Tully v. Mobil Oil Corp.

Background

In 1980 New York created a 2% tax on oil companies’ in-state sales and barred companies from raising consumer prices to recover that tax. Ten oil companies sued, arguing the state rule conflicted with federal price-control authority under the Emergency Petroleum Allocation Act (EPAA). A district court enjoined enforcement of New York’s anti-passthrough rule, and the Temporary Emergency Court of Appeals (TECA) affirmed that result for the period while federal price controls were in force. New York appealed to the Supreme Court after the federal law expired.

Reasoning

The Court stressed that it must judge the case according to the law as it exists at the time of decision. Because the federal price-control law had expired, the earlier federal barrier to enforcing New York’s rule no longer existed. The Court concluded the prior declaration of invalidity and the injunction, as written, no longer had current effect. The Court therefore vacated the judgment and injunction and sent the case back to TECA to reconsider remaining questions, such as whether oil companies may still pass through taxes that accrued before the federal law expired and how the state’s “self-destruct” provisions operate.

Real world impact

The immediate effect is that the nationwide injunction blocking New York’s anti-passthrough rule was set aside and enforcement questions return to TECA. Oil companies, New York tax officials, and consumers remain affected while the specialized court sorts out whether past taxes may be passed on and how the statute’s expiration clauses apply. This decision is not a final ruling on those unresolved issues.

Dissents or concurrances

Justice Stevens dissented, arguing TECA correctly held that federal price controls preempted New York’s anti-passthrough rule while the federal authority was in effect and would have affirmed TECA’s judgment.