Supreme Court of the United States

No. 05-___

IN THE Supreme Court of the United States

U.S. Steel Mining Company, LLC, et al., Petitioners, v. Virgil Helton, West Virginia Tax Commissioner.

______

On Petition for a Writ of Certiorari to the West Virginia Supreme Court of Appeals ______

PETITION FOR A WRIT OF CERTIORARI ______

Steven H. Becker Thomas C. Goldstein Paul A. Horowitz (Counsel of Record) Suzanne I. Offerman Amy Howe BAKER & MCKENZIE LLP Kevin K. Russell 1114 Ave. of the Americas GOLDSTEIN & HOWE, P.C. New York, NY 10036 4607 Asbury Pl., NW Washington, DC 20016 Herschel H. Rose III (202) 237-7543 Steven R. Broadwater ROSE LAW OFFICE 500 Virginia St. East Suite 1290 Charleston, WV 25335 March 31, 2006 i

QUESTION PRESENTED Whether the Import-Export Clause of the United States Constitution categorically prohibits a State from imposing a tax on goods in export transit, as this Court held in Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69 (1946), or whether, as the West Virginia Supreme Court of Appeals held below, Richfield Oil has been superseded by this Court’s decisions in Michelin Tire Corp. v. Wages, Inc., 423 U.S. 276 (1976), and Washington Department of Revenue v. Ass’n of Washington Stevedoring Cos., 435 U.S. 734 (1978). ii

PARTIES TO THE PROCEEDINGS BELOW In addition to the parties named in the caption, the following parties appeared below and are petitioners here: Consolidation Coal Company, Laurel Run Mining Company, McElroy Coal Company, Arch Coal, Inc., Mid-Vol Leasing, Inc., Coastal Coal-West Virginia, LLC, Elk Run Coal Company, Inc., Paynter Branch Mining, Inc., Kingston Resources, Inc., Pioneer Fuel Corporation, and Peabody Holding Company, LLC. RULE 29.6 STATEMENT U.S. Steel Mining Company, LLC is a wholly owned subsidiary of United States Steel Corporation. No publicly held corporation owns more than 10% of the stock of United States Steel Corporation. Consolidation Coal Company is a wholly owned subsidiary of CONSOL Energy Inc., which is a publicly traded company of which no individual or entity owns 10% or more of its stock. Laurel Run Mining Company is a wholly owned subsidiary of Island Creek Coal Company, which is a wholly owned subsidiary of Consolidation Coal Company. McElroy Coal Company is a wholly owned subsidiary of Consolidation Coal Company. Neuberger Berman, LLC and FMR Corp. (a Fidelity Investment Company) are publicly traded companies that own 10% or more of the stock of Arch Coal, Inc. Mid-Vol Leasing, Inc. was purchased by Lexington Coal Company, LLC during the pendency of this litigation. Lexington Coal Company, LLC has no parent company and is not publicly traded. Coastal Coal-West Virginia, LLC is a wholly owned subsidiary of Alpha Natural Resources, which is a publicly traded company. Pursuant to a sales agreement between El Paso Corporation and Amfire, LLC (an affiliate of Alpha iii Natural Resources), any refunds related to tax periods on or before January 31, 2003 will be paid by Alpha Natural Resources to El Paso Corporation. Elk Run Coal Company, Inc. is a wholly owned subsidiary of Massey Energy Company, which is a publicly traded company. No publicly held company owns more than 10% of Massey Energy Company. Paynter Branch Mining, Inc. is a wholly owned subsidiary of Riverton Coal Production, Inc., which is a wholly owned subsidiary of Foundation American Coal Holding, LLC, which is a wholly owned subsidiary of Foundation Coal Corporation, which is a wholly owned subsidiary of FC 2 Corp., which is a wholly owned subsidiary of Foundation Coal Holdings, Inc. Foundation Coal Holdings, Inc. is a publicly traded company. Kingston Resources, Inc. is owned by the same companies that own Paynter Branch Mining, Inc. Pioneer Fuel Corporation is a wholly owned subsidiary of Pioneer Mining, Inc., which is a wholly owned subsidiary of Riverton Coal Production, Inc., which is a wholly owned subsidiary of Foundation American Coal Holding, LLC, which is a wholly owned subsidiary of Foundation Coal Corporation, which is a wholly owned subsidiary of FC 2 Corp., which is a wholly owned subsidiary of Foundation Coal Holdings, Inc. Foundation Coal Holdings, Inc. is a publicly traded company. Peabody Holding Company, LLC is a wholly owned subsidiary of Peabody Energy Corporation, a publicly traded company. FMR Corp. (a Fidelity Investment Company) owns more than 10% of Peabody Energy Corporation’s stock.

TABLE OF CONTENTS QUESTION PRESENTED...... i PARTIES TO THE PROCEEDINGS BELOW ...... ii RULE 29.6 STATEMENT ...... ii TABLE OF CONTENTS...... iv TABLE OF AUTHORITIES...... v PETITION FOR A WRIT OF CERTIORARI ...... 1 OPINIONS BELOW...... 1 JURISDICTION ...... 1 RELEVANT CONSTITUTIONAL, STATUTORY, AND REGULATORY PROVISIONS...... 1 STATEMENT...... 1 REASONS FOR GRANTING THE WRIT...... 9 I. The Ruling Below Conflicts With This Court’s Decision In Richfield Oil...... 9 II. The Lower Courts Are In Irreconcilable Conflict Over The Continuing Vitality Of Richfield Oil...... 17 A. The Lower Courts Are Divided And Confused...... 17 B. Only This Court Can Resolve The Recurring Division...... 22 III. The Decision Below Is Wrong Because Richfield Oil Remains Good Law...... 24 CONCLUSION...... 30 v TABLE OF AUTHORITIES

Cases Agostini v. Felton, 521 U.S. 203 (1997)...... 22 Ammex, Inc. v. Dep’t of Treas., 603 N.W.2d 308 (Mich. App. 1999) ...... 21 Arizona Dep’t of Rev. v. Robinson’s Hardware, 721 P.2d 137 (Ariz. 1986) ...... 21 Auto Cargo, Inc. v. Miami Dade County, 237 F.3d 1289 (CA11 2001) ...... 20 Bradford Exchange v. Dep’t of Rev., 115 Ill. App. 3d 674 (1987)...... 20 Brown v. Houston, 114 U.S. 622 (1885) ...... 16 Canton Railroad Co. v. Rogan, 340 U.S. 511 (1951)...... 25 Coast Pacific Trading, Inc. v. State of Washington, 719 P.2d 541 (Wash. 1986) ...... 21 Coe v. Errol, 116 U.S. 517 (1886)...... 11 Commonwealth Edison Co. v. Montana, 453 U.S. 609 (1981)...... 7, 16, 21 Diamond Shamrock Refining and Marketing Company v. Nueces County Appraisal District, 876 S.W.2d 298 (Tex. 1994) ...... 19 IBM Corp. v. United States, 59 F.3d 1234 (CAFC 1995) .... 23 Ill. Tool Works, Inc. v. Indep. Ink, Inc., 74 U.S.L.W. 4154 (Mar. 1, 2006)...... 22 Kansas City, Ft. S. & M.R. R. Co. v. Kansas, 240 U.S. 227 (1916)...... 11 Kosydar v. National Cash Register, 417 U.S. 62 (1974)...... 29 Los Angeles Tile Co. v. Chatham Co. Bd. of Tax Assessors, 433 S.E.2d 82 (Ga. App. 1993)...... 21 Louisiana Land and Exploration Co. v. Pilot Petroleum Corp., 900 F.2d 816 (CA5 1990)...... 17, 19, 20, 28 McDonnell Douglas Corp. v. State Bd. of Equalization, 13 Cal. Rptr. 2d 399 (Ct. App., 2d App. Dist., 1992)...... 21 vi Melton v. Peabody Holding Company, Inc., Civil Action No. 04-AA-77 ...... 5 Michelin Tire Corp. v. Wages, Inc., 423 U.S. 276 (1976)...... passim National Private Truck Council v. Oklahoma Tax Comm’n, 515 U.S. 582 (1995)...... 21 Quill Corp. v. North Dakota, 504 U.S. 298 (1992) ...... 29 R.J. Reynolds Tobacco Co. v. Durham County, NC, 479 U.S. 130 (1986)...... 26 Reich v. Collins, 513 U.S. 106 (1994)...... 21 Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69 (1946)...... passim Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989) ...... 22 St. Louis Southwestern Ry. Co. v. Arkansas, 235 U.S. 350 (1914)...... 11 State Oil Co. v. Khan, 522 U.S. 3 (1997) ...... 22 Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122 (1819)...... 28 Tenet v. Doe, 125 S. Ct. 1230 (2005) ...... 22 Thames & Mersey Marine Ins. Co. v. United States, 237 U.S. 19 (1915)...... 23 United States v. Hatter, 532 U.S. 557 (2001)...... 22 United States v. Hvoslef, 237 U.S. 1 (1914)...... 11 United States v. IBM Corp., 517 U.S. 843 (1996)...... passim Virginia Indonesia Co. v. Harris County Appraisal District, 910 S.W.2d 905 (Tex. 1995) ...... 18, 19, 20, 21 Washington Department of Revenue v. Ass’n of Washington Stevedoring Cos., 435 U.S. 734 (1978) . passim Constitutional Provisions U.S. Const. art. I, § 10, cl. 2...... passim U.S. Const. art. I, § 9, cl. 5...... 23 U.S. Const., amend. XI ...... 21 vii Statutes 28 U.S.C. 1257(a) ...... 1 Tax Injunction Act, 28 U.S.C. 1341 ...... 21 W. Va. Code 11-12B-3(a)...... 2 W. Va. Code 11-13A-2(c)(6)(H) ...... 4 W. Va. Code 11-13A-3(a)...... 2 W. Va. Code 11-13A-3(b) ...... 2 W. Va. Code 11-13A-4...... 4 W. Va. Code 11-13A-4(e)...... 4 W. Va. Code 11-13A-6(a)...... 2 W. Va. Code 22-3-11(h) ...... 2 W. Va. Code 22-3-32(a) ...... 2 W. Va. Code 22-3-32(b) ...... 2 Regulations W. Va. Code R. 110-13A-2.7 ...... 2 W. Va. Code R. 110-13A-2a.1...... 12 W. Va. Code R. 110-13A-2a.2...... 13 W. Va. Code R. 110-13A-2a.5.2...... 8 Other Authorities Laurence H. Tribe, AMERICAN CONSTITUTIONAL LAW (3d ed. 2000)...... 26 Max Farrand, THE RECORDS OF THE FEDERAL CONVENTION (1911) ...... 10 Walter Hellerstein, Michelin Tire Corp. v. Wages: Enhanced State Power to Tax Imports, 1976 SUP. CT. REV. 99 (1976)...... 26

PETITION FOR A WRIT OF CERTIORARI Petitioners U.S. Steel Mining Company, LLC, et al., respectfully petition for a writ of certiorari to review the judgment of the West Virginia Supreme Court of Appeals in this case. OPINIONS BELOW The opinion of the West Virginia Supreme Court of Appeals (Pet. App. 1a-66a) is designated for publication but not yet published. The decisions of the Circuit Court (Pet. App. 67a-75a) and the Tax Commissioner (Pet. App. 76a- 81a) are unpublished. JURISDICTION The judgment of the state Supreme Court was entered on December 2, 2005. Pet. App. 83a. On February 23, 2006, the Chief Justice extended the time in which to file this petition to and including March 31, 2006. App. No. 05A767. This Court has jurisdiction pursuant to 28 U.S.C. 1257(a). RELEVANT CONSTITUTIONAL, STATUTORY, AND REGULATORY PROVISIONS The relevant constitutional, statutory, and regulatory provisions are reproduced in the appendix to this petition. Pet. App. 82a-88a. STATEMENT The Import-Export Clause of Article I of the U.S. Constitution provides in relevant part that “[n]o State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its Inspection Laws * * *.” U.S. Const. art. I, § 10, cl. 2. The West Virginia Supreme Court of Appeals in this case upheld as consistent with the Import- Export Clause West Virginia’s taxes on coal that petitioners export to foreign customers notwithstanding that the taxes (i) 2 accrue while the coal is in export transit, and (ii) are imposed directly upon the value added to the coal by the loading of the coal onto railcars for shipment during the export process. 1. Petitioners are companies that mine coal in the State of West Virginia for domestic sale and international export.1 As described by the state Tax Commissioner, following processing operations, the coal at issue “immediately enters the export stream to purchasers in foreign countries.” Pet. App. 80a. In particular, after processing, coal is placed in railcars designated for export to a particular foreign purchaser. Because there are no storage facilities at the port, the loading of the railcars is coordinated with the arrival of the ship that will take the coal to the foreign customer. The coal is then taken directly from the mine to the port in Virginia, where the coal is loaded onto its designated vessel. Title to the coal always transfers from petitioners to the buyer during the course of export. Although the specific timing of the transfer of title depends on the particular transaction, it typically occurs late in the shipping process, as when the coal is delivered to the port or is loaded into the ship, and never earlier than when it is loaded onto the train. West Virginia imposes several taxes on petitioners’ exported coal. The taxes are measured either by the sale price (ad valorem) or by tonnage sold.2 Although the language of

1 Petitioners’ factual description is taken from the undisputed factual record before the lower courts. See Pet. App. 68a (circuit court noting that parties did not dispute factual findings of Tax Commissioner); id. 79a (Tax Commissioner adopting the “description of the salient steps in this export stream for the coal” as “set forth in Petitioner U.S. Steel Mining Company’s initial brief”). 2 W. Va. Code 11-13A-3(a) imposes a “severance tax” upon “every person exercising the privilege of engaging or continuing within [West Virginia] in the business of severing, extracting, reducing to possession and producing [coal] for sale, profit or commercial use.” This tax is imposed at the rate of five percent of 3 the various taxes “is slightly different,” Pet. App. 5a, they are similar in relevant part. Ibid. Unlike traditional “severance” taxes, all of the taxes accrue upon sale, not upon severance of the coal from the ground. Id. 79a. Moreover, the sale is consummated, and the taxes accrue, while the coal is in the export stream: title is conveyed to the purchaser after the coal is loaded onto the railcars, or more typically, upon delivery to the port or transfer into the ship. See ibid. (Tax Commissioner finding that liability accrued at time of sale,

the gross income derived from the sale of the coal by the producer, net of transportation costs from the point of loading to the port. Id. § 11-13A-3(b); see also W. Va. Code R. 110-13A-2.7. W. Va. Code 11-13A-6(a) imposes an “additional tax” upon “every person exercising the privilege of engaging or continuing within [West Virginia] in the business of severing coal, or preparing coal (or severing and preparing coal) for sale, profit or commercial use.” The additional tax is imposed at the rate of 0.35% of sales proceeds and is included in the severance tax. Ibid. W. Va. Code 11-12B-3(a) imposes a “minimum severance tax” upon “every person exercising the privilege of engaging within [West Virginia] in severing, extracting, reducing to possession or producing coal for sale, profit or commercial use.” This tax is imposed at the rate of $0.75 per ton of coal sold. Ibid. W. Va. Code 22-3-32(a) imposes a “special tax” upon “every person in [West Virginia] engaging in the privilege of severing, extracting, reducing to possession or producing coal for sale, profit or commercial use.” This tax is imposed at the rate of $0.02 per ton of coal sold and is collected in the same manner, at the same time, and upon the same tonnage as the minimum severance tax. Id. § 22-3-32(b). Petitioners allege that all of these taxes are unconstitutional as applied to exported coal. Petitioners do not challenge a fifth tax imposed on coal – the “coal mining assessment” imposed under W. Va. Code 22-3-11(h). This tax is assessed on tonnage mined and not tonnage sold, and therefore, unlike the other taxes, accrues upon the severance rather than sale of coal, prior to the coal’s entry into the stream of export. 4 “which is after the coal has entered the continuous stream of export to foreign customers”). Other West Virginia taxes, by contrast, are imposed on, and limited to the value of, the natural resource as it is severed from the ground. Compare W. Va. Code 11-13A-4(e) (“The privilege of severing and producing limestone and sandstone by quarrying or mining shall end once the limestone or sandstone is severed from the earth.”); id. § 11-13A-2(c)(6)(H) (“For limestone or sandstone quarried or mined, gross value is the value of such stone immediately upon severance from the earth.”). In addition, for purposes of the ad valorem taxes, the value of the coal includes “the cost of loading the coal into railcars” for transportation at the initiation of the export process. Pet. App. 14a; see also W. Va. Code 11-13A-4. The value of the coal at the time of loading – which is after the coal has been sized, cleaned, separated, and blended according to the foreign purchaser’s specifications – is significantly higher than at the earlier point at which it is mined. 2. This case began when petitioners applied to the state Tax Commissioner for a refund of taxes paid on exported coal. Petitioners argued that the taxes violate the Import- Export Clause under this Court’s decision in Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69 (1946). In Richfield Oil, the Court invalidated California’s application of a retail sales tax to the sale of oil to foreign purchasers for export abroad. The plaintiff in that case sold oil to the government of New Zealand, transferring title to the oil when it was delivered into a ship that would later transport the oil overseas. Id. at 71-72. As in this case, the state sales tax accrued at the time of the transfer of title and was based on the purchase price. Ibid. This Court rejected the argument that the tax was valid because it was of general application and did not discriminate against sales for export. Id. at 76. Although such nondiscriminatory taxes may be permissible under the dormant Commerce Clause, this Court held that “we cannot write any such qualification into the Import- 5 Export Clause.” Ibid. Instead, the Court held that the relevant constitutional question was “whether at the time the tax accrued the oil was an export.” Id. at 78. In the case before it, the Court concluded that the tax was upon an export because the “delivery marked the commencement of the movement of the oil abroad.” Id. at 83. The Court explained that the same result would have obtained if the plaintiff had delivered the oil to a train for transport to the ship: “It would not be clearer that the oil had started upon its export journey had it been delivered to a common carrier at an inland point. The means of shipment are unimportant so long as the certainty of the foreign destination is plain.” Ibid. In subsequent proceedings initiated by petitioners and others covering later tax years, the state Office of Tax Appeals – an independent tribunal created in January 2003 – held that the challenged taxes are unconstitutional under Richfield Oil. 3 In this case, by contrast, the state Tax Commissioner rejected petitioners’ refund claims, refusing to apply Richfield Oil in light of “the more modern precedents of the Supreme Court.” Pet. App. 80a-81a. The Commissioner acknowledged that “liability for the taxes in question accrues under the statutory law, at the time of sale, in these cases, which is after the coal has entered the continuous stream of export to foreign customers.” Id. 79a. Nonetheless, the Commissioner concluded that the taxes were valid because, in her view, the taxes did not offend the policies underlying the Import-Export Clause. Id. 81a. Petitioners appealed that determination to the Circuit Court of Kanawha County. The circuit court affirmed,

3 The State appealed those decisions and the appeals have been held in abeyance pending resolution of this case, with the exception of one case in which the circuit court ruled against one petitioner based on the state Supreme Court’s decision here. See Melton v. Peabody Holding Company, Inc., Civil Action No. 04- AA-77. In that case, the petitioner will appeal to the state Supreme Court by April 28, 2006. 6 agreeing that more recent precedent “announced a significantly different Import-Export Clause analysis than that of Richfield Oil.” Pet. App. 71a. 3. The state Supreme Court in turn sustained the taxes, divided three to two. See Pet. App. 3a-4a. a. The majority below emphasized “the great magnitude of importance attendant to our resolution of the issues,” as a judgment in petitioners’ favor would assertedly be “a body blow” to the “public fisc of West Virginia.” Pet. App. 22a-23a. The court announced that it would “affirm the taxes as constitutional unless it appears beyond doubt that they offend the United States Constitution.” Id. 22a. The majority proceeded to reject petitioners’ claims. It principally reasoned that this Court’s jurisprudence “took a sharp turn” away from Richfield Oil and adopted a “new policy-based * * * approach” in Michelin Tire Corp. v. Wages, Inc., 423 U.S. 276 (1976), and Washington Department of Revenue v. Ass’n of Washington Stevedoring Cos., 435 U.S. 734 (1978). Pet. App. 9a-10a. Although Washington Stevedoring specifically left open whether this policy-based analysis applies “when a State directly taxes imports or exports in transit,” or whether the per se prohibition of Richfield Oil applies instead, the state Supreme Court employed the Michelin analysis to uphold the taxes in this case. Id. 40a. The court held that the taxes were constitutional under that policy-based inquiry because, in its view, the taxes do not “impinge[] on the federal government’s ability to speak with one voice when regulating commercial relations with foreign governments” because they do not “caus[e] retaliation by foreign governments.” Ibid. Further, the court held that the taxes do not disrupt “harmony in commerce among the states,” as reflected in this Court’s decision upholding a similar tax under the Commerce Clause. 7 Ibid. (citing Commonwealth Edison Co. v. Montana, 453 U.S. 609 (1981)).4 The court further opined that the taxes are upon “the privilege and occasion of producing coal for sale or commercial use.” Pet. App. 5a. However, it did not dispute that the taxes accrue upon sale and are moreover levied based not merely on the value of the coal itself but on the value added by the loading of the coal onto railcars. Id. 6a & n.3. Rather it stated that, in its view, the loading “is properly viewed as a part of the coal production/mining and processing process,” Pet. App. 15a, as distinct from “the mined and processed coal’s entry into export transit,” id. 20a. b. Justice Maynard dissented. He found it “crystal clear” that “at least two of the taxes * * * are unconstitutional under the federal Import-Export Clause as interpreted” in Richfield Oil. Pet. App. 46a. He explained that it was undisputed “that the processed coal moves into export transit as it is loaded onto the train,” as “once the coal is loaded onto the train, it cannot be diverted from its overseas destination.” Id. 47. “Further, there is no dispute that the sale of the coal occurs no earlier than when the coal is loaded onto the railcars, and that the taxes at issue accrue at the time of sale.” Ibid. Justice Maynard found inappropriate “the majority opinion’s wholesale rejection of Richfield Oil in favor of the Michelin Tire/Washington Stevedoring line of cases.” Ibid. Not only has this Court “never overruled Richfield Oil,” but it “plainly has distinguished Richfield from Michelin/Stevedoring.” Ibid. (citing United States v. IBM Corp., 517 U.S. 843, 861-62 (1996)). Justice Benjamin separately dissented in relevant part, concluding that the ad valorem taxes are unconstitutional insofar as they apply to the value added to the sale by loading

4 The court also noted that the taxes do not have “an effect on federal import revenues,” although it recognized that fact “is largely irrelevant in the case of exports.” Pet. App. 12a. 8 the coal onto railcars destined for export. He concluded that petitioners’ challenges must be sustained in light of the state Supreme Court’s obligation to “embrace and enforce” this Court’s precedent, rejecting the view that “applicable precedent should be ignored or minimized because another line of cases is more to a court’s liking.” Pet. App. 56a. In his view, the majority inappropriately “presume[s] that Richfield Oil’s ‘stream-of-export’ rule has been overruled or disregarded by the United States Supreme Court in favor of Michelin’s policy rule.” Id. 58a. As did Justice Maynard, Justice Benjamin found it clear that the ad valorem taxes transgress this Court’s decision in Richfield Oil. Justice Benjamin found significant that the State taxes “activities beyond the production of the coal, including the loading of the coal for shipment,” and measures the tax in terms of gross value at sale. Pet. App. 56a. He found it particularly significant that the taxes “include a component of enhanced value of the coal derived by the activity of the producer loading coal for shipment,” ibid., because loading at the very least represents the “irrevocable commitment of the coal to the foreign market.” id. 57a. Moreover, Justice Benjamin noted, it is inaccurate to characterize the taxes as merely “severance taxes,” given that they also apply to the processing of coal in the State “whether the coal is mined in West Virginia or some other state.” Id. 51a n.3 (citing W. Va. Code R. 110-13A-2a.5.2) (emphasis in original). Justice Benjamin nonetheless found the disagreement among the members of the court “understandable” given the absence of “non-divergent case law.” Pet. App. 56a. “Indeed,” he explained, “one might understandably hope that the United States Supreme Court would take the opportunity to bring a new clarity to this area of constitutional law in the near future.” Ibid. 4. This petition followed. 9 REASONS FOR GRANTING THE WRIT Certiorari should be granted because the decision below squarely conflicts with this Court’s decision in Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69 (1946). The state Supreme Court concluded that Richfield Oil had been impliedly superseded by later precedent, a question upon which the lower courts are avowedly in conflict. It is this Court’s prerogative alone to overrule its precedents and, indeed, this Court has repeatedly disavowed overruling Richfield Oil. To the contrary, this Court has explicitly held open the question of Richfield Oil’s continuing validity, preferring “to defer decision until a case with pertinent facts is presented.” Washington Department of Revenue v. Ass’n of Washington Stevedoring Cos., 435 U.S. 734, 757 n.23 (1978). This is that case. The Court should take this opportunity to bring needed clarity and national uniformity to the proper construction of the Import-Export Clause. Moreover, in doing so, this Court should reaffirm that the plain text of the Import-Export Clause prohibits a state from imposing taxes on goods in export transit. While a policy-based analysis may be appropriate to applications of the Import-Export Clause to taxes that have only an indirect effect on exports, there is no basis for overruling this Court’s settled, bright-line rule prohibiting states from taxing goods while they are actually in export transit. I. The Ruling Below Conflicts With This Court’s Decision In Richfield Oil. 1. In Richfield Oil, this Court addressed the constitutionality under the Import-Export Clause of a tax on the “privilege of conducting a retail business” in California as applied to the sale of oil in the state for export. 329 U.S. at 83. The appellant, a California oil refiner, sold oil to the government of New Zealand. Id. at 71. The transaction was “f.o.b. Los Angeles,” such that title passed when the oil entered the tanker supplied by the purchaser in Los Angeles 10 harbor. Ibid. The state “assessed a retail sales tax against appellant measured by the gross receipts from the transaction.” Id. at 71-72. This Court held that the tax violated the Import-Export Clause. It reasoned in three parts. First, the Court held that the Constitution categorically prohibits any tax if “at the time the tax accrued the [taxed good] was an export.” 329 U.S. at 78. This prohibition includes, the Court held, the assessment of generally applicable, nondiscriminatory taxes on goods in export transit. Id. at 76. While this Court acknowledged that the distinct provisions of the Commerce Clause permit some non-discriminatory state taxes on interstate commerce, it nonetheless concluded that the constitutional text precludes writing any such “qualifications into the Import-Export Clause”: It prohibits every State from laying “any” tax on imports or exports without the consent of Congress. Only one exception is created—“except what may be absolutely necessary for executing it’s [sic] inspection Laws.” The fact of a single exception suggests that no other qualification was intended. It would entail a substantial revision of the Import- Export Clause to substitute for the prohibition against “any” tax a prohibition against “any discriminatory” tax. Ibid. The drafting history of the Clause furthermore demonstrated that the “language adopted was supported by Madison ‘as preventing all state imposts.’” Id. at 77 (quoting 2 Max Farrand, THE RECORDS OF THE FEDERAL CONVENTION 442 (1911)). Second, the Court held that the oil taxed by California was in the export stream and thus subject to the Import- Export Clause. The test, the Court held, is whether, at the point of the accrual of the tax, “the process of exportation has started,” 329 U.S. at 82, because the goods have “‘started upon such transportation in a continuous route or journey,’” 11 id. at 79 (quoting Coe v. Errol, 116 U.S. 517, 527 (1886)). In that case, exportation had begun: “Delivery was made into the hold of the vessel from the vendor’s tanks located at the dock. That delivery marked the commencement of the movement of the oil abroad.” Id. at 82-83. Though “the vessel was in California waters and was not bound for its destination until it started to move,” “when the oil was pumped into the hold of the vessel, it passed into the control of a foreign purchaser and there was nothing equivocal in the transaction which created even a probability that the oil would be diverted to domestic use.” Id. at 83. Third, the Court held that the California tax was “an impost within the meaning of the Import-Export Clause.” 329 U.S. at 83. The Court recognized that the State had characterized the tax as one on “the privilege of selling tangible personal property” within California, ibid., and that the state Supreme Court had described it as merely “an excise tax * * * measured by the gross receipts from sales,” id. at 83-84. Although the state court’s construction was “binding” as a matter of state law, this Court held it was “not determinative” of the federal constitutional question, which “turns not on the characterization which the state has given the tax, but on its operation and effect.” Id. at 84 (citing St. Louis Southwestern Ry. Co. v. Arkansas, 235 U.S. 350, 362 (1914); Kansas City, Ft. S. & M.R. R. Co. v. Kansas, 240 U.S. 227, 231 (1916)). Otherwise, “the obstructions to exportation which it was the purpose to prevent could readily be set up by legislation nominally conforming to the constitutional restriction but in effect overriding it.” Id. at 85 (quoting United States v. Hvoslef, 237 U.S. 1, 13 (1914)). Examining the operation and effect of the tax, this Court concluded that it constituted a forbidden impost because the “California Supreme Court conceded that the delivery of the oil ‘resulted in the passage of title and the completion of the sale, and the taxable incident.’” 329 U.S. at 84. In other words, the tax was forbidden because the “incident which 12 gave rise to the accrual of the tax was a step in the export process.” Ibid. 2. The West Virginia taxes challenged in this case are indistinguishable in any relevant respect from those held unconstitutional in Richfield Oil. In both cases, the critical constitutional question is “whether at the time the tax accrued the [good] was an export.” Richfield Oil, 329 U.S. at 78. In this case, as in Richfield Oil, the taxes accrue upon sale, a fact specifically noted by the Tax Commissioner. See Pet. App. 79a (“This tribunal also finds that liability for the taxes in question accrues under the statutory law, at the time of sale * * *.”). The West Virginia statutes uniformly calculate the amount of tax owed in accordance with the sale price or tonnage sold which, the state Supreme Court observed, “may in fact be determined only when the coal is delivered to the export carrier ship.” Pet. App. 6a. Accordingly, the Tax Commissioner has promulgated implementing regulations that make clear that liability for the severance and additional taxes does not accrue at the time the coal is mined, but rather at the time the coal is sold.5 In particular, the regulations provide that when “natural resources [are] severed or processed * * * and sold during a reporting period,” the tax is based on “the amount received or receivable by the taxpayer,” W. Va. Code R. 110-13A-2a.1 (emphasis added), and when “natural resources are severed for sale at a future date, payment of the tax with respect to the severed natural resource is delayed until the point in time when the taxpayer

5 The Commissioner has made clear that the same is true with respect to the special tax. See West Virginia State Tax Dep’t, Commonly Asked Questions About the Special Tax on Coal, Pub. TSD-382 (Mar. 1999) (“Liability for payment of this tax accrues when the coal is sold by the producer, or the coal is shipped for commercial use by the producer.”). 13 recognizes gross income under the taxpayer’s method of 6 accounting,” id. § 110-13A-2a.2 (emphasis added). It is furthermore undisputed that the sale takes place, and title is passed to the foreign purchaser, no earlier than when the coal is loaded onto a railcar designated for shipment abroad or, more typically, when the coal is delivered to the port or loaded into the ship. See Pet. App. 79a (Tax Commissioner finding that “the time of sale * * * is after the coal has entered the continuous stream of export to foreign customers”).7 And, as in Richfield Oil, at the time of sale, the coal “passed into the control of the foreign purchaser and there [is] nothing equivocal in the transaction which create[s] even a probability that the [coal] would be diverted to domestic use.” 329 U.S. at 83.8

6 In a footnote, the majority below stated that the Tax Commissioner’s conclusion that the taxes accrue at the time of sale was not “dispositive in relation to the legal issue before this Court – the actual constitutionality of the severance taxes in their operation and effect.” For reasons discussed infra, that legal conclusion is incorrect. For present purposes, however, it bears noting that the court did not disagree that the taxes actually accrue upon sale. To the contrary, the court expressly agreed that in the case of each tax, “either the final sales price or the invoiced tonnage of the coal that is sold is used to calculate the taxes; even though this final price or tonnage measurement may in fact be determined only when the coal is delivered to the export carrier ship.” Pet. App. 6a. 7 Depending on a particular contract, title transfers from petitioners to the foreign customer (1) when the coal is loaded onto the railcars for shipment to the port (FOB mine or FOB railcar); (2) when the coal arrives at the port (FOB Terminal); or (3) as the coal passes over the railing of the vessel (FOB vessel). Tr. 49, 62, 77, 88, 104; A.R. 210, 327, 716, 811, 817, 913. The earliest that sales are completed is when processed coal is loaded onto the railcars for shipment to the port. Tr. 49, 77, 104; A.R. 716, 817. 8 In a footnote, the majority below stated that “[a]s our discussion infra indicates, the coal severance taxes at issue in the instant case are not imposed on goods after they have been loaded, 14 The differences between this case and Richfield Oil are plainly immaterial. First, it is immaterial that in Richfield Oil the tax accrued when the oil was loaded onto a ship while in this case the taxes accrue at the earliest when the coal is loaded onto railcars for delivery to a waiting ship. See Richfield Oil, 329 U.S. at 83 (noting that it would have made no difference if the oil had been “delivered to a common carrier at an inland point” rather than delivered directly to the ship because the “means of shipment are unimportant so long as the certainty of the foreign destination is plain”). Second, it makes no constitutional difference that the majority below characterized the state laws as taxing “the privilege and occasion of producing coal for sale or commercial use,” Pet. App. 7a n.3, rather than as taxing exported coal. This Court rejected a similar ploy in Richfield Oil. 329 U.S. at 83-84 (rejecting claim that because the “California Supreme Court held that the tax is an excise tax for the privilege of conducting a retail business measured by the gross receipts from sales” the Import-Export Clause was not violated).

nor after they have clearly been started on their journey.” Pet. App. 9a n.4. That short-hand description of subsequent passages of the opinion should not be mistaken as indicating any disagreement with the uncontested finding of the Tax Commissioner that the taxes accrue upon sale which, in this case, takes place when the coal has been loaded onto railcars, delivered to the port, or loaded into the ship. The later portions of the opinion to which the footnote refers make clear that the court’s reference in footnote 4 is to its legal conclusion that the tax does not fall upon the coal “in transit” because the amount of the tax is calculated based on the coal’s value at the time it is loaded onto the railcars and does not include any value “added during [the] movement or transit” that follows. Pet. App. 15a. As discussed above, that legal conclusion is irreconcilable with this Court’s decision in Richfield Oil, which invalidated a state tax because it accrued when the oil was in export transit. 15 Finally, it is irrelevant that the majority below characterized the loading of coal (the value of which is also taxed by the State), as part of “the coal production/mining” process, rather than part of the “export transit.” Pet. App. 15a. Again, this Court encountered and rejected a similar argument in Richfield Oil, in which the “Supreme Court of California held that [the Import-Export Clause] did not bar the tax because the delivery of the oil which resulted in the passage of title occurred prior to the commencement of the exportation.” 329 U.S. at 74. The question “whether at the time the tax accrued the oil was an export,” this Court made clear, is a question of federal, not state, law. Id. at 78. And on that question of federal law, the loading of coal in this case cannot fairly be distinguished from the loading of oil in Richfield Oil. Indeed, in that very case this Court observed that the “certainty that the goods are headed to sea and that the process of exportation has started may normally be best evidenced by the fact that they have been delivered to a common carrier for that purpose.” 329 U.S. at 82. Here, no less than in Richfield Oil, the delivery of the coal to the rail carrier begins the irrevocable process of export.9

9 Petitioner U.S. Steel’s description of the process in its brief before the Tax Commissioner, which the Commissioner in turn expressly adopted as its factual findings on the matter, Pet. App. 79a, explained that the coal mine is equipped with a flood load facility that permits a unit train, consisting of 110 gondola cars, to be loaded while the train passes under the flood load facility. The coal is identified and irrevocably destined for export as it is loaded on that unit train through the flood load facility. By that time, Petitioners have provided the railroad with both the foreign country of destination and the identity of the foreign customer, and the railroad has coordinated the arrival of the ship that will carry the coal to the foreign destination. The coal is literally rolling to the sea when it is loaded onto the unit train, and once the coal has left the flood load facility, it cannot be diverted from its foreign 16 In this respect it is noteworthy that the Court in Richfield Oil distinguished Brown v. Houston, 114 U.S. 622 (1885), which sustained a Louisiana tax on “coal held in that State for sale.” Richfield Oil, 329 U.S. at 78 (emphasis added). That coal, at the time of taxation, “was not an export,” this Court explained, because “[w]hen taxed it was not held with the intent or for the purpose of exportation, but with the intent and for the purpose of sale there, in New Orleans.” Ibid. (quoting Brown, 114 U.S. at 78). In this case and Richfield Oil, by contrast, the state was not merely taxing a commodity that was held in the state. Rather, it was imposing the tax on a commodity that, at the time the tax accrued, was already in the stream of export commerce.10

destination. From the beginning of the loading process at the Pinnacle Mine, the train does not stop until it arrives at Lambert’s Point, where the train is broken up and the coal from each car is dumped onto a conveyor belt, which loads the coal directly into the vessel. Br. 3 (emphasis added). 10 Finally, this Court made clear in Richfield Oil that it makes no difference under the Import-Export Clause that the tax applies equally to coal sold domestically. In that case, this Court noted that the dormant Commerce Clause permits some nondiscriminatory state taxes on goods in interstate commerce, but rejected the claim that this meant that nondiscriminatory taxes imposed on goods in export transit passed muster under the Import-Export Clause. See 329 U.S. at 75 (noting that “the two clauses, though complementary, serve different ends. And the limitations of one cannot be read into the other.”). The reliance of the majority below, Pet. App. 20a, on Commonwealth Edison Co. v. Montana, 453 U.S. 609 (1981), a dormant Commerce Clause case, is therefore inapt. See also Washington Stevedoring, 435 U.S. at 751 (noting differences between requirements of the Commerce Clause and the Import-Export Clause and concluding that the “resolution of the Commerce Clause issue, therefore, does not dispose of the Import- Export Clause question”). 17 II. The Lower Courts Are In Irreconcilable Conflict Over The Continuing Vitality Of Richfield Oil. The West Virginia Supreme Court made little effort to reconcile its decision with Richfield Oil because it concluded that Richfield Oil had been superseded by more recent precedents, principally this Court’s decision in Michelin Tire Corp. v. Wages, Inc., 423 U.S. 276 (1976). See Pet. App. 9a- 10a. That conclusion provoked four separate opinions in this case, two in dissent. That division is emblematic of the continuing disagreement and confusion among the lower courts over whether states may tax goods sold to foreign purchasers for immediate shipment abroad. That disagreement arises principally from continuing uncertainty regarding the question this Court has repeatedly left open over “the applicability of the Michelin approach when a State directly taxes imports or exports in transit.” Washington Stevedoring, 435 U.S. at 757 n.23. Only this Court can resolve that question and it should do so in this case. A. The Lower Courts Are Divided And Confused. The decision below conflicts directly with the Fifth Circuit’s decision in Louisiana Land and Exploration Co. v. Pilot Petroleum Corp., 900 F.2d 816 (1990). In that case, the Fifth Circuit held that the Import-Export Clause precluded the State of Alabama from imposing a nondiscriminatory tax on jet fuel sold for export to Canada. As in this case and Richfield Oil, the seller contracted to provide the export goods “free on board” the means of transportation to be used to begin transport of the goods abroad (in this case a train; in Richfield Oil and Louisiana Land, a ship). Louisiana Land, 900 F.2d at 817. But while the West Virginia Supreme Court principally analyzed the question under the Michelin standard, the Fifth Circuit rejected that approach, concluding instead that it was bound to apply this Court’s decision in Richfield Oil. Id. at 821. Under that standard, the court held that the tax was impermissible because the fuel had been delivered to 18 a vehicle for international transport to Nova Scotia. Because “[n]o question existed about its destination,” the court concluded that “[w]ithout contradiction, the oil was in transit.” Ibid. Applying the per se prohibition of Richfield Oil, the Fifth Circuit held that “the Alabama fuel tax is an impost upon an export within the meaning of the Import- Export Clause, and is therefore unconstitutional.” Ibid. The Supreme Court of Texas reached the same conclusion, under the same analysis, with respect to a tax imposed on goods held pending export to Indonesia. The plaintiff in Virginia Indonesia Co. v. Harris County Appraisal District, 910 S.W.2d 905 (1995), purchased various goods for an Indonesian joint venture project. The goods became the property of the foreign purchaser upon arrival in Indonesia, but the Texas Supreme Court nonetheless held that the goods became exempt from taxation as soon as they were purchased for eventual shipment to Indonesia because at “the time of purchase, the goods are committed to foreign export and cannot thereafter be diverted to domestic use.” Id. at 907. The government argued that this conclusion was incompatible with the analysis of Michelin, but the Texas Supreme Court concluded that because the case involved goods in the “stream of export,” the case was controlled instead by the per se rule of Richfield Oil. Id. at 911-12. The court noted that this Court had repeatedly recognized that it had not yet decided whether the Michelin analysis applies to cases “involv[ing] a direct tax on in-transit goods.” Id. at 911. Accordingly, the Texas court recognized that resolving the continuing vitality of the Richfield Oil rule was the sole prerogative of this Court and, therefore, it applied “the long- standing rule that a tax on goods in the export stream of commerce violates the import-export clause.” Id. at 912. In applying that principle to the facts of the case before it, the Texas Supreme Court held that the taxed goods entered the “stream of export commerce” when they “began their movement to a precommitted foreign destination” – in that 19 case, by being shipped to an export packer’s facility to be processed for eventual shipment to Indonesia. Ibid. There can be no doubt that the Fifth Circuit and Texas Supreme Court would have held that the taxes in this case are unconstitutional. The coal in this case was indisputably in the “stream of export” under the law of these courts, as it was already aboard a train or ship and irrevocably committed to international export at the time the taxes accrued. And under the law of these courts, that fact was sufficient in itself to render the tax unconstitutional under the binding holding of Richfield Oil. The attempts of the majority below to reconcile its holding with the decisions of other courts lack merit. The majority below attempted to distinguish the Fifth Circuit’s decision by asserting that in this case, unlike Louisiana Land, the taxed goods were not “undisputedly in export transit.” Pet. App. 21a. But the coal in this case was no less clearly “in export transit” than was the jet fuel in Louisiana Land. In both instances, the tax accrued upon sale which, in both cases, occurred no earlier than upon the loading of the goods for export. See 900 F.2d at 817 (fuel was sold “free on board the Liberian flagged tanker”); supra note 8 (coal is sold no earlier than upon loading onto railcar). The majority’s attempt to distinguish the Texas Supreme Court’s decision – on the ground that the taxed goods in Virginia Indonesia were “merely in export through Texas” while the coal in this case originated in West Virginia, Pet. App. 21a n.12 – also fails. It is true that the court in Virginia Indonesia acknowledged its prior holding in Diamond Shamrock Refining and Marketing Company v. Nueces County Appraisal District, 876 S.W.2d 298 (Tex. 1994). See 910 S.W.2d at 910. In Diamond Shamrock, the court upheld a tax applied to oil imported into Texas for refining, concluding that the Richfield Oil categorical rule did not apply to “goods merely in transit within the only state the goods ever enter.” Id. at 301. Whatever the merits of that 20 distinction, it does not apply in this case, for the tax here is imposed on goods as they are in transport from West Virginia to a port in Virginia for export abroad. This case, accordingly, is on all fours with Virginia Indonesia, which likewise involved a tax on goods in export transit through multiple states and applied Richfield Oil. See 910 S.W.2d 906, 911-12.11 These fundamentally contradictory approaches and conclusions have been repeated in a number of lower court decisions that have continued to wrestle with the consequences of the continuing uncertainty over the validity of the Richfield Oil rule in the wake of Michelin. In Auto Cargo, Inc. v. Miami Dade County, 237 F.3d 1289 (2001), for example, the Eleventh Circuit declined to apply the categorical rule of Richfield Oil to a “five dollar ‘vehicle export fee’” imposed upon used cars shipped through the Port of Miami. Although recognizing that this Court’s prior decisions held that “a state could not tax goods destined for export once they entered the ‘export stream,” the court of appeals nonetheless concluded that “Michelin overruled [those] cases.” Id. at 1292. Other courts have reached the same conclusion. See, e.g., Bradford Exchange v. Dep’t of Rev., 115 Ill. App. 3d 674, 682 (1987); Arizona Dep’t of Rev.

11 However, even if the lower court were correct that the Texas Supreme Court would apply Michelin in a case such as this, that would simply mean that the division of authority is even more splintered than petitioners understand it to be; for it is quite clear that the Fifth Circuit makes no such distinction and applies Richfield Oil to all taxes that accrue while goods are in export transit. See Louisiana Land, 900 F.2d at 821 (tax unconstitutional because it was “levied on the goods themselves while they are in transit”); id. at 820 (concluding that the Michelin analysis is limited “to taxes levied on goods no longer in transit”). Thus, even if the West Virginia Supreme Court were correct, and the Texas Supreme Court applies a rule contrary to the law of the federal court of appeals with jurisdiction over Texas, that would itself be a substantial reason for this Court to grant certiorari. 21 v. Robinson’s Hardware, 721 P.2d 137, 139 (Ariz. 1986). On the other hand, numerous lower courts continue to view Richfield Oil as precedential authority in cases involving taxes imposed on export goods in transit. See, e.g., Ammex, Inc. v. Dep’t of Treas., 603 N.W.2d 308, 313 (Mich. App. 1999) (Richfield Oil remains valid authority); Los Angeles Tile Co. v. Chatham Co. Bd. of Tax Assessors, 433 S.E.2d 82, 83 (Ga. App. 1993) (holding that even after Michelin, State may not impose tax on export goods in transit); McDonnell Douglas Corp. v. State Bd. of Equalization, 13 Cal. Rptr. 2d 399 (Ct. App., 2d App. Dist., 1992) (applying Richfield Oil per se rule to invalidate sales tax on aircraft parts purchased for shipment to Mexico); Coast Pacific Trading, Inc. v. State of Washington, 719 P.2d 541, 544 (Wash. 1986) (“The parties thus correctly point out that Michelin and Stevedoring have not overruled decisions that struck down taxes levied directly on goods that had reached the export stream.”).12 At the same time, the question of the states’ ability to tax goods in export transit is one of substantial importance and regular recurrence. See, e.g., Virginia Indonesia Co., 910 S.W.2d at 916 (Hecht, J., dissenting) (noting that “[t]his is not an isolated case, even in Texas” and citing another pending similar case). As this Court has previously noted, as early as 1979, “33 States had adopted some type of severance tax,” Commonwealth Edison Co. v. Montana, 453 U.S. 609, 625

12 The conflict arises principally in the state, rather than federal, courts because the “sovereign immunity States enjoy in federal court, under the Eleventh Amendment, [] generally bar[s] tax refund claims from being brought in that forum.” Reich v. Collins, 513 U.S. 106, 110 (1994). At the same time, this Court has construed the Tax Injunction Act, 28 U.S.C. 1341, to prohibit federal courts from entertaining a suit for declaratory or injunctive relief challenging the validity of a state tax “where a plain, speedy and efficient remedy may be had in the courts of such State.” See generally National Private Truck Council v. Oklahoma Tax Comm’n, 515 U.S. 582, 586 (1995). 22 (1981), and as the opinions below document, Pet. App. 16a & n.10, 28a-30a, a dozen or more states impose coal mining taxes in particular. Although those statutes may vary in important respects from the tax imposed in this case, the substantial confusion about the legal test to be applied to such taxes, not to mention the ultimate constitutionality of the imposts, disserves both taxpayers and taxing authorities in those states. B. Only This Court Can Resolve The Recurring Division. This Court has repeatedly reaffirmed that “if a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.” Agostini v. Felton, 521 U.S. 203, 237 (1997) (quoting Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989)). Accordingly, if the majority below was wrong to conclude that Richfield Oil was no longer controlling authority, certiorari would be warranted to vindicate the authority of that precedent and the prerogative of this Court to determine the continuing validity of its own precedents. See Tenet v. Doe, 125 S. Ct. 1230, 1237 (2005). At the same time, if Richfield Oil has been fatally undermined, certiorari should be granted to explicitly overrule it, for no other court may properly do so. Indeed, for that very reason, this Court has repeatedly granted certiorari in cases such as this, in which the continuing validity of its precedents has been drawn into question. See, e.g., Ill. Tool Works, Inc. v. Indep. Ink, Inc., 74 U.S.L.W. 4154 (Mar. 1, 2006); United States v. Hatter, 532 U.S. 557, 567 (2001); State Oil Co. v. Khan, 522 U.S. 3, 9 (1997); Agostini, 521 U.S. at 237; Tenet, 125 S. Ct. at 1237. In fact, this Court granted certiorari in nearly identical circumstances in Washington Stevedoring itself. There, the State of Washington argued that its business and occupation 23 tax was valid because, in its view, decisions of this Court invalidating such a tax had been undermined by later precedent. The lower state courts held themselves bound by the earlier precedent, “in recognition of [their] duty to abide by controlling United States Supreme Court decisions.” Washington Stevedoring, 435 U.S. at 742 (quoting 559 P.2d at 998-99). Though no circuit conflict had arisen on the question, this Court granted certiorari to decide it. Similarly, in United States v. IBM, 517 U.S. 843, 846 (1996), this Court granted certiorari to decide whether a prior case involving the Export Clause,13 Thames & Mersey Marine Ins. Co. v. United States, 237 U.S. 19 (1915), was “no longer valid, having been superseded by subsequent decisions interpreting the Import-Export Clause” including “specifically, Michelin Tire Corp.” The lower court in IBM acknowledged that in Michelin Tire Corp., this Court had “modified its approach to issues arising under [the Import- Export] Clause.” IBM Corp. v. United States, 59 F.3d 1234, 1236 (CAFC 1995). But the court of appeals nonetheless concluded that it was this Court’s sole prerogative and duty to overrule its own cases. Id. at 1239. Although the petitioner cited no circuit split, this Court nonetheless “agreed to hear this case to decide whether we should overrule Thames & Mersey.” 517 U.S. at 846. There is no basis for a different result in this case. Indeed, this Court has previously recognized the need for a decision on the question presented in this case. In Washington Stevedoring, this Court specifically reserved “the question of the applicability of the Michelin approach when a State directly taxes imports or exports in transit.” 435 U.S. at 757 n.23. “As in Michelin, decided less than three years ago, we prefer to defer decision until a case with pertinent facts is presented. At that time, with full argument, the issue with all

13 The Export Clause bars federal taxation of exports: “No Tax or Duty shall be laid on Articles exported from any State.” U.S. Const. art. I, § 9, cl. 5. 24 its ramifications may be decided.” Ibid. See also IBM, 517 U.S. at 862. This case illustrates the need for such a considered decision by this Court and presents the ideal opportunity to provide it. III. The Decision Below Is Wrong Because Richfield Oil Remains Good Law. Certiorari also is warranted because the decision below is wrong in concluding that Richfield Oil has been overruled sub silentio by the policy-based approach of Michelin and Washington Stevedoring. To the contrary, as noted by the dissenting Justices in this case, Pet. App. 47a, there can be no fair suggestion that Richfield Oil has been overruled. 1. This Court has repeatedly acknowledged that Michelin and Washington Stevedoring did not reach the question decided in Richfield Oil because the cases addressed fundamentally different constitutional questions. In Washington Stevedoring itself, this Court noted that Michelin “qualified its holding with the observation that Georgia had applied the property tax to goods ‘no longer in transit.’” 435 U.S. at 756 (quoting Michelin, 423 U.S. at 302 n.20). “Because the goods were no longer in transit * * * the Court did not have to face the question whether a tax relating to goods in transit would be an ‘Impost or Duty’ even if it offended none of the policies behind the Clause.” Ibid.14 This Court went on to explain that it did not face that question in Washington Stevedoring either, because although the tax at issue accrued while the goods were in transit, “the tax does not fall on the goods themselves,” but rather on the stevedoring activity that moved the goods on and off the

14 In particular, Michelin sustained an ad valorem tax on goods stored in a Georgia warehouse that had previously been imported. The Court held that the Import-Export Clause does not apply to “a nondiscriminatory ad valorem property tax which is also imposed on imported goods that are no longer in import transit.” 423 U.S. at 286 (emphasis added). 25 ships. Ibid.15 Accordingly, the Court explained, “[w]e do not reach the question of the applicability of the Michelin approach when a State directly taxes imports or exports in transit.” Id. at 757 n.23. Ignoring these plain statements, the petitioner in United States v. IBM Corp., 517 U.S. 843 (1996), nonetheless argued that Michelin and Washington Stevedoring superseded this Court’s decision in Richfield Oil. The question in IBM was whether the Constitution precluded the federal government from imposing a nondiscriminatory tax on maritime insurance for goods in export transit. The Government conceded that the insurance tax was “essentially a tax on the goods themselves.” Id. at 861. However, the Government nonetheless insisted “that Michelin and Washington Stevedoring by analogy permit Congress to impose generally applicable, nondiscriminatory taxes that fall directly on exports in transit,” contrary to this Court’s holding in Richfield Oil. Ibid. While expressing doubt that the analogy was apt, this Court ultimately concluded that the Government’s argument failed on its own terms because “[t]his Court has never upheld a state tax assessed directly on goods in import or export transit.” Id. at 862 (emphasis added). The Court explained:

15 In Washington Stevedoring, the Court sustained the application of a Washington business and occupation tax to persons engaged in stevedoring. The tax was merely “a general business tax that applies to virtually all businesses in the State.” 435 U.S. at 754. It did “not fall on the goods themselves”: “The levy reaches only the business of loading and unloading ships or, in other words, the business of transporting cargo within the State of Washington.” Id. at 755. The Court relied on Canton Railroad Co. v. Rogan, 340 U.S. 511 (1951), which sustained the application of a state gross receipts tax to a railroad which derived most of its revenue from imports and exports: “The difference is that in the present case the tax is not on the goods but on the handling of them at the port.” Id. at 514-15 (emphasis in original). 26 Our holdings in Michelin and Washington Stevedoring do not * * * interpret the Import-Export Clause to permit assessment of nondiscriminatory taxes on imports and exports in transit. Michelin involved a tax on goods, but the goods were no longer in transit. The tax in Washington Stevedoring burdened imports and exports while they were still in transit, but it did not fall directly on the goods themselves * * *. Id. at 861.16 Indeed, the Court strongly suggested that its more recent decisions were consistent with Richfield Oil’s categorical prohibition against taxes on imports and exports in transit, noting that “in Michelin, we suggested that the Import-Export Clause would invalidate application of a nondiscriminatory property tax to goods still in import or export commerce.” Id. at 862 (emphasis added). Similarly, the Court in IBM observed that Washington Stevedoring “declined to endorse the Government’s theory” because under the Court’s cases – including Richfield Oil – the Constitution would be violated if “the State [or Federal Government] had taxed either the goods or activity so connected with the goods that the levy amounted to a tax on the goods themselves.” Ibid. (quoting Washington Stevedoring, 435 U.S. at 756 n.21) (alteration in IBM). Professor Tribe thus properly summarized this Court’s jurisprudence as “permit[ting] facially nondiscriminatory taxes—whether on interstate or on international goods—on items before or after their movement, but not while in transit.” Laurence H. Tribe, AMERICAN CONSTITUTIONAL LAW § 6-26, at 1163 (3d ed. 2000) (emphasis added). Accord Walter Hellerstein, Michelin Tire Corp. v. Wages: Enhanced State Power to Tax Imports, 1976 SUP. CT. REV. 99, 126 (1976)

16 Accord R.J. Reynolds Tobacco Co. v. Durham County, NC, 479 U.S. 130, 154 (1986) (“This Court has observed that in Michelin it limited its holding to the imported goods ‘no longer in transit.’”). 27 (Michelin sustains only “nondiscriminatory ad valorem property taxes upon goods no longer in transit”). Under that standard, the West Virginia taxes at issue in this case are unconstitutional,17 and certiorari should be granted to resolve the conflict between the ruling below and this Court’s precedent. 2. This difference in treatment applied to export-related taxes under this Court’s precedents – a categorical prohibition against taxes on export goods while in transit and a policy- based analysis of other taxes indirectly affecting exports – is well founded. Michelin and Washington Stevedoring adopted a flexible policy-based approach to the Import-Export Clause’s application to circumstances in which the constitutional text is ambiguous and clear lines are impossible to draw. See Michelin, 423 U.S. at 293-294 (observing, in case involving tax on goods no longer in transit, that the “terminology employed by the Clause – ‘Impost or Duties’ – is sufficiently ambiguous that we decline to presume it was intended to embrace taxation that does not create the evils the Clause was specifically intended to eliminate”). That is, the Court recognized that taxes on goods that are not in transit, and taxes that are not directly imposed on goods but nonetheless bear a close connection, are neither clearly included in nor excluded from the constitutional phrase “Imposts or Duties on Imports or Exports.” Nonetheless, categorically excluding such taxes from the limitations of the Clause could risk circumvention of the Import-Export Clause’s important prohibitions. At the same time, pervasively prohibiting all such taxes would often lead to an undue interference with state taxing authority with little

17 Importantly, because the unconstitutionality of the taxes arises from the State’s taxation of the export goods while they are in transit, the taxes are invalid in their entirety and would not be remedied by refunding solely the amount of the tax based on the value added by loading the coal onto the railcars, as the majority below wrongly suggested. See Pet. App. 23a n.13. 28 benefit to the purposes of the Clause. In such circumstances, the Court appropriately resolved the textual ambiguity by reference to the underlying purposes of the Clause. In this case and Richfield Oil, by contrast, the taxes on goods in export transit fall within the core of the plain meaning of the constitutional text. Indeed, taxes on goods in import or export transit are the very essence of prohibited “Imposts or Duties on Imports or Exports.” Because there is no textual ambiguity for this Court to resolve, the constitutional text must be given its plain effect, notwithstanding the lower court’s belief that the provision’s purposes would be better served by a different rule. When the language of the constitutional provision is clear, “it would be dangerous in the extreme to infer from extrinsic circumstances, that a case for which the words of an instrument expressly provide, shall be exempted from its operation.” Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 202 (1819) (Marshall, C.J.). In any event, as the Fifth Circuit concluded in Louisiana Land, the categorical rule of Richfield Oil is fully consistent with the policies underlying the Import-Export Clause. See 900 F.2d at 820-21. That Clause was part of the constitutional design to prevent states from interfering with import-export commerce and to leave to the federal government the authority to “speak with one voice when regulating commercial relations with foreign governments.” Id. at 821 (citing Michelin, 423 U.S. at 285). “To permit any and every state to impose a direct tax on goods in the export stream would circumvent this objective.” Ibid. Indeed, to permit states to impose taxes on goods in export commerce would be to give the states a power that the federal government itself indisputably lacks. See IBM, 517 U.S. at 849 (“The Court has strictly enforced the Export Clause’s prohibition against federal taxation of goods in export transit * * *.”); id. at 857-62 (declining to reverse this precedent in light of Michelin). Unlike the assessment on imports in Michelin and the tax on stevedoring in Washington 29 Stevedoring, state taxes imposed directly on exports in transit necessarily interfere with the constitutional design, which not only leaves the question of export taxation to the federal government, but also resolves that question in the Constitution itself. At the same time, adhering to the settled precedent of Richfield Oil is consistent with the need, emphasized by this Court, for a bright-line rule for establishing the limits of state taxing authority over goods in export transit under the Import- Export Clause. See, e.g., Kosydar v. National Cash Register, 417 U.S. 62, 71 (1974). While such clear rules may be subject to criticism as “overly wooden or mechanistic,” this Court has explained that this “is an instance, however, where, we believe that simplicity has its virtues”: The Court recognized long ago that even if it is not an easy matter to set down a rule determining the moment in time when articles obtain the protection of the Import-Export Clause, “it is highly important, both to the shipper and to the State, that it should be clearly defined so as to avoid all ambiguity or question.” Ibid. (citation omitted). This Court has further noted in a related context that such a bright-line rule firmly establishes the boundaries of legitimate state authority to impose a duty to collect sales and use taxes and reduces litigation concerning those taxes. This benefit is important, for as we have so frequently noted, our law in this area is something of a “quagmire” and the “application of constitutional principles to specific state statutes leaves much room for controversy and confusion and little in the way of precise guides to the States in the exercise of their indispensable power of taxation.” Quill Corp. v. North Dakota, 504 U.S. 298, 315-16 (1992) (citation omitted). 30 The clarity of the Richfield Oil categorical rule thus serves important purposes, as does continuing adherence to a precedent that has been the established law of the land of many decades. See IBM, 517 U.S. at 857 (“[W]e frequently have declined to overrule cases in appropriate circumstances because stare decisis ‘promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.’”). Given the vast number of state taxes that could conceivably be imposed on goods in export transit, and the billions of dollars at stake, overruling Richfield Oil in order to substitute the “peculiar definitional analysis [of] Michelin,” IBM, 517 U.S. at 858, along with its inherent ambiguities, will virtually guarantee perpetual litigation over the validity of numerous state taxes. * * * * * This case presents a recurring question of enormous practical importance to states and businesses alike. As the splintered decisions below illustrate, the unsettled state of this Court’s precedents has left the lower courts in disarray over the limits the Constitution imposes on the states’ taxing authority in this area. Justice Benjamin’s separate opinion below thus gave voice to a common sentiment when he observed that “one might understandably hope that the United States Supreme Court would take the opportunity to bring a new clarity to this area of constitutional law in the near future.” Pet. App. 56a. The Court should do so in this case. CONCLUSION For the foregoing reasons, the petition for a writ of certiorari should be granted.

Respectfully submitted,

March 31, 2006