United States Supreme Court Rules in DaimlerChrysler v. Cuno

Overview

The U.S. Supreme Court has unanimously ruled in DaimlerChrysler Corp. v. Cuno and Wilkins v. Cuno that the Cuno plaintiffs, who challenged the constitutionality of Ohio's investment tax credit (“ITC”), lacked standing to bring their suit in the federal courts. The Supreme Court vacated the portion of the Sixth Circuit Court of Appeals' decision in Cuno that invalidated the ITC, remanding the cases to the lower court for dismissal.

The cases concerned whether two incentives used to induce DaimlerChrysler to locate a new auto plant in Toledo, Ohio, near an existing plant violated the Commerce Clause of the United States Constitution. The incentives at issue were a local property tax abatement and the ITC. The trial court upheld the constitutionality of both incentives and the plaintiffs appealed to the Court of Appeals for the Sixth Circuit, which upheld the property tax abatement program but struck down the ITC. Both parties appealed to the United States Supreme Court (“Supreme Court”), which agreed to hear DaimlerChrysler’s challenge to the Sixth Circuit’s invalidation of the ITC. The plaintiffs’ appeal, with respect to the property tax abatement, is still pending, and the Supreme Court has not ruled on whether it would hear the case.

The Supreme Court’s decision vacates the trial court and Court of Appeals decisions, meaning that the cases have no status as precedent. The plaintiffs can now, if they so choose, refile their case in the Ohio state courts, which do not apply the same standing requirements as the federal courts. The uncertainty engendered by the Supreme Court’s resolution of the cases may cause the Congress to assert its Commerce Clause power to allow the states to utilize incentives like the ITC. In particular, the Economic Development Act of 2005, which would authorize incentives such as the ITC, was introduced in the House and the Senate in May of 2005. H.R. 2471 (2005) and S. 1066 (2005). Congress delayed consideration of these bills when the Supreme Court agreed to hear the case and may now revisit the issue.