In International Business Machines Corp v. Dep’t of Treasury, No. 327359, the Michigan Court of Appeals held that a lower court must “strictly comply with” a higher court’s remand order. Accordingly, when a lower court takes an action that goes beyond the mandate—even where there has been an intervening change in law—it has exceeded its mandate and must be reversed.
IBM had prevailed in a tax dispute against the Michigan Department of Treasury. IBM had argued that it was entitled to use the Multistate Tax Compact’s three-factor formula to determine its 2008 taxes. Treasury, on the other hand, rejected IBM’s use of the Compact’s test and, instead, said that IBM was required to compute its taxes under the Michigan Business Tax Act. The case was litigated all the way to the Michigan Supreme Court. The Michigan Supreme Court held that IBM was entitled to use the Compact’s formula. The Supreme Court’s opinion stated that the Court was remanding “to the Court of Claims for entry of an order granting summary disposition in favor of IBM.”
Treasury moved for reconsideration and before the Supreme Court ruled on its motion, the Legislature passed a provision rescinding Michigan’s membership in the Compact, effective January 1, 2008. Despite Treasury’s filing supplemental authority, the Michigan Supreme Court denied the motion for reconsideration without explanation.
On remand the Court of Claims initially followed the mandate and entered summary disposition for IBM. On reconsideration, it held that the Legislature’s actions “represented an intervening change of law, thereby excepting application of the law of the case doctrine.” Accordingly, it entered summary disposition in favor of Treasury. IBM appealed.
On appeal, the Court of Appeals explained that Michigan jurisprudence recognized the principle of the “rule of mandate,” which is distinct from the law of the case doctrine. Under rule of the mandate, “a lower court must strictly comply with, and may not exceed the scope of, a remand order.” Here, because the Supreme Court had “mandated ministerial entry of judgment in favor of IBM,” the mandate barred any action other than entry of judgment for IBM. The Court of Claims, thus, had no discretion to enter judgment for Treasury. As the Court of Appeals noted, “[f]or 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.” Therefore, the Court of Appeals reversed and entered judgment in favor of IBM.