Direct Marketing Association Oral Argument Update

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Direct Marketing Association Oral Argument Update


Direct Marketing Association Supreme CourtOral argument in the case of Direct Marketing Association v. Brohl occurred on December 8, 2014.   For  readers who are following the case, we thought it would be useful not only to recap some of the high points of the argument, but also to provide a list of resources and press reactions.  Both a transcript and an audio recording of the hearing are now available online.   Briefs of the parties as well as those of amicus curiae are available as well. The Direct Marketing Association was supported by briefs from the Institute for Professionals In Taxation, the Tax Foundation, the United States Chamber of Commerce, the Council on State Taxation, and National Federation of Independent Business Small Business Legal CenterGeorge Isaacson and Matthew Schaefer of Brann & Isaacson represented Direct Marketing Association before the nation’s highest court.

Direct Marketing Association v. Brohl Argument Highlights

Although the Direct Marketing Association’s case was limited to the question of whether its challenge to Colorado’s so-called “Amazon Law” could be heard in Federal court, a surprising number of the comments and questions from the Justices focused on issues relating to the merits of the case.  Time and again the Justices expressed concern not only about the impact of Colorado’s law on direct marketers, but of the extraordinary burden on interstate sellers were other states to follow Colorado’s lead in enacting similar statutes.  Indeed, Justice Scalia explained that this is “a very important case because I have no doubt that if we come out agreeing with [Colorado], every one of the states is going to pass laws like this.”  Colorado’s Solicitor General acknowledged this.  Even small businesses would be at risk of having to submit “potentially 50 different forms to all of these States,” Justice Alito noted.  “But that’s where this all could lead, couldn’t it?” Alito asked.  Colorado’s lawyer agreed.

In questioning Colorado’s lawyer, the Justices expressed repeated skepticism about how Colorado could force nonresident sellers to turn over information about their customers.  For example, Justice Scalia challenged the idea that Colorado could compel “non-State citizens, out-of-State people” to provide information to help Colorado collect a tax that it lacked constitutional authority to impose on those companies in the first instance.  These same concerns led other Justices to be skeptical about keeping DMA’s case out of Federal court.   “What doesn’t [make sense to me],” Justice Sotomayor explained, “is how we can apply the [Tax Injunction Act] to an entity that has no direct responsibility to you” to collect or pay taxes.  Colorado is relying on the Tax Injunction Act to prevent the Federal courts from hearing any challenge to its Amazon Law, even cases asserting claims under the United States Constitution.

Justice Scalia also identified First Amendment issues associated with requiring sellers, including potentially unpopular not-for-profit corporations, to turn over their customer lists.  They “don’t want their [customers’] identity known because hurtful things will be done to them.”  Scalia continued:  “I’m claiming a First Amendment objection to turning over the names of members, and you tell me that cannot get into Federal court?”  “Justice Scalia,” Colorado’s attorney responded, “I’m telling you that you cannot get into Federal court.”  DMA’s case includes a First Amendment challenge to Colorado’s law.

In the end, Colorado’s position, that any law even marginally bearing on state taxation, could not be challenged in Federal court triggered significant skepticism from a number of the Justices.  Once “we start down your road,” Justice Breyer explained, “there is no stopping place.”  In his summation, George Isaacson, counsel for the Direct Marketing Association, agreed.  Colorado’s interpretation of the Tax Injunction Act, he argued, could bar from Federal court any third party impacted by a law indirectly related to taxation, no matter how attenuated their relationship might be to Colorado taxpayers or their transactions.  “It [could] reach common carriers, it could reach internet service providers, it could reach credit card companies, it could reach … any party that the State maintains has some information that would be relevant to assist it, to facilitate it in the collection … of taxes.”

Press Coverage and Analysis

Oral argument in Direct Marketing Association v. Brohl received wide coverage and analysis, including a blow-by-blow of the oral argument, as well as a deeper analysis, in Forbes, and articles in the New York Times, Target Marketing, DM News (which also published a separate analytical piece), and Retail Dive.  The story also appeared in The National Law Journal.

A decision is expected in the spring.

 

 

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