Healy v. Ratta, 292 U.S. 263 (1934)

APPEAL FROM THE CIRCUIT COURT OF APPEALS

FOR THE FIRST CIRCUIT

Syllabus

1. A merchant whose business had been conducted through salesmen in a city and elsewhere in the state, alleging that a state law imposing a statewide license tax on each salesman or graduated local tax in cities was in denial of equal protection of the laws, brought suit in a federal court to enjoin the enforcement of the law, naming as sole defendant a city officer whose authority to enforce it was confined to his particular city.

Held:

(1) That the matter in controversy did not embrace the right to restrain enforcement of the law by other officers in other places in the state, and that the collateral effect of the decree, by virtue of stare decisis, upon other and distinct controversies with other officers could not be considered in ascertaining whether the jurisdictional amount was involved, even though their decision might turn on the same question of law. P. 266.

(2) Evidence of injury to the plaintiff’s business outside of the city, and of the cost of licenses for doing it, must therefore be disregarded in determining the amount in controversy. P. 267.

2. In an injunction suit in a federal court challenging the constitutionality of a state law which imposes license taxes on plaintiff’s salesmen and subjects them to arrest and fine for nonpayment, the issue being confined to the right of the state to collect the taxes and not extending to the method of enforcement, the amount in controversy is the amount of the taxes due from plaintiff or demanded of him, and does not include the penalty or loss of business which payment of the tax would avoid. P. 267.

3. The inability of a taxpayer to litigate the validity of a tax without risk of irreparable injury to his business, which is ground for invoking the equitable jurisdiction of a federal court, affords no measure of the value of the matter in controversy. P. 269.

4. The policy of Congress to narrow the jurisdiction of federal courts in suits between citizens of different States or based on federal questions calls for strict construction of the statute in determining the value of the matter in controversy. P. 270.

5. The power reserved to the states, under the Constitution, to provide for the determination of controversies in their courts may be restricted only by the action of Congress in conformity with the judiciary sections of the Constitution. P. 270.

6. Due regard for the rightful independence of state government, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the statute has defined. P. 270.

7. In suits to enjoin the collection of a tax payable annually or the imposition of penalties in case it is not paid, the sum due or demanded is the matter in controversy, and the amount of the tax, not its capitalized value, is the measure of the jurisdictional amount. P. 270.

67 F.2d 554 reversed.

Appeal from the affirmance of a decree against Healy, a police officer, perpetually enjoining him from making arrests, prosecuting, or otherwise interfering with the plaintiff or his dealers in the City of Manchester for failure to pay license taxes imposed by a New Hampshire "Hawkers & Peddlers" law.