Cory Corporation and Mitchell Manufacturing Company, Delaware Corporations v. Ernest J. Sauber

Circuit Judges, on Petition for Rehearing en Banc.

Plaintiffs joined with defense counsel in a stipulation in the district court that

“The air conditioners in suit and similar air conditioners on which assessments have been made are sometimes hereinafter collectively referred to as plaintiff’s air conditioners.

“ * * * the present civil actions are prototype or test cases to determine whether plaintiff’s air conditioners are subject to federal excise tax.”

The district court, in finding of fact 7, found:

“It has been heretofore stipulated by the parties and found by this court that the present consolidated civil action is a prototype or test case to determine whether plaintiff’s air conditioners are subject to excise tax.”

Plaintiffs’ counsel, in their brief, recognized the scope of plaintiffs’ liability in litigation in this case, when they said, at page 4:

“Since the ‘substantially more than $1,000,000 in federal excise taxes’ assessed against plaintiff’s air conditioners represent 10% of the sales price, this case involves substantially more than $10,000,000 of air conditioners. Even at an average price of $200 a unit (the average price of the units in suit was less than $150), substantially more than fifty thousand air conditioning units are involved.”

Of course, the decision of this court in this case is binding only on the parties to this case, subject to their right to seek a review of the correctness of our holding, by applying to the United States Supreme Court.

Those who seek to intervene in this court as amicus curiae1 are not bound by either the stipulation of the parties in this case or our opinion and judgment. In other words, this is plaintiffs’ lawsuit, and not that of the amicus curiae. When and if the government attempts to apply our holding in this case to the amicus curiae, they have a right to litigate their case, and to seek what they consider to be a proper result for them. While our decision might be cited as a precedent in such subsequent litigation, the same as any other case holding, it would not be binding as res judicata on the amicus curiae, who were not parties to this case. Subsequently, if, conformably to our decision, and assuming it is not reversed by the Supreme Court, the Commissioner of Internal Revenue makes a new ruling to replace that which we have declared invalid, the amicus curiae will be free to go into court and attack the validity of the new ruling. Even if the validity of the new ruling is then sustained, the amicus curiae will still have an opportunity under § 7805(b) of the 1954 Revenue Code 2to procure a ruling from the Secretary of the Treasury as to “the extent, if any, to which” the ruling “shall be applied without retroactive effect”. In addition, they would probably have a right to contest in court the Secretary’s ruling under § 7805(b).

We have voted to deny plaintiffs’ petition for rehearing en banc.