APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Daniel R. Dominguez, U.S. District Judge]
The opinion of the court was delivered by: Lynch, Chief Judge.
Before Lynch, Chief Judge, Torruella and Lipez, Circuit Judges.
The question presented in this case is whether the Supreme Court's decision in Levin v. Commerce Energy, Inc., 130 S. Ct. 2323 (2010), requires the federal courts to refrain from exercising jurisdiction over this case, a dormant Commerce Clause attack on Puerto Rico's differential taxation of categories of brewers. We answer that question affirmatively and affirm the district court's dismissal on comity grounds.
Puerto Rico has classified Coors Brewing Co. ("Coors") as a "large brewer" under its beer tax schedule and accordingly taxes Coors at a higher rate than it taxes "small brewers," including local Puerto Rico brewer Cerveceria India. In 2006, Coors brought suit in federal district court against Juan Carlos Mendez-Torres, Puerto Rico's Secretary of the Treasury Department (the "Secretary"), challenging this differential treatment under the dormant Commerce Clause. The district court originally dismissed the case on comity grounds, but in 2009, this court reversed that decision, interpreting the Supreme Court's decision in Hibbs v. Winn, 542 U.S. 88 (2004), to conclude that neither comity nor any federal statute barred Coors from seeking relief from the state taxation scheme in federal court. Coors Brewing Co. v. Mendez-Torres (Coors Brewing Co.), 562 F.3d 3 (1st Cir. 2009).
On remand to the district court, the parties moved toward a final resolution of the case, stipulating to resolve Coors's motion for summary judgment before any other matter pending in the case. As it turned out, the Supreme Court interpreted Hibbs differently than we predicted. On June 1, 2010, the Supreme Court decided Levin, which expressly abrogated this court's 2009 Coors Brewing Co. decision.
On July 14, 2010, the Secretary moved the district court to dismiss the case based on Levin. The district court then issued an opinion in which it reached Coors's motion for summary judgment, which it denied, before granting the Secretary's motion to dismiss on grounds of comity.
Coors has appealed both decisions, arguing primarily that the Secretary consented to resolving this case in federal court, and that, even if he had not, the Puerto Rico courts do not provide the "plain, adequate, and complete" forum required under comity, and that equity requires reversal here for other reasons.
Because we find that the Secretary has not consented to litigate this case in federal court, and because we have long found the Puerto Rico courts to provide an "adequate state forum" for the adjudication of federal constitutional claims, and no other grounds justify retention of jurisdiction, we affirm the district court's grant of the Secretary's motion to dismiss. We also vacate the district court's merits ruling denying Coors summary judgment; it will have no effect on any later proceedings in the courts of Puerto Rico.
We do not address the merits of Coors's challenge to the beer tax regime and make no ruling as to the validity of that regime under the dormant Commerce Clause. Should Coors choose to pursue its case in the Puerto Rico courts, it may press its federal constitutional claims there and, should it receive an unfavorable disposition, it may seek further review of any substantial federal claims in the U.S. Supreme Court. Pleasures of San Patricio, Inc. v. Mendez-Torres, 596 F.3d 1, 7 (1st Cir. 2010).
Puerto Rico has a long history of differentiating in its beer excise tax between "small" and "large" brewers, and the "large" brewers have a long history of bringing challenges to this differentiation. In 1969, Puerto Rico first imposed a uniform excise tax of $0.75 per gallon on all beer sold within the Commonwealth. P.R. Law 143 of June 30, 1969. In 1978, the legislature began differentiating within this tax between "large brewers," those producing more than 31 million gallons annually, and "small brewers," those producing less than that amount. That same year, the tax on large brewers was raised to $1.60 per gallon, while the tax on small brewers was set at $1.05 per gallon. P.R. Law 37 of July 13, 1978. This $0.55 differential between large and small brewers held steady until 2002, when the legislature amended the law to increase the difference to $1.90 per gallon. The large brewer tax was raised to $4.05 per gallon; the small brewer tax to $2.15 per gallon, and four intermediate gradations were added in between.*fn1 P.R. Laws. Ann. tit. 13, § 9521 (2002). In 2004, the legislature again amended the regime, this time, to permit small brewers to pay the tax rates for each of the respective lower gradations, so long as their total per annum production remained below 31 million gallons. P.R. Laws. Ann. tit. 13, § 9574 (2004).
Since the 1978 amendments, Puerto Rico's beer tax has undergone almost continuous litigation in state and federal court. In 1978, the United States Brewers Association ("USBA") brought initial challenges to the tax regime in both the federal district and Puerto Rico courts. Under the Butler Act, 48 U.S.C. § 872, a close analogue to the Tax Injunction Act ("TIA"), 28 U.S.C. § 1341,*fn2 the federal district court directed USBA to seek a decision in state court on the merits of the tax challenge, but retained jurisdiction over the suit in the event the state courts failed to provide a "plain, speedy and efficient remedy." U.S. Brewers Ass'n v. Cesar Perez, 455 F. Supp. 1159, 1164 (D.P.R. 1978) (internal quotation marks omitted).
USBA accordingly brought its case in state court, where it lost on the merits. The Puerto Rico Superior Court rejected USBA's various constitutional and other challenges to the tax and dismissed the complaint, U.S. Brewers Ass'n v. Perez, Civ. No. PE-78-1137 (Dec. 12, 1978), and the Puerto Rico Supreme Court upheld the dismissal, U.S. Brewers Ass'n v. Sec'y of the Treasury (U.S. Brewers P.R.), 109 P.R. Dec. 456, 9 P.R. Offic. Trans. 605 (1980).
Meanwhile, USBA appealed the federal district court's decision to this court, arguing that the Butler Act did not bar federal jurisdiction over the action since USBA was not seeking to reduce Puerto Rico's tax revenue. This court rejected that argument, holding that the action was barred by considerations underlying the Butler Act, namely "equity practice, . . . principles of federalism . . . and the imperative need of a State to administer its own fiscal operations," U.S. Brewers Ass'n v. Perez (U.S. Brewers), 592 F.2d 1212, 1214 (1st Cir. 1979) (omissions in original) (quoting Tully v. Griffin, 429 U.S. 68, 73 (1976)) (internal quotation marks omitted), and remanded to the district court for dismissal, id. at 1215.
Later, on the very same day the 2002 Amendments went into effect increasing the tax differential between small and large brewers to $1.90 per gallon, a new suit was filed attacking the new law. The Puerto Rico Association of Beer Importers ("PRABI"), of which Coors was then a member, challenged the new law in Puerto Rico Superior Court. PRABI argued that the special exemption for small brewers -- which favored local Puerto Rico brewer, Cerveceria India -- violated the dormant Commerce Clause. The Superior Court dismissed the case, and the Puerto Rico Supreme Court affirmed. Puerto Rican Ass'n of Beer Imps. v. Puerto Rico (Beer Imps.), 171 P.R. Dec. 140 (2007), cert. denied, 552 U.S. 1257 (2008).
About two weeks after PRABI filed suit in Puerto Rico Superior Court, and before that court had ruled on the merits, Coors withdrew its claims without prejudice. Three days later, it initiated its own suit in the U.S. District Court for the District of Columbia, requesting a temporary restraining order and preliminary injunction against the enforcement of the new tax. The district court dismissed the suit with prejudice on jurisdictional grounds under the Butler Act. Coors Brewing Co. v. Calderon (Calderon), 225 F. Supp. 2d 22, 27 (D.D.C. 2002); see also id. at 26 ("Coors' argument that the Butler Act and [TIA] foreclose subject matter jurisdiction only in those instances where a party seeks to enjoin the collection of taxes, thereby decreasing a state's tax revenues, is similarly unconvincing as a thinly veiled attempt to circumvent the clear will of Congress.").
On appeal, Coors settled the case, agreeing to a stipulation that the district court's judgment "determines with finality the Court's lack of jurisdiction but is without prejudice to the substantive claims that the Court lacked jurisdiction to address."
B. The Present Litigation over the 2004 Amendments
In 2004, the Puerto Rico legislature again amended the tax regime, this time to permit small brewers to take advantage of all five lower tax gradations. P.R. Laws. Ann. tit. 13, § 9574. In response to these amendments, on November 17, 2006, Coors filed suit in the U.S. District Court for the District of Puerto Rico. It is in this suit that Coors's present appeal is taken. The suit attacked the tax differential, sought a declaration that the "Special Exemption" for small brewers violated section three of the Federal Relations Act, 48 U.S.C. § 741a, as well as the dormant Commerce Clause, and requested additional declaratory and injunctive relief under 42 U.S.C. § 1983. See Complaint, Coors Brewing Co. v. Mendez-Torres, No. 3:06-cv-02150 (Nov. 17, 2006). The Secretary initially filed a motion to dismiss with prejudice on grounds that the district court lacked subject matter jurisdiction under the Butler Act and TIA, on grounds of comity, and on grounds of collateral estoppel based on the earlier decisions in U.S. Brewers P.R., Beer Imps., and Calderon. The district court dismissed the case on jurisdictional and collateral estoppel grounds.
Coors made several arguments in its first appeal in this case. First, it challenged the district court's collateral estoppel ruling, arguing that its suit challenged the new, 2004 Amendments to the tax, and thus presented circumstances unaddressed in Calderon, Beer Imps. and U.S. Brewers P.R. It also argued that there had been an intervening change in the law since the district court dismissed its 2002 suit. In 2004, the Supreme Court decided Hibbs v. Winn, which held that the TIA did not bar a challenge by Arizona taxpayers to a tax credit for donations to school tuition organizations which were then permitted under state law to award tuition grants for religious schools. 542 U.S. at 92. The Supreme Court reasoned that Congress had only intended the TIA to bar federal jurisdiction in cases where state taxpayers sought to avoid paying state taxes or sought to decrease state tax revenues overall. Id. at 107. Extending this reasoning to the Butler Act, Coors argued that because it did not seek to decrease its own tax burden, but sought a higher tax rate on small brewers, neither comity not the Butler Act barred its requested relief.
As said, this court ruled in favor of Coors in 2009, holding that the suit was not precluded and that neither the Butler Act nor principles of comity barred the exercise of federal jurisdiction. Coors Brewing Co., 562 F.3d at 3. We briefly summarize the reasoning set forth in that opinion. First, we held that because Calderon merely found the federal courts to be without jurisdiction to address Coors's claims, and Hibbs altered the applicable legal standard, Calderon did not foreclose a new jurisdictional inquiry. 562 F.3d at 12. Under the logic of Hibbs, we held that the Butler Act did not bar federal jurisdiction over Coors's suit. 562 F.3d at 15-16. We also rejected the Secretary's comity argument, finding that Hibbs had narrowed the comity doctrine.*fn3 562 F.3d at 18. ...