U.S. Supreme Court
Dismisses Cuno Case
In late 2004, the Sixth Circuit caused great concern for
economic developers in the Sixth Circuit and across the country when it found
an Ohio incentive program unconstitutional in Cuno v. DaimlerChryler.
Those concerns have now been addressed, at least temporarily, by the U.S.
Supreme Court.
In 1998, Ohio granted DaimlerChrysler tax benefits in an effort
to encourage the expansion of a Toledo Jeep facility. A group of taxpayers
sued, claiming the incentives violated the U.S. Constitution's Commerce Clause,
which grants Congress the power to regulate interstate commerce and prohibits
state interference with same.
In 2001, the federal district court in Ohio found no such
violations, but when the case was appealed to the U.S. Court of Appeals for the
Sixth Circuit, which includes Kentucky, the Sixth Circuit held the incentives
violated the Commerce Clause. Ohio appealed to the U.S. Supreme Court.
Instead of deciding the case on the merits, the Supreme Court
recently held the plaintiffs lacked standing. To have standing, a plaintiff
must show "personal injury fairly traceable to the defendant's allegedly
unlawful conduct". The Court held an interest in tax revenues, as one of
millions of taxpayers, was too "remote, fluctuating and uncertain".
At present, this case has no impact on Kentucky's incentive
programs. First, the Sixth Circuit's opinion is no longer binding and never
governed Kentucky programs directly. Second, most of Kentucky's programs are
distinguishable from the Ohio program held unconstitutional by the court.
Finally, this issue may become moot as legislation is before Congress
authorizing state incentives. It is likely that incentive programs will
be challenged in other jurisdictions and litigation of this issue will continue
until such time as a federal law is passed which clearly holds that state
incentives are permissible or such time as a federal court makes a finding to
that effect.
To view a complete copy of the opinion issued, please visit
http://www.supremecourtus.gov/opinions/05pdf/04-1704.pdf.
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