No In the United States Court of Appeals for the Sixth Circuit. CHARLOTTE CUNO, et al., Plaintiffs-Appellants,

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1 No In the United States Court of Appeals for the Sixth Circuit CHARLOTTE CUNO, et al., Plaintiffs-Appellants, v. DAIMLERCHRYSLER, INC; TOLEDO PUBLIC SCHOOL DISTRICT; WASHINGTON LOCAL SCHOOL DISTRICT; CARLETON S. FINKBEINER, City of Toledo; CITY OF TOLEDO; JOSEPH T. DETERS; THOMAS M. ZAINO, Commissioner, Ohio Department of Taxation; C. LEE JOHNSON, Department of Development, State of Ohio; STATE OF OHIO, Defendants-Appellees. On Appeal from the United States District Court for the Northern District of Ohio at Cleveland BRIEF OF AMICUS CURIAE, NISSAN NORTH AMERICA, INC. IN SUPPORT OF DEFENDANTS-APPELLEES PETITION FOR REHEARING EN BANC CHARLES A. TROST MICHAEL G. STEWART WALLER LANSDEN DORTCH MARTHA J. TRAMMELL ASSISTANT GENERAL COUNSEL NISSAN NORTH AMERICA, INC. 983 NISSAN DRIVE & DAVIS, PLLC 511 UNION STREET SMYRNA, TN SUITE 2700 (615) NASHVILLE, TN (615) Counsel for Amicus Curiae Nissan North America, Inc. Of Counsel Becker Gallagher Legal Publishing, Inc. Cincinnati, OH

2 DISCLOSURE OF CORPORATE AFFILIATIONS AND FINANCIAL INTEREST Pursuant to 6 th Cir. R. 26.1, Nissan North America, Inc., as Amicus Curiae, makes the following disclosures: 1. Is said party a subsidiary or affiliate of a publicly-owned corporation? A. Yes. If the answer is yes, list below the identity of the parent corporation or affiliate and the relationship between it and the named party: Nissan North America, Inc. is a wholly-owned U.S. subsidiary of Nissan Motor Co., Ltd. Nissan Motor Co., Ltd. is a publicly-owned Japanese corporation whose American Depository Receipts are publicly traded in the U.S. 2. Is there a publicly-owned corporation, not a party to the appeal, that has a financial interest in the outcome? A. No. MARTHA J. TRAMMELL Assistant General Counsel Nissan North America, Inc. 983 Nissan Drive Smyrna, Tennessee (615) Attorney for Amicus Curiae, Nissan North America, Inc. i

3 TABLE OF CONTENTS Corporate Disclosure Statement...i Table of Contents... ii Table of Authorities... iii Interest of Amicus Curiae...iv Argument...1 I. Tennessee s pursuit of automotive industry investments and jobs through tax credits and other incentives has been hugely successful and beneficial to that State...1 II. III. The competition for automotive manufacturing jobs is global and pits Tennessee against Japan, Mexico, Canada and a growing number of other nations with sophisticated automotive industries...4 By casting doubt on the use of tax incentives as industrial recruitment tools in the four states in this Circuit, the panel s decision, regardless of its ultimate outcome or scope, will immediately cripple Tennessee s popular and successful industrial recruitment efforts...6 Certificate of Compliance...9 Certificate of Service...10 ii

4 TABLE OF AUTHORITIES Case McConnell v. City of Lebanon, Tennessee, 203 Tenn. 498 (1958)...1 Other Authorities Bureau of Labor Statistics, State average annual pay for 2000 and 2001, Bush, Bernard, Decherd to Get Nissan Metal Forge, THE TENNESSEAN, July 17, Callow, John, Nissan to Add 1,500 More Jobs, DAILY NEWS JOURNAL (Murfreesboro, Tennessee), June 26, Institute of Labor and Industrial Relations at the University of Michigan, et al., Contribution of the U.S. Motor Vehicle Industry to the Economies of the United States, California, New York, and New Jersey in 2003 (May, 2004) (available at Nissan Announces 1,500 Jobs Coming to Smyrna, THE LEWISBURG TRIBUNE (Lewisburg, Tennessee), June 26, Nissan Expansion Good News for Regional Economy, DAILY NEWS JOURNAL (Murfreesboro, Tennessee), July 21, Sharp, Tom, Federal Case on Tax Breaks Could Affect Tennessee, THE TENNESSEAN, September 13, Thomas, Wayne and Nee, Larry, Nissan Plans Forging Plant, THE HERALD CHRONICLE (Winchester, Tennessee), July 20, iii

5 INTEREST OF AMICUS CURIAE Nissan North America, Inc. ( Nissan ) has numerous facilities (automotive plants and equipment) and many employees in the State of Tennessee. Nissan receives tax incentives from the State of Tennessee based, in part, on the extent of business done and workers employed in Tennessee. Nissan has an interest in this case because the panel s decision creates uncertainty which brings into question the value of business tax incentives received and relied upon by Nissan, and, therefore, will likely affect Nissan s decisions regarding location of its facilities going forward. This brief is accompanied by a motion seeking leave of this Court for authority to file pursuant to Fed. R. App. P. 29. iv

6 ARGUMENT Nissan North America, Inc. ( Nissan ), as Amicus Curiae, urges this Court to grant Appellee DaimlerChrysler Corporation s Petition for Rehearing en banc. This case involves a question of exceptional importance in that this Court s broad declaration that Ohio s investment tax credits are unconstitutional casts doubt upon and threatens Tennessee s longstanding, highly successful public policy of using tax credits as incentives to compete successfully in the global competition for highwage automotive manufacturing plants. I. Tennessee s pursuit of automotive industry investments and jobs through tax credits and other incentives has been hugely successful and beneficial to that State. For nearly half a century, Tennessee has sought to encourage the location in Tennessee of plants and equipment by high wage industries, 1 and in particular the 1 See McConnell v. City of Lebanon, Tennessee, 203 Tenn. 498, (1958) where the Tennessee Supreme Court summarized the underlying policy: This Court will take judicial notice of the change in the agricultural economy of this section of the country due in a large measure to the mechanization of farm operations, thus causing the country people to move to the towns and cities where work is available and, if work is not available in those places within the State, then the emigration occurs to other states, principally where industrial jobs and a weekly payroll are available. Under such conditions as are made to appear herein, as well as what is judicially known by this Court, is the State held to be powerless and to be forced to remain supine and impotent? We think not. 1

7 automotive industry, by providing a variety of tax incentives for investments in plants and equipment located in Tennessee. The results of these efforts began to be significantly realized when, in 1980, then Governor Lamar Alexander successfully negotiated with Nissan to locate its first automobile manufacturing plant in the United States in Smyrna, Tennessee. From this beginning in 1980, Nissan has invested approximately $2.8 billion in plants and equipment in Smyrna and Decherd, Tennessee, bringing a total of 12,000 new American jobs to Nissan s Tennessee plants, 8,500 direct Nissan jobs, as well as 3,500 on-site contractor and supplier jobs. The effect of these industrial recruitment efforts has entirely transformed Tennessee s economy. In each of the last nine years there have been between $2 billion and $4.2 billion invested in plants and equipment by all manufacturers in Tennessee. Tom Sharp, Federal Case on Tax Breaks Could Affect Tennessee, THE TENNESSEAN, September 13, The Nissan plant, along with others, has spawned the location of more than 950 parts manufacturing plants and supplier facilities in and around Middle Tennessee, collectively estimated to employ more than 154,000 Tennesseans representing 33% of the state s manufacturing workforce and 5.7% of total state employment. Nissan Announces 1,500 Jobs Coming to Smyrna, THE LEWISBURG TRIBUNE (Lewisburg, Tennessee), June 26, This job multiplier effect makes the automotive industry a sought-after boon 2

8 to state economies. Each manufacturing job at a major automotive facility like that operated by Nissan in Smyrna spins off an additional 9.4 jobs. Institute of Labor and Industrial Relations at the University of Michigan, et al., Contribution of the U.S. Motor Vehicle Industry to the Economies of the United States, California, New York, and New Jersey in 2003 (May, 2004)(available at Tennessee, as a comparatively low wage state, has benefited more from such jobs than would its high-wage counterparts like California, New York, and New Jersey. 2 Assembly line jobs at Nissan s Smyrna and Decherd facilities provide an average annual wage in excess of $57,000 over $25,000 higher than the state average. Nissan Expansion Good News for Regional Economy, DAILY NEWS JOURNAL (Murfreesboro, Tennessee), July 21, 2000, at 4A (citing Tennessee Commissioner of Economic and Community Development); Bureau of Labor Statistics, supra. All told, Tennessee s automotive manufacturers provide jobs, with a Tennessee payroll in excess of $5.7 billion, which represent the first and only opportunity for thousands of Tennessee families to move solidly into the middle class. 2 New York ranked third, New Jersey fifth, California sixth, and Tennessee thirtieth among the fifty states and District of Columbia for average annual pay in Bureau of Labor Statistics, State average annual pay for 2000 and 2001, 3

9 II. The competition for automotive manufacturing jobs is global and pits Tennessee against Japan, Mexico, Canada and a growing number of other nations with sophisticated automotive industries. Recent experience involving Nissan illustrates that in a global economy, particularly since the ratification of the NAFTA Treaty, the economic reality is that the various states within the United States compete for manufacturing jobs not only among themselves, but also internationally. In 2001, for example, when Nissan decided to expand its engine plant in Decherd, Tennessee, as part of an overall Tennessee investment of more than $1 billion, it added approximately 1,000 additional high paying Tennessee jobs to Franklin County. Bush Bernard, Decherd to Get Nissan Metal Forge, THE TENNESSEAN, July 17, In 2004, Nissan further expanded the Decherd facility to add a crankshaft production center. Id. In deciding where to place this operation, the choice ultimately came down to either expanding the facility in Decherd, Tennessee, or expanding Nissan s existing factory in Aguascalientes, Mexico where it is currently manufacturing 250,000 Sentra automobiles annually, many of which are exported to the United States. Fortunately for Tennessee and the United States, Tennessee was selected. The incentives offered by Tennessee were a significant factor in offsetting the very substantial wage differential between Tennessee and Mexico. In other major Tennessee investments in the past four years, Nissan has established new production lines and expanded facilities for manufacturing 4

10 Pathfinder and Maxima vehicles in Smyrna, Tennessee. The recent Maxima and Pathfinder operations, together with the recent Decherd engine plant expansion and crankshaft production line mentioned above, added more than 2,000 new Tennessee Nissan jobs, all transferred from existing facilities in Japan. Tennessee s tax credits provided a key incentive which rewarded Nissan for each job relocated from Japan to Tennessee. Wayne Thomas and Larry Nee, Nissan Plans Forging Plant, THE HERALD CHRONICLE (Winchester, Tennessee), July 20, 2004, at 1A; John Callow, Nissan to Add 1,500 More Jobs, DAILY NEWS JOURNAL (Murfreesboro, Tennessee), June 26, 2003, at 1. By casting doubt 3 on the validity of tax incentives, the decision in this case, if allowed to stand, will substantially impair Tennessee s ability to attract new industry and create new jobs. But Tennessee s loss will not be Kentucky s, Michigan s, or Ohio s gain. It may not be Alabama s or Mississippi s gain either; rather it may well be Mexico s, Canada s, or some other country s gain, and Tennessee and, ultimately, the entire United States will be the losers. 3 Nissan certainly neither contends nor concedes that the Tennessee tax incentives on which it has relied are unconstitutional and is prepared to contest that matter should it ever become a justiciable issue. The problem addressed in this Brief is the perception of possible unconstitutionality that this case has engendered and the doubt and uncertainty that it has created. 5

11 III. By casting doubt on the use of tax incentives as industrial recruitment tools in the four states in this Circuit, the panel s decision, regardless of its ultimate outcome or scope, will immediately cripple Tennessee s popular and successful industrial recruitment efforts. As dramatic as the illustration of foreign competition may be, to the extent manufacturers continue to make investments within the United States, the Balkanization among the States created by this Court s decision controlling as it is only in Michigan, Ohio, Kentucky, and Tennessee puts all four of those States at a distinct disadvantage vis-à-vis the 46 other U.S. States in the competition for the next major manufacturing investment in the United States. While its reach and applicability to other tax incentive statutes has yet to be determined, if not reversed, the panel s opinion will raise a host of intractable issues: Will the reductions in tax liabilities by the application of tax credits be abolished prospectively, and if so, beginning when? Will the new Cuno rule be applied retroactively in the form of assessments of tax deficiencies based on retroactive disallowance of the tax credits, and if so, for how many years back? How will companies who long ago performed their part of the bargain and made investments in reliance upon the tax incentives be made whole? 6

12 If Nissan again decides to expand its manufacturing base in the United States, the uncertainty cast by this Court s decision over the constitutionality of tax incentives in the Sixth Circuit will assure that Nissan will have to disregard the tax incentives in its analysis of whether to expand its existing plants in Tennessee. The uncertainty may force Nissan to look elsewhere, perhaps to its other U.S. plant located in Mississippi a State in a Circuit not under the same cloud of uncertainty or to defer expanding further anywhere in the United States until such time as the uncertainty in the tax incentive structure has been settled. The broader question no one can answer definitively at this time is whether foreign manufacturers will continue to have the same level of confidence as before in the stability and predictability of the tax structure and legal system of the United States. 4 Would they not simply assume that the other Circuits will follow the lead of the Sixth Circuit? Before making billion dollar investments in U.S. communities in reliance upon tax incentives, negotiators of incentive packages for foreign manufacturers will have to ask themselves will they later find their trust was misplaced and their reliance was based on a reneged deal. What do the Governors and Commissioners of Economic Development of Tennessee and Kentucky say now to the officials of Nissan and Toyota to assuage 4 This question arises as well with respect to DaimlerChrysler, BMW, Toyota, Honda, Hyundai, and all the other automobile manufacturers who have invested in plants in various states both within and without the Sixth Circuit. 7

13 their concerns that those states may not be able to make good on their promises of significant long term future tax incentives upon which they relied to make massive investments in plants and equipment in those States? This Court, acting en banc, by reversing the decision of the panel and affirming the decision of the District Court, can provide the answer, which is that their confidence was not misplaced the commitments will be kept. The enormous adverse impact which the Court s decision in this case potentially poses to the economy of Tennessee and its 5,400,000 residents (an impact which can be expected to be replicated in Ohio, Michigan, and Kentucky) makes this case one of exceptional importance meriting this Court s grant of rehearing en banc. MARTHA J. TRAMMELL Assistant General Counsel Nissan North America, Inc. 983 Nissan Drive Smyrna, Tennessee (615) Of Counsel: Attorney for Amicus Curiae, Nissan North America, Inc. Charles A. Trost Michael G. Stewart Waller Lansden Dortch & Davis, PLLC 511 Union Street, Suite 2700 Nashville, Tennessee (615)

14 CERTIFICATE OF COMPLIANCE WITH RULE 32(a) 1. This brief complies with the type-volume limitation of FED. R. APP. P. 32(a)(7)(B) because it contains words, excluding the parts of the brief exempted by FED. R. APP. P. 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of FED. R. APP. P. 32(a)(5) and the type style requirements of FED. R. APP. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using Times New Roman 14 point font in text and Times New Roman 14 point font in footnotes produced by Microsoft Word 2000 software. Dated: September, 2004 Attorney for Amicus Curiae 9

15 CERTIFICATE OF SERVICE I hereby certify that I caused a true and correct copy of the foregoing brief to be sent by U.S. Mail, postage prepaid, to: Erika Z. Jones Terry J. Lodge, Esq. Charles A. Rothfeld 316 N. Michigan Street, Suite 520 David M. Gossett Toledo, Ohio Mayer, Brown, Rowe & Maw 1909 K Street, NW Peter D. Enrich, Esq. Washington, DC Northeastern University School Of Law John T. Landwehr 400 Huntington Avenue Albin Bauer Boston, Massachusetts Eastman & Smith Ltd. P. O. Box Barbara E. Herring Toledo, Ohio Samuel J. Nugent City of Toledo Law Department Theodore M. Rowen One Government Center, Suite 2250 Truman A. Greenwood Toledo, Ohio Spengler Nathanson, P.L.L. 608 Madison Avenue, Suite 1000 Sharon A. Jennings Toledo, Ohio this 16 th day of September, 2004 Assistant Attorney General 30 East Broad Street, 17 th Floor Columbus, Ohio Attorney for Amicus Curiae 10