The SUPREME COURT dealt a blow in the fight against corporate tax incentives, but Professor Peter Enrich and his students are not retreating.

Professor Peter Enrich, surrounded by his clients, addresses the press following oral argument before the Supreme Court.

Enrich’s “law office” of current students joined him at the Supreme Court in March. About 60 Northeastern law students have worked on this case.

“He’s so intellectually rigorous. It was fantastic to have to continually sharpen your work. We were never 'the help.’”

Summer 2006

Still Standing

BY JERI ZEDER     |     PHOTOGRAPHS BY CAROL T. POWERS

THIS IS THE STORY of how, toiling pro bono, a beloved law professor and his cadre of students fought corporate tax incentives all the way to the Supreme Court — and gave a multibillion dollar corporation and its fancy, high-paid lawyers a run for their money. And they aren’t finished yet.

On Monday, May 15, 2006, the Supreme Court issued a momentary setback to Professor Peter Enrich and his uncompensated “law firm” of students when it ruled that their plaintiffs — primarily Ohio taxpayers — lacked standing to sue DaimlerChrysler in federal court. But the Court left open the substantive question Enrich was pressing: that investment tax credits are unconstitutional. “The effect of the Court’s ruling is not to end our challenge or to uphold Ohio’s discriminatory use of its tax system to steer business investment into the state,” says Enrich. “Rather, the decision simply sends us back to the Ohio state courts, where we began six years ago.” Enrich notes that, after all appeals are exhausted in Ohio, the case could return to the Supreme Court for a ruling on the merits — with nationwide implications.

The case, DaimlerChrysler Corp. v. Cuno, has garnered national press for its potential impact on a widespread state practice of giving billions of dollars in tax breaks to giant corporations. But for the Northeastern law school community, it’s also about how the scholarship of an unassuming law professor yielded a powerful legal theory and engaged students in high-impact litigation.

Starting Point

It all began in 1996, when Enrich’s article, “Saving the States from Themselves: Commerce Clause Constraints on State Tax Incentives for Business,” was published in the Harvard Law Review. Enrich argued that a cornerstone of state economic development policy — tax breaks to lure large corporations to invest in their municipalities — violates the Constitution.

Several months later, Enrich returned to his campus office after teaching a class to find a message blinking on his telephone. “Hi. This is Ralph Nader,” a voice said. “Give me a call.”

“Can we litigate on this?” Enrich recalls Nader asking him. “Someone can,” Enrich answered. “I’m not a litigator.”

He was about to become one.

More than 40 states offer tax investment credits to entice large corporations to locate business within their borders. In 1997, the cost to states and localities of such credits and other corporate incentives was about $50 billion per year; today, that number is believed to be far higher. According to Enrich, who served as general counsel to the Massachusetts Executive Office for Administration and Finance before joining the law school’s faculty, studies show that corporations win at the expense of the states, which compete to provide better and better incentives while draining public money that could otherwise be spent on roads, schools and other infrastructure projects. What’s going on is a classic Prisoner’s Dilemma: though states are hurt by the practice, they must engage in it as long as other states do, or lose out on corporate investments. Enrich wasn’t the first scholar to notice the problem, but he was the first to link it to a legal theory: that investment tax credits violate the Dormant Commerce Clause, prohibiting states from interfering with Congress’ power to regulate interstate commerce.

Nader and Enrich assembled a pro bono legal team including several dozen Northeastern law students. Nader’s public interest organization provided publicity support and a few thousand dollars for printing, filing and traveling expenses. Thus armed, they brought a test case in Ohio state court, naming DaimlerChrysler as a defendant.

Laying the Groundwork

DaimlerChrysler had agreed to build a $1.2 billion Jeep assembly plant, keeping 4,900 jobs in economically depressed Toledo. In exchange, the state and municipality rewarded DaimlerChrysler with $280 million in tax incentives, composed of a franchise tax credit and a property tax exemption. Representing the plaintiffs — about a dozen individuals and several small businesses, most of whom were displaced by the new plant — Enrich challenged the legality of the tax incentives. Enrich’s team filed the suit in state court for standing reasons; “federal courts take a dim view of taxpayer standing,” he notes. The defendants successfully removed the case to federal district court, over the plaintiffs’ objections, which ruled against the plaintiffs on the merits.

On appeal, the Sixth Circuit, without addressing the standing question, decided in the plaintiffs’ favor regarding the tax credit, but upheld the property tax exemption. The tax credit, the court said, discriminated against interstate commerce because it treated a business that invested in Ohio differently from similarly situated businesses that invested elsewhere. The court ruled that the property tax exemption did not have that fatal flaw.

This partial victory raised the stakes, and the case started garnering serious nationwide press. Faster than you can say “strange bedfellows,” unexpected coalitions of advocacy groups weighed in. Libertarian-style conservatives and progressive anti-corporate interests favored Enrich’s side; pro-business groups and liberal organizations favoring economic development projects in blighted inner cities opposed it.

DaimlerChrysler appealed to the Supreme Court, which granted certiorari on September 27, 2005. Ominously, the Court asked the parties to brief the standing issue.

Preparing for Battle

Looking for help last year, Enrich posted a notice on the School of Law’s internal Web site, matter-of-factly mentioning that he was going to need student volunteers to help him prepare a brief and oral argument for the Supreme Court. “When he put out the advertisement,” recalls John Moore ’07, “I think he thought he was going to get two or three students. Then he walks into the room and there are 12 of us. And he goes, ‘Wow, I didn’t think there would be this many.’” Over the six years that Enrich has been litigating this case, a total of about 60 students have assisted him.

Opening it up to students is, for Enrich, part of what being a law professor is all about. “Impact litigation is valid work for a law professor to do,” says Enrich. “It’s a great academic activity for students.”

Students appreciated Enrich’s inclusiveness. “At another law school, there would have been a dehumanizing competition on who might be worthy of helping. At Northeastern, it was just so open,” says Dan Barrett ’07.

With a student team of self-described “con-law junkies” assembled, the next step was to divvy up tasks: researching the justices to see where each stood on the procedural and substantive issues raised; surveying the various kinds of tax incentives operating in states across the country; and monitoring issues raised in the amicus briefs. But the most challenging issue was the question of standing.

What Enrich needed was a judicially palatable theory of standing, one that was novel but not radical. He was toying with something he called “pendent standing.” Sarah London ’06 got right on it. She turned to one of the law library’s non-circulating books, pouring over an imposing 33-volume analysis of federal practice and procedure by Wright and Miller. There, she discovered something exciting.

Essentially, London found legal support for Enrich’s idea of pendent standing, what Wright and Miller called “ancillary standing.” Analogous to the federal court doctrine of supplemental jurisdiction, the idea was this: if plaintiffs have properly brought a case in federal court, then all related claims are properly before the court, even if they would not, independently, confer standing. The Supreme Court had never considered the question, but Wright and Miller had noticed it in appellate decisions. After more study, e-mail exchanges, three or four all-nighters, and discussions with Enrich, ancillary standing became a centerpiece of the team’s Supreme Court case.

Enrich’s students cherished moments like these: the chance to talk about thorny questions of law with a brilliant professor who treated them like peers. “He’s so intellectually rigorous. It was fantastic to have to continually sharpen your work,” says Barrett. “We were never ‘the help.’’’

What Enrich gave in collegial and intellectual respect, he got back in loyalty and work product. There were no slackers. “It was us sort of working late at night in coffee shops and the library. I was struck by the allegiance we all had to the case and the questions it raised,” says Barrett.

“We knew we were all he had,” says Catherine Bednar ’06, Enrich’s project manager and personal researcher on the case.

Before the Bench

Briefs were filed in January 2006, and the team turned to preparing Enrich for oral argument, slated for March 1, 2006. At his first moot court, Enrich appeared before an austere panel of three law professor colleagues and two members of the local bar. He barely got out two sentences before they exploded with questions. When the ordeal ended an hour later, “Justice” (Professor) Michael Meltsner told Enrich, “This was as brutal as it can possibly be.” Commenting on one of his answers on standing, “Justice” (Professor) Wendy Parmet told Enrich, “You left me speechless.” All agreed that Enrich’s native demeanor — his serene, thoughtful, straightforward delivery and mastery of material — were his best qualities and would serve him well before the Supremes. Referring to a trademark Enrich habit, Meltsner offered this advice: “Don’t argue with your glasses on your head.”

As the day of oral argument approached, students started to scramble for seats in the courtroom. London made it to witness Enrich raise her ancillary standing theory at oral argument. “My heart left my throat,” she says. Justice Ginsburg had herself once pressed the bounds of jurisdiction and standing before the Court as ACLU counsel in Craig v. Boren (1976). “She was quick to correct him on the finer points of the case,” says London. “It made me smile to think of a connection through time that she was once before the Court making a creative argument of a novel idea on standing.”

In another memorable moment, Justice Scalia challenged Enrich to pinpoint where, in Flast v. Cohen (1968), Enrich found the Supreme Court language he was relying on for support. Unflustered and consulting nary a note, Enrich cited Footnote 4, and proceeded to quote from memory. A sheepish Scalia said he no longer read footnotes, eliciting laughter in the courtroom.

London felt Enrich’s earnest intellectuality played well with the justices. “[Justice] Roberts would pose a hypothetical. Peter would pause and give a well-thought-out answer,” she said. “The Court responded well to that.”

Meeting the plaintiffs at the Court left an enormous impression on the law students, putting a human face on the lawyer’s role and slapping into perspective the legal abstractions they had been submerged in for months. “This discussion of legal principle is divorced from the real world,” laments Barrett. Referring to one of the plaintiffs, he asks a poignant question. “The owner of Kim’s Auto lost her business. Who is helping her?”

“The Court’s decision rests on its determination that the plaintiffs in the case — citizen taxpayers and small businesses in Toledo — have not suffered the kind of direct, personal injury that entitles them to a hearing in the federal courts,” said Enrich. “It will not be easy to explain this conclusion to the plaintiffs.”

Tough lessons for the plaintiffs — and for Enrich’s law students. Their involvement allowed them to experience, as no casebook could, the procedural chess game of litigation, the intellectual vigor that is legal reasoning, and the decisional mazes that are America’s courts. As Enrich continues his quest against corporate tax incentives, he’ll indelibly transmit these lessons to the next generation of Northeastern law students who’ll make up his pro bono “law firm.”

Jeri Zeder is a freelance writer in Lexington, Massachusetts, and regular contributor to Northeastern Law Magazine.