
    INTERNATIONAL BUSINESS MACHINES CORPORATION v DEPARTMENT OF TREASURY
    Docket No. 327359.
    Submitted July 12, 2016, at Detroit.
    Decided July 21, 2016, at 9:00 a.m.
    Leave to appeal dismissed 500 Mich 894.
    International Business Machines Corporation (IBM) brought an action in the Court of Claims against the Department of Treasury, challenging the department’s ruling that IBM was not entitled to apportion its business income tax base and modified gross receipts tax base using the three-factor apportionment formula provided in the Multistate Tax Compact, MCL 205.581 et seq., and was instead required to apportion its income using the sales-factor formula in the Business Tax Act (BTA), MCL 208.1101 et seq., when calculating its state taxes for 2008. The Court of Claims, Joyce A. Draganchuk, J., granted summary disposition in favor of the department, ruling that the BTA mandated the use of the sales-factor apportionment formula. The Court of Appeals, Ronayne Krause, P.J., and Borrello, J. (Riordan, J., concurring), affirmed the order in an unpublished opinion per curiam, issued November 20, 2012 (Docket No. 306618). The Supreme Court granted IBM’s application for leave to appeal. 494 Mich 874 (2013). In a lead opinion by Justice Viviano, joined by Justices Cavanagh and Markman, and a concurring opinion by Justice Zahra, the Supreme Court held that the modified gross receipts tax is an income tax for purposes of the Multistate Tax Compact and that IBM was entitled to use the compact’s elective three-factor apportionment formula to calculate its 2008 Michigan taxes. Int’l Business Machines Corp v Dep’t of Treasury, 496 Mich 642 (2014). The Supreme Court remanded the case to the Court of Claims for entry of an order granting summary disposition in favor of IBM. The department moved for rehearing, and before the Supreme Court rendered a decision on the motion, the Legislature enacted 2014 PA 282, which amended the BTA, retroactively rescinding Michigan’s membership in the compact, effective January 1, 2008, and precluding foreign corporations such as IBM from using the three-factor apportionment formula that had been available under the compact. The Supreme Court denied the motion for rehearing. 497 Mich 894 (2014). On remand, the Court of Claims, Michael J. Talbot, C.J., initially entered judgment in favor of IBM as directed by the Supreme Court, but subsequently granted, on reconsideration, summary disposition in favor of the department, determining that the law-of-the-case doctrine did not apply because 2014 PA 282 represented an intervening change of law. IBM appealed.
    The Court of Appeals held,-.
    
    Under the law-of-the-case doctrine, if an appellate court has passed on a legal question and remanded the case for further proceedings, the legal questions thus determined by the appellate court will not be differently determined on a subsequent appeal in the same case where the facts remain materially the same; the appellate court’s decision binds lower tribunals because the tribunal may not take action on remand that is inconsistent with the judgment of the appellate court. Under the rule of mandate, when an appellate court remands a case with specific instructions, it is improper for a lower court to exceed the scope of the order. The rule of mandate is similar to, but broader than, the law-of-the-case doctrine and provides that any trial court that has received the mandate of an appellate court cannot vary or examine that mandate for any purpose other than executing it. The trial court may decide anything not foreclosed by the mandate, but the trial court commits jurisdictional error if it takes actions that contradict the mandate. In this case, the analysis was governed by the rule of mandate, not by the law-of-the-case doctrine. The Supreme Court specifically mandated entry of an order granting summary disposition in favor of IBM, the mandate foreclosed all other possibilities and any renewed litigation over IBM’s 2008 business taxes, and the Court of Claims erred by taking an action that contradicted the mandate, effectively exceeding the remand’s jurisdictional scope. In ignoring the remand directive and ordering application of 2014 PA 282 to IBM’s 2008 taxes in connection to the apportionment formula, the Court of Claims improperly reversed the Supreme Court’s ruling in Int’l Business Machines Corp, 496 Mich 642, and impermissibly authorized legislative reversal of a judicial decision. The Court of Appeals’ decision in Gillette Commercial Operations North America & Subsidiaries v Dep’t of Treasury, 312 Mich App 394 (2015), that 2014 PA 282 was constitutionally sound did not change the analysis. IBM was entitled to the protection afforded it under Int’l Business Machines Corp, 496 Mich 642; however, other taxes not addressed in that opinion but caught under the umbrella of 2014 PA 282 would be subject to 2014 PA 282 as construed by the Gillette panel. A distinction existed between impermissibly applying 2014 PA 282, as upheld in Gillette, to alter the Supreme Court’s specific resolution of the apportionment-formula question pertaining to IBM’s 2008 taxes and applying 2014 PA 282 to all other pending tax disputes. The Court of Claims erred by failing to grant summary disposition in favor of IBM.
    Reversed; case remanded for entry of judgment in favor of IBM.
    Appeals — Permissible Actions on Remand — Rule of Mandate.
    Under the rule of mandate, when an appellate court remands a case with specific instructions, it is improper for a lower court to exceed the scope of the order; the rule of mandate is similar to, but broader than, the law-of-the-case doctrine and provides that any trial court that has received the mandate of an appellate court cannot vary or examine that mandate for any purpose other than executing it; the trial court may decide anything not foreclosed by the mandate, but the trial court commits jurisdictional error if it takes actions that contradict the mandate.
    
      Miller, Canfield, Paddock & Stone, PLC (by Clifford W. Taylor, Gregory A. Nowak, Michael P Coakley, and Maria Baldysz), for International Business Machines Corporation.
    
      Bill Schuette, Attorney General, Aaron D. Lind-strom, Solicitor General, Matthew Schneider, Chief Legal Counsel, and Zachary C. Larsen, Assistant Attorney General, for the Department of Treasury.
    Before: WILDER, P.J., and MURPHY and O’CONNELL, JJ.
   PER CURIAM.

Plaintiff, International Business Machines Corporation (IBM), appeals as of right a Court of Claims order granting, on reconsideration, summary disposition in favor of defendant, Department of Treasury (the Department). We reverse and remand for entry of judgment in favor of IBM consistently with our Supreme Court’s directive in this case in Int’l Business Machines Corp v Dep’t of Treasury, 496 Mich 642; 852 NW2d 865 (2014).

In Int’l Business Machines, id. at 644-646, the Supreme Court opened its opinion by alluding to the issue presented, describing the nature of the case, and setting forth its holding:

In this case, we must determine whether [IBM] could elect to use the three-factor apportionment formula under the Multistate Tax Compact (the Compact)[, MCL 205.581 et seq.,\ for its 2008 Michigan taxes, or whether it was required to use the sales-factor apportionment formula under the Michigan Business Tax Act (BTA)[, MCL 208.1101 et seq]. The Department. . . rejected IBM’s attempt to use the Compact’s apportionment formula and, instead, required IBM to apportion its income using the BTA’s sales-factor formula.
We conclude that IBM was entitled to use the Compact’s three-factor apportionment formula for its 2008 Michigan taxes and that the Court of Appeals erred by holding otherwise on the basis of its erroneous conclusion that the Legislature had repealed the Compact’s election provision by implication when it enacted the BTA. We further hold that IBM could use the Compact’s apportionment formula for that portion of its tax base subject to the modified gross receipts tax of the BTA.
Accordingly, we reverse the Court of Appeals’judgment in favor of the Department, reverse the Court of Claims’ order granting summary disposition in favor of the Department, and remand to the Court of Claims for entry of an order granting summary disposition in favor of IBM. [Emphasis added.]

The Department filed a motion for rehearing, and before the Supreme Court rendered a decision on the motion, the Legislature enacted 2014 PA 282, amending the BTA, retroactively rescinding Michigan’s membership in the Compact, effective January 1, 2008, and precluding foreign corporations such as IBM from using the three-factor apportionment formula that had been available under the Compact. The Department filed supplemental authority in support of its pending motion for rehearing, alerting our Supreme Court to the statutory amendment. Subsequently, the Supreme Court denied the motion for rehearing absent any explanation or elaboration. Int’l Business Machines Corp v Dep’t of Treasury, 497 Mich 894 (2014). On remand, the Court of Claims initially entered judgment in favor of IBM as directed by the Supreme Court. However, the Court of Claims later granted the Department’s motion for reconsideration, determining that 2014 PA 282 represented an intervening change of law, thereby excepting application of the law-of-the-case doctrine.

“When an appellate court remands a case with specific instructions, it is improper for a lower court to exceed the scope of the order.” People v Russell, 297 Mich App 707, 714; 825 NW2d 623 (2012); see also Glenn v TPI Petroleum, Inc, 305 Mich App 698, 706; 854 NW2d 509 (2014) (“The trial court erred by failing to comply on remand with the very specific directives of this Court.”); K & K Constr, Inc v Dep’t of Environmental Quality, 267 Mich App 523, 544; 705 NW2d 365 (2005) (clear instructions in a remand order must be followed); Rodriguez v Gen Motors Corp (On Remand), 204 Mich App 509, 514; 516 NW2d 105 (1994) (“It is the duty of the lower court or tribunal, on remand, to comply strictly with the mandate of the appellate court.”). In this case, the Court of Claims did not have any discretion or authority to rule in favor of the Department. The Court of Claims was specifically instructed to enter an order granting summary disposition in favor of IBM, and it erred by ultimately failing to do so.

The procedural posture of this case resulted in arguments regarding the applicability of the law-of-the-case doctrine, which doctrine is subject to an exception when there is an intervening change of law. See People v Olear, 495 Mich 939 (2014); Grace v Grace, 253 Mich App 357, 363; 655 NW2d 595 (2002). In Grievance Administrator v Lopatin, 462 Mich 235, 259-260; 612 NW2d 120 (2000), our Supreme Court explained the nature of the law-of-the-case doctrine:

Under the law of the case doctrine, if an appellate court has passed on a legal question and remanded the case for further proceedings, the legal questions thus determined by the appellate court will not be differently determined on a subsequent appeal in the same case where the facts remain materially the same. The appellate court’s decision likewise binds lower tribunals because the tribunal may not take action on remand that is inconsistent with the judgment of the appellate court. Thus, as a general rule, an appellate court’s determination of an issue in a case binds lower tribunals on remand and the appellate court in subsequent appeals. [Citations and quotation marks omitted.]

The Department maintains that the law-of-the-case doctrine is not controlling because the legal question concerning the effect of 2014 PA 282 on IBM’s 2008 taxes was not passed on by the Supreme Court in its opinion nor, expressly, in its order denying the Department’s motion for rehearing and because 2014 PA 282 represented an intervening change of law, assuming that the doctrine was initially implicated. We conclude that the analysis in this case is not governed by the law-of-the-case doctrine; however, contrary to the Department’s view, this does not mean that the Court of Claims was free to try anew under 2014 PA 282 the issue regarding the apportionment formula applicable to IBM’s 2008 taxes. Rather than apply the law-of-the-case doctrine, we hold that the principle alluded to earlier—that a lower court cannot exceed the scope of a remand order—controls and is distinguishable from the law-of-the-case doctrine. We find instructive a recent decision by the United States Court of Appeals for the Ninth Circuit in Stacy v Colvin, 825 F3d 563, 567-568 (CA 9, 2016), wherein the federal court, distinguishing the law-of-the-case doctrine from what it coined the “rule of mandate,” observed:

The rule of mandate is similar to, but broader than, the law of the case doctrine. The rule provides that any district court that has received the mandate of an appellate court cannot vary or examine that mandate for any purpose other than executing it. The district court may, however, decide anything not foreclosed by the mandate. But the district court commits “jurisdictional error” if it takes actions that contradict the mandate. [Citations and quotation marks omitted.][]

Although the terminology “rule of mandate” has apparently not been used in Michigan caselaw, it quite plainly embodies the well-accepted principle in our jurisprudence that a lower court must strictly comply with, and may not exceed the scope of, a remand order. Glenn, 305 Mich App at 706; Russell, 297 Mich App at 714; K & K Constr, 267 Mich App at 544; Rodriguez, 204 Mich App at 514. In this case, the Supreme Court mandated ministerial entry of judgment in favor of IBM, the mandate foreclosed all other possibilities and any renewed litigation over IBM’s 2008 business taxes, and the Court of Claims erred by taking an action that contradicted the mandate, effectively exceeding the remand’s jurisdictional scope. The distinction we recognize today between the law-of-the-case doctrine and the rule of mandate, as implicated by the Supreme Court’s explicit directive in Int’l Business Machines, 496 Mich at 645, is further buttressed by the principles of the law-of-the-case doctrine, which is a discretionary doctrine that expresses the general practice of the courts and is not a limit on the power of the courts. Locricchio v Evening News Ass’n, 438 Mich 84, 109 & n 13; 476 NW2d 112 (1991); Grace, 253 Mich App at 363. The plain and unambiguous remand directive cannot be construed as having provided any room for the exercise of discretion by the Court of Claims, and the directive most certainly placed a strict limit on the power of the Court of Claims on remand, which limit was exceeded. For all intents and purposes, the case was over once it left the jurisdiction of the Michigan Supreme Court; there was not to be any further substantive litigation, proceedings, or decision-making. The Court of Claims was simply to perform the non-discretionary, ministerial task of entering judgment in favor of IBM. Indeed, the Supreme Court itself had the option of entering the judgment. MCR 7.316(A)(7) (stating that the Supreme Court may “enter any judgment . . . that ought to have been entered”).

Further, the Department’s position that the Court of Claims should be able to examine the issue of IBM’s 2008 taxes under 2014 PA 282 is untenable. In Int’l Business Machines, 496 Mich at 645, our Supreme Court conclusively determined that IBM could use the Compact’s apportionment formula for purposes of the 2008 taxes. Under the Department’s theory, the issue of the proper apportionment formula relative to IBM’s 2008 taxes could be litigated endlessly on the basis of any future statutory changes bearing on the question. Collateral estoppel principles preclude such an approach. See Monat v State Farm Ins Co, 469 Mich 679, 682-684; 677 NW2d 843 (2004). Again, the case had effectively been concluded, except for the formal entry of the judgment. Additionally, it is well established that “the Legislature may not reverse a judicial decision,” Gen Motors Corp v Dep’t of Treasury, 290 Mich App 355, 372-373; 803 NW2d 698 (2010), and that “only the Supreme Court has the authority to overrule its own decisions,” People v Crockran, 292 Mich App 253, 256; 808 NW2d 499 (2011). If 2014 PA 282 is specifically applied in order to ascertain the apportionment formula available to IBM with respect to its 2008 business taxes, it would effectively result in the impermissible legislative reversal of Int’l Business Machines. Similarly, in ignoring the remand directive and ordering application of 2014 PA 282 to IBM’s 2008 taxes in connection to the apportionment formula, the Court of Claims essentially and improperly reversed the Supreme Court’s ruling in Int’l Business Machines. And recall that the Supreme Court was fully cognizant of 2014 PA 282 when ruling to deny the Department’s motion for rehearing. If the Supreme Court wishes to revisit the issue on an application for leave to appeal, it of course has that prerogative, but neither this Court nor the Court of Claims is in a position to alter the ruling and ignore the remand directive in Int’l Business Machines.

Finally, this Court’s opinion in Gillette Commercial Operations North America & Subsidiaries v Dep’t of Treasury, 312 Mich App 394; 878 NW2d 891 (2015), does not and cannot change our analysis. Gillette addressed numerous state and federal constitutional arguments challenging 2014 PA 282 and the retroactive character of the legislation. This Court found that 2014 PA 282 is constitutionally sound. Id. at 401. That said, the Gillette opinion could not overrule or reverse the Supreme Court’s earlier opinion in Int’l Business Machines and the resolution of the specific tax issues addressed therein. See Crockran, 292 Mich App at 256. IBM is entitled to the protection afforded it under the Int’l Business Machines decision; however, other taxes not addressed in the opinion but caught under the umbrella of 2014 PA 282 would be subject to 2014 PA 282 as construed by the Gillette panel. There is a distinction between applying 2014 PA 282, as upheld in Gillette, to alter the specific resolution in Int’l Business Machines of the apportionment-formula question pertaining to IBM’s 2008 taxes, which is not permissible under the ruling and remand directive, and applying 2014 PA 282 to all other pending tax disputes, recognizing that the Legislature was free to change the law in response to Int’l Business Machines.

Reversed and remanded for entry of judgment in favor of IBM. We do not retain jurisdiction. Having fully prevailed on appeal, taxable costs are awarded to IBM under MCR 7.219.

Wilder, P.J., and Murphy and O’Connell, JJ., concurred. 
      
       The Ninth Circuit concluded that an administrative law judge (ALJ) did not violate the rule of mandate in the case by taking new evidence on a matter because the “remand order did not preclude the ALJ from taking [the] new evidence .. ..” Stacy, 825 F3d at 568.
     