STATE OF OHIO AND JOSEPH W. TESTA, TAX COMMISSIONER OF OHIO APPELLANTS
GREAT LAKES MINERALS, LLC APPELLEE
TRANSFER FROM COURT OF APPEALS CASE NO. 2018-CA-000484
GREENUP CIRCUIT COURT NO. 17-CI-00311 HONORABLE ROBERT B.
COUNSEL FOR APPELLANTS: Thomas Edward Madden Daniel W. Fausey
Assistant Attorneys General
COUNSEL FOR APPELLEE: Thomas Dulaney Bullock Robert V.
Bullock James Roscoe Stinetorf Bullock 85 Coffman, LLP
State of Ohio and Joseph W. Testa, Tax Commissioner of Ohio,
appeal an order of the Greenup Circuit Court denying their
motion to dismiss Great Lakes Minerals, LLC's suit
against them. For the following reasons, we reverse the
decision of the Greenup Circuit Court and remand with
instructions to dismiss all claims.
Lakes Minerals, LLC (hereinafter, Great Lakes) is a mineral
processing company that sells minerals to buyers at its
Greenup County, Kentucky plant. Great Lakes maintains that it
sells its products in Kentucky; all transactions, including
payment and delivery of goods, occur in Kentucky; Great Lakes
does not have a physical presence in Ohio; and Great Lakes
neither directly nor indirectly delivers its products to the
State of Ohio.
very simply, Ohio has created a commercial activity tax (CAT)
that taxes persons who do business and have a substantial
nexus to Ohio. O.R.C.5751.02(A). Ohio's Department of
Taxation (Department) may issue a CAT assessment to an
out-of-state business for outstanding liability to Ohio
arising from transactions with an Ohio company. Businesses
are provided administrative remedies to protest CAT
assessments to the Tax Commissioner of Ohio, then the Ohio
Board of Tax Appeals, and then the Ohio appellate courts.
O.R.C. 5751.09; O.R.C. 5717.02; ORC 5717.04.
determined that between 2009 and 2016, Great Lakes sold over
$104 million in minerals that were then shipped to Ohio
addresses. The Department issued a CAT assessment against
Great Lakes for $325, 000. Great Lakes paid a portion of the
assessment but petitioned for reassessment with the
Commissioner, challenging the assessment's validity. .
month after protesting to the Commissioner, Great Lakes sued
Ohio and Joseph W. Testa, Ohio's Tax Commissioner, in his
official and individual capacities, in Greenup Circuit Court.
Great Lakes sought: (1) a declaratory judgment that it is not
subject to Ohio's CAT; (2) monetary relief pursuant to 42
U.S.C.A. § 1983 for the forced collection of taxes not
owed, in violation of the Ohio and United States
Constitutions; and (3) a determination pursuant to
60.03 that it would be inequitable to require Great Lakes to
defend an action in a foreign state. Ohio moved to dismiss
Great Lakes' complaint on grounds of sovereign immunity,
qualified immunity, comity, lack of personal jurisdiction,
and failure to exhaust administrative remedies. The Greenup
Circuit Court denied Ohio's Motion to Dismiss in a
two-sentence order, and Ohio filed a Notice of Appeal with
the Court of Appeals. Ohio moved to transfer jurisdiction
over that interlocutory appeal to this Court, which this
Court granted. We then abated this case pending the Supreme
Court of the United States' decision in Franchise Tax
Board of California v. Hyatt, 139 S.Ct. 1485 (2019)
(hereinafter "Hyatt IIT). Following the
rendition of Hyatt in, this Court granted the
Appellants' motion for leave to file supplemental briefs.
Supplemental briefing by the parties has been completed, and
the matter is ripe for consideration.
State of Ohio argues that it is protected by sovereign
immunity under Hyatt III. Testa argues that he is
entitled to the same sovereign immunity as Ohio in his
official capacity and qualified official immunity in his
personal capacity. Great Lakes, on the other hand, argues
that sovereign immunity does not apply to actions for
declaratory or injunctive relief and that sovereign immunity
does not apply to the appellants in the capacity in which
they were sued pursuant to 42 U.S.C.A. § 1983. The
question of whether a defendant is protected by sovereign
immunity, governmental immunity, or official immunity is a
question of law. Rowan Cty. v. Sloas, 201 S.W.3d
469, 475 (Ky. 2006). This Court reviews questions of law
de novo. Cumberland Valley Contractors, Inc. v. Bell Cty.
Coal Corp., 238 S.W.3d 644, 647 (Ky. 2007).
State of Ohio
first address whether the State of Ohio is protected by the
doctrine of sovereign immunity. Ohio relies, in large part,
on Hyatt III to argue that it is entitled to
sovereign immunity protection. In that case, Hyatt sued the
Franchise Tax Board of California in Nevada state court for
various torts the Tax Board allegedly committed during a tax
audit. Hyatt III, 139 S.Ct. at 1491. After
discussing the United States Constitution at length as well
as the intent of the framers, the United States Supreme Court
held that the Tax Board of California was protected by
sovereign immunity and could not be sued in Nevada state
court. Id. at 1492. Great Lakes, however, attempts
to distinguish the case at bar from Hyatt III
because Hyatt was seeking a monetary award of damages from
California. Great Lakes, conversely, is only seeking monetary
damages against Testa in his individual capacity and
declaratory, injunctive, and equitable relief against ...