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Ford Motor Co. v. Dep't of Treasury - 323 U.S. 459, 65 S. Ct. 347 (1945)

Rule:

The nature of a suit as one against the state is to be determined by the essential nature and effect of the proceeding. And when the action is in essence one for the recovery of money from the state, the state is the real, substantial party in interest and is entitled to invoke its sovereign immunity from suit even though individual officials are nominal defendants.

Facts:

Petitioner, a non-resident foreign manufacturing corporation, brought suit against the respondents, the department of treasury of the State of Indiana and M. Clifford Townsend, Joseph M. Robertson and Frank G. Thompson, the Governor, Treasurer and Auditor, respectively, of the State of Indiana, who "together" constituted the board of the department of treasury. Petitioner, by following the state statutory procedure set forth in Ind. Code § 64-2614 (a), sought a refund of gross income taxes paid to the department and measured by sales claimed by the state to have occurred in Indiana; petitioner alleged that the income taxes were illegally collected. The district court denied recovery. The United States Court of Appeals for the Seventh Circuit affirmed. Petitioner appealed.

Issue:

Can petitioner’s claim against the respondents - , the department of treasury of the State of Indiana and M. Clifford Townsend, Joseph M. Robertson and Frank G. Thompson, the Governor, Treasurer and Auditor, respectively, of the State of Indiana – proceed in federal courts?

Answer:

No.

Conclusion:

In vacating the decision without reaching the merits, the United States Supreme Court held that petitioner's action could not be maintained in the federal courts. Ind. Code § 64-2614(b), upon which petitioner based his action for tax refund, clearly provided for an action against the state as opposed to action against the collecting officer individually. Therefore, petitioner's suit, though brought against a state department and individual board members, constituted action against the State of Indiana and, as such, was barred by the Eleventh Amendment. Further, because petitioner's claim was for a tax refund, the action was one for recovery of money. Therefore, the state was the real, substantial party in interest and entitled to invoke its sovereign immunity. The Court held that Indiana had not waived its immunity from suit. Ind. Code. § 64-2614 did not contain any clear indication that state consented to be sued in federal courts.

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