Montana v. United States, 440 U.S. 147 (1979)

Montana v. United States

No. 77-1134

Argued December 4, 1978
Decided February 22, 1979
440 U.S. 147

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MONTANA

Syllabus

Montana levies a 1% gross receipts tax upon contractors of public, but not private, construction projects. A public contractor may credit against the gross receipts tax its payments of personal property, corporate income, and individual income taxes. Any remaining gross receipts tax liability is customarily passed on in the form of increased construction costs to the governmental unit financing the project. In 1971, the contractor on a federal project in Montana brought a suit in state court contending that the gross receipts tax unconstitutionally discriminated against the Government and the companies with which it dealt. The litigation was directed and financed by the United States. Less than a month later, the Government brought this action in the Federal District Court challenging the constitutionality of the tax. By stipulation, the case was continued pending resolution of the state court litigation, which concluded in a decision by the Montana Supreme Court upholding the tax. Kiewit I. The court found the distinction between public and private contractors consistent with the mandates of the Supremacy and Equal Protection Clauses. At the Solicitor General’s direction, the contractor abandoned its request for review by this Court. The contractor then instituted a second state court action regarding certain tax payments different from those in Kiewit I. The Montana Supreme Court, finding the second claim essentially no different from the first, invoked the doctrines of collateral estoppel and res judicata to affirm the dismissal of the complaint. Kiewit II. Thereafter, the District Court heard the instant case on the merits, and concluded that the United States was not bound by Kiewit I and that the tax violated the Supremacy Clause.

Held: The United States is collaterally estopped from challenging the prior judgment of the Montana Supreme Court. Pp. 153-164.

(a) The interests underlying the related doctrines of collateral estoppel and res judicata -- that a

right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction . . . cannot be disputed in a subsequent suit between the same parties or their privies . . . ,

Southern Pacific R. Co. v. United States, 168 U.S. 1, 48-49 -- are similarly implicated when nonparties assume control over litigation in which they have a direct financial or proprietary interest and then seek to redetermine issues previously resolved. Here it is undisputed that the United States exercised sufficient control over the Kiewit I litigation to actuate principles of collateral estoppel. Pp. 153-155.

(b) The precise constitutional claim advanced by the United States in this litigation was presented and resolved against the Government in Kiewit I. Pp. 156-158.

(c) The factual and legal context in which the issues of this case arise has not materially changed since Kiewit I, and thus the normal rules of preclusion should operate to relieve the parties of "redundant litigation [over] the identical question of the statute’s application to the taxpayer’s status." Tait v. Western Maryland R. Co., 289 U.S. 620, 624. Commissioner v. Sunnen, 333 U.S. 591, distinguished. Pp. 158-162.

(d) Though preclusion may be inappropriate when issues of law arise in successive actions involving unrelated subject matter, that exception is inapposite here, since the Government’s "demands" are closely aligned in time and subject to those in Kiewit I. Nor is this a case where a party has been compelled to accept a state court’s determination of issues essential to the resolution of federal questions. Rather the Government, "freely and without reservation submitte[d] [its] federal claims for decision by the state courts . . . and ha[d] them decided there. . . ." England v. Medical Examiners, 375 U.S. 411, 419. Since the Government has not alleged unfairness or inadequacy in the state procedures to which it voluntarily submitted, it is estopped from relitigating issues previously adjudicated. Pp. 162-164.

437 F.Supp. 354, reversed.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, BLACKMUN, POWELL, REHNQUIST, and STEVENS, JJ., joined. REHNQUIST, J., filed a concurring statement, post, p. 164. WHITE, J., filed a dissenting opinion, post, p. 164.