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Harper v. Virginia Dep't of Taxation (91-794), 509 U.S. 86 (1993).
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SUPREME COURT OF THE UNITED STATES


No. 91-794


HENRY HARPER, et al., PETITIONERS v. VIRGINIA DEPARTMENT OF TAXATION

on writ of certiorari to the supreme court of virginia

[June 18, 1993]

Justice Kennedy , with whom Justice White joins, I nonetheless agree with the Court that Davis v. Michigan Dept. of Treasury, 489 U.S. 803 (1989), must be given retroactive effect. The first condition for prospective application of any decision is that it must announce a new rule of law. Ashland Oil, Inc. v. Caryl, 497 U.S. 916, 918 (1990) (per curiam); American Trucking Assns., Inc. v. Smith, supra, at 179; United States v. Johnson, 457 U.S. 537, 550, n. 12 (1982); Chevron Oil Co. v. Huson, 404 U. S., at 106-107. The decision must "overrul[e] clear past precedent on which litigants may have relied" or "decid[e] an issue of first impression whose resolution was not clearly foreshadowed." Id., at 106. Because Davis did neither, it did not announce new law and therefore must be applied in a retroactive manner.

Respondent argues that two new principles of law were established in Davis. First, it points to the holding that 4 U.S.C. § 111 in which the United States consents to State taxation of the compensation of "an officer or employee of the United States," applies to federal retirees as well as current federal employees. Brief for Respondent 16-18. See Davis, 489 U. S., at 808-810. In Davis, however, we indicated that this holding was "dictate[d]" by "the plain language of the statute," id., at 808, and weadded for good measure our view that the language of the statute was "unambiguous," "unmistakable," and "leaves no room for doubt," id., at 809, n. 3, 810. Given these characterizations, it is quite implausible to contend that in this regard Davis decided "an issue of first impression whose resolution was not clearly foreshadowed." Chevron Oil, supra, at 106.

The second new rule respondent contends the Court announced in Davis was that the state statute at issue discriminated against federal retirees even though the statute treated them like all other state taxpayers except state employees. Brief for Respondent 18-26. See Davis, supra, at 814, 815, n. 4. The Davis Court, however, anchored its decision in precedent. We observed that in Phillips Chemical Co. v. Dumas Independent School Dist., 361 U.S. 376 (1960), "we faced th[e] precise situation" confronting us in Davis, and so Phillips Chemical controlled our holding. 489 U. S., at 815, n. 4. To be sure, Justice Stevens in dissent disagreed with these contentions and attempted to distinguish Phillips Chemical. 489 U. S., at 824-826. The Court, however, was not persuaded at the time, and I remain convinced that the Court had the better reading of Phillips Chemical. A contrary holding in Davis, in my view, would have created a clear inconsistency in our jurisprudence. Under Chevron Oil, application of precedent which directly controls is not the stuff of which new law is made.

Far from being "revolutionary," Ashland Oil Co. v. Caryl, supra, at 920, or "an avulsive change which caused the current of the law thereafter to flow between new banks," Hanover Shoe, Inc. v. United Shoe Machinery Co., 392 U.S. 481, 499 (1968), Davis was a mere application of plain statutory language and existing precedent. In these circumstances, this Court is not free to mitigate any financial hardship that might befall Virginia's taxpayers as a result of their state government's failure to reach a correct understanding of the unambiguous dictates offederal law.

Because I do not believe that Davis v. Michigan Dept. of Treasury, supra, announced a new principle of law, I have no occasion to consider Justice O'Connor's argument, post, at 21-25, that equitable considerations may inform the formulation of remedies when a new rule is announced. In any event, I do not read Part III of the Court's opinion as saying anything inconsistent with what Justice O'Connor proposes.

On this understanding, I join Parts I and III of the Court's opinion and concur in its judgment.