amendment prohibition against deprivation of property without due process of law [9] requires that they be afforded a remedy to secure return of improperly exacted taxes. They are correct. To satisfy the requirements of the Due Process Clause ... in this refund action the State must provide taxpayers with, not only a fair opportunity to challenge the accuracy and legal validity of their tax obligation, but also a clear and certain remedy for any erroneous or unlawful tax collection to ensure that the opportunity to contest the tax is a meaningful one. McKesson Corp. v. Division of Alcoholic Beverages, ___ U.S. at ___, 110 S.Ct. at 2251 (citation and footnote omitted). [A] ruling that a tax is unconstitutionally discriminatory under the Commerce Clause places substantial obligations on the States to provide relief.... American Trucking Ass'ns v. Smith, ___ U.S. at ___, 110 S.Ct. at 2333. Vermont must afford a remedy and a meaningful remedy, but not any particular remedy. [S]ome form of hearing is required before an individual is finally deprived of a property interest. Mathews v. Eldridge, 424 U.S. 319, 333, 96 S.Ct. 893, 902, 47 L.Ed.2d 18 (1976), quoted in McKesson Corp., ___ U.S. at ___ n. 17, 110 S.Ct. at 2250 n. 17. But that remedy is not, as a matter of constitutional necessity, a plenary suit in the court of general jurisdiction. Our Legislature has provided a specific administrative procedure to afford plaintiffs the remedy to which they are constitutionally entitled. 32 V.S.A. § 8914 states: Any overpayment of [the motor vehicle purchase and use] tax as determined by the commissioner shall be refunded. Plaintiffs concede that § 8914 covers unconstitutional taxes as well as arithmetic errors: The statute makes no distinction between overpayments due to unconstitutionality or other causes. Brief for Appellants Williams and Levine at 19; Brief for Appellant Woodard at 27. See also United States v. Dalm, 494 U.S. 596, ___ n. 6, 110 S.Ct. 1361, 1368-69 n. 6, 108 L.Ed.2d 548 (1990) (The common sense interpretation is that a tax is overpaid when a taxpayer pays more than is owed, for whatever reason or no reason at all.... The word [`overpayment'] encompasses `erroneously,' `illegally,' or `wrongfully' collected taxes....). Prior to the United States Supreme Court's decision, the remedy provided by § 8914 was not available to Williams and Levine to the extent they challenged the facial validity of § 8903, because the Commissioner of Motor Vehicles is not authorized to rule upon the constitutionality of the statutes he is bound to administer. See Westover v. Village of Barton Elec. Dep't, 149 Vt. 356, 357, 543 A.2d 698, 699 (1988). Nevertheless, after the Supreme Court's ruling that the use tax statute is facially unconstitutional, a complaint to the Commissioner under § 8914 would not have been futile. [10] The Commissioner at that point would not have been required to address the constitutionality of the statute, for that question had been decided; he would have been faced instead with three potential questions: Did the Department in fact administer the use tax statute in a manner that discriminated against nonresidents? If not, did the Department's enforcement of the tax, eventually pursuant to Rule 86-28-E, comply with the statute? If it did comply with the statute, did the practice violate the Commerce or Privileges and Immunities Clauses? [11] Plaintiff Woodard also challenged the Department's practice on statutory grounds, and raised additional constitutional challenges to the use tax as administered in the case of Vermont residents who registered their cars out of state before bringing them to Vermont. The Commissioner had jurisdiction to decide all of these claims. See Alexander v. Town of Barton, 152 Vt. 148, 151, 565 A.2d 1294, 1296 (1989) (while administrative agencies cannot rule on the constitutionality of legislation, they can adjudicate constitutional questions in determining validity of statutorily-delegated agency practices); Christian Brothers Institute of New Jersey v. Northern New Jersey Interscholastic League, 86 N.J. 409, 416, 432 A.2d 26, 29 (1981) (administrative agency may rule on constitutional issues relevant and necessary for resolution of questions within scope of its jurisdiction); 4 K. Davis, Administrative Law Treatise § 26:15, at 480 (2d ed. 1983) (exhaustion of administrative remedies may be required when a factual context is needed for deciding the constitutional question or when the objecting party may prevail on nonconstitutional grounds). The first question posed by Williams and Levine, in particular, was suited to agency determination. See Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 2466, 45 L.Ed.2d 522 (1975) (Exhaustion is generally required as a matter of preventing premature interference with agency processes, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review.). All plaintiffs in this case, therefore, had an available remedy in § 8914 but chose not to pursue it. One further point must be addressed. In American Trucking Ass'ns v. Conway, 146 Vt. 579, 508 A.2d 408 (1986), this Court considered a constitutional challenge to statutes imposing certain fees on foreign-registered trucks. While ruling that the statutes at issue violated the Commerce Clause of the United States Constitution, we upheld the superior court's refusal to order a refund of fees collected pursuant to the objectionable statutes. This action for a tax refund is a suit against the state, and therefore, is barred by sovereign immunity unless the state has waived its immunity. Id. at 587-88, 508 A.2d at 414. We found that 23 V.S.A. § 3020(b), authorizing the Commissioner to refund a tax or fee that has been illegally or erroneously collected or computed, did not constitute a waiver of sovereign immunity. The statute, we wrote, merely provides for a refund mechanism if errors are made in determining what tax is imposed.... Here, the Vermont legislature has not inferentially indicated its intent to provide the amounts paid to the state under a statute later declared invalid. Id. at 588, 508 A.2d at 414. We recognize that our construction of 23 V.S.A. § 3020(b) in American Trucking Ass'ns is incompatible with the meaning we have ascribed to 32 V.S.A. § 8914 in this opinion. The term overpayment in § 8914, if anything, implies a narrower authority to award refunds than the term illegally or erroneously collected in § 3020(b); yet, as we have explained, § 8914 does provide a remedy to recover amounts paid to the state under a statute later declared invalid. The Court's confined reading of § 3020(b) was grounded in an understanding of common-law sovereign immunity that is no longer tenable after the Supreme Court's recent unanimous decisions in McKesson Corporation and Howlett v. Rose . Thus, in American Trucking Ass'ns, we said that the state cannot be sued without its consent for injuries resulting from the exercise of functions essentially governmental in character. 146 Vt. at 587, 508 A.2d at 413. But due process may require that states entertain suits against them though they have not consented. That is the holding of McKesson: [I]f a State places a taxpayer under duress promptly to pay a tax when due and relegates him to a postpayment refund action in which he can challenge the tax's legality, the Due Process Clause of the Fourteenth Amendment obligates the State to provide meaningful backward-looking relief to rectify any unconstitutional deprivation. ___ U.S. at ___, 110 S.Ct. at 2247 (footnotes omitted). Howlett specifically holds that the Supremacy Clause does not permit a state law defense of sovereign immunity in a § 1983 action brought in state court where a sovereign immunity defense would not be available had the action been brought in a federal forum. ___ U.S. at ___, 110 S.Ct. at 2242-43. [A]s to persons that Congress subjected to liability, individual States may not exempt such persons from federal liability by relying on their own common law heritage. Id. at ___, 110 S.Ct. at 2247. The import of these decisions cannot be avoided. Section III of the Court's opinion in American Trucking Ass'ns should be considered overruled. Common-law sovereign immunity, however, is not vitiated entirely. A state must provide some remedy to permit the recoupment of unconstitutionally exacted taxes, but it may choose, and limit, the remedy, so long as it comports with due process principles. McKesson notes that States may avail themselves of a variety of procedural protections against any disruptive effects of a tax scheme's invalidation, such as providing by statute that refunds will be available to only those taxpayers paying under protest, or enforcing relatively short statutes of limitation applicable to refund actions. ___ U.S. at ___, 110 S.Ct. at 2257. The Court added that [s]uch procedural measures would sufficiently protect States' fiscal security when weighed against their obligation to provide meaningful relief for their unconstitutional taxation. Id. Vermont has consented to suit for the recovery of wrongfully levied purchase and use taxes by providing in 32 V.S.A. § 8914 for administrative complaint to the Commissioner of Motor Vehicles. Because that remedy provides taxpayers with due process  indeed, plaintiffs have not challenged the sufficiency of the remedy  the defense of sovereign immunity in a court of plenary jurisdiction remains intact and available to the State. The superior court could not award a refund of taxes absent the State's waiver of immunity, and, therefore, properly dismissed plaintiffs' claims for monetary relief.